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Exam 1
Review
| Question | Answer |
|---|---|
| Assurance Services | Professional services that enhance the quality of information, or its context, for decision makers. Many assurance services involve some form of attestation. |
| Attest | to provide assurance as to its reliability |
| Attestation Engagement | An examination, review, or agreed-upon procedures engagement performed under the attestation standards related to subject matter or an assertion that is the responsibility of another party. |
| Assertion | A representation or declaration made by the responsible party, typically management of the entity. |
| Suitable Criteria | The standards or benchmarks used to measure & present the subject matter & against which the CPA evaluates the subject matter; criteria that are established/developed by groups composed of experts that follow due process procedures |
| Suitable Criteria attirbutes | objectivity, measurability, completeness, and relevance. |
| Financial Reporting Framework | A set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the financial statements |
| Generally Accepted Accounting Principles | Concepts or standards established by such authoritative bodies as the FASB and the GASB and accepted by the accounting profession as essential to proper financial reporting. |
| Applicable Financial Reporting Framework | The financial reporting framework adopted by management & those charged with governance in the preparation of the financial statements that are acceptable in view of the nature of the entity & the objectives of the financial statements |
| Examination | An attest engagement designed to provide the highest level of assurance that CPAs provide on subject matter |
| Audit | an examination of financial statements |
| Review | An engagement designed to express limited assurance relating to subject matter or an assertion; generally limited to inquiries & analytical procedures |
| Agreed-upon Procedures Engagement | An attestation engagement in which a practitioner performs specific procedures on subject matter and reports the findings without providing an opinion or a conclusion on it. |
| 3 Types of Engagement | Examination, Review, Agreed-Upon Procedures |
| Highest level of Assurance Provided | Examination |
| Limited level of Assurance Provided | Review |
| Summary of findings of Assurance Provided | Agreed-upon Procedures |
| Other assurance services | Fraud & illegal act related services, Customer satisfaction measures, XBRL services |
| Attestation Services | Audits of FS, examinations of internal control, Trust services (SysTrust), reviews of FS or other info, agreed-upon procedures engagements, cybersecurity engagements, etc. |
| Assurance service relationships | Attestation Services, Other Assurance Services |
| Nonassurance services relationships | Tax services, Management consulting services, Others |
| Management Consulting Services | Fraud investigations, info technology consulting, etc. |
| Other nonassurance services | Bookkeeping, other |
| United States v Arthur Young | The SC case that established the overall, legal responsibility of accountants who perform audits of a client |
| Key provision of US v Arthur Young | the concept that the audit profession serves as a watchdog, requiring complete independence from the client and fidelity to the public trust |
| Business risk (of the client) | The risk assumed by investors or creditors that is associated with the company’s survival and profitability. |
| Information risk | The risk that the information used by investors, creditors, and others to assess business risk is materially misstated. |
| Two risk aspects of risk banks related to customers | Business risk, Information risk |
| Corporate Governance | The rules, processes, and laws by which businesses are operated, regulated, and controlled |
| Primary concern of corporate governance | the nature and extent of accountability of people in the corporation and procedures to try to assure that the organization works in the best interests of its stakeholders |
| Audit Committee | A committee of a corporation’s board of directors that engages, compensates, & oversees the work of the independent auditors, monitors activities of the internal auditing staff, & intervenes in any disputes between management and the independent auditors |
| Members of the audit committee must be | independent directors (members of the BOD who do not also serve as corporate officers or have other relationships that might impair independence). |
| Fraud | Intentional misstatement of financial statements by management (fraudulent financial reporting), or theft of assets by employees (employee fraud) |
| Dodd-Frank Act | A U.S. federal law that increases federal government regulation of the financial industry |
| Financial Audit | An audit of the financial accounting information of an organization or segment of the organization. This may involve a complete set of financial statements or a portion of a statement |
| Audit of Financial Statements | An examination designed to provide an opinion, the CPA’s highest level of assurance that the financial statements follow generally accepted accounting principles, or another acceptable basis of accounting |
| Compliance Audit | An audit to measure the compliance of the organization with some established criteria (e.g., laws and regulations, or internal control policies and procedures) |
| Operational Audit | An analysis of a department or other unit of a business or governmental organization to measure the effectiveness and efficiency of operations |
| Integrated Audit | An audit in which auditors, in addition to an opinion on the financial statements, express an opinion on the effectiveness of a company’s internal control over financial reporting, in accordance with PCAOB AS 2201 |
| Market capital threshold for integrated audit | $75,000,000 |
| American Institute of Certified Public Accountants | The national professional organization of CPAs engaged in promoting high professional standards to ensure that CPAs serve the public interest |
| Auditing Standards Board (ASB) | The AICPA’s senior committee for auditing, attestation, and quality control applicable to the performance and issuance of audit and attestation reports for nonpublic companies (nonissuers) |
| ASB | Auditing Standards Board |
| Statements of Auditing Standards (SASs) |
Created by:
marg995