Auditing - Ch. 21 Assurance, Attestation And Internal Auditing

Front 1

WHAT ARE ASSURANCE SERVICES?

Back 1

Independent professional services that improve the quality of information, or its context, for decision makers.

Hint 1

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Front 2

WHAT ARE THE MAJOR ELEMENTS OF ASSURANCE SERVICES?

Back 2

1. Independence
2. Professional Services
3. Improves the quality of information
4. For Decision Makers

Hint 2

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Front 3

WHAT ARE THE ASSURANCE SERVICES?

Back 3

1. CPA Performance View
2. CPA Web Trust
3. CPA Sys Trust
4. CPA Risk Advisory
5. PrimePlus Services

Hint 3

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Front 4

WHAT ARE PRIME PLUS SERVICES?

Back 4

- Services help seniors and their families make difficult decisions concerning health care, living situations and financial needs.
- Includes providing medical and living needs, estate planning, financial planning, tax preparation and cash flow management.
- Formally known as ElderCare

Hint 4

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Front 5

WHAT ARE ATTEST ENGAGEMENTS?

Back 5

- Attest services occur when a practitioner is engaged to issue, or does issue, a REPORT on subject matter, or an assertion about subject matter, that is the responsibility of another party.

Hint 5

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Front 6

WHAT ARE THE TYPES OF ATTEST ENGAGEMENTS?

Back 6

1. Examination
2. Review
3. Agree-Upon Procedures

Hint 6

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Front 7

WHAT IS THE OBJECTIVE IN AN ENGAGEMENT TO EXAMINE AN INTERNAL CONTROL?

Back 7

To express an opinion on the effectiveness of the entity's internal control, in all material respects, based on the control criteria. Similar to the audit of internal control.

Hint 7

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Front 8

WHAT TYPES OF ATTESTATION ENGAGEMENTS ARE ALLOWED TO BE PERFORMED FOR REPORTING ON INTERNAL CONTROL?

Back 8

1. Examination - similar in scope and detail to an audit
2. Agreed-upon procedures

Hint 8

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Front 9

WHAT ARE THE BASIC CONTENTS OF THE AUDITOR'S REPORT IN AN INTERNAL CONTROL REPORT?

Back 9

1. Report Title - contains the word Independent
2. Introductory paragraph - what the report is about
2. Scope paragraph - what governing rules were used to do the report, and overview of how the report was done.
3. Inherent limitations paragraph
4. Opinion paragraph - auditor gives opinion of management's assertions of internal control.
5. Signature and Date

Hint 9

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Front 10

WHAT ARE TRUST SERVICES?

Back 10

Provides assurance surrounding the security and effectiveness of retail and business internet commerce. Based on 5 principles: Security; Availability; Processing Integrity; Online Privacy; and Confidentiality.

Hint 10

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Front 11

WHAT ARE WebTrust AND SysTrust?

Back 11

AICPA AND CICA (Canadian Inst of Chartered Accountants) developed these 2 unique sets of principles by which CPAs could evaluate business systems and controls. Under the umbrella of TRUST services. WebTrust has to do with E-commerce and SysTrust has to do with Information Systems.

Hint 11

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Front 12

WHAT ARE PROSPECTIVE FINANCIAL STATEMENTS?

Back 12

Contain financial information made up of either financial forecasts or financial projections.

Hint 12

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Front 13

WHAT ARE FINANCIAL FORECASTS?

Back 13

Prospective financial statements that present an entity's expected financial position, results of operations, and cash flows. Based on assumptions reflecting conditions the responsible party EXPECTS TO EXIST and the course of action it EXPECTS TO TAKE. Can be made available for general use.

Hint 13

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Front 14

WHAT ARE FINANCIAL PROJECTIONS?

Back 14

Prospective financial statements that present, given one or more hypothetical assumptions, an entity's expected financial position, results or expected conditions. Not to be made available for general use if an accountant's report is involved.

Hint 14

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Front 15

FINANCIAL FORECASTS VS FINANCIAL PROJECTIONS

Back 15

Fin Forecasts can be made available for General use, but Fin Projections are not to be made available for general use if an accountant's report is involved. Any type of prospective financial statement can be issued for limited use.

