This publication is designed to provide accurate and authoritative information regarding the subject matter covered. IAPC International Auditing Practices Committee ISA International Standards on Auditing ISB Independence Standards Board LIFo Last In First out.
L IST OF C ITED C ASES
L IST OF F IGURES
G ENERAL
- Attestation Services
- Assurance Services
Presentation and disclosure—The components of the financial statements are properly classified, described and disclosed. Reasonable assurance refers to the auditor's degree of satisfaction that the evidence obtained during the performance of the audit supports the assertions contained in the financial statements.
T ERMS E NGAGEMENT 12
The auditor should not agree to a change in the terms of the audit engagement without reasonable justification. However, we will notify you in writing of significant deficiencies or material deficiencies in internal control that are relevant to the audit of the financial statements that we have determined during the audit.
G ENERAL
- PCAOB Standards and Rules
- The PCAOB Responsibilities The PCAoB has four main responsibilities which include
- The PCAOB Enforcement Role
Performs other testing of the firm's audit, oversight, and quality control procedures. A firm's quality control review is tailored to the firm's size and the nature of its practice.
P RACTICE
G ENERAL
ISA 260: Communicating with those charged with governance - ISA 265: Notifying them of deficiencies in internal control. ISA 320: Materiality in Planning and Performing the Audit - ISA 330: Auditor's Responses to Assessed Risks.
In addition, the website contains project histories, audio recordings of the IAASB meetings, IAASB exposure drafts, and any stakeholder comments on those drafts. Which of the following statements is correct regarding the IAASB. a) The International Auditing and Assurance Standards Board (IAASB) is an independent standards body serving the public interest.
G ENERAL
AICPA A UDITING S TANDARDS
- General Standards
- Standards of Field Work
- Standards of Reporting
The auditor should have sufficient knowledge of the SASs to identify those that apply to his or her audit. The auditor should be aware of and consider interpretive publications applicable to his or her audit.
PCAOB A UDITING S TANDARD
- Professional Standards
- Interim Standards
- Planning Activities
- Audit Strategy
- Audit Plan
- Use of IT in Planning Audit (Verse Audit Management) verse Audit Management software allows you to create audit plans,
- Engagement Quality Review for an Audit
- Engagement Quality Review for a Review of Interim Financial Information
- Engagement Quality Review for an Attestation Engagement Performed Pursuant to Attestation Standard No. 1, Examination
- Documentation of an Engagement Quality Review Documentation of an engagement quality review should contain suffi-
- Integration of IT
The successor auditor should request that the client authorize the predecessor auditor to permit a review of the predecessor auditor's working papers. The former auditor should also agree with the successor auditor on the use of the working papers. However, the information obtained from these inquiries and any review of the predecessor audit report and.
Review the hiring team's assessment of the firm's independence in relation to the hire.
G ENERAL
- Forecasting Financial Statements’ Analysis
- Management Discussion & Analysis (MD&A)
- Registration Statements & Other SEC Filings
- Miscellaneous Assurance Services
- Consulting Services
- Tax Services
- Valuation Services
- Personal Financial Planning
Under Section 404(b) of the Act, independent auditors are now required to "certify and report" on a company's assessment under Section 404(a). 1990 to the financial reporting crisis before the passage of the Sarbanes-Oxley Act in 2002 is somewhat unclear. Bookkeeping or other services related to the audit client's accounting records or financial statements;
Depending on the nature of the tax advisory service, auditor's independence can be undermined in the following scenarios.
G ENERAL
The specified parties assume responsibility for the adequacy of the agreed procedures for their purposes. The criteria to be used in determining the findings are agreed between the practitioner and the specified parties. The specified parties are responsible for the adequacy (nature, timing and extent) of the agreed procedures because they best understand their needs.
To this end, the auditor should have sufficient knowledge of the specific subject to which the agreed procedures are to be applied.
R EPORTING
- Required Elements
- Miscellaneous Reporting Elements .1 Adding Specified Parties
6 AGREED PROCEDURES 97 assistance from the specialist to the auditor in an agreed procedural task. The date of completion of the agreed procedures should be used as the date of the GP's report. Further, when the circumstances impose limitations on the performance of the agreed actions, the auditor should attempt to obtain agreement from the specified parties to change the agreed procedures.
6 AGREEMENT PROCEDURES 99 limitations on the performance of procedures in his or her report or withdraws from the engagement.
In light of the fact that 25% of the fund's assets depended on the collectability of this related party account, McCurdy acknowledged that the receivable was material and would require special consideration. McCurdy also relied on Gulf Insurance Company's February 1999 renewal of the fund's bond, although he took no steps to determine the basis of the company's decision. The Commission found, for example, that Gulf Insurance Company's renewal of the fund's bonds in February 1999 could not support a reasonable judgment that the receivable was collectable.
The record does not indicate whether Gulf was aware of the status of the claim at the time.
G ENERAL
- Scope of the Independence
- Effects of Impairment of Independence
- Termination of Impairment
- Independence and Cooperative Arrangements with Clients Independence will be considered to be impaired if, during the period of
- Extended Service Engagement
The value of the trust or estate's holdings in the client exceeded 10% of the trust's or estate's total assets. During the period covered by the accounts, or during the period of the professional engagement, a company, partner or professional employee in the company was simultaneously associated with the customer as a(n). When a Covered Member becomes aware that a member of the assurance engagement team or a person capable of influencing the assurance engagement is considering employment or affiliation with a client, the Covered Member must notify an appropriate person within the firm.
