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2025 AUD CPA Exam Summary Notes Complete Audit & Attestation Review
Ethics, Risk, Evidence, Reports Becker-Aligned AICPA Blueprint Graded A+
SU | 1 |- |answersEngagement |Responsibilities Nature |of |an |Attest |Engagement |- |answersGives |an |assertion |or |opinion |on |the |material |of |the | responsible |party. |They |only |apply |to |a |CPA |operating |in |public |practice. |Some |services |require |a |CPA | to |disclaim |assurance. Attestation |Standards |- |answersGeneral |Standards |(training, |proficiency, |knowledge). |Should |be | measurable. |CPA |must |maintain |independence. Field |Work |Standards |(planning |and |supervision |& |sufficient |appropriate |evidence) Reporting |Standards |(Character |of |Engagement, |conclusion, |reservations, |restrictions) Acronym: |TIPSC |PE |CCRR Generally |Accepted |Auditing |Standards |and |the |International |Auditing |Standards |- |answersThe | General |Standards |were |codified |between |GAAS |and |the |AICPA's |ASB. |They |basically |converge |with | international |standards |but |still |differ |in |some |areas. Who |regulates |issuers |versus |non-issuer |audits? |- |answersIssuers |Audit |= |PCAOB, |Non-issuer |= |ASB | Standards Who |issues |Government |Audit |Standards? |- |answersThe |yellowbook |is |the |government |standards |and |is |issued |by |the |Governmental |Accountability |Office. |It |is |ASB |unless |modified. |Federal |Awards |may | require |a |single |audit |which |falls |under |the |OMB |Single |Audit |Act. Purpose |of |an |Audit |- |answersTo |provide |financial |statement |users |with |an |opinion |on |whether |the | financial |statements |are |presented |fairly |in |accordance |with |the |applicable |financial |reporting | framework |and |free |from |material |misstatement |whether |due |to |fraud |or |error. Professional |Skepticism |- |answersRequired |by |auditors |when |performing |an |audit. Audit |Risk |- |answersThe |risk |that |an |audit |will |not |detect |a |material |misstatement. |There |will |always | be |audit |risk, |but |the |goal |is |to |get |that |risk |as |close |to |zero |as |possible. Managements |Assertions |- |answersCAVE |CROC Completeness Accuracy Valuation |and |Allocation Existence
Cutoff Rights |and |Obligations Occurrence Classification |and |Understandability Assertions |about |Transactions |and |Events |(P&L |and |Cash |Flows) |- |answersOccurrence, |Completeness, | Accuracy, |Cutoff, |Classification Assertions |about |Account |Balances |(B/S) |- |answersExistence, |Rights |and |Obligations, |Completeness, | Valuation |and |Allocation Assertions |about |Presentation |and |Disclosure |(Mainly |notes |to |financial |statements) |- | answersOccurrence |and |Rights |and |Obligations, |Completeness, |Classification |and |Understandability, | Accuracy |and |Valuation PCAOB |Assertions |- |answersSame |as |above |but |they |do |not |explicitly |address |accuracy. Professional |Responsibilities |of |Auditors |- |answersMust |comply |with |unconditional |requirements |(i.e. | independence). Additional |Professional |Services |- |answersPreparation |(Non-attest), |Compilation |(Non-attest |but |must | be |independent), |Review |(Limited |assurance, |performed |by |inquiry |and |analytical |procedure), |agreed | upon |procedures |(attest, |must |be |independent), |Prospective |Financial |Statements, |Examinations |of | Internal |Control |over |Financial |Reporting Assurance |Services |- |answersAssurance |> |Attest |> |Audit Does |not |include |consulting |services Designed |to |enhance |decision |making Quality |Control |- |answersStarts |with |Tone |of |the |Top, |ethical |requirements, |and |other |procedures. | SOX |requires |a |second |auditor |to |sign |off |on |audits. |CEO |and |CFO |must |sign |off |on |financial | statements. SU | 2 |- |answersProfessional |Responsibilities Code |of |Professional |Conduct |- |Principles |- |answersResponsibilities, |Protect |public |interest, |act |with | integrity, |be |objective |and |independent, |act |with |due |professional |care, |follow |the |scope |and |nature | of |services Code |of |Professional |Conduct |- |Rules |- |answersFall |under |the |principles, |more |specific. Independence |- |answersMust |be |independence |in |mind |and |in |appearance. | Independence |is |impaired |if |a |COVERED |members |has |certain |interests |or |relationships: |Covered |= | attest |member, |partner |or |manager |who |provides |non-attest |services, |partner |in |office |where |lead | engagement |partner |practices.
