Auditing Principles - Professional Standards

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Auditing Principles - Professional Standards
2014-09-14 15:32:25
Auditing Principles Professional Standards

Auditing Principles - Professional Standards
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  1. When a CPA firm completes an audit of a nonpublic business and issues a report, does
    it express an opinion on the client’s accounting records, financial statements,
    or both
    Only financial statements. Per GAAS
  2. What is a material amount from the perspective of auditors? Give an example of how that
    may differ based on the nature of the item
    Sufficiently important to influence decisions made by reasonable users of financial statements

    Size matter!!
  3. What are the duties and responsibilities of the Public Company Accounting Oversight
    Registration of public accounting firms that audit public companies

    • Conduct inspections of public company practice of registered public
    • accounting firms

    Establishing ethical and professional standards
  4. Which of the following organizations can revoke the right of an individual to practice as a CPA?
    The applicable state board of accountancy
  5. The AICPA over time has played an important role in standards setting.
    Which of the following standards are currently established by the AICPA?
    Auditing standards applicable to audits ofnonpublic companies
  6. Which of the following does the FASB consider a source of non-authoritative guidance for use when there is no authoritative guidance available?
    FASB concepts statements
  7. Financial statements audits performed under PCAOB requirements are designed to provide which types of assurance with respect the detection of material misstatements due to errors or fraud?
    Reasonable (Yes) Absolute (No)
  8. A basic objective of a CPA firm is to provide professional services
    that conform with professional standards. Reasonable assurance of achieving
    this basic objective is provide through:
    A system of quality control
  9. Which of the following is not explicitly included in a standard report
    for a nonpublic company?
    The internal control of the client was satisfactory
  10. What is explicitly included in a standard report for a nonpublic company?
    The CPA’s opinion that the financial statements comply with GAAP

    An identification of the financial statements audited

    That GAAP standards were followed during audit
  11. The general group of the 10 PCAOB Auditing Standards requires that:
    Auditors maintain an independent attitude
  12. Which AICPA quality control standard would most likely be satisfied
    when a CPA firm maintains records indicating which partners or employees of the
    firm were previously employed by the CPA firm’s clients?
    Relevant ethical requirements
  13. An audit provides reasonable assurance of detecting material:
    Fraudulent financial reporting (YES) Misappropriation of Assets (YES)
  14. Which of the following is not included in an integrated audit report on
    the financial statements of a public company?
    The report states that the audit was performed in accordance with AICPAstandards
  15. Included in an integrated audit report on the financial statements of a
    public company?
    Report indicates that the financial statements are the responsibility of management

    Report indicates that the auditors have also audited the effectiveness of the company’s internal control

    Report is signed in the name of the CPA firm
  16. Audit firms that are subject to inspections by the PCAOB staff include
    Audit firms that are registered with the PCAOB
  17. Which of the following is not a difference noted when comparing the
    AICAP audit report to the international audit report?
    The international audit report includes an opinion of internal control
  18. GAAS
    Generally accepted auditing standards
  19. GAAS Principles
    Purpose of audit

    Premise of audit

    Personal responsibility of auditor

    Auditor actions in performing audit

    Reporting results of audit
  20. Purpose
    Provide an opinion on financial statements
  21. Premise
    Client prepares fin statements and provide auditor with needed info
  22. Personal Responsibility
    Appropriate competence and capabilities and professional skepticism
  23. Auditors actions
    obtain reasonable assurance that stmnts are free from error or fraud
  24. Reporting Results
    express in written report the opinion on findings
  25. GAAS 10 Standards
    General (1-3)

    Standards for fieldwork (1-3)

    Reporting Standards (1-4)
  26. General Standards
    1-Adequate technical training

    2-Independent mental attitude

    3-Due professional care is exercised
  27. Standards of field work
    1-Adequately plan and properly supervise work

    2-Obtain sufficient understanding of client

    3-Obtain sufficient audit evidence for opinion
  28. Reporting Standards
    1-Financial statements presented with GAAP

    2-Id principles not consistently applied

    3-Info disclosures adequate unless otherwise stated

    4-Report should clearly state degree of responsibility of auditors
  29. Terminology - Unconditional Responsibillity
    Must, Shall, is required

    Auditor must fulfill
  30. Terminology - Presumptively Mandatory

    Auditor must unless alt actions were sufficient and documented
  31. Terminology - Responsibility to Consider
    May, Might, Could

    Auditor should consider
  32. GAAS Hierarchy

    2-Interpretive Publication(Guidance papers)

    3-Other Auditing Publications(Textbook)
  33. Fraud
    • Inherent - built in risk
    • Fraud - intentional acts
  34. Standard Auditors Report for Non-Public Companies
    • Title
    • Addresse
    • Content Sections
    • Signature(Firm Name)
    • City and State of office issuing  audit report
    • Date
  35. Content Sections of Report
    • Introductory (we have audited)
    • Management Responsibility 
    • Auditor Responsibility
    • Opinion Paragraph (Must state GAAP)
  36. Materiality
    Sufficiently important to influence decisions made by reasonable users of financial statements

  37. Other type of auditor reports
    Unmodified-good(lack of departure from gaap)

    Qualified-bad-(departure from gaap)

    Adverse-bad(significant departure from gaap)

    Disclaimer-unable to arrive at an opinion
  38. Public Company Audit Report
    Title (Report of Registered Independent Public Accounting Firm)

    Refers to PCAOB rather than GAAS

    Includes paragraph that refers to report on internal control

    More Brief than nonpublic
  39. Performa financial info
    as is report
  40. Elements of Quality Control
    • Leadership top down
    • Relevant ethical
    • Acceptance and continuance of clients
    • Human resources
    • Engagement performance
    • Monitoring
  41. PCAOB members
    • 2 CPA
    • 3 Attorney
    • =5 total

    cannot serve more than two 5 year terms
  42. PCAOB inspections frequency
    • every year for greater than 100
    • every 3 years for less than 100
  43. PCAOB inspections focus
    evaluate performance of sample of individual audit

    report - pass/fail and written to SEC part public part confidential (deficiencies)
  44. Peer Review
    System Review - study of CPA system 

    Engagement Review - sample CPA work (less in scope than system review)

    Report - pass, fail or pass with deficiencies