Auditing "engagement Responsibilities"

Front 1

What are the primary ways that information of a company's financial position and performance are provided to external parties?

Back 1

Financial Statements

Front 2

Who prepares/responsible for the financial statements of a company?

Back 2

Management

Front 3

What is the purpose of an audit?

Back 3

To provide and independent opinion on whether a set of financial statements are presented fairly in all material respects, in conformity with a financial reporting framework.

Front 4

What are the 2 forms of independence for a auditor?

Back 4

1. Independence in mind

2. Independence in appearance

Front 5

What are the overall objectives of Auditor? (2)

Back 5

1. Exercise professional judgement to plan, perform audit with professional skepticism

2. Gather evidence to obtain reasonable assurance about whether financial statements are presented fairly

Front 6

What does professional skepticism mean?

Back 6

He/she is adopting a questioning mind and critically assessing evidence that is provided by the auditing process.

Front 7

What is the difference between sufficient and appropriate evidence?

Back 7

Sufficient is a quantity concept, the auditor believes he/she has enough evidence to obtain that reasonable assurance where Appropriate evidence is a quality concept, where the evidence that is gathered is right evidence that the auditor hopes to gather to achieve his/her goal.

Front 8

What must the auditing report comply with?

Back 8

Generally Accepted Auditing Standards (GAAS)

Front 9

When representing financial statements are presented fairly in conformity with financial reporting framework, management implicitly and explicitly makes assertions about what in the financial statements? (4)

Back 9

1. Recognition

2. Measurement

3. Presentation

4. Disclosure of information in financial statements

Front 10

Auditors use management's assertions to assess the risks of material misstatement and to _____, ____, and ______ procedures to obtain evidence regarding management's assertions

Back 10

Plan, Design, and perform

- They use managements assertions as a framework for engagements

Front 11

In the plan and performing stage of the audit, Assertions about classes of transactions, events for the period (Income statement, Statement of cash flows), include what? (5)

Back 11

1. Occurrence: (The recorded transactions and events, actually occured)

2. Completeness: (That all transactions and

events that should be recorded, were recorded)

3. Accuracy: amounts and other date were recorded appropriately

4. Cutoff: Transactions and events were recorded in the actual period

5. Classification: The transactions and events were recorded in the proper accounts.

Front 12

When planning and performing an audit, Assertions about account balances and balance sheet data include What?

Back 12

1. Existing: that assets, liabilities, and equity interest, exist

2. Rights, Obligations: That the entity holds/controls its assets and liabilities are its obligations

3. Completeness: Assets, liabilites, and equity interest that should be recorded, were recorded.

4. Valuation, allocation: Assets, Liabilities, and equity interest are recorded in the appropriate amounts and any valuation or allocation adjustments are properly recorded.

Front 13

When planning and performing and audit, assertions about presentation on face of financial statements, disclosure include what? (2)

Back 13

1. Occurence, rights, obligations (disclosed transactions, events, and other matters have occurred AND pertain to the entity)

2. Completeness. (That all disclosures that should have been included, were included)

Front 14

Some assertions overlap categories. There are how many assertions that form the foundation of financial statement audit. What are they? What can we use to remember this?

Back 14

8

CAVE CROC

C = Completeness

A = Accuracy

V= Valuation and Allocation

E = Existence

C = Cutoff

R = Rights and obligations

O = Occurrence

C = Classification and Understandability

Front 15

The PCOB's auditing standards identify how many assertions to be applied to transactions, balances, and the presentation and disclosures of financial statements?

Back 15

5

Front 16

What assertions does the PCOB's auditing standards identify? (5)

Back 16

1. Existence/occurrence: (assets/liabilities of company exist at given date, Recorded transactions have occurred during given period)

2. Completeness: All transactions, accounts should be presented in financial statements are so included.

3. Valuation/allocation: Assets, liability, equity, revenue, expense, components have been included in financial statements at appropriate amounts.

4. Rights, obligations: Company hold/controls rights to assets, liabilities are obligations of company at given date.

5. Presentation, Disclosure: Components of financial statements are properly classified, described, disclosed. (in the footnotes of the financial statements)

Front 17

What are the 3 levels of professional responsibilities that are used in BOTH the GAAS and PCOB's auditing standards to describe requirements of auditors?