Retain |working |papers | 7 |years. Offers |of |Employment |while |being |a |covered |member |- |answersThis |will |impair |independence What |is |the |cooling |off |period |to |work |for |a |client |in |a |key |position? |- |answers1 |Year SU | 3 |- |answersPlanning |and |Risk |Assessment Preconditions |- |answersManagement |uses |acceptable |financial |reporting |framework, |is |responsible |for |F/S |and |internal |control |and |to |give |auditors |necessary |documents. Client |Acceptance |- |answersAuditor |should |communicate |with |predecessor |auditor. |Auditor |should | NOT |take |audit |if |mgmt |lacks |integrity. Auditor |should |ask |why |they |want |to |change |auditors. Terms |of |Engagement |- |answersOnly |accept |if |preconditions |are |met |and |a |common |understanding |of |terms |has |been |reached. |Terms |= |Objective |and |Scope, |Responsibilities |of |auditor |and |mgmt, | inherent |limitations, |financial |reporting |framework, |expected |form |and |content |of |audit |reports. Summarized |in |Engagement |letter, |which |is |a |contract. Audit |Planning |- |answersContinues |throughout |audit. |Size, |complexity, |experience, |and |change |in | circumstances |affect |planning. |Audit |plan |should |be |in |accordance |with |GAAS. Risk |Assessment |Procedures |- |answersPerformed |to |obtain |understanding |of |entity |and |environment | and |to |assess |RMM |at |F/S |and |assertion |level. RMM |- |answersInherent |Risk |x |Control |Risk |= |RMM Audit |Risk |Formula |- |answersAR |= |(IR |x |CR) |x |DR IR |x |CR |= |RMM DR |= |Detection |Risk Bring |DR |lower |to |lower |AR |by |increasing |substantive |audit |procedures. |Can |also |lower |AR |by | lowering |CR |by |testing |a |clients |internal |controls. Materiality |- |answersProfessional |judgment |about |whether |or |not |a |misstatement |could |reasonable | influence |the |economic |decision |of |users |as |a |group. Planning |Materiality |- |answersDefined |at |three |levels |for |planning |purposes. |Financial |Statement | level, |account |balances, |and |classes |of |transactions. Performance |Materiality |- |answersSet |by |auditor |at |less |than |the |materiality |for |the |statements |as |a | whole. |It |is |an |adjustment |to |reduce |to |an |appropriately |low |level |the |probability |that |the |sum |of | uncorrected |and |undetected |misstatements |exceeds |the |applicable |materiality. Misstatements |- |answersThe |auditor |should |consider |uncorrected |misstatements |and |accumulate | identified |misstatements.
Types |of |Misstatements |- |answersFactual |(Real, |no |doubt) Judgmental |Misstatements |(unreasonable |accounting |estimate |or |inappropriate |accounting |policy) Projected |(auditor |estimate |of |the |misstatements |in |the |populations |based |on |audit |samples) Analytical |Procedures |- |answersStudies |plausible |relationships |among |financial |and |nonfinancial |data. | Develop |an |expectation |and |compare |to |management |balance. |Can |be |used |as |risk |assessment | (planning) |or |as |a |substantive |procedure |to |eliminate |the |need |for |substantive |tests |of |details |in |a | low |risk |account. Five |Sources |of |Information |for |Analytical |Procedures |- |answers1. |Financial |Information |from | Comparable |Prior |Periods
- |Anticipated |Results
- |Relationships |among |Elements |of |Financial |Information |(ex. |Sales |and |A/R |should |increase/decrease |by |similar |amounts)
- |Comparable |information |from |client's |industry
- |Relationships |between |financial |and |relevant |nonfinancial |information |(Ex. |# |of |hours |worked |and | labor |cost) When |are |analytical |procedures |alone |enough? |- |answersWhen |tests |of |details |may |not |indicate |a | potential |misstatement |(ex. |completeness |assertion) In |stable |environments |and |predictable |environments When |gathered |from |reliable |sources Consideration |of |Fraud |in |Audits |- |answersFraud |happens |when |there |is |pressure, |opportunity, |and | rationalization. | Fraud |is |intentional. Auditors |should |apply |analytical |procedures |to |Revenue |accounts. |Compare |recorded |sales |to | production |capacity. Fraud |Risk |- |answersIncreased |by |the |opportunity |for |management |override. |Increased |by |improper | revenue |recognition. Responses |to |Fraud |Risk |- |answersAssign |more |experienced |personnel. |Make |unpredictable |audit | procedure |choices. Auditor |responsibility |for |consideration |of |laws |and |regulations |- |answersShould |consider |law |and | regulations |recognized |as |having |a |direct |effect |on |the |determination |of |material |amounts |and | disclosures. | Other |indirect |effects |of |laws |may |be |material |in |the |future |due |to |penalties |or |the |business | continuing |as |a |going |concern. SU | 4 |- |answersStrategic |Planning |Issues
