Audit Lecture 2 Flashcards

Study and learn Audit Lecture 2 with these quiz-based flashcard quizzes. Get familiar with different terms and definitions in Audit Lecture 2 with quiz-based flashcards quizzes which will make the learning and exploring more easy and simple.

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Cards In This Set

Front Back
Overview of financial statement audit
  1. Plan the audit
  2. Obtain understanding of client and its environment including IC
  3. Assess risk of misstatement and design further audit procedures
  4. Perform tests of controls (maybe..)
  5. Perform substantive procedures
  6. Complete the audit
  7. Issue audit report
Two sets of standards directly related to financial statements
  1. GAAS
  2. GAAP
Financial statements are prepared following GAAP, once prepared an audit is initiated following the auditing standards of
Either
  1. US GAAS (non public)
  2. PCAOB (public)
Which results in audited financial statements and an audit report
It should be noted that GAAP is the framework used by companies in the US however other frameworks include
  1. IFRS
  2. Accounting standards of various countries
  3. Special purpose frameworks (e.g. cash or tax basis)
Similarly auditing standards besides GAAS and PCAOB include
  1. International auditing standards
  2. Auditing standards of various countries
Sources of GAAP include
  1. Standards for financial accounting (Financial Accounting Standards Board-FASB)
  2. Standards of accounting and financial reporting by state and local governmental organizations (Government Accounting Standards Board-GASB)
  3. Accounting reporting standards of US Governments (Federal Accounting Standards Advisory Board-FASAB)
The AICPA's Auditing Standards Board (ASB) issues
Statements on Auditing Standards (SAS's) which are the generally accepted auditing standards for non public companies (non issuers)
SAS's are codified into AU sections of volume 1 of the AICPA Professional Standards and are written
In the context of an audit of financial statements by an auditor. There are now over 120 SAS's (all were revised and clarified in 2010-12 to make them more in accord with International Auditing Standards
The PCAOB has its own series of standards, it began with the ASB standards in place as of
4-16-2003, and is updated for its own pronouncements titled Auditing Standard No. X, with the X representing the current number in the sequence.
Unconditional means
  1. Must
  2. Shall (PCAOB only)
  3. Is required (PCAOB only)
Presumptively mandatory responsibility means
Should (unless auditor has justification)
To consider (PCAOB only uses this)
  1. May
  2. Might
  3. Could
  4. Others
The AICPA's GAAS authority resides with
  1. Bylaws of AICPA
  2. State Boards of Accountancy
  3. SEC regulations
  4. Courts
The nature of GAAS is to
Govern the quality of performance
Underlying principles of GAAS issued by the ASB (Auditing Standards Board) by section
  1. Purpose of an audit
  2. Premise of an audit
  3. Personal responsibilities of the auditor
  4. Auditor actions in performing the audit
  5. Reporting results of an audit