an introduction to assurance and financial statement auditing
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
|
|
||||
|---|---|---|---|---|---|
| charge too much | existence
🗑
|
||||
| charge too little | completeness
🗑
|
||||
| why do we need audits? | Humans are prone to error, accuracy of financial statements, people play with numbers to make them in their favor, boost investor's confidence
🗑
|
||||
| public company | a company that sells its stocks or bonds to the public, giving the public a valid interest in the proper use, or stewasrdship, over the company's resources
🗑
|
||||
| managers= | Agents
🗑
|
||||
| Stocksholders= | principals
🗑
|
||||
| Auditors add ______ to the information from the agent to the principal | Credibility
🗑
|
||||
| can not implement internal controls but can... | recommend them.
🗑
|
||||
| Materiality | the magnitude of a misstatement that would likely change the judgment of a reasonable financial statement user. (an amount financial statements would be misstated wo change opinion to invest of a stockholder's interest)
🗑
|
||||
| Audit Risk | the risk that the auditor will unknowingly fail to modify the audit opinion when a material misstatement exists (more testing, risk goes down)
🗑
|
||||
| Why is audit risk important? | want risk to be small, balance amount of risk your willing to accept, impacts amount of testing to do
🗑
|
||||
| Reasonable Assurance | implies some risk that a material misstatement could be present in the financial statements and the auditor will fail to detect it.
🗑
|
||||
| Auditing standards | serve as the guidelines for and measures of the quality of the auditor's performance
🗑
|
||||
| PCAOB | audit auditors, regulate all audits of all publicly traded companies
🗑
|
||||
| Auditing Standards board | all non public companies
🗑
|
||||
| GAAS | Generally Accepted Auditing Standards
🗑
|
||||
| Types of GAAS | 1. General Standards, 2. Fieldwork Standards, 3. Reporting Standards
🗑
|
||||
| General Standards | TIP
🗑
|
||||
| TIP | Training a proficiency are adequate as an auditor; Independence in attitude; due Professional care in planning and performing
🗑
|
||||
| adequate training and proficiency as an auditor | know what you're doing
🗑
|
||||
| Independence in attitude | don't be influenced by someone else's opinion
🗑
|
||||
| due Professional care in planning and performing | put thought into before audit and during (JUDGMENT)
🗑
|
||||
| Fieldwork Standards | PIE
🗑
|
||||
| PIE | planned and assistants supervised; Internal controls understood to understand the nature, timing and extent of the audit; EVIDENCE that is sufficient and competent
🗑
|
||||
| Reporting standards | ACED
🗑
|
||||
| ACED | Accordance with GAAP; principles not CONSISTENTLY applied; Express and opinion; adequate DISCLOSURE
🗑
|
||||
| identify when principles have not been consistently applied example | LIFO --> FIFO
🗑
|
||||
| Adequate DISCLOSURE | financial statements as a whole: BS, IS, CFS, FOOTNOTES
🗑
|
||||
| What types of things do you need to know in audit planning? | Type of audit (public vs. private); management's attitude; company risk; who is performing the audit; scope of the audit; Internal Controls; Company Background; Past problems; Industry
🗑
|
||||
| materiality is a matter of | professional judgement
🗑
|
||||
| unqualified audit report | a "clean" audit report, indicating the auditor's opinion that a client's financial statements are fairly presented in accordance with agreed-upon criteria
🗑
|
||||
| assurance services | independent professional services that improve the quality of information, or its context, for decision makers. Encompasses attest services and financial statement audits
🗑
|
||||
| attest | a service when a practitioner is engaged to issue a report on subject matter, or an assertion about subject matter, that is the responsibility of another part.
🗑
|
||||
| audit evidence | all the information used by the auditor in arriving at the conclusions on which the audit opinion is based; includes the information contained in the accounting records underlying the financial statements and other information.
