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Cards In This Set
| Front | Back |
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Who is responsible for the selection and appointment of the independent external auditor?
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The Audit Committee of the Client's Board of Directors
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As part of the pre-acceptance phase of the engagement, what are the QUALITY CONTROL POLICIES AND PROCEDURES the auditor should consider?
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- Firm's ability to Meet Reporting Deadlines
- Firm's ability to Staff the Engagement - Independence - Integrity of Client Management |
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Before accepting an engagement, the auditor should assess the auditability of the potential client by considering what?
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- Availability and Adequacy of Accounting Records
- Management's Attitude towards the Internal Control Environment |
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What inquiries should be made with the predecessor auditor BEFORE accepting the engagement?
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- Infomation pertaining to mgmt's integrity
- Disagreements w/ mgmt - Reasons for the change of auditors - Info regarding fraud, illegal acts by the client and matters relating to internal control |
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What inquiries should be made with the predecessor auditor AFTER accepting the engagement?
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- Making specific inquiries of the predecessor regarding matters that the successor believes may affect the conduct of the audit
- Reviewing the predecessor's audit documentation (workpaper/ evidence) |
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Is an Engagement Letter mandatory?
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Yes - An understanding with the client should be established for services to be performed for each engagement, and this understanding should be documented through an engagement letter.
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Engagement Letter Contents
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- Objectives
- Mgmt Responsibilities - Auditor's Responsibilities - Limitations - Other Matters |
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What is the objectives of the engagement?
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The objective of the audit is the expression of an opinion on the financial statements.
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What are Mgmt's Responsibilities?
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- Accounting Policies
- Effective Internal Control - Complies with laws and regulations - Making all information available to the auditor - Rep Letter at the conclusion of the audit - Adjusting F/S to correct material misstatements identified by the auditor - Rep Letter; Any uncorrected misstatements are immaterial |
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What are auditor's responsibility?
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Accordance with GAAS:
- Obtain reasonable assurance whether the F/S are free from material misstatement - Obtain understanding of the entity and its environment |
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What are some limitations of the engagement?
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- a material misstatement may remain undetected because auditors obtains only reasonalble assurance
- NOT designed to detect error or fraud that is immaterial to the F/S - NOt designed to provide assurance on I/C, or to identify significant deficiencies |
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What are some of the Other Matters included in the Engagement Letter?
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- Overall Audit Strategy
- Arrangement involving the conduct of the engagement. such as timing, client assistance, and availability of documents - Involved parties - Arrangement regarding fees and billing - Any limitations - Restricted use - Add'l Services |