Control |Activities |for |Internal |Control |- |answersPolicies |and |procedures |helping |to |ensure |that | management's |directives |are |followed. |Authorization, |performance |reviews, |information |processing, | segregation |of |duties, |etc. Information |Systems |for |Internal |Control |- |answersIdentifies |and |records |all |valid |transactions, | classifies |properly, |measure |properly, |and |presents |and |discloses |properly. Monitoring |of |Control |- |answersThis |is |management's |responsibility. |It |is |ongoing. Flowcharting |- |answersTool |for |documenting |internal |control. SU | 6 |- |answersInternal |Control: |Sales-Receivables-Cash |Receipts |Cycle Segregation |of |Duties |- |answersOrganizations |should |segregate |duties |so |that |there |is |a |segregation | of |authorization, |recording, |and |custody. |If |not |possible, |then |more |supervision |and |or |owner | involvement. SU | 7 |- |answersInternal |Control |-- |Purchases, |Payroll, |and |Other |Cycles Management's |Responsibility |over |Purchases, |Payroll, |and |Other |Cycles |- |answers1. |Proper | authorization |2. |Proper |order |quality |and |quantity |3. |Acceptance |of |goods |4. |Proper |terms |5. | Payment |of |authorized |goods |6. |Timely |payment Responsibility |of |personnel |in |purchases, |payroll, |and |other |departments |- |answersInventory |control | provides |authorization |and |performs |accountability. |Purchasing |Agent |issues |POs. |Receiving | department |receives |approved |purchases. |A/P |records |payment. Controls |for |Purchases/Cash |Disbursements |- |answersDocuments |are |prenumbered. |Receiving |doesn't |accept |merchandise |without |PO. |See |page |225. Considerations |when |using |Purchases |Technology |- |answersComputers |are |replacing |clerks |so |need |to |have |proper |controls. |Consider |passwords, |field |checks, |and |validity |checks |and |preformatted | screens. Electronic |Data |Interchange |for |Purchases |- |answersWhen |computers |at |one |business |communicate | via |computers |with |another |business. |Make |sure |there |are |appropriate |signatures |and |reviews |for | orders. Payroll |Responsibilities |for |Internal |Control |- |answersManagement |should |ensure |that |there |is |a | proper |authorization |of |payroll, |calculation, |safeguarding, |distribution |and |accounting |of |payroll. | Controls: |HR |only |authorizes |employees |and |pay |rates. |Supervisors |approve |work |executed. |Basically | every |function |is |segregated |and |only |does |their |job. Payroll |Technology |Considerations |- |answersObjectives |for |controls |are |the |same |as |manual. |Controls | are |access |controls, |preformatted |screens, |validity |checks, |time |records |were |automatically | reconciled. |Exceptions |for |reasonableness |are |investigated. SU | 8 |- |answersAuditor's |Response |to |Assessed |Risk
How |to |assess |RMM |- |answersAssess |at |financial |statement |and |assertion |level. |Consider |transactions, |balances, |and |disclosures. |To |do |this, |auditor |uses |evidence |gathered |from |risk |assessment | procedures. |This |determines |nature, |type, |and |extent |of |further |audit |procedures. Significant |Risks |- |answersIt |will |be |significant |if |it |deals |with |fraud, |economic |developments, | complexity, |related |party |transactions, |high |degrees |of |uncertainty, |or |a |transaction |outside |the | normal |course |of |business. Assessing |Risk |in |a |Computer |Environment |- |answersObjectives |are |the |same. SU | 9 |- |answersInternal |Control |Communications |and |Reports Communicating |Internal |Control |Related |Matters |Identified |in |an |Audit |- |answersAuditor |is |not | required |to |perform |procedures |specifically |to |identify |internal |control |weaknesses. But, |when |identified |the |auditor |should |report |them. Should |be |in |writing |to |management. Material |weaknesses |are |more |sever |than |significant |deficiencies. Should |be |communicated |by |auditor |report |day |or |within | 60 |days |after. Indicators |of |Material |Weakness |- |answersFraud |signs, |restatement |of |financial |statements, | identification |of |material |misstatement |that |was |not |caught |by |internal |control, |ineffective |oversight | of |financial |reporting Should |an |Auditor |issue |a |report |stating |no |material |weaknesses |or |deficiencies |were |identified? |- | answersNo. Auditor's |Communication |to |Management |- |answersNever |discuss |details |of |procedures |to |be |used. | Never |discuss |what |materiality |actually |is. |Otherwise |normal |communications |with |management |and | those |charged |with |governance. Sox |Requirements |- |answersCommunicate |to |those |in |charge, |all |critical |account |policies |to |be |used, | GAAP |treatments |discussed |with |mgmt, |ramifications |of |alternative |disclosures |and |treatments, | treatments |preferred |by |auditor. When |is |internal |control |not |effective? |- |answersIf |a |material |weakness |exists. |Must |obtain | reasonable |assurance |to |ensure |no |material |weaknesses |for |issuers. Integrating |Audits |- |answersAudit |of |internal |control |should |be |integrated |with |audit |of |the |F/S. | However, |audit |of |internal |controls |will |usually |involve |testing |more |controls |than |F/S |would |need. | Same |materiality |applies |to |audit |of |Internal |Controls |that |applies |to |financial |statements. |The | approach |should |be |a |top |down |approach. What |approaches |are |used |to |test |operating |effectiveness |of |controls? |- |answersInquiry, |Observation, | inspection, |Re-performance Deficiency, |Significant |Deficiency, |Material |Weakness |- |answersDeficiency |- |control |doesn't |allow | mgmt |or |employees |to |perform |functions |to |detect, |correct |or |prevent |misstatement |on |timely |basis.
