In the U.S.A, who issues auditing standards applicable to audits of private companies and other entities known as nonissuers?
AICPA’s Auditing Standards Board.
What is meant by Generally Accepted Auditing Standards (GAAS) under the clarified auditing standards?
The Statements on Auditing Standards issued by the AICPA’s Auditing Standards Board.
In the U.S.A, who issues auditing standards applicable to audits of governmental entities?
U.S. Government Accountability Office (GAO).
Who is primarily responsible for the fairness of an entity’s financial statements?
Management. The financial statements are the representation of management.
What is the auditor’s primary role?
To provide an impartial (independent) assessment of the reliability of management’s financial statements.
In the U.S.A, who issues auditing standards applicable to audits of public companies (also known as issuers)?
Public Company Accounting Oversight Board (PCAOB).
Define “Generally Accepted Accounting Principles (GAAP).”
The standards by which the quality of the financial statements is judged.
List some benefits of an audit to a private company (also known as a nonissuer).
- More favorable cost of capital; 2. Insights into adequacy of internal controls; 3. Benchmark an entity’s performance with other similar entities.
Identify the topics associated with the four reporting standards for Generally Accepted Auditing Standards (GAAS), which are still applicable to the PCAOB’s auditing standards.
- GAAP 2. Consistency 3. Disclosure 4. Opinion.
Identify the topics associated with the three field work standards formerly known as Generally Accepted Auditing Standards (GAAS), which are still applicable to the PCAOB’s auditing standards.
- Planning and supervision 2. Internal control 3. Evidence.
Identify the 4 primary themes associated with the AICPA’s 7 principles for audit standard setting.
- Purpose/premise 2. Responsibilities 3. Performance 4. Reporting
Identify the topics associated with the three general standards formerly known as Generally Accepted Auditing Standards (GAAS), which are still applicable to the PCAOB’s auditing standards.
- Training 2. Independence 3. Due professional care.
Identify the topics associated with each of the AICPA’s 7 principles for audit standard setting.
- Purpose 2. Premise 3. Responsibilities 4. Reasonable assurance 5. Performance requirements to achieve reasonable assurance 6. Inherent limitations 7. Reporting
What type of professional requirement is indicated by the word must in AICPA professional standards?
Unconditional requirement.
What is meant by the term interpretive publications?
These consist of the appendices to the SASs, auditing interpretations of the SASs, the AICPA Audit and Accounting Guides, and AICPA auditing Statements of Position.
What type of professional requirement is indicated by the word should in AICPA professional standards?
Presumptively mandatory requirement.
Services for which a CPA firm is required to have a sytem of quality control.
Audits, attestation, compilation and review services. (Not applicable to tax or consulting services.)
Who is responsible for the administration of a quality control system?
May be vested in one person but everyone shares responsibility.
What is meant by the term engagement quality control review?
A process designed to provide an objective evaluation, before the report is released, of the significant judgments the engagement team made and the conclusions it reached. (Such a process is only for those audit engagements for which the firm has determined that an engagement quality control review is required, and is not applicable to all audits.)
List the six elements of a quality control system.
Leadership responsibilities for quality within the firm Relevant ethical requirements (especially independence) Acceptance and continuance of client relationships Human resources Engagement performance Monitoring.
What are some considerations that must be given by the auditor during the planning phase of the audit?
- Determine whether to accept or continue the audit engagement 2. Assess the risk of material misstatement 3. Evaluate requirements for staffing and supervision 4. Prepare the required written audit program (also called the “audit plan”).
List the two types of test of details.
- Tests of ending balances 2. Tests of transactions.
List the four basic steps in the audit process.
- Planning 2. Internal Control Consideration 3. Substantive Audit Procedures 4. Reporting.
List the two types of substantive audit procedures.
- Analytical Procedures 2. Tests of details.