Hint 15

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Front 16

WHAT ARE SAS 70 REPORTS AND WHY ARE THEY USED

Back 16

Provides guidance to service auditors when assessing the internal controls of a service organization and issuing a service auditor’s report. SAS 70 also provides guidance to auditors of financial statements of an entity that uses one or more service organizations. Service organizations are typically entities that provide outsourcing services that impact the control environment of their customers. Used to process payroll, handle dividend distribution, handle investments

Hint 16

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Front 17

WHAT MUST AUDITORS DO TO USE THE SAS 70 REPORTS AS EVIDENCE IN THEIR TESTS OF CONTROLS?

Back 17

SERVICE ORGANIZATIONS: They must ensure that those controls at the service provider are adequate. Providers engage auditors to issue a special report concerning the controls. The reports may be based on controls placed in operation (type 1) and may report on tests of effectiveness (type 2)

Hint 17

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Front 18

WHAT IS THE DIFFERENCE IN THE LEVELS OF ASSURANCE BETWEEN COMPILATIONS, REVIEWS AND AUDITS?

Back 18

- Compilations have NO assurance
- Reviews have LIMITED assurance
- Audits have REASONABLE assurance

Hint 18

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Front 19

WHAT IS A COMPILATION?

Back 19

Presenting, in the form of financial statements, information that is the representation of management or owners without undertaking to express any assurance on the statements.
3 forms:
1. Compilation with Full Disclosure
2. Compilation that Omits Substantially All Disclosures
3. Compilation when the Accountant is Not Independent
(uses the word Compilation)

Hint 19

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Front 20

WHAT IS A REVIEW?

Back 20

The performance of inquiry and analytical procedures to provide the accountant with a reasonable basis for expressing limited assurance that NO material modifications should be made to the statements in order for them to conform to GAAP or another comprehensive basis of accounting. (uses the word Inquiries)

Hint 20

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Front 21

WHAT DOES A REVIEW INVOLVE?

Back 21

1. Obtain knowledge of principles and practices of the industry
2. Obtain general understanding of entity's organization
3. Ask entity's personnel about important matters
4. Perform analytical procedures
5. Read financial statements to see if they conform to GAAP
6. Obtain reports from other accountants
7. Obtain representation letter from management

Hint 21

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Front 22

WHAT IS AN INTERNAL AUDIT?

Back 22

An independent, objective, assurance and consulting activity designed to add value and improve an organization's operations. Helps organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve effectiveness of risk management, control, and governance processes.

Hint 22

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Front 23

WHAT IS THE GUIDANCE FOR INTERNAL AUDITING?

Back 23

MANDATORY -
- Definition of internal auditing
- Code of ethics
- Standards
STRONGLY RECOMMENDED GUIDANCE
- Position papers
- Practice advisories
- Practice guides

Hint 23

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Front 24

WHAT HELPS INTERNAL AUDITORS BE INDEPENDENT?

Back 24

Organizational independence is achieved through REPORTING STRUCTURES. Typically, internal audit depts report directly to the audit committee.
- Personal Independence is achieved through INDIVIDUAL ATTITUDES.

Hint 24

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Front 25

WHAT ARE THE DIFFERENCES/SIMILARITIES BETWEEN INTERNAL AND EXTERNAL AUDITS (AUDITORS)?

Back 25

One purpose of Internal Audit: ADDS VALUE
- Some of the work performed by internal auditors is directly relevant to the work of the external (independent) auditor.
- Before relying on the work of the internal auditors, the external auditor must evaluate internal auditors' objectivity and competence.

Hint 25

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Front 26

DIFFERENCES BETWEEN EXTERNAL AND INTERNAL AUDITORS

Back 26

External - rely on materiality, and not concerned with auditing a particular area in great depth
Internal - assist management and board of directors in evaluating and managing risk, assess compliance with laws and regulations, asses operational efficiency, and perform detailed financial audits of specific areas.

Hint 26

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Front 27

WHAT ARE THE GENERAL STANDARDS FOR AN ATTESTATION?

Back 27

1. Adequate technical training
2. Adequate domain knowledge (fin stmts)
3. Verifiable assertion
4. Independence
5. Due professional care

Hint 27

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Front 28

WHAT ARE THE STANDARDS OF FIELDWORK FOR AN ATTESTATION?

Back 28

1. Planning and supervision
2. (no Internal control like in an audit)
3. Sufficient appropriate evidence

Hint 28

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Front 29

WHAT ARE THE REPORTING STANDARDS FOR AN ATTESTATION?

Back 29

1. Identify assertion
2. State conclusion in accordance with criteria
3. (no Consistency)
4. (no Adequate disclosures)
5. State reservations
6. Extent of use

Hint 29

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