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27 Cards in this Set

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Two steps in an independent audit
(1) Examination of a set of Financial Statements
(2) Report of the findings to outside parties
5 Assertions
(1) Valuation
(2) Existence and Occurence
(3) Presentation and Disclosure
(4) Completeness
(5) Obligations and Rights
Define Material
Anything of a size or type that would influence the judgement of a reasonable person relying on the information
Define Misstatement
Error
Fraud
Direct Illegal Act
Define Error
Unintentional Mistake
Define Fraud
Intentional act that results in a material misstatement in FS
Define Direct Illegal Act
One that has an immediate effect on the FS figures
Generally Accepted Auditing Standards (GAAS) are established by. . .
Statements of Auditing Standards
Statements of Auditing Standards are produced by. . .
Auditing Standards Board
This provides rules for work done for a nonpublic company that is less than an engagement
Statements on Standards for Accountign and Review Services
This provides rules when a conclusion is expressed about an assertion
Statements on Standards for Attestation Engagements
What are the three sections to the ten basic generall accepted auditing standards?
General, Fieldwork, and Reporting
Of the ten basic generally accepted auditing standards what are included in the GENERAL STANDARDS section?
(1) The audit is performed by a person or persons having adequate technical training and proficiency as an auditor

(2) In all matters relating to the assignment, independence in mental attitude is to be maintained by the auditor

(3) Due professional care is to be exercised in the performance of the audit and preparation of the report
Of the ten basic generally accepted auditing standards what are included in the STANDARDS OF FIELD WORK section?
(1) The work is to be adequately planned, and assistants, if any, are to be properly supervised

(2) A sufficient understanding of internal control is to be obtained to help determine the nature, extent, and timing of the substantive testing to be performed

(3) Sufficient, competent evidential matter is to be obtained through inspections, observation, inquiries, confirmations, and the like to afford a reasonable basis for an opinion regarding the FS under audit
Of the ten basic generally accepted auditing standards what are included in the STANDARDS OF REPORTING section?
(1) The report shall state whether the financial statements are presented in accordance with generally accepted accounting principles

(2) The report shall identify those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period.

(3) Informative disclosures in the FSs are to be regarded as reasonably adequate unless otherwise stated in report

(4) The report shall either contain an expression of opinion regarding the FS, taken as a whole, or an assertion to the effect that an opinion cannot be expressed.
As a result of SOX, this has been created to enforce auditing, quality control, and independence standards and rles within the accounting profession
PCAOB - Public Company Accounting Oversight Board
T/f PCAOB is not a government agency?
True, but it does come under the oversight and enforcement authority of the SEC
Registered firms with PCAOB are inspected how often?
Every three years
This opinion is given when an auditor's examination provides sufficient evidence that statements are presented fairly in accordance with GAAP
An Unqualified Opinion
This opinion is given if there is a problem that is material but some credibility can be given to the statements as a whole
A Qualified Opinion
This opinion is given in sever cases, when a departure from GAAP can have such an impact that the entire statements cannot be viewed as fairly presented in any capacity
An Adverse Opinion
What are the three paragraphs included in a standard unqualified opinion?
Introductory, Scope, and Opinion
A standard unqualified opinion is normally dated. . .
prior to the final day of field work
What are the four purposes of the introductory paragraph in a standard unqualified opinion?
(1)Indicates that an audit has been carried out of the FS

(2)Identifies the FS by name, company name, and date

(3)Specifies that the statements are the responsibility of managment

(4)State that the auditor's responsibilty is to express an opinion on the FS based on audit
What are the five purposes of the scope paragraph in the standard unqualified opinion?
(1)Specifices that the audit was conducted according to the auditing standards generally accepted in the US

(2)Indicates that audit was planned and performed to obtain reasonable assurance that the statements were free from material misstatements

(3)Explains that evidece supporting amts and disclosures has been examined but only on a test basis

(4)Indicates that an assessment was made of accouting principles, significant estimations, and statement presentation

(5)States the belief that audit provides a reasonable basis for the opinion
What are the three purposes of the opinion paragraph in the standard unqualified opinion?
(1)Starts with the phrase "in out opinion" to show that this is not a guarantee but only an expert judgement

(2)Says that statements present fairly in all material respects the financial position, operations, and cash flows

(3)States that FS conform to accounting principles generally accepted in the US
What are the four reasons to include a fourth paragraph in a standard unqualified opinion?
(1)Emphsis of a matter (to draw attention to)

(2)Lack of consistency (draws attention to a footnote)

(3)Going concern problem (doubt of a company's potential to stay in business)

(4)Other information attached to audited financial statements