🗑
|
||||
| auditing | a systematic process of objectively obtaining and evaluating evidence regarding assertions abouteconomic actions andevents to ascertain thedegree ofcorrespondence between thoseassertions andestablished criteriaand communicating results to interested users
🗑
|
||||
| financial statement assertions | expressed or implied representations by management that are reflected in the financial statement components
🗑
|
||||
| information asymetry | the concept that the manager generally has more information about the true financial position and results of operations of the entity than the absentee owner does
🗑
|
||||
| An independent audit aids in the communication of economic data because the audit | lends credibility to the financial statements
🗑
|
||||
| best describes the reson why an independent auditor is often retained to report on financial statements | different interests may exist between the entity preparing the statements and the persons using the statements, and thus outside assurance in needed to enhance the credibility of the statements
🗑
|
||||
| Relationships among auditing, attest, and assurance services | Auditing is a type of assurance service (Assurance-attest-audit)
🗑
|
||||
| attest and assurance services are not | financial statement auditing is a form of attest service but not of assurance (WRONG)
🗑
|
||||
| For what primary purpose does the auditor obtain an understanding of the entity and its environment? | to plan the audit and determine the scope of audit procedures to be performed
🗑
|
||||
| Describe the role of materiality in a financial statement audit | the lower the level at which the auditor assesses materiality, the greater the amount of evidence the auditor must gather
🗑
|
||||
| Most important reason for an auditor to gain an understanding of an audit client's system of internal control over financial reporting | Understanding a client's system of internal control can help the auditor assess risk and identify areas where financial statement misstatements might be more likely
🗑
|
||||
| Preplanning the audit includes | Understanding the client and the client's industry; determining audit engagtement team requirements, ensuring the independence of the audit team and audit firm
🗑
|
||||
| the auditing standards used to guide the conduct of the audit are | implicitly referred to in the opinion paragraph of the auditor's standard report
🗑
|
||||
| a client has used an inappropriate method of accounting for its pension liability on the balance sheet. The resulting misstatement is moderately material, but the auditor does not consider it to be pervasive. the client won't alter acct treatment. | Issue Qualified opinion due to departure form GAAP
🗑
|
||||
| 5 components of business processes | financing, purchasing, inventory management, revenue,
🗑
|
||||
| place the events of the last several years in sequence | increased consulting services to audit clients, enron and other scandals, sarbanes-oxley act, prohibition of morst sonsulting work for audit clients, establishment of PCAOB
🗑
|
||||
| relationship between business objectives, strategies, processes, controls and transactions | to achieve its objectives, a business formulates strategies and implements processes, which are carreid out through business transactions. the entity's information and internal control systems must be designed to ensure that the transactions are proper
🗑
|
||||
| asb vs. pcaob | asb= nonpublic company audits; pcaob= public company audits
🗑
|
||||
| general character of the three generally accepted auditing standards classified as standars of field work | criteria for audit planning and evidence gathering
🗑
|
||||
| management's and the external auditor's respective levels of responsibility for a public company's financial statements | management has the primary responsibility to ensure that the comany's financial statemetns are prepared in accordance with GAAP, and the auditor provides reasonable assurance that the statements are free of material misstatement
🗑
|
||||
| The Public Accounting Oversight Board | is a quasi-governmental organization that has legal authority to set auditing standards for audits of public companies
🗑
|
||||
| not a part of the role of internal auditor | providing reports on the reliability of financial statements to investors and creditors
🗑
|
||||
| operational auditing is oriented primarily toward | future improvementes to accomplish the goals of management
🗑
|
||||
| considered an assurance serive engagement | expressing an opinion about the reliability of a client's financial statements
🗑
|
Review the information in the table. When you are ready to quiz yourself you can hide individual columns or the entire table. Then you can click on the empty cells to reveal the answer. Try to recall what will be displayed before clicking the empty cell.
To hide a column, click on the column name.
To hide the entire table, click on the "Hide All" button.
You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
If you know all the data on any row, you can temporarily remove it by tapping the trash can to the right of the row.
To hide a column, click on the column name.
To hide the entire table, click on the "Hide All" button.
You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
If you know all the data on any row, you can temporarily remove it by tapping the trash can to the right of the row.
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Created by:
12633728
Popular Accounting sets