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70 Cards in this Set
- Front
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International vs. US: Compliance with GAAS |
International: comply except in "exceptional circumstances"
US: PCAOB has three responsibility levels for compliance (1) Unconditional (included in ASB standards) (2) Presumptively mandatory (included) (3) Responsibility to consider |
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International vs. US: Confirmation of A/R |
International: Not required; consider the assessed risk of material misstatement at the assertion level
US: Confirmation is presumptively required unless: (1) A/R are immaterial (2) Use of confirmation would be ineffective (3) Combined assessed level of inherent and control risk is low |
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International vs. US: Fraud definition |
International: An intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage.
US: An intentional act that results in a material misstatement in financial statements that are the subject of an audit. |
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International vs. US: Written representations for fraud |
International: Auditors should obtain a written representation from management that it has disclosed to the auditor the results of its assessment of the risk of fraud.
US: Not required, but representations on fraud are obtained |
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International vs. US: Looking for illegal acts |
International: Concerned with whether laws may materially affect financial statements; no distinction between indirect and direct illegal acts
US: Obtain reasonable assurance of detection of illegal acts that have a direct and material effect on FS; consider indirect effects that come to attention |
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International vs. US: Use of the work of internal auditors |
International: Auditors evaluate internal auditor objectivity, competence, and work performance before using their work.
US: Auditors must determine that the internal audit function applies a systematic and disciplined approach, including quality control. |
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International vs. US: Sending letter of audit inquiry to lawyers |
International: Only required when an auditor “assesses a risk of material misstatement.”
US: Presumptively required |
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International vs. US: Reviewing predecessor auditor’s working papers for evidence on beginning balances |
International: The standard states that this may provide sufficient appropriate audit evidence on opening balances.
US: This statement is not included in standards. |
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International vs. US: Terms of audit engagement change, and auditor is unable to agree on new terms |
International: Auditor should withdraw and consider whether there is an obligation to contact other parties
US: No explicit obligation to contact other parties |
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International vs. US: Opinion on financial statements |
International: Audit opinion may be on either (1) The fair presentation of the FS, or (2) That the FS "give a true and fair view"
US: Audit opinion only on fair presentation of the FS |
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International vs. US: Audit report modification for consistency related to changes in accounting principle |
International: Not required
US: Modify audit reports for changes in accounting principles with a material effect on the FS |
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International vs. US: Where to include of an emphasis of a matter paragraph in an audit report |
International: Preferably after opinion statement
US: After opinion |
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International vs. US: Providing location the auditor practices in an auditing report |
International: Required
US: Not required |
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International vs. US: Dating the audit report for a subsequent event |
International: When management amends FSs for a subsequent event, the auditor should perform necessary procedures and change the date of the audit report to no earlier than the date the FS were accepted as amended
US: Auditor may "dual date" report |
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International vs. US: Communications to those charged with governance (internal control deficiencies and other matters) |
International: Report does not include a restriction on use to those charged with governance Identify significant deficiencies, but no category used to identify material weaknesses
US: Report indicates that it shouldn't be used by anyone other than those charged with governance |
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International vs. US: Audit of internal control |
International: Not required
US: PCAOB (public) required |
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IASB |
International Accounting Standards Board Develops IFRS |
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GASB |
Governmental Accounting Standards Board Source of GAAP |
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ASC |
Accounting Standards Codification Issued by FASB; an authoritative structure of GAAP |
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AICPA |
American Institute of Certified Public Accounting |
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ASB |
Auditing Standards Board AICPA's committee for auditing, attestation, and quality control "Standards on types of professional service" |
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SAS |
Statement of Auditing Standards Issued by the ASB For non-public entities Provides guidance on GAAS Includes interim reviews of quarterly FS of client |
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SSAE |
Statements on Standards for Attestation Engagements Issued by AICPA's ASB For attestations on subject matters other than financial statements Includes examining forecasts and pro forma |
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SSARS |
Statements on Standards for Accounting and Review Services
For compilations and reviews of nonissuers |
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ET |
The ethics code of AICPA's Code of Professional Conduct |
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QC |
SQCS Statements on Quality Control Standards AICPA's ASB issued this to provide guidance for quality control |
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PFP |
AICPA's ASB issued this to provide guidance on personal financial planning |
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CS |
AICPA consulting standards Covers advisory |
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SEC |
Securities and Exchange Commission
Regulates publicly traded companies in order to protect the public |
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SOX |
Sarbanes-Oxley Act Enforced by the SEC Created the PCAOB |
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PCAOB |
Public Company Accounting Oversight Board PCAOB rules approved by SEC Oversees audits of public companies |
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GAO |
Governmental Accountability Office Issues auditing standards for entities getting government grant money |
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DOL |
Department of Labor Issues standards for the audit of employee benefit plans |
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IFCA |
International Federation of Accountants |
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IAASB |
International Auditing and Assurance Standards Board Issued ISA (International Standards on Auditing) |
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IESBA |
International Ethics Standard Board for Accountants |
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GAAS general purpose |
Measures quality of an auditor's performance |
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Code of Professional Conduct |
Made by the AICPA Provides minimum levels of acceptable conduct relating to all services provided by CPAs (not just public) |
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Code of Professional Conduct Conceptual Framework for Independence |
Look at potential threats and safeguards |
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Potential threats to independence |
1. Self-review threat 2. Advocacy threat 3. Adverse interest threat 4. Familiarity threat 5. Undue influence threat 6. Financial self-interest threat 7. Management participation threat |
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Self-review threat |
Reviewing evidence that results from the member's own work |
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Advocacy threat |
Actions promoting the client's interest on position |
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Adverse interest threat |
Actions or interests between the member and the client that are in opposition (ex: litigation between client and member) |
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Familiarity threat |
Members having a close or longstanding relationship with client or knowing individuals or entities who performed nonattest services for the client |
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Undue influence threat |
Attempts by a client's management (or others) to coerce the member or exercise excessive influence over the member |
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Financial self interest threat |
Potential benefit to a member from a financial interest/relationship in/with an attest client (direct and material indirect interest) |
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Management participation threat |
Assuming the role of management or performing management functions for the attest client |
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Safeguards of independence |
(a) Safeguards created by the profession, legislation, or regulation (e.g., required continuing education on in dependence and ethics).
