SU 01 Professional Standards Flashcards
Assurance
Umbrella term including audit, attestation and other services (such as risk advising, website security, data integrity)
Providing assurance: providing the public some manner of assurance that a thing is legitimate
Attestation
Practitioner reports on specific subject matter
includes audit + other services (examinations (of financial forecasts), reviews, agreed-upon procedures)
Audit
Auditor presents an opinion on the reliability of (historical) financial statements, internal controls are assessed
What auditing standards are set by the AICPA
Statements on auditing standards (“professional” standards)
sets official standards for non-issuers
Non-issuers
non-publicly traded companies
Statements on Auditing standards
SAS
set by the AICPA
codified as AU
What auditing standards are set by the PCAOB?
Final authority on standards for issuers
initially adopted AICPA standards then the created their own
Codified as AS
What are staff accounting bulletins
issued by the SEC
what are three types of peer review
- System review
- Engagement Review
- Report review
What is system review?
the highest level of peer review - onsite review
What is Report review?
the lowest level of peer review - paper review only
What is Engagement Quality Review?
EQR
review of audit firm by the PCAOB
What are the legally mandated audit objectives
- identify and assess risk of material misstatement of the financial statements, whether due to fraud or error, ad design and perform audit procedures responsive to those risks
- conclude whether there is substantial doubt about the client’s ability to continue as a going concern
What is the subject of an audit
financial statements
What is a review vs an audit
lower level attestations, not an audit - does not consider internal controls
only available for private companies
AUPs
Agreed upon procedures
contract to examine some specific thing (internal controls, XBRL)
what is the biggest internal control risk
humans
ICFR
internal controls over financial reporting
now a required part of the audit
on what does the frequency of PCAOB reviews of audit firms depend?
Number of audit clients
on what does the frequency of PCAOB reviews of audit firms depend?
Number of audit clients
Who conducts peer review of audit companies
other auditing companies
What are the statements on quality control standards
SQCS
general statments about how to do good quality work
What are the categories of attestation standards?
General standards
Standards of field work
standards of reporting
What are the general attestation standards
- Training and proficiency in attestation
- knowledge of the subject matter
- suitable and available criteria (objective, relevant)
- mental attitude of independence
- due professional care
What are the attestation standards of fieldwork
- planning and supervision
- sufficient evidence to form a reasonable basis for conclusion
What are the attestation standards of reporting
Must be stated in the attestation report:
- character of engagement
- conclusion about the subject matter
- significant reservations (CAMS)
- restrictions of use
SSAE
Statement of standards for attestation engagements
What is the character of an auditing engagement
audit, subject matter is financial statements
What is the conclusion about the subject matter of an audit engagement
auditor’s opinion
What are CAMS
critical audit matters
What does an auditor’s report examine
evidence supporting the:
- amounts and disclosures in financial statements
- accounting principles used
- significant estimates made by management
- financial statement presentation
what are the components of fair presentation of financial reports
Proper recognition, measurement, presentation and disclosure
What are the types of management assertions
- About classes of transactions and events for the period (IS & SCF)
- about Account balances at the end of the period (BS)
- about presentation and disclosures (notes)
What are the main management assertions
- Completeness
- Accuracy
- Presentation
- Existence
- Cutoff
- Rights & Obligations
- Occurrence
- Classification
EVERYTHING AUDITED IS DESCRIBED IN THESE TERMS
What is the completeness assertion
All the transactions, events, accounts and disclosures were recorded and included in statments
Relates to IS, BS, Notes
What is the accuracy assertion
That all amounts are appropriate
aka valuation and allocation
Relates to IS, BS, Notes
What is the presentation assertion
That the components of the financial statements are properly classified, described, and disclosed
Relates to IS, BS
What is the existence assertion
That the items described on the balance sheet exist
Relates to BS
What is the cutoff assertion
That all events and transactions have been recorded in the proper period
Relates to IS
What is the Rights and Obligations assertion
That assets and liabilities shown belong to the firm in question, and all existing rights and obligations are recorded
Relates to BS and notes
What is the occurrence assertion
that the transactions and events recorded actually occurred
Relates to IS and Notes
What is the classification assertion
That amounts are recorded in proper accounts and properly presented
Relates to IS, BS, and notes
Which management assertions related to the income statement
Completeness
Accuracy
Presentation
Cutoff
Occurrance
Classification
Which management assertions relate to the balance sheet
Completeness
Accuracy
Presentation
Existence
Rights & Obligations
Classifications
Which management assertions relate ONLY to the balance sheet (not the income statement)
Existence
Rights & Obligations
Which management assertions relate ONLY to the income statement (not the balance sheet)
Cutoff
Occurrence
Which management assertions relate to both the income statement and the balance sheet
Completeness
Accuracy (Valuation & Allocation)
Presentation
Classification
