Chapter 1 - Additional Slides

Question 1

What is an attest engagement? What are example?

Answer 1

When the assertions are made explicitly in writing by the accountable party (the asserter), the resulting assurance engagement is called an attest engagement.

Financial statements and notes.

Question 2

What is a direct reporting engagement? What is an example?

Answer 2

If there is no explicit assertions made in writing by the accountable party, the PA needs to develop the explicit standards of performance themselves, resulting in a direct reporting engagement.

A government auditor assigned to determine whether the goals of the environmental protection agency are met by the agency

Question 3

What is the general standard (audit)

Answer 3

The auditor should comply with relevant professional ethical requirements relating to audit engagement. - Competence, objectivity, due professional care.

Question 4

What are the GAAS (Audit) Examination Standards?

Answer 4

1. The auditor should conduct an audit in accordance with Canadian Audit Standards (CAS)
2. In determining the audit procedures to perform in accord with CA’s “scope of an audit”, the auditor should comply with each CAS relevant to the audit.
3. The auditor should obtain reasonable assurance that the financial statements taken as a whole are free from material misstatements, whether due to fraud or error.
4. The auditor should plan and perform an audit to reduce audit risk to an acceptably low level that is consistent with the objective of the audit.

Question 5

What are the 5 parts of the assurance engagement general standards?

Answer 5

1. Practitioner should have a reasonable basis for believing the engagement can be completed in accordance with assurance standards.
2. Management must acknowledge the responsibility for the subject matter
3. Adequate proficiency to perform the engagement and adequate knowledge of the subject matter
4. Engagement is performed with due care and an objective state of mind.
5. Criteria for evaluating the subject matter should be identified or developed.

Question 6

T or F: Review engagements have their own standards

If the above is true, what are the 3 standards and what is the code for the standards

Answer 6

True

Review engagement general standards
Review engagement examination standards
Review engagement reporting standards.

CSRE 2400

Question 7

What is Section 7060?

Answer 7

Auditor Review of Interim Financial Statements and Other Financial Standards

Question 8

Which CAS standards describes planning and supervision.

What are 4 items required to be done by auditors under this standard?

Answer 8

CAS 300 highlights planning and supervision.
- Prepare the audit program and supervise the audit work
- Obtain knowledge of the audits business
- Dealing with differences of opinion among the audit firms own personnel.
- Timing

Question 9

What does CAS require auditors to do with the clients internal controls?

What does good internal controls lead to?

Answer 9

• CAS requires understanding of the auditees system of internal controls
• Good internal controls reduce the probability of errors or irregularities in the financial statements.

Question 10

What does CAS 200.17 describe?

What is the definition of sufficient audit evidence in accordance with CAS 200.17?

Answer 10

It describes the need for sufficient and appropriate audit evidence in forming conclusions.

To obtain reasonable assurance, the auditor shall obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level and thereby enable the auditor to draw reasonable conclusions on which to base the auditors opinion.

Question 11

What are the two characteristics of appropriate evidence? Does the standards require absolute evidence?

Answer 11

They are reliable and relevant.

No, the standards only require sufficient.

Question 12

What are the audit reporting standards?

Answer 12

1. The report should identify the financial statements and distinguish between the responsibilities of management and the responsibilities of the auditor.
2. The auditor should determine whether the financial reporting framework adopted by management in preparing the financial statements are acceptable.
3. The auditor should refer to CAS 700, 701, 705, and 706 when expressing an opinion on a complete set of general purpose financial statements in accordance with a financial reporting framework that is designed to achieve fair presentation.

Question 13

What is the general topics of CAS
- 700
-701
-705
-706

Answer 13

700 (Forming an opinion)
701 (New standards - KAM)
705 - Modification of an opinion
706 (EOM and OM paragraphs)

Question 14

What does an audit opinion imply?

What ethical principle does an individual need to assess evaluate disclosure?

What happens if the report has a lack of disclosure?

Answer 14

An audit opinion implies that there is adequate disclosure and all important information required by the users is included.

• Auditors need professional judgement
• It is a departure from GAAP and may require a qualified report.

Question 15

What is CAS 200.15?

Answer 15

Professional skepticism. Requires the auditor to plan and perform an audit with professional skepticism recognizing that circumstances may exist that cause the financial statement to be materially misstated.

Question 16

What actions would an auditor take to ensure professional skepticism is exercised? What are two considerations?

Answer 16

The auditor will questions all assertions made by management orally, written, or combined in the accounting records.

Consider:
1. Balanced by respecting the integrity of management
2. Results from the potential conflict of interest between ,management and users of the financial statement

Question 17

What does critical thinking consider? Why is critical thinking necessary?

Answer 17

Critical thinking considers how, when, and whom management is trying to persuade in making assertions.
Necessary in evaluating the appropriateness of how the assertions are presented to users of the financial information.

Question 18

What are the five six steps of the audit process? What step are the first 5 bundled into?

Answer 18

1. Plan for an effective audit engagement
2. Check preconditions for an audit
3. Assess ethical requirements and compliance like independence.
4. Determine if you are going to accept and retain the client
5. Establish an agreement of the terms (Engagement letter)
6. Plan the audit

• This is really the client acceptance stage where we perform risk assessments.

Question 19

What are the different items to consider when planning?

Answer 19

1. Assessing materiality
2. Determine audit risk
3. Determine inherent and control risks
4. Decide on the mix of testing procedures for the controls and the substantive events and accounts.

Question 20

What are the last 3 of the audit process?

Answer 20

7. Perform the tests and evaluate results
8. Form an opinion (Conclude)
9. Issue an appropriate report.