Whose |property |are |the |working |papers |- |answersThe |auditors. |Retain |for | 5 |years |from |report |date. | 7 |years |for |issuers. SU | 11 |- |answersEvidence |-- |Sales-Receivables-Cash |Cycle Big |idea |of |testing |Sales-Receivables-Cash |- |answersTesting |receivables |tests |revenue |as |well |because | most |Revenue |credits |are |offset |by |a |debit |to |A/R. |If |not |then |probably |Cash. Receivables/Revenue |- |Completeness |Substantive |Testing |- |answersDoes |the |subsidiary |ledger | reconcile |to |general |ledger? Use |Analytical |Procedures |(A/R |Turnover |Ratio) Test |whether |the |relative |shipping |documents |and |sales |invoices |were |recorded |on |time |of |sale. Receivables/Revenue |- |Accuracy |Substantive |Testing |- |answersManagement |representation |letter, |look |at |management's |disclosures, |compare |ledger |to |financial |statements. Receivables/Revenue |- |Valuation |Substantive |Testing |- |answersAre |they |measured |at |NRV |(per | GAAP)? | Age |the |A/R. |Trace |cash |receipts |after |B/S |date. Review |delinquent |customer's |credit |ratings. Receivables/Revenue |- |Existence |Substantive |Testing |- |answersConfirm |A/R. |If |no |confirmation, |then | document |how |he/she |overcame |presumption. |Confirmations |may |detect |lapping |(fraud). |May |also | detect |for |cutoff. | Trace |the |ledger |to |the |documents. Receivables/Revenue |- |Cutoff |Substantive |Testing |- |answersTest |to |see |if |sales/A/R |were |recorded | when |title |passed |to |customer. Receivables/Revenue |- |Rights |and |Obligations |- |answersWere |receivables |sold? |Inquire |mgmt. | Is |it |depositing |cash |receipts |into |a |bank |account |it |owns? Is |it |making |sales |with |a |right |of |return? |What |were |sales |returns |before |and |after |year |end? Receivables/Revenue |- |Occurrence |- |answersDid |sales |actually |occur? |Get |a |sample |of |recorded |sales, |also |include |large |sales |in |sample. Related |Accounts |for |Receivables/Revenue |- |answersSales |Returns |should |be |tested |but |unless | material |probably |not |with |as |much |substantive |testing |as |A/R |or |Revenue. |Bad |Debt |write-offs/Allowance |should |be |tested |if |the |A/R |and |Revenue |testing |is |NOT |sufficient. |(Could | confirm |written |off |accounts |and |look |for |return |to |sender) Cash |- |Completeness |Testing |- |answersTrace |daily |remittance |list |to |last |validated |deposit |ticket |for | period. |For |disbursements, |determine |last |check |written |and |trace |to |accounting |records. |Are |all | outstanding |checks |on |bank |rec? Cash |- |Accuracy |- |answersCompare |daily |remittance |lists |with |deposits, |entries, |and |posting.
