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25 Cards in this Set
- Front
- Back
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3 Fundamental Principles
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Responsibility Principle, Performance Principle and Reporting Principle
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Key elements of the Responsibility Principle
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a) approp. competence and capabilities to perform audit; b) comploying with relevant ethical requirements; c) professional skepticism and professional judgement
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Key elements of Performance Principle
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Obtain reasonable assurance with high but not absolute, the auditor: a) plans work and properly supervises assistants; b) applies approp. materiality levels; c) IDs and assess risk of material misstatements; d) Sufficient and approp. audit evidence
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Key elements of Reporting Principle
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Auditor expresses an opinion based on evidence obtained in a written report
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Audit Procedures
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Particular and specialized actions that auditors take to obtain evidence in a specific audit engagement.
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Auditing standards
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Audit quality guides that remain the same throughout the audit.
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Independence in fact
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Allows auditors to form an opntion on the financial statements w/o being affected by influences
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Independence in appearance
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Others' perceptions of auditor's independence.
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Due Care
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Reflects a level of performance that would be exercisede by reasonable auditors in similar circumstances. Includes Professional Skeptism and Judgement
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Professional Skepticism
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State of mind that is characterized by appropriate questioning and critical assessment of audit evidence.
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Professional Judgment
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Application of relevant training and experience in making informed decisions.
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5 elements of Fundamental Principle: Assurance
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a) reasonable assurance; b) planning and supervision; c) materiality; d) risk assessment; e) audit evidence
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Reasonable Assurance
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Performance Principle. Recognizes that GAAS may not detect all material misstatements
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Planning and Supervision
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Performance Principle. a) preparing audit plan and supervising audit work; b) obtaining knowledge of client's business; c) dealing with difference of opnion among acctg. firm's own personnel.
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Materiality
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Performance Principle. Recognizes that auditors should focus on matters that are important to financial statement users
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Risk Assessment
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Performance Principle. ID important concerns (risks) they face in the audit.
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Risk Assessment: Internal control
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a system's capability to prevent or detect material acctg. frauds or errors and provide for their correction on a timely basis
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Risk Assessment: Risk of Material Misstatement (RMM)
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Inherent Risk: probability that a misstatement or error will occur; and Control Risk: probability that a misstatement or error will not be prevented or detected in a timely manner
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Risk Assessment: Audit Evidence
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Performance Principle. evaluate sufficient appropriate evidence to afford a reasonable basis for their opinion.
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Detection Risk
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The risk that audit team's procedures will fail to detect a material misstatement.
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Reporting Principle: Unqualified Report
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"good" in the sense that auditors are not calling attention to anything wrong w/ the financial statements
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Reporting Principle: Adverse Report
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Opposite of unqualified, concludes that the financial statements are not presented in conformity w/ GAAP
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Reporting Principle: Qualified Report
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except for a relatively isolated departure, finanical statements are presented in conformity with GAAP.
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Reporting Principle: Disclaimer of Opinion
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Auditors may choose not to express an opinion on the financial statements.
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Auditor's Report Components
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a) Report Title; b) Addressee; c) Introductory Para: Responsibility of managment and the auditors; d) Scope Para: PCAOB/GAAS mentioned; e) Opinion Para: opinion on financial statements in conformance to GAAP; f) Explanatory Para:
g) IC para: |
