Principles of Auditing & Other Assurance
Services Complete and Verified Study
Guide Highly Graded A+ Exam ||Already
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Assurance - ANSWER-Describes the broad range of information enhancement services
that are provided by certified public accountants (CPAs)
Assurance Services auditors provide - ANSWER-Audits of FAinancial Statements
Examinations of Internal Control
trust Services, E.G., WebTrust and SysTrust
Reviews of Financial Statements or Other Information
Agreed-Upon Procedures Engagements
CPA PrimePlus/Elder Care Services
XBRL Services
NonAssurance Services auditors provide - ANSWER-Tax Services
Management Consulting Services
Fraud investigations
Information technology Consulting
Bookkeeping/General Accounting
Two types of assurance services - ANSWER-Those that increase reliability of
information (ex: audit & assurance services)
Those that put information into a form or context that facilitates decision making (ex:
tax)
Attestation services - ANSWER-A major subset of assurance services that provides
assurance as to it's reliability
Attest engagement - ANSWER-A practitioner is engaged to issue or does issue an
examination, a review, or an agreed upon procedures report on subject matter or an
assertion about subject matter that is the responsibility of another party (e.g.
management)
Three forms of attest engagement - ANSWER-1. An examination, referred to as an
audit when it involves historical financial statements, provides highest form of assurance
that CPAs can offer.
2. A review is substantially lessor in scope of procedures than an examination and is
designed to lend only a moderate/limited degree of assurance.
,3. An agreed-upon procedure engagement results in a report by the CPA that describes
those procedures and their findings.
Examination Form of Attestation - ANSWER-Level of Assurance Provided - High
Risk of Material Misstatement - Low
Nature of Assurance in Report - "In our Opinion..." Procedures - Select from all
available procedures any combination that can limit attestation risk to a low level.
Review Form of Attestation - ANSWER-Level of Assurance Provided - Moderate
(Limited)
Risk of Material Misstatement - Moderate
Nature of Assurance in Report - "We are not aware of any material modifications that
should be made." Procedures - Generally limited to inquiry and analytical procedures.
Agreed-Upon Procedures Forms of Attestation - ANSWER-Level of Assurance Provided
- Summary of Findings
Risk of Material Misstatement - Varies by specific engagement.
Nature of Assurance in Report - "includes a summary of procedures followed and
findings."
Procedures - Agreed upon with the specified user or users.
Independent auditor's Contribution - ANSWER-To provide credibility to information by
reducing information risk, the risk that information is materially misstated.
Business risk - ANSWER-the risk that a company will not be able to meet its financial
obligations due to economic conditions or poor management decisions.
Financial statement misstatements arise due to: - ANSWER-Accidental errors, lack of
knowledge of accounting principles, unintentional bias, and deliberate falsification.
Major auditing developments of 20th century - ANSWER-Consideration of internal
control
Reliance upon sampling, rather than complete verification
Emphasis upon "fairness" of statements
Increased liability to third parties
Increased concern with auditing compliance and internal control
Increased concern with detecting fraudulent financial reporting.
Accounting profession's credibility crisis in 21st century - ANSWER-Enron bankruptcy
and WorldCom fraud
Andersen Conviction
Sarbane's-Oxley Act of 2002
Public Company Accounting Oversight Board
Types of Audit - ANSWER-Financial
,Compliance
Operational
Integrated (financial statements & Internal Control)
Financial Audit - ANSWER-Covers Balance Sheet & related statements of income,
retained earnings and cash flows
Goal is to determine if prepared in conformity with GAAP
Performed by CPAs
Users include Management, investors, bankers, creditors, financial analysts,
government agencies.
Audit involves: - ANSWER-searching and verifying accounting records and examining
other documents. Evidence necessary to issue an audit report that states auditors'
opinion.
Compliance Audit - ANSWER-Performed by External and/or internal auditors
Measures the compliance of the organization with some established criteria (e.g. laws
and regulations, or internal control policies and procedures)
Operational Audit - ANSWER-Study of a specific unit of an organization for the purpose
of measuring its performance. the principle purpose is to provide recommendations to
improve efficiency and effectiveness. Auditors' report consists of ideas and
recommendations, not an opinion as to compliance with recognized criteria.
Integrated audit - ANSWER-SOX requires that auditors of publicly traded companies in
the United States perform an integrated audit that includes providing assurance on both
the financial statements and the effectiveness of internal control over financial reporting.
Internal Auditors - ANSWER-Employed by a company as an employee. Often perform
operational and compliance audits of internal controls.
Who does the Internal auditor report to? - ANSWER-Audit Committee of the Board of
directors and also to the president or another high-level executive.