Cash |- |Valuation |- |answersNot |risky. |Be |aware |of |FC |for |this |however. Cash |- |Existence |- |answersThis |is |usually |a |HIGH |inherent |risk. Count |cash |on |hand. Confirm |cash |directly |to |bank, |approved |by |client. | Cutoff |Bank |Statements |- |This |is |used |to |test |reconciling |items |on |the |year-end |bank |rec. |Search |for | checks |written |before |year |end |but |not |list |as |outstanding |on |bank |rec. SU | 12 |- |answersEvidence |- |Purchases, |Payables, |and |Inventory |Cycle A/P |Significance |- |answersThis |is |generally |the |most |significant |current |liability A/P |Completeness |Assertion |- |answersThe |most |important |assertion |for |A/P. Test |by |reconciling |ledger |with |general |ledger. Use |analytical |procedures |from |prior |experience. Trace |subsequent |payments |to |recorded |payables. |Match |payments |issued |after |year |end |to |related | payables. |Any |checks |that |cannot |be |matched |are |probably |unrecorded |liabilities. | Search |suspense |files |for |unmatched |documents |and |unvouchered |A/P. A/P |Accuracy |- |answersObtain |a |representation |letter |and |compare |G/L |to |financial |statements. A/P |Valuation |- |answersNot |a |major |assertion, |usually |satisfied |by |tests |of |existence |and | completeness. A/P |Existence |- |answersConfirmation |generally |NOT |used |for |this |assertion. |If |done, |sample |small |and |large |balances. |Basis |it |on |activity |in |account. A/P |Cutoff |- |answersAll |goods |where |titles |has |passed |to |client |are |recorded |in |inventory |and |a/p. | Keep |in |mind |FOB |Shipping |point |or |FOB |Destination |for |when |title |passes. |Check |cash |disbursements |and |the |offset |to |A/P. A/P |Occurrence |- |answersSample |A/P |with |documentary |support. Inventory |Completeness |- |answersMainly |use |analytical |procedures |to |determine |this. Inventory |Accuracy |- |answersCompare |ledger |to |financial |statements Inventory |Valuation |and |Allocation |- |answersAre |goods |priced |at |the |lower |of |Cost |or |Market? Compare |recorded |costs |with |current |cost |to |replace |goods. | Calculate |the |inventory |turnover |ratio. |Small |turnover |might |indicate |obsolete |items. Test |manufactured |inventory |for |reasonableness |in |o/h. Inventory |Existence |- |answersOBSERVATION |is |generally |REQUIRED. |Periodic, |observe |count |at |year | end. |Perpetual |can |be |done |at |interim |if |RMMs |are |low |and |records |are |well |kept.
What |should |the |auditor |obtain |evidence |with |regard |to |Litigation |Claims |and |Assessments? |- | answers1. |Circumstances |regarding |the |possibility |of |the |uncertainty |of |a |loss, |probability |of |an | unfavorable |outcome |and |the |amount |or |range |of |possible |loss. What |should |the |auditor |do? |- |answersTalk |with |in |house |counsel |and |figure |out |process |for | identifying |LCAs. |Obtain |written |representations |from |management. |Examine |documents |in |entity's | possession |(legal |expense |accounts |and |invoices |from |and |correspondence |with |external |legal | counsel.) Apply |related |procedures |(board |minutes, |contracts, |etc., |or |guarantees) LCA |Communication |- |answersIf |an |auditor |concludes |no |actual |or |potential |LCA |exists |then |no | communication |with |the |entity's |legal |counsel |is |required. Letter |of |Inquiry |- |answersList |that |describes |pending |or |threatened |LCA, |also |a |list |that |describes |or | evaluates |unasserted |claims |and |assessments. Subsequent |Events |- |answersAuditors |should |perform |procedures |to |obtain |sufficient |appropriate | audit |evidence |to |ensure |that |all |subsequent |events |are |noted |in |financial |statements. Written |Representations |- |answersRequired |to |obtain. |They |compliment |other |procedures |but |do |not | alone |provide |sufficient |appropriate |evidence. |Dated |as |of |auditor |report |date. |Letter |is |drafted |by | auditor |but |to |auditor. |Signed |by |management. |Must |disclaim |or |withdraw |without |written | representation. Going |Concern |- |answersPeriod |is | 1 |year |after |date |financial |statements |are |issued. |Going |concern |is | the |ability |to |meet |obligations |as |they |become |due. | If |substantial |doubt |exists |then |auditor |needs |to |evaluate |management's |plan |to |mitigate |those | effects. |Consider |adequacy |of |opinion |and |emphasize |matter |or |disclaim |opinion. |If |entity |fails |within | 1 |year |after |audit, |it |doesn't |mean |audit |was |insufficient. SU | 15 |- |answersEvidence |-- |Sampling Sampling |- |General |- |answersSampling |is |supposed |to |represent |the |population. |It |also |provides |a | reasonable |basis |for |conclusions |about |the |population. |Sample |is |considered |reasonable |if, |subject |to | sampling |risk, |you |would |come |to |the |same |conclusion |if |you |sampled |every |member |of |population. Non-statistical |Sampling |- |answersUses |auditor's |subjective |judgment |to |determine |sample |size |and | selection. |Auditor |cannot |establish |quantitative |methods |to |project |results |to |population, |and |obtain | sufficient |appropriate |audit |evidence |about |entire |population |without |other |procedures. Statistical |Sampling |(Attribute |Sampling |and |Variables |Sampling) |- |answersRandom |and |uses |an | appropriate |method. |It |is |objective. |Has |a |confidence |level. |Precision |is |how |closely |the |sample | reflects |population. Types |of |Random |Sampling |- |answersSimple, |Stratified, |Probability |weighted, |systematic |random | sampling. |Goal |is |to |have |minimum |sample |to |gain |sufficient |appropriate |evidence. Sampling |Risk |- |answersRisk |that |conclusion |drawn |from |sample |would |be |different |than |if |whole | population |tested.