A member's independence would not be compromised by conducting separate assessments of the effectiveness of a client's internal control, including separate assessments of the client's ongoing audit activities.
I NTEGRITY AND O BJECTIVITY 2
In this regard, the member may wish to consult with his or her legal advisor. An immediate family member's employment by an attesting client will impair independence, unless: a) The immediate family member does not have primary responsibility for significant accounting functions that support material components of the financial statements. The immediate family member does not have responsibility for the preparation of the financial statements.
The trust was created by the covered person named as beneficiary, or. c) The beneficiary had direct control over the investment decisions or assets of the trust. d) The beneficiary had indirect control over the investment decisions or assets of the trust.
G ENERAL
At the start of the current audit engagement, the audit team leader must: (i) perform the quality control for an engagement; (ii) evaluating compliance with relevant ethical requirements; (iii) to be determined. Performing these preliminary engagement activities enables the auditor to plan an audit engagement that, for example: (i) maintains the necessary independence and capability to perform the engagement; (ii) Identifies management integrity issues that may affect the auditor's willingness to continue with the engagement; (iii) has no misunderstanding with the entity about the terms of the engagement. The auditor should establish an overall audit strategy that defines the scope, timing and direction of the audit and guides the development of the audit plan.
The overall audit strategy and audit plan are subject to change and updates, as necessary, during the course of the audit.
I NVOLVEMENT OF P ROFESSIONALS P OSSESSING S PECIALIZED S KILLS
P LANNING A CTIVITIES
However, planning includes consideration of the timing of certain activities and audit procedures to be completed prior to the performance of further audit procedures. A general understanding of the legal and regulatory framework applicable to the entity and how the entity complies with that framework. When discussing matters included in the overall audit strategy or audit plan, care is required not to jeopardize the effectiveness of the audit.
For example, discussing the nature and timing of detailed audit procedures with management can compromise the effectiveness of the audit by making the audit procedures too predictable.
S UPERVISION OF E NGAGEMENT T EAM M EMBERS
AND P ERFORMING AN A UDIT 3
Determining Tolerable Misstatement
The auditor shall determine a tolerable misstatement at an amount or amounts that reduces to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements would result in a material misstatement of the financial statements. In determining a tolerable misstatement and planning and performing audit procedures, the auditor should consider the nature, cause (if known), and amount of misstatements that have arisen during audits of prior period financial statements.
Considerations for Multi-location Engagements
Considerations as the Audit Progresses
The auditor must understand the company and its environment (“understanding of the company”) to understand the events, conditions and activities of the company that can reasonably be expected to have a significant effect on the risks of material misstatement. The company's sources of revenue, including the relative profitability of its main products and services; and. The purpose of understanding the company's performance measures is to identify the performance measures, whether external or internal, that affect the risks of material misstatement.
The auditor must define: (i) the company's risk assessment process; (ii) information and communications; (iii) supervisory activities; and onward.
Overall Responses
Responses Involving the Nature, Timing, and Extent of Audit Procedures
obtain sufficient evidence to support the auditor's assessments of control risk for the purposes of the audit of the financial statements; ii). The evidence provided by the auditor's tests of the effectiveness of controls depends on a mixture of nature, timing and extent. The length of time during the audit period that the auditor relies on the operational effectiveness of the control;
The evidence provided by the auditor's substantive procedures depends on the nature, timing and extent of those procedures.
G ENERAL
- Relevance
- Reliability
- Audit Documentation Requirement
- Documentation of Specific Matters
- Retention of and Subsequent Changes to Audit Documentation The auditor must retain audit documentation for seven years from the
- Matters to Be Communicated to the Audit Committee If the auditor decides to make reference in his or her report to the audit
- Evaluating the Results of the Audit of Internal Control Over Financial Reporting
- Evaluating the Results of the Audit of Financial Statements In forming an opinion on whether the financial statements are presented
The auditor must prepare audit documentation in connection with each engagement performed in accordance with the standards of the PCAoB. 5 describes the auditor's responsibilities with regard to evaluating the results of the audit, including evaluating the identified control deficiencies. The accountant must perform analytical analyzes with regard to turnover up to and including the end of the reporting period.
The auditor should assess whether the difference between estimates best supported by the audit evidence and estimates contained in the financial statements, which are individually reasonable, indicates a possible bias on the part of the company's management.
A PPENDIX
G ENERAL
The auditor must assess the risks of material misstatement at two levels: (1) at the financial statement level and (2) at the assertion level. The risks of material misstatement at the financial statement level are broadly related to the financial statements as a whole and potentially affect many assertions. Risks of material misstatement at the financial statement level may be particularly relevant to the auditor's consideration of the risk of material misstatement due to fraud.
The auditor assesses the inherent risk using information obtained in performing risk assessment procedures and taking into account the characteristics of the financial statements and the disclosures in the financial statements.
D ETECTION R ISK
- Obtaining an Understanding of the Company and Its Environment
- Obtaining an Understanding of Internal Control Over Financial Reporting
Industry developments (a potential related business risk could be, for example, that the company does not have the staff or expertise to deal with the changes in the industry). Expansion of the business (a potential related business risk could be, for example, that the demand for the company's products or services has not been accurately estimated). Current and prospective financing requirements (a potential related business risk could be, for example, the loss of financing due to the company's inability to meet financing requirements).
The purpose of obtaining an understanding of the company's performance measures is to identify performance measures, whether external or internal, that affect the risks of material misstatement.