GAO - ANSWER-Government Accountability Office, Headed by the comptroller general,
are responsible of supporting Congress
Internal Revenue Service Agents - ANSWER-responsible for enforcement of tax laws of
various sorts, generally perform compliance audits of income tax returns.
AICPA - ANSWER-American Institute of Certified Public Accountants. Voluntary
national organization of more than 370,000 members.
AICPA's Traditional role - ANSWER-Establishing standards for public companies, since
2002 only non-public companies as it was taken over by the PCAOB.
Research & publication
, Continuing professional education
Professional regulation for individual CPAs and public accounting firms.
Auditing Standards Board (ASB) - ANSWER-Establishes auditing standards for auditors
of nonpublic companies. Responsible for issuing official pronouncements on auditing
matters for nonpublic companies ("nonissuers").
Statements on Auditing Standards (SASs) - ANSWER-A most important series of
pronouncements
Statements on Standards for Attestation Engagements (SSAEs) - ANSWER-Issued by
AICPA, provides CPA with guidance for attesting to information other than financial
statements as financial forecasts.
Accounting and Review Services Committee - ANSWER-Establishes standards for
reporting on financial statements when the CPA's role Is to compile or review, rather
than audit of financial statements.
Statements on Standards for Accounting and Review Services (SSARS) - ANSWER-
The important pronouncement of financial statements issued.
FASB - ANSWER-Financial Accounting Standards Board - Establishes accounting
standards (GAAP) in the U.S. for entities other than federal, state and local
governments.
GASB - ANSWER-Government Accounting Standards Board (GASB) establishes
accounting standards for state and local government units.
Federal Accounting Standards Advisory Board - ANSWER-Establishes accounting
standards for the government.
PCAOB - ANSWER-Public Company Accounting oversight Board - Created in 2002 to
oversee and discipline CPAs and CPA firms that audit public companies. Under the
authority of SEC.
Public Company Accounting Oversight Board - ANSWER-Five member board, has the
responsibility to establish or adopt auditing, attestation, quality control, ethics and
independence standards relating to the preparation of audit reports for SEC registrants.
To register firms, perform inspections of firms, conduct investigations and disciplinary
proceedings of firms, and sanction registered firms.
SEC - ANSWER-Securities and Exchange Commission - Agency of the US
Government. Has the oversight responsibility for the PCAOB. The primary function of
SEC is to protect investors and public by requiring full disclosures of financial
information by companies offering securities for sale to the public, and to prevent
misrepresentation, deceit or other fraud in the sale of securities.
Services Complete and Verified Study
Guide Highly Graded A+ Exam ||Already
Passed!!
Assurance - ANSWER-Describes the broad range of information enhancement services
that are provided by certified public accountants (CPAs)
Assurance Services auditors provide - ANSWER-Audits of FAinancial Statements
Examinations of Internal Control
trust Services, E.G., WebTrust and SysTrust
Reviews of Financial Statements or Other Information
Agreed-Upon Procedures Engagements
CPA PrimePlus/Elder Care Services
XBRL Services
NonAssurance Services auditors provide - ANSWER-Tax Services
Management Consulting Services
Fraud investigations
Information technology Consulting
Bookkeeping/General Accounting
Two types of assurance services - ANSWER-Those that increase reliability of
information (ex: audit & assurance services)
Those that put information into a form or context that facilitates decision making (ex:
tax)
Attestation services - ANSWER-A major subset of assurance services that provides
assurance as to it's reliability
Attest engagement - ANSWER-A practitioner is engaged to issue or does issue an
examination, a review, or an agreed upon procedures report on subject matter or an
assertion about subject matter that is the responsibility of another party (e.g.
management)
Three forms of attest engagement - ANSWER-1. An examination, referred to as an
audit when it involves historical financial statements, provides highest form of assurance
that CPAs can offer.
2. A review is substantially lessor in scope of procedures than an examination and is
designed to lend only a moderate/limited degree of assurance.
,3. An agreed-upon procedure engagement results in a report by the CPA that describes
those procedures and their findings.
Examination Form of Attestation - ANSWER-Level of Assurance Provided - High
Risk of Material Misstatement - Low
Nature of Assurance in Report - "In our Opinion..." Procedures - Select from all
available procedures any combination that can limit attestation risk to a low level.
Review Form of Attestation - ANSWER-Level of Assurance Provided - Moderate
(Limited)
Risk of Material Misstatement - Moderate
Nature of Assurance in Report - "We are not aware of any material modifications that
should be made." Procedures - Generally limited to inquiry and analytical procedures.
Agreed-Upon Procedures Forms of Attestation - ANSWER-Level of Assurance Provided
- Summary of Findings
Risk of Material Misstatement - Varies by specific engagement.
Nature of Assurance in Report - "includes a summary of procedures followed and
findings."
Procedures - Agreed upon with the specified user or users.
