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35 Cards in this Set
- Front
- Back
Foundations of GAAS
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Materiality & Audit Risk
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Auditing Standards
General Standards |
(TIP)
TRAINING and proficiency to perform audit INDEPENDENCE in mental attitude due PROFESSIONAL care |
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Training & Proficiency
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Education & Audit Experience
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Independence
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In Fact and Appearance
Honest No Direct Financial Interest No Indirect Material Financial Interest |
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Professional Care
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Technical abilities mirror those help by peers
in the profession Follow GAAS Standards Obtain a Reasonable Level of Assurance Maintain Reasonable Level of Skepticism Supervise Audit Staff Review judgment at every level |
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GAAS
Field Work Standards |
(PIE)
PLAN the work and supervise assistants understand INTERNAL control sufficient audit EVIDENCE |
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GAAS
Standards of Reporting |
(GODC)
-conformity with GAAP -expression of OPINION -DISCLOSURES -principles CONSISTENTLY observed |
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Examples of Attest Engagements
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Practitioner is engaged to
Exam Review Agreed Upon Procedure |
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Attestation Standards
General Standards |
(TSCIP)
T-RAINING and proficiency -knowledge of SUBJECT matter -suitable & available CRITERIA I-NDEPENDENCE in mental attitude -due PROFESSIONAL care |
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Attestation Standards
Field Work |
(PE)
-PLANNING and supervision -EVIDENCE reporting |
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Attestation Standards
Reporting |
(CCRR)
-CHARACTER of engagement -CONCLUSION on subject matter -significant RESERVATIONS -RESTRICTIONS on use |
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Compilation Services
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SSARS be followed
o Non-Public entities only Independence NOT required for Compilations o No Internal Control work allowed o No assurance given Must understand client industry |
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Review Services
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SSARS to be followed
o Non-Public entities only Provides negative assurance Independence required o No Internal Control work allowed o Performs analytical procedures o No material indirect financial interest allowed o No immaterial direct financial interest allowed Must understand client industry |
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Attestation Services
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CPA expresses a conclusion about an assertion
o Compliance with laws NOT considered a Consulting engagement Independence Required |
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Consulting Services
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Independence not required
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Propective F/S
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Report is restricted to specified users
Agreed-upon procedures implemented |
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Sarbanes Oxley Act of 2002 requirements
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1. Preapproval of services by audit committees
2. Disclosure of fees paid to the accountant 3. Rotation of audit partners 4. Communications by auditor with audit committee 5. The auditor to avoid most nonaudit services 6. Audit committee to be established by issuers |
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Responsibilities and Activities of Public Company Accounting Oversight Board (PCAOB)
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1. REGISTER public accounting firms
2. OVERSEE AUDIT of public companies 3. ESTABLISH/ADOPT STANDARDS on auditing, quality control, ethics, and independence 4. INSPECT REGISTERED AUDIT FIRMS 5. CONDUCT INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS on registered public accounting firms |
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Authoritative Literature Hierarchy
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Statements on Auditing Standards (SAS)
Auditing Interpretations, AICPA Guides & SOPs Industry Articles (no authority) |
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Elements of Quality Control
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(HR MEEL)
HUMAN resources client RELATIONSHIPS MONITORING ETHICAL requirements ENGAGEMENT performance LEADERSHIP |
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WebTrust services provides assurance on e-commerce related to
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(SAPCO)
Security Availability Processing integrity Confidentiality Online privacy |
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Prior to accepting engagement what must be done
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Review F/S
Speak to Third Parties Contact Predecessor Auditor to evaluate whether engagement should be accepted |
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What does Audit Committee do?
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Part of the Board of Directors
Officers Not Allowed Responsible for Hiring Auditor o Oversees Internal Control o Must Agree with Auditor on Responsibility of the Parties Audit Fee Timing of the Audit Audit Plan o Acts as Liaison Between Auditor and the Board Auditor Communicates Concerns about Internal Control Deficiencies Errors Fraud Illegal Activities |
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Categories of Assertions
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(ADEPT)
Account balances Disclosures Events Presentations Transactions |
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Financial Statement Assertions
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(CAVE CROC)
Completeness Accuracy Valuation and allocation Existence Cutoff Rights and obligations Occurrence Classification and understandability |
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Audit Engagement Agreement must be written & cover what?
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o Objectives of Engagement
o Limitations of Engagement o Responsibilities of Management Provide written assertions o Responsibilities of Auditor Limited error/fraud responsibility o Expectations of Access to Records o Financial Statements (and Disclosures) are Management’s Responsibility o Compliance with Laws o Internal Control |
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Audit Risk Formula
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Audit Risk = Inherent x Control x Detection
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Control Risk
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o Will Internal Control detect error or fraud?
o Auditor cannot control |
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Inherent Risk
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o Which transactions have a higher level of risk?
o Auditor cannot control |
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Detection Risk
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o Will the auditor fail detect a material
misstatement? o Auditor CAN control Do testing at year-end Increase substantive testing Run more effective tests |
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Auditor's responsibility for detecting Fraud & Illegal Acts
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(AD)
o ASSESS THE RISK that such things will lead to material misstatements. o Design the audit to provide reasonable assurance against Fraud Illegal acts that directly affect the F/S Material errors have been detected |
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When to report fraud
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All Mgt Fraud to committee
Minor Fraud by low level -no Minor Fraud by mgt - yes |
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Fraud Red Flags
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Management compensation tied to stock
Aggressive financial forecasting Former auditor disagreed with Mgmt Records not available for audit |
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Quantity
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Sufficiency is the measure of the ___ of evidence
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Quality
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Appropriateness is the measure of the ___ of evidence that relates to relevance and reliability
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