Chapter 2 reading guide

Question 1

What is CPA Canada? What 5 roles does it play to ensure audit quality?

Answer 1

national organization that represents the accounting profession

key roles:
1. professional representation
2. standard setting support
3. education and qualification
4. ethical and professional conduct
5. enhancing audit quality

Question 2

What organization has the authority to set auditing standards in Canada?

Answer 2

AASB (auditing and assurance standards board), they make the CAS (canadian auditing standards)

Question 3

What is the purpose of the Canadian Public Accountability Board (CPAB)?

Answer 3

responsible for overseeing public accounting firms that audit reporting issuers (public companies). main goal to protect investing public and enhance confidence in the integirity of financial reporting.

Question 4

what are the key roles and fucntions of CPAB

Answer 4

1. audit firm registration - all public companies must be registered with CPAB
2. inspection and oversight
3. enforcement and remediation
   - impose restrictions or deregister firms
4. collaboration and audit quality improvement
   - works with CPA, AASB, promoting consistent, high quality audits

Question 5

CAS

Answer 5

Canadian auditing standards

Question 6

principles underlying the financial statement audit as per CAS 200

Answer 6

• purpose of the audit
• personal responsibilities
• performance responsibilities
• reporting responsibilities

Question 7

What are management’s responsibilities for the financial statements?

Answer 7

preparation of and fair presentation of financial statements

design, implement, and maintain internal controls

providing information and access to external auditors

Assess whether going concern is appropriate

Question 8

Personal Auditor responsibilities

Answer 8

professional competence and due care (formal education, adequate experience, continuing professional education)

maintain professional skepticism and judgement

compliance with ethical and independence requirements

Question 9

What four general requirements must be met in the PERFORMANCE of an audit before an
auditor can provide an opinion?

Answer 9

adequate planning and supervision

determine and apply materiality levels

Identify and assess risks of material misstatement

sufficient and appropriate evidence

Question 10

What is the purpose of a practice inspection? Who may conduct a practice inspection?

Answer 10

to ensure that CPAs in public practice comply with professional standards and to promote continous improvement on audit quality

CPA provincial bodies

Question 11

For a public accounting firm, what is meant by quality control?

Answer 11

system of policies and procedures designed to enable and support assurance engagement teams to perform quality engagements.

Question 12

What are the required elements of quality control for a public accounting firm, what must be ongoing?

Answer 12

1. governance and leadership
2. relevant ethical requirements
3. acceptance and continuance of client relationships and engagements
4. engagement performance
5. resources
6. infomration and communication

ongoing: monitoring and remidation

Question 13

What are 10 ways that public accountants are encouraged to conduct themselves
professionally (Figure 2-6)?

Answer 13

maintain integrity

demonstrate objectivity

exercise professional competence and due care

uphold confidentiality

exhibit professional behaviour

maintain independece

exercise professional judgement

apply professional judgement

comply with professional standards

promote the public interest