Overreliance |on |controls, |incorrect |acceptance, |under |reliance, |or |an |incorrect |rejection |are |types |of | sampling |risks. Audit |Efficiency |and |Effectiveness |Errors |- |answersEfficiency |errors |might |assume |controls |are |less | effective |than |they |actually |are |or |that |there |is |a |misstatement |when |there |isn't |one. |This |leads |to | more |work. Effectiveness |Errors |might |assume |controls |are |more |effective |than |they |are |or |that |a |misstatement | doesn't |exist |when |in |fact |it |does. Non-sampling |Risk |- |answersCan |be |controlled |by |QC |and |planning. |Results |from |inappropriate | procedures, |misinterpreting |audit |evidence, |not |recognizing |misstatements |or |control |deviations. What |determines |sample |size? |- |answersTests |of |Controls: |tolerable |rate |of |deviation, |expected |rate | of |deviation, |desired |level |of |assurance, |number |in |pop. Tests |of |Details: |Assessed |RMM, |evidence |on |assertion |from |other |procedures, |tolerable | misstatement, |expected |misstatement. When |to |treat |as |misstatement? |- |answersIf |appropriate |procedures |cannot |be |completed |on |item, | then |treat |as |misstatement |or |replace |item |if |you |are |sure |it |is |not |a |misstatement. | Project |for |misstatement |and |if |test |of |details |the |projection |is |the |projected |misstatement |and |if | controls |then |sample |deviation |rate. What |does |a |high |deviation |rate |mean? |- |answersHigher |RMM |and |most |likely |less |reliance |on | controls. What |does |high |projected |misstatement |mean? |- |answersTransaction |class |or |account |balance |is | possibly |materially |misstated. |If |wrong |may |need |to |increase |sample |size. Steps |in |a |Statistical |Plan |(Attribute |Sampling) |- |answersDetermine |objectives. |Define |the |population | and |sampling |unit. |Determine |acceptable |sampling |risk. |Calculate |sampling |size |(stratifying |reduces | variability), |define |sampling |approach |(simply, |systematic, |etc.), |take |the |sample, |evaluate |sample | results, |document |sampling |procedures. Variables |Sampling |versus |Attribute |Sampling |- |answersVariables |is |for |tests |of |details, |attributes |is |for |controls. Classical |Variables |Sampling |(Mean-per-Unit) |- |answersSampling |for |tests |of |details |provides |evidence | about |whether |a |financial |statement |assertion |about |an |account |balance |is |materially |misstated. Precision |- |answersThe |precision |or |confidence |interval |(allowance |for |sampling |risk) |is |an |interval | around |the |sample |statistic |that |is |expected |to |include |the |true |value |of |the |population |at |the | specified |confidence |level. |When |using |classical |variables |sampling, |the |allowance |for |sampling |risk |is | calculated |based |on |the |normal |distribution What |is |the |primary |objective |of |monetary-unit |sampling |(MUS) |- |answersTo |identify |overstatement | errors |(Assets) |The |larger |the |transaction |or |balance |the |more |likely |it |will |be |selected.
Disclaimer |of |Opinion |- |answersBasically |says |the |auditor |has |NOT |been |able |to |obtain |sufficient | appropriate |evidence |and |therefore |NO |opinion |is |express. |Possible |effects |of |undetected | misstatements |are |material |and |pervasive. Adverse/Disclaim |- |answersTwo |worst |opinions. |Adverse |is |when |you |DO |have |enough |evidence. | Disclaim |is |when |you |DON'T. Emphasis |of |Matter |or |Other |Matter |Paragraph |- |answersTo |draw |attention |to |a |certain |part |of |f/s. Pervasive |Effects |on |Statements |- |answersNot |limited |to |a |specific |element |or |item. |It |is |everywhere. | It |is |also |substantial |proportion |of |the |statements. |They |are |also |fundamental |to |the |user's | understanding. Misstatement |- |answersPresented |Amount |minus |the |amount |to |be |presented |fairly. Addressing |the |Report |- |answersShould |be |address |to |those |for |whom |the |report |is |prepared. |To | entity |or |to |those |charged |with |governance. |Could |be |the |partners |or |proprietor. | If |someone |is |retained |or |hired |by |someone |NOT |the |client, |report |is |addressed |to |them. Dating |the |Report |- |answersDate |is |date |no |earlier |than |when |auditor |has |obtained |sufficient | appropriate |audit |evidence. |Auditor |normally |is |not |responsible |for |items |after |report |date. | Auditor |is |allowed |to |dual |date |for |subsequent |events. Basis |for |Qualified |Opinion |Paragraph |- |answersThis |precedes |the |opinion |paragraph. | Should |contain |language |like |"except |for". |DON'T |use |"subject |to", |or |other |words |that |lack |clarity. Don't |refer |to |the |notes, |as |the |actual |notes |are |part |of |statements |so |that |would |be |confusing. Inability |to |Obtain |Sufficient |Appropriate |Audit |Evidence |- |answersCould |come |from |situations |outside |entity's |control, |nature |or |timing |of |work, |management |imposed |limitations. |Describe |in |qualified | opinion |paragraph. | "Except |for |the |possible |effects |of |the |matter |described |in |the |basis |for |qualified |opinion |paragraph" Limitations |on |Scope |prior |to |Engagement |that |will |result |in |Disclaimer |- |answersDo |NOT |accept | audit. How |to |Qualify |Material |Misstatements |of |a |Specific |Amounts |- |answersDescribe |effects |and |if | practicable |quantify |the |effects. |Practicable |does |NOT |put |the |auditor |in |the |position |of |preparer. Adverse |Opinions |- |answersExpress |when |the |auditor |has |sufficient |appropriate |evidence |that | misstatements |are |both |material |and |pervasive. |Describe |and |quantify |if |possible. |State |that |it |is |NOT |presented |fairly |in |accordance |with |applicable |framework. Disclaimers |of |Opinion |- |answersCannot |obtain |evidence |and |the |possible |effects |would |be |both | Material |and |Pervasive. Intro |paragraph |says |"we |were |engaged |to |audit" |instead |of |"we |audited |ex |company"
Auditors |responsibility |section |states |auditor |responsibility |and |inability |to |obtain |sufficient | appropriate |evidence |described |in |disclaimer |of |opinion |paragraph. Piecemeal |Opinions |- |answersNot |appropriate. |You |cannot |express |an |unmodified |opinion |on |the | financial |statements |as |a |whole |and |then |report |qualified, |adverse, |or |disclaim |another |statement. SU | 17 |- |answersReports |-- |Other |Modifications Emphasis-of-matter |Paragraphs |- |answersTo |draw |attention |to |a |matter |appropriately |accounted |for | and |noted |in |statements, |and |is |fundamental |to |the |user |understanding |the |financial |statement. How |to |show |emphasis |of |matter |paragraphs |- |answersComes |after |opinion. |Heading |is |emphasis |of | Matter. |Describe |where |matter |can |be |found |in |financial |statements. |Indicate |that |opinion |is |NOT | modified |with |respect |to |matter |identified. Other-Matter |Paragraph |- |answersDraws |user's |attention |to |any |matter |relevant |to |users | understanding |of |the |auditors |audit, |responsibilities, |or |report. |It |is |NOT |required |to |be |presented |or | disclosed |in |the |statements. |Ex. |Can |be |used |to |state |why |an |auditor |cannot |withdraw |from |an | engagement. | Normally |comes |after |opinion |but |situations |can |warrant |it |coming |in |other |places. When |to |include |other-matter |or |emphasis |of |matter |- |answersIf |opinion |changes |in |a |revised |report | issued |after |original |report. Group |Audits |- |answersGroup |audits |are |performed |when |there |are |multiple |auditors |for |instance | one |for |the |equity |method |investee |and |one |for |the |parent. |The |auditor |can |take |responsibility |for | the |audit |of |the |investee |or |subsidiary |in |the |audit |report |or |not |assume |responsibility |by |referring |to |the |component |auditor |in |the |audit |report. Assuming |Responsibility |for |Group |Audit |- |answersMight |need |to |perform |risk |assessment | procedures, |perform |more |procedures, |and |review |component |auditor |work. Consistency |of |Financial |Statements |- |answersAuditor |should |check |for |comparability |between | statements |that |may |be |effected |by |changes |in |accounting |principles |or |prior |period |misstatements. | Always |evaluates |earliest |period |before |that |for |comparability |even |if |not |presented. Uncertainties |and |Going |Concern |- |answersManagement |is |responsible |for |estimating |the |effect |of | future |events |on |the |financial |statements. |Going |concern |emphasis |of |matter |paragraphs |should |be | added |when |there |is |substantial |doubt |about |going |concern. Comparative |Financial |Statements |- |answersAn |updated |report |is |NOT |a |reissuance |of |a |prior |report. | Auditor |should |be |aware |of |items |that |could |effect |prior |period |statements. |Auditors |do |NOT |report | on |comparative |information |that |consists |of |condensed |statements |or |summarized |prior |period | information. SU | 18 |- |answersMiscellaneous |Reporting |Topics Interim |Financial |Information |- |answersCovers |a |period |less |than |a |year. |It |may |be |condensed. |