(b) Safeguards implemented by the client (e.g., an effective governance structure, including an active audit committee).
(c) Safeguards implemented by the firm (e.g., quality controls for attest engagements).
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Auditors must be independent for |
Auditing, attestation, and review |
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Auditors don't need to be independent for |
Compilations, tax work, or consulting Though you are assumed independent unless stated otherwise |
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Independence creditor rule |
If the client hasn't paid you for more than a year, independence is impaired |
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Independence loan rule |
Auditors may not have loans with the client unless grandfathered |
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A CPA who is a director of a nonprofit organization where board is large and representative of community leadership is not lacking independence if: |
(1) Position purely honorary (2) Position identified as honorary on external materials (3) CPA participation restricted to use of name (4) CPA does not vote or participate in management affairs |
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List of covered members |
1. On attest engagement team
2. In position to influence attest engagement
3. Partner/manager who provides nonattest services to the attest client beginning once he/she provides ten hours of nonattest service to the client and ending on the later of (a) The firm signs the report on FS for the year the services were provided (b) He no longer expects to provide ten hours or more of nonattest services on a recurring basis
(d) A partner in the office in which the lead attest engagement partner primarily practices in connection with the attest engagement;
(e) The firm, including the firm’s employee benefit plans; or
(f) An entity whose policies can be controlled by any of the individuals or entities described in (a) through (e) or by two or more such individuals or entities if they act together. |
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Covered members are subject to |
the strictest independence rules |
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Immediate family |
Spouse, spousal equivalent, dependent |
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Close relative |
Parent, sibling, nondependent child |
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Independence is impaired if who owns stocks? |
Covered members and their immediate families |
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Independence is impaired if who is in a key position |
Close family |
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Exceptions to the independence rules |
(a) An individual in a covered member’s immediate family was employed by the client in a position other than a key position (“audit sensitive position”)
(b) In connection with his or her employment, an individual in the immediate family of one of the following covered members participated in a retirement, savings, compensation, or similar plan that is sponsored by a client or that invests in a client (provided such plan is normally offered to all employees in similar positions):
[1] A partner or manager who provides ten or more hours of nonattest services to the client; or
[2] Any partner in the office in which the lead attest engagement partner primarily practices in connection with the attest engagement. |
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When a CPA performs nonattest services, two conditions must be met: |
1. The nonattest service must be documented in an engagement letter 2. You must be satisfied that somebody at the client’s entity can take responsibility for this that is not you the auditor |
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Examples of PCAOB independence impairments |
Doing bookkeeping for client Doing tax returns for top level management clients |
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When are CPAs allowed to depart from GAAP? |
Only when results of applying will be misleading. (1) New legislation (2) New form of business transaction |
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Exceptions to the confidentiality rules under AICPA's Code of Professional Conduct |
(1) Compliance with auditing rules and rules for giving opinion (2) Compliance with enforceable subpoena or summons (3) AICPA review of professional practice (4) Initiating complaint or responding to inquiry made by a recognized investigative or disciplinary body |
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Contingent fees as covered under the Code of Professional Conduct |
You may not:
(a) Perform for a contingent fee any professional services when the member or member’s firm also performs any of the following services for that client:
[1] Audits or reviews of financial statements
[2] Compilations when the member is independent and expects that a third party may use the financial statements
[3] Examinations of prospective financial information client
(b) Prepare an original or amended tax return or claims for a tax refund for a contingent fee for any client |
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Commissions as covered under the Code of Professional Conduct |
A member in public practice may not accept a commission for recommending a product or service to a client when the member or member’s firm also performs any of the following services for that client:
(a) Audits or reviews of financial statements
(b) Compilations when the member is independent and expects that a third party may use the financial statements
(c) Examinations of prospective financial information |
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Basic engagements of personal financial planning |
(a) Defining engagement objectives (b) Planning specific procedures appropriate to engagement (c) Developing basis for recommendations (d) Communicating recommendations to client (e) Identifying tasks for taking action on planning decisions |
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Under AICPA (SOX), how long do you have to save audit workpapers? |
5 (7) |
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Under SOX Title 2, issuer's public accounting firm cannot legally perform these activities when also auditing: |
(1) Bookkeeping or other services relating to financial statements or accounting records (2) Financial information systems design and/or implementation (3) Appraisal services (4) Internal audit outsourcing services (5) Management functions (6) Actuarial services (7) Investment or broker-dealer services (8) Certain tax services, such as tax planning for potentially abusive tax shelters |
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Title 4 of SOX |
(a) It is management’s responsibility to establish adequate internal control (b) Management must assess its IC (c) The CPA firm attests to management’s assessment of IC |