Independent auditor's Contribution - ANSWER-To provide credibility to information by
reducing information risk, the risk that information is materially misstated.
Business risk - ANSWER-the risk that a company will not be able to meet its financial
obligations due to economic conditions or poor management decisions.
Financial statement misstatements arise due to: - ANSWER-Accidental errors, lack of
knowledge of accounting principles, unintentional bias, and deliberate falsification.
Major auditing developments of 20th century - ANSWER-Consideration of internal
control
Reliance upon sampling, rather than complete verification
Emphasis upon "fairness" of statements
Increased liability to third parties
Increased concern with auditing compliance and internal control
Increased concern with detecting fraudulent financial reporting.
Accounting profession's credibility crisis in 21st century - ANSWER-Enron bankruptcy
and WorldCom fraud
Andersen Conviction
Sarbane's-Oxley Act of 2002
Public Company Accounting Oversight Board
Types of Audit - ANSWER-Financial
,Compliance
Operational
Integrated (financial statements & Internal Control)
Financial Audit - ANSWER-Covers Balance Sheet & related statements of income,
retained earnings and cash flows
Goal is to determine if prepared in conformity with GAAP
Performed by CPAs
Users include Management, investors, bankers, creditors, financial analysts,
government agencies.
Audit involves: - ANSWER-searching and verifying accounting records and examining
other documents. Evidence necessary to issue an audit report that states auditors'
opinion.
Compliance Audit - ANSWER-Performed by External and/or internal auditors
Measures the compliance of the organization with some established criteria (e.g. laws
and regulations, or internal control policies and procedures)
Operational Audit - ANSWER-Study of a specific unit of an organization for the purpose
of measuring its performance. the principle purpose is to provide recommendations to
improve efficiency and effectiveness. Auditors' report consists of ideas and
recommendations, not an opinion as to compliance with recognized criteria.
Integrated audit - ANSWER-SOX requires that auditors of publicly traded companies in
the United States perform an integrated audit that includes providing assurance on both
the financial statements and the effectiveness of internal control over financial reporting.
Internal Auditors - ANSWER-Employed by a company as an employee. Often perform
operational and compliance audits of internal controls.
Who does the Internal auditor report to? - ANSWER-Audit Committee of the Board of
directors and also to the president or another high-level executive.
GAO - ANSWER-Government Accountability Office, Headed by the comptroller general,
are responsible of supporting Congress
Internal Revenue Service Agents - ANSWER-responsible for enforcement of tax laws of
various sorts, generally perform compliance audits of income tax returns.
AICPA - ANSWER-American Institute of Certified Public Accountants. Voluntary
national organization of more than 370,000 members.
AICPA's Traditional role - ANSWER-Establishing standards for public companies, since
2002 only non-public companies as it was taken over by the PCAOB.
Research & publication
, Continuing professional education
Professional regulation for individual CPAs and public accounting firms.
Auditing Standards Board (ASB) - ANSWER-Establishes auditing standards for auditors
of nonpublic companies. Responsible for issuing official pronouncements on auditing
matters for nonpublic companies ("nonissuers").
Statements on Auditing Standards (SASs) - ANSWER-A most important series of
pronouncements
Statements on Standards for Attestation Engagements (SSAEs) - ANSWER-Issued by
AICPA, provides CPA with guidance for attesting to information other than financial
statements as financial forecasts.
Accounting and Review Services Committee - ANSWER-Establishes standards for
reporting on financial statements when the CPA's role Is to compile or review, rather
than audit of financial statements.
Statements on Standards for Accounting and Review Services (SSARS) - ANSWER-
The important pronouncement of financial statements issued.
FASB - ANSWER-Financial Accounting Standards Board - Establishes accounting
standards (GAAP) in the U.S. for entities other than federal, state and local
governments.
GASB - ANSWER-Government Accounting Standards Board (GASB) establishes
accounting standards for state and local government units.
Federal Accounting Standards Advisory Board - ANSWER-Establishes accounting
standards for the government.
PCAOB - ANSWER-Public Company Accounting oversight Board - Created in 2002 to
oversee and discipline CPAs and CPA firms that audit public companies. Under the
authority of SEC.
Public Company Accounting Oversight Board - ANSWER-Five member board, has the
responsibility to establish or adopt auditing, attestation, quality control, ethics and
independence standards relating to the preparation of audit reports for SEC registrants.
To register firms, perform inspections of firms, conduct investigations and disciplinary
proceedings of firms, and sanction registered firms.
SEC - ANSWER-Securities and Exchange Commission - Agency of the US
Government. Has the oversight responsibility for the PCAOB. The primary function of
SEC is to protect investors and public by requiring full disclosures of financial
information by companies offering securities for sale to the public, and to prevent
misrepresentation, deceit or other fraud in the sale of securities.