SSARs |- |answersThese |standards |apply |to |Compilations, |Reviews, |and |preparation |of |financial | statements. |SAS's |apply |to |audits. |Similar |procedures |to |determining |whether |to |accept |an |audit | engagement |apply |in |the |SSARs. When |not |to |accept |an |engagement |under |SSARs? |- |answersIf |you |believe |you |cannot |satisfy |ethical | requirements, |preliminary |understanding |that |information |needed |to |perform |engagement |is |NOT | available, |or |doubts |about |management |integrity. Prospective |Financial |Information |- |answersCan |be |compiled |or |reviewed |but |NOT |audited. Preparation |of |Financial |Statements |(AR-C |70) |- |answersThis |is |a |NON-ATTEST |service. |Does |not | require |accountant |to |determine |or |be |independent. |Do |NOT |need |to |verify |management's | information, |will |not |express |an |opinion, |or |report |on |the |statements. |Cannot |be |relied |on |to |identify |misstatements |or |compliance. AR-C | 70 |does |NOT |apply |is |other |AICPA |pronouncements |are |governing. Preparation |Procedures |- |answersPrepare |from |information |provided |by |client. |If |you |come |across | incorrect |info, |then |ask |management |to |provide |correct |info. |If |you |provide |a |known |departure |from | framework |then |this |should |be |disclosed. | | Notate |on |EACH |page |that |"no |assurance |is |provided". |OR |provide |a |statement |that |disclaims |and | tells |the |user |no |assurance |is |provided. | | Management |is |allowed |to |omit |disclosures |so |long |as |the |accountant |states |this |and |the |intent |is | NOT |to |mislead |users. | Documentation |should |be |a |copy |of |the |financial |statements |and |an |engagement |letter. Compilation |of |Financial |Statements |- |answersObjective |is |to |apply |accounting |expertise |and |assist | management |in |the |presentation |of |financial |statements. | -Must |determine |if |independent -Report |on |Statements -Disclose |a |lack |of |independence -Associate |name |with |statement | Don't |accept |unless |mgmt |intends |to |fairly |present |statements |including |disclosures. Procedure |for |Compilation |- |answersRead |statements, |consider |form |and |if |free |from |material | misstatement. |Withdraw |if |management |won't |correct |material |misstatements. |Do |NOT |modify | compilation |report |unless |substantially |all |disclosures |are |omitted. |Disclose |lack |of |independence |in | separate |paragraph |in |statements. |Never |say |that |the |statements |conform |to |a |framework. |This |can | only |be |determined |by |an |audit. |
If |supplementary |information |is |compiled, |consider |issuing |a |separate |report |or |adding |a |paragraph. |If |it |is |RSI |then |discuss |in |other |matter |paragraph. Reviews |of |Financial |Statements |- |answersObjective |is |to |obtain |limited |assurance |for |whether |any | material |modifications |to |the |framework |were |made. |Also |known |as |negative |assurance. |Primarily | performed |through |inquiry |and |analytical |procedure. | Accountant |should |obtain |a |rep |letter. | The |accountant |should |accumulate |misstatements. | No |adverse |report |option |available |either |state |that |no |modifications |known |or |withdraw |from | engagement. Engagements |to |Apply |Agreed-Upon |Procedures |- |answersApplies |to |specific |procedures |performed | on |a |set |of |subject |matter |and |report |on |those |findings. |Specified |parties |assume |responsibility |for | sufficiency |of |procedures. | It |provides |no |opinion, |rather |just |reports |the |findings |and |procedures. | AT | 201 |Applies Financial |Forecasts |and |Projections |- |answersCan |examine, |compile |or |apply |agreed |upon |procedures | to |PFSs. |Must |be |independent |unless |simply |compiling. | Forecast |presents |an |expected |financial |position |and |result |of |operation. | Projections |is |based |on |hypothetical |assumptions. |(If |this |happens |then |this |will |be |the |result) SU | 20 |- |answersGovernmental |Audits GAO |- |answersGovernment |Accountability |Organization |- |they |publish |governmental |auditing | standards. |Generally |Accepted |Government |Auditing |Standards |GAGAS. |This |is |referred |to |as |the | yellow |book. |If |a |requirement |says |must |or |should |it |MUST |be |followed. Scope |of |Government |Audits |- |answersGreater |than |businesses |and |has |more |responsibility CPE |Requirement |- |answers80 |Hours |every | 2 |Years |of |which | 24 |should |be |yellow |book Single |Audit |Requirements |- |answersRequires |a |single |audit |to |a |non |federal |entity |who |expends | more |than |$750,000 |of |federal |awards. |Has |to |be |submitted |to |the |OMB. |Must |express |an |opinion |on |the |statements, |internal |control, |compliance, |and |schedule |of |federal |expenditures. Which |of |the |following |would |be |a |consideration |in |planning |an |auditor's |sample |for |a |test |of | controls? |- |answersA |test |of |controls |is |an |application |of |attribute |sampling. |The |initial |size |for |an | attribute |sample |is |based |on |(1) |the |desired |assurance |(complement |of |the |risk |of |overreliance) |that | the |tolerable |population |deviation |rate |is |not |exceeded |by |the |actual |rate, |(2) |the |tolerable | population |deviation |rate, |(3) |the |expected |population |deviation |rate, |and |(4) |the |population |size. | However, |a |change |in |the |size |of |the |population |has |a |very |small |effect |on |the |required |sample |size | when |the |population |is |large. |Consequently, |population |size |is |often |not |considered |unless |it |is |small.
