Audit 1 AUI3702
Audited Financial Statements- The Basics
1-01
What is the objective of the independent audit? - to express an opinion stating whether the financial
statements, taken as a whole, are fairly presented in all material respects in conformity with accounting
principles generally accepted in the U.S.
Audited Financial Statements- The Basics
1-02
Which standards provide the most authoritative U.S. auditing guidance for nonissuers and issuers and
who issues those standards? - NonIssuers:
Statements on Auditing Standards (SASs), issued by the AICPA Auditing Standards Board.
Issuers:
Auditing Standards (ASs), issued by the Public Accounting Oversight Board (PCAOB) plus all SAS adopted
by PCAOB.
Audited Financial Statements- The Basics
1-03
What is the three general Standards? TIP - The auditor must have adequate technical TRAINING and
proficiency to perform the audit.
The auditor must maintain INDEPENDENCE in mental attitude in all matters relating to the audit.
The auditor must excercise due PROFESSIONAL CARE in the planning and performance of the audit and
the preparation of the report.
,Audited Financial Statements- The Basics
1-04
What are the three standards of fieldwork? PIE - The auditor must adequately PLAN the work and must
properly supervise any assistants.
The auditor must obtain a sufficient understanding of the entity and its environment, including its
INTERNAL CONTROL, to assess the risk of material misstatement of the financial statements whether
due to error or fraud, and to design the nature, timing, and extent of further audit procedures.
The auditor must obtain sufficient appropriate audit EVIDENCE by performing audit procedures to afford
a reasonable basis for an opinion regarding the F/S under audit.
Audited Financial Statements- The Basics
1-05
What are the four standards of reporting? All CPAs Do Ok! - The auditor must state in the auditor's
report whether the financial statements are presented in accordance with generally accepted
ACCOUNTING PRINCIPLES.
The auditor must identify in the auditor's report those circumstances in which such principles have not
been CONSISTENTY observed in the current period in relation to the preceding period.
When the auditor determines that informative DISCLOSURES in the F/S are not reasonably adequate,
the auditor must so state in the auditor's report.
The auditor must either express an OPINION regarding the F/S, taken as a whole, or state that an
opinion cannot be expressed, in the auditor's report. When the auditor cannot express an overall
opinion, the auditor should state the reasons therefore in the auditor's report. In all cases where an
auditor's name is associated with F/S, the auditor should clearly indicate the character of the auditor's
work, if any, and the degree of responsibility the auditor is taking, in the auditor/s report.
, Audited Financial Statements- The Basics
1-06
Explain the difference between auditing standards and auditing procedures. - Auditing standards
measure the quality of the performance of the audit
Auditing procedures are the acts to be performed during the audit
Reports on Audited Financial Statements
1-07
What should be included in the introductory paragraph of the auditor's standards report under U.S.
auditing standards? - The F/S identified in the report were audited
The F/S are the responsibility of Mgt.
The auditor's responsibility is to express an Opinion based on the audit
Reports on Audited Financial Statements
1-08
What should be included in the Scope paragraph of the auditor's standard report under U.S. auditing
standards? - Statement that:
The audit was conducted in accordance with auditing standards generally accepted in the U.S
(nonissuers), or the audit was conducted in accordance with the standards of the PCAOB.
The audit was planned and performed to obtain reasonable assurance that eth F/S are free of material
misstatement.
The audit included:
Audited Financial Statements- The Basics
1-01
What is the objective of the independent audit? - to express an opinion stating whether the financial
statements, taken as a whole, are fairly presented in all material respects in conformity with accounting
principles generally accepted in the U.S.
Audited Financial Statements- The Basics
1-02
Which standards provide the most authoritative U.S. auditing guidance for nonissuers and issuers and
who issues those standards? - NonIssuers:
Statements on Auditing Standards (SASs), issued by the AICPA Auditing Standards Board.
Issuers:
Auditing Standards (ASs), issued by the Public Accounting Oversight Board (PCAOB) plus all SAS adopted
by PCAOB.
Audited Financial Statements- The Basics
1-03
What is the three general Standards? TIP - The auditor must have adequate technical TRAINING and
proficiency to perform the audit.
The auditor must maintain INDEPENDENCE in mental attitude in all matters relating to the audit.
The auditor must excercise due PROFESSIONAL CARE in the planning and performance of the audit and
the preparation of the report.
,Audited Financial Statements- The Basics
1-04
What are the three standards of fieldwork? PIE - The auditor must adequately PLAN the work and must
properly supervise any assistants.
The auditor must obtain a sufficient understanding of the entity and its environment, including its
INTERNAL CONTROL, to assess the risk of material misstatement of the financial statements whether
due to error or fraud, and to design the nature, timing, and extent of further audit procedures.
The auditor must obtain sufficient appropriate audit EVIDENCE by performing audit procedures to afford
a reasonable basis for an opinion regarding the F/S under audit.
Audited Financial Statements- The Basics
1-05
What are the four standards of reporting? All CPAs Do Ok! - The auditor must state in the auditor's
report whether the financial statements are presented in accordance with generally accepted
ACCOUNTING PRINCIPLES.
The auditor must identify in the auditor's report those circumstances in which such principles have not
been CONSISTENTY observed in the current period in relation to the preceding period.
When the auditor determines that informative DISCLOSURES in the F/S are not reasonably adequate,
the auditor must so state in the auditor's report.
The auditor must either express an OPINION regarding the F/S, taken as a whole, or state that an
opinion cannot be expressed, in the auditor's report. When the auditor cannot express an overall
opinion, the auditor should state the reasons therefore in the auditor's report. In all cases where an
auditor's name is associated with F/S, the auditor should clearly indicate the character of the auditor's
work, if any, and the degree of responsibility the auditor is taking, in the auditor/s report.
, Audited Financial Statements- The Basics
1-06
Explain the difference between auditing standards and auditing procedures. - Auditing standards
measure the quality of the performance of the audit
Auditing procedures are the acts to be performed during the audit
Reports on Audited Financial Statements
1-07
What should be included in the introductory paragraph of the auditor's standards report under U.S.
auditing standards? - The F/S identified in the report were audited
The F/S are the responsibility of Mgt.
The auditor's responsibility is to express an Opinion based on the audit
Reports on Audited Financial Statements
1-08
What should be included in the Scope paragraph of the auditor's standard report under U.S. auditing
standards? - Statement that:
The audit was conducted in accordance with auditing standards generally accepted in the U.S
(nonissuers), or the audit was conducted in accordance with the standards of the PCAOB.
The audit was planned and performed to obtain reasonable assurance that eth F/S are free of material
misstatement.
The audit included:
