AUD CPA Exam Notes -Complete Exam Study
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SU 1 ------- ✔ CORRECT ANSWER ✓✓Engagement Responsibilities
Nature of an Attest Engagement ------- ✔ CORRECT ANSWER ✓✓Gives 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 ------- ✔ CORRECT ANSWER ✓✓General 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 ------- ✔
CORRECT ANSWER ✓✓The 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? ------- ✔ CORRECT ANSWER ✓✓Issuers Audit =
PCAOB, Non-issuer = ASB Standards
Who issues Government Audit Standards? ------- ✔ CORRECT ANSWER ✓✓The 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 ------- ✔ CORRECT ANSWER ✓✓To 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 ------- ✔ CORRECT ANSWER ✓✓Required by auditors when performing
an audit.
Audit Risk ------- ✔ CORRECT ANSWER ✓✓The 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 ------- ✔ CORRECT ANSWER ✓✓CAVE 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) ------- ✔ CORRECT ANSWER
✓✓Occurrence, Completeness, Accuracy, Cutoff, Classification
Assertions about Account Balances (B/S) ------- ✔ CORRECT ANSWER ✓✓Existence, Rights and
Obligations, Completeness, Valuation and Allocation
,Assertions about Presentation and Disclosure (Mainly notes to financial statements) ------- ✔
CORRECT ANSWER ✓✓Occurrence and Rights and Obligations, Completeness, Classification and
Understandability, Accuracy and Valuation
PCAOB Assertions ------- ✔ CORRECT ANSWER ✓✓Same as above but they do not explicitly
address accuracy.
Professional Responsibilities of Auditors ------- ✔ CORRECT ANSWER ✓✓Must comply with
unconditional requirements (i.e. independence).
Additional Professional Services ------- ✔ CORRECT ANSWER ✓✓Preparation (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 ------- ✔ CORRECT ANSWER ✓✓Assurance > Attest > Audit
Does not include consulting services
Designed to enhance decision making
Quality Control ------- ✔ CORRECT ANSWER ✓✓Starts 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 ------- ✔ CORRECT ANSWER ✓✓Professional Responsibilities
, Code of Professional Conduct - Principles ------- ✔ CORRECT ANSWER ✓✓Responsibilities,
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 ------- ✔ CORRECT ANSWER ✓✓Fall under the principles,
more specific.
Independence ------- ✔ CORRECT ANSWER ✓✓Must 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.
Conceptual Framework for Independence ------- ✔ CORRECT ANSWER ✓✓Identify threats to
independence, use safeguards to minimize them to acceptable level.
How is independence impaired? ------- ✔ CORRECT ANSWER ✓✓If a covered member has a
direct financial interest in an attest client during engagement.
Covered member has loans to or from an attest client during engagement.
Covered member has indirect material financial interest.
Covered member is a executor of trust.
Covered member owns 5% or more of an attest client during period or engagement.
Immediate family of a covered member is subject to independence rules.
Close relatives can result in impairment but are less strict than immediate.
May be impaired by actual or threatened litigation.
What services impair independence? ------- ✔ CORRECT ANSWER ✓✓Covered member should
not assume management responsibilities.
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SU 1 ------- ✔ CORRECT ANSWER ✓✓Engagement Responsibilities
Nature of an Attest Engagement ------- ✔ CORRECT ANSWER ✓✓Gives 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 ------- ✔ CORRECT ANSWER ✓✓General 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 ------- ✔
CORRECT ANSWER ✓✓The 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? ------- ✔ CORRECT ANSWER ✓✓Issuers Audit =
PCAOB, Non-issuer = ASB Standards
Who issues Government Audit Standards? ------- ✔ CORRECT ANSWER ✓✓The 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 ------- ✔ CORRECT ANSWER ✓✓To 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 ------- ✔ CORRECT ANSWER ✓✓Required by auditors when performing
an audit.
Audit Risk ------- ✔ CORRECT ANSWER ✓✓The 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 ------- ✔ CORRECT ANSWER ✓✓CAVE 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) ------- ✔ CORRECT ANSWER
✓✓Occurrence, Completeness, Accuracy, Cutoff, Classification
Assertions about Account Balances (B/S) ------- ✔ CORRECT ANSWER ✓✓Existence, Rights and
Obligations, Completeness, Valuation and Allocation
,Assertions about Presentation and Disclosure (Mainly notes to financial statements) ------- ✔
CORRECT ANSWER ✓✓Occurrence and Rights and Obligations, Completeness, Classification and
Understandability, Accuracy and Valuation
PCAOB Assertions ------- ✔ CORRECT ANSWER ✓✓Same as above but they do not explicitly
address accuracy.
Professional Responsibilities of Auditors ------- ✔ CORRECT ANSWER ✓✓Must comply with
unconditional requirements (i.e. independence).
Additional Professional Services ------- ✔ CORRECT ANSWER ✓✓Preparation (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 ------- ✔ CORRECT ANSWER ✓✓Assurance > Attest > Audit
Does not include consulting services
Designed to enhance decision making
Quality Control ------- ✔ CORRECT ANSWER ✓✓Starts 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 ------- ✔ CORRECT ANSWER ✓✓Professional Responsibilities
, Code of Professional Conduct - Principles ------- ✔ CORRECT ANSWER ✓✓Responsibilities,
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 ------- ✔ CORRECT ANSWER ✓✓Fall under the principles,
more specific.
Independence ------- ✔ CORRECT ANSWER ✓✓Must 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.
Conceptual Framework for Independence ------- ✔ CORRECT ANSWER ✓✓Identify threats to
independence, use safeguards to minimize them to acceptable level.
How is independence impaired? ------- ✔ CORRECT ANSWER ✓✓If a covered member has a
direct financial interest in an attest client during engagement.
Covered member has loans to or from an attest client during engagement.
Covered member has indirect material financial interest.
Covered member is a executor of trust.
Covered member owns 5% or more of an attest client during period or engagement.
Immediate family of a covered member is subject to independence rules.
Close relatives can result in impairment but are less strict than immediate.
May be impaired by actual or threatened litigation.
What services impair independence? ------- ✔ CORRECT ANSWER ✓✓Covered member should
not assume management responsibilities.
