Card Set Information
Making something certain
or overcoming doubt
To state that something is true, especially in a formal written statement
A Methodical examination and review
Ethical Standards for
audits of public companies
accounting and review standards for engagements involving
non public companies
State Boards of Accountancy
License CPA's and CPA firms to practice in jurisdictions
Regulation of the Public Accounting Profession
Adequate Technical training and proficency
Independence in mental attitude is to be maintained
Due professional care
Standards of Field Work
Auditor must adequately plan and properly supervise work
Auditor must obtain a sufficient understanding of entity, including assess risk of material misstatement
Auditor must obtain audit evidence to afford a reasonable basis for the opinion
Standards of Reporting
State whether the FS are presented in accordance with
ID circumstances were principles have
not been consistently applied
are adequate unless otherwise stated in report
Report should clearly state the
responsibility being assumed by the auditors
, by expressing an opinion or stating that one can not be expressed
Terminology in Auditing Standards
Auditors Responsibility for detecting Fraud and Error-Part 1
Asses the risk of errors and fraud that may cause the FS to contain a material misstatement.
Obtain information to assess the inherent risks and fraud risks:
Information about the company and its environment
Discussion among audit team members
Inquires of Management and others
Planning Analytical procedures
Auditors Responsibility for detecting Fraud and Error-Part 2
Based on Assesment
plan and perform the audit
Exercise Due care
proper degree of professional skepticism
to achieve reasonable assurance that material misstatement due to error or fraud will be detected.
Auditors Responsibility For the Detection of Illegal Acts
Those that can have a direct and material effect on FS amounts
an audit obtains reasonable assurance of detecting these types of illegal acts.
Those with an Indirect Effect on FS
audit doesn't provide assurance indirect illegal acts will be uncovered
The Standard Auditors Report for Non Public Companies
The Standard Auditors Report- Introductory Paragraph
audited the accompanying
BS of XYZ Co....
These financial statements are t
he responsibility of the companies management
express an opinion
The Standard Auditors Report- Scope Paragraph
Should say things Like:
in accordance with auditing standards
obtain reasonable assurance
free from material misstatement
examining on test basis
assessing the accounting principles
audit provides a reasonable basis for our opinion
The Standar Auditors Report- Opinion Paragraph
, the financial statements referred to above
present fairly, in all material respects
results ended in conformity with a
ccounting principles generally accepted
in the USA.
FS follow GAAP and the auditor does not add explanatory language
Scope limitation or departure from GAAP
Ex: departure from GAAP so significant that the FS as a whole are misleading
Disclaimer of Opinion
Ex: Unable to determine an opinion due to a very significant scope limitation
Public Company Audit Report
Refers to standards of the PCAOB rather than GAAS
Includes a fourth paragraph that reports internal control
City and State of audit firm must be incuded
Applicability of SSAE's
Standards for Attestation Services
Establish the auditing standards for other audit/attest services
Quality Control In the Public Accounting Firm
Leadership responsibility for quality within the firm
Tone at the top
QC Element 1: Leadership Responsibilities for quality within the firm
recognizes that quality is essential in performing engagemnts and recognizes the need to
Perform work that complies with professional standards and regulatory and legal requriements
Issue reports that are appropriate in circumstances.
QC Element 2: Relevant Ethical Requirements
Ex: At least annually, the firm should obtain written confirmation of compliance with its indpendence poices from all firm personnel who are required to be independent.
QC Element 3: Acceptance and Continuance
Firm will continue relationships where the firm
to perform the engagement
Can Comply with Legal and ethical requirements.
Ex: firm will get background before taking on a client.
QC Element 4: Human Resources
Firm has personal with capabilities and commitment to ethical Principles to perform engagements in accordance to professional standards, regs and legal requirements.
QC Element 5: Engagement Performance
Design plicies and procedures that address the tracking of progress of each engagement.
QC Element 6: Monitoring
Working papers, reports and client financial statements
are reviewed to assess compliance
with firms quality control policy and procedures.
Quality Control Procedures
Not specifired by AICPA
Depend on firm size
to provide assurance that the CPA firm meets its responsibilities.
Regulation of Public Companies
registration of public accounting firms that audit public companies
conduct inspections of practice of registerd pub. Acctg frims.
Regulations of Non-Public Companies
AICPA&State Boards of Accountancy
Peer review of nonpublic practice segments
5 members-only two may be CPA's
Members Appointed by the SEC and may serve no more that two five-year terms
All accounting firms that audit SEC registrants must register with PCAOB
PCAOB can impose monetary damages, suspend firms or make referrals to Justice Department
by PCAOB staff
Evaluate performance of sample audit and review engagments
Wirtten report to SEC
, part of which is made public
Members of AICPA
Conducted by CPA's or other CPA Firms
Two types of peer reviews
1. System Review-study of CPA firms system of quality control, by sampling
2. Engagement Review-Less in scope than system review.
: pass, pass with deficiencies, or fail
International Audit Report
Expanded description of managements responsibility
Enhanced Explanation of the Audit process
Report may indicate that the financial statements comply with the provisions of the country's relevant statues or laws
Must include city of auditors office
Signed by auditor or the audit firm or both.