Back 17

1. Unconditional responsibilities (auditor MUST comply with an unconditional requirement whenever it is relevent.

2. Presumptively mandatory responsibility (an auditor SHOULD obtain an engagement letter between the auditor and client, rare cases cause for to auditor to judge if it is necessary)

3. Use professional judgements when determining whether to perform actions or procedures when the standards use "MIGHT" or "COULD".

Front 18

What does the word "MUST" indicate?

Back 18

An unconditional requirement exists (Example: an auditor MUST be independent)

Front 19

A Preparation requires what of the practitioner? (2)

Back 19

1. no assurance

2. no report

Front 20

A Compilation requires what of the practitioner? (1)

Back 20

Disclaimer of any assurance

Front 21

A Review requires what of the practitioner? (1)

Back 21

Limited Assurance

Front 22

An Examination or audit requires what of the practitioner? (2)

Back 22

1. Positive assurance OR

2. Opinion Expressed

Front 23

Agreed-upon procedures require what of the practitioner? (1)

Back 23

Results of the procedures but NO assurance

Front 24

What are the Statements on Auditing Standards? (SASs)

Back 24

They are issued by the Auditing Standards Board. They apply to audits of nonissuers' financial statements.

Front 25

How are the SASs codified?

Back 25

Using the AU-C prefix

Front 26

What are the Statements on Standards for Accounting and Review Services (SSARs)?

Back 26

They are Issued by the AICPA's Accounting and Review Services Committee (ARSC). They apply to preparations, compilations, and reviews of nonissuers' financial statements.

Front 27

How are the SSARSs codified?

Back 27

AR-C 60, 70, 80, 90, and 120

Front 28

What are the Statements on Standards for Attestation Engagements (SSAEs)?

Back 28

They are issued by the AICPA's Auditing Standard's Board (ASB) or another AICPA designated body. They apply to examinations, reviews, and agreed-upon procedures engagements for subject matter other than traditional financial statements.

Front 29

What did the federal legislation, Sabanes-Oxley Act of 2002 (SOX), create?

Back 29

The Public Company Accounting Oversight Board (PCAOB)

Front 30

The PCAOB's standards apply to the audits of _______ by public accounting firms.

Back 30

audits of issuers

Front 31

To Make U.S. generally accepted auditing standards (GAAS) easier to read, understand, and apply, what board undertook a clarity project?

Back 31

The AICPA's Auditing Standards Board (ASB)

Front 32

What does AICPA stand for?

Back 32

The American Institute of Certified Public Accountants

Front 33

What were the results of the clarification project that was undertaken by the AICPA's ASB?

Back 33

a redrafting of its standards into a new codification of Statements on Auditing Standards. Each Clarified statement states

1. objectives

2. Definitions (if relevant)

3. Requirement

4. Application and other explanatory material.

Front 34

Each code of the AICPA's ASB have ___-_____ identification codes and each code has the prefix ______ where C means what?

Back 34

3-digit, AU-C, Clarified

Example: AU-C 210 "Terms of Engagement"

Front 35

The ASB's standards apply to audits of nonissuers. What do nonissuers mean?

Back 35

Nonpublic companies

Front 36

What are issuers?

Back 36

Public companies required to file with the Securities and Exchange Commission

Front 37

Audits of Issuers are regulated by whom?

Back 37

The PCAOB

Front 38

Which act authorized the PCOAB to establish auditing and related professional practice standards to be used by registered public accounting firms?

Back 38

The Sarbanes Oxley Act of 2002

Front 39

The PCAOB reorganized it auditing standards in 2015. Each standard has an ____ prefix followed by a ____ digit number. However, in most cases, the PCAOB standards are similar to current ASB standards.

Back 39

AS prefix, 4 digit

Example: AS 1005 "Independence"

Front 40

The Government Auditing Standards (The Yellow Book issued by the Government Accountability Office) applies to what? (2)

Back 40

1. audits of the federal government's entities, programs, activities, and functions

2. Federal awards to nonfederal entities

Front 41

What is the GAO?

Back 41

Government Accountability Office

Front 42

The GAO requires governmental auditors to follow what standards? What is the exception?

Back 42

The ASB standards, except as otherwise provided in the yellow book.

Front 43

Audits under the Single Audit Act also follow the ____ ___ _____ ___ ____ Audit requirements for federal awards (2 CFR 200)

Back 43

Office of Budget and Management (OMB)

Front 44

An auditor is deemed to be associated with financial information when the procedures applied suffice to report in accordance with what?

Back 44

GAAS (AU-C 200)