AUD CPA Exam Notes Questions and Answers
100% Pass
SU 1 - ✔✔Engagement Responsibilities
Nature of an Attest Engagement - ✔✔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 - ✔✔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 - ✔✔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? - ✔✔Issuers Audit = PCAOB, Non-issuer = ASB
Standards
Who issues Government Audit Standards? - ✔✔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.
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,Purpose of an Audit - ✔✔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 - ✔✔Required by auditors when performing an audit.
Audit Risk - ✔✔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 - ✔✔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) - ✔✔Occurrence, Completeness,
Accuracy, Cutoff, Classification
Assertions about Account Balances (B/S) - ✔✔Existence, Rights and Obligations, Completeness,
Valuation and Allocation
Assertions about Presentation and Disclosure (Mainly notes to financial statements) - ✔✔Occurrence and
Rights and Obligations, Completeness, Classification and Understandability, Accuracy and Valuation
Page 2/32
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,PCAOB Assertions - ✔✔Same as above but they do not explicitly address accuracy.
Professional Responsibilities of Auditors - ✔✔Must comply with unconditional requirements (i.e.
independence).
Additional Professional Services - ✔✔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 - ✔✔Assurance > Attest > Audit
Does not include consulting services
Designed to enhance decision making
Quality Control - ✔✔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 - ✔✔Professional Responsibilities
Code of Professional Conduct - Principles - ✔✔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 - ✔✔Fall under the principles, more specific.
Independence - ✔✔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.
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, Conceptual Framework for Independence - ✔✔Identify threats to independence, use safeguards to
minimize them to acceptable level.
How is independence impaired? - ✔✔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? - ✔✔Covered member should not assume management
responsibilities.
Expert witness services, managing internal audit, tax advocacy services, appraisals all impair
independence.
NOT impaired by preparing taxes, business risk consulting, advisory services.
NOT impaired for non-issuer bookkeeping, payroll processing.
Integrity and Objectivity - ✔✔Must be objective and act with integrity and be free from conflicts of
interest, not knowingly misrepresent facts, and not subordinate his or her judgment.
Can conflicts of interest be permitted? - ✔✔Yes, if disclosed, and consent is obtained from appropriate
parties. This does not apply to independence.
Page 4/32
©EmilyCharlene 2024. All Rights Reserved.
100% Pass
SU 1 - ✔✔Engagement Responsibilities
Nature of an Attest Engagement - ✔✔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 - ✔✔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 - ✔✔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? - ✔✔Issuers Audit = PCAOB, Non-issuer = ASB
Standards
Who issues Government Audit Standards? - ✔✔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.
Page 1/32
©EmilyCharlene 2024. All Rights Reserved.
,Purpose of an Audit - ✔✔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 - ✔✔Required by auditors when performing an audit.
Audit Risk - ✔✔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 - ✔✔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) - ✔✔Occurrence, Completeness,
Accuracy, Cutoff, Classification
Assertions about Account Balances (B/S) - ✔✔Existence, Rights and Obligations, Completeness,
Valuation and Allocation
Assertions about Presentation and Disclosure (Mainly notes to financial statements) - ✔✔Occurrence and
Rights and Obligations, Completeness, Classification and Understandability, Accuracy and Valuation
Page 2/32
©EmilyCharlene 2024. All Rights Reserved.
,PCAOB Assertions - ✔✔Same as above but they do not explicitly address accuracy.
Professional Responsibilities of Auditors - ✔✔Must comply with unconditional requirements (i.e.
independence).
Additional Professional Services - ✔✔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 - ✔✔Assurance > Attest > Audit
Does not include consulting services
Designed to enhance decision making
Quality Control - ✔✔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 - ✔✔Professional Responsibilities
Code of Professional Conduct - Principles - ✔✔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 - ✔✔Fall under the principles, more specific.
Independence - ✔✔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.
Page 3/32
©EmilyCharlene 2024. All Rights Reserved.
, Conceptual Framework for Independence - ✔✔Identify threats to independence, use safeguards to
minimize them to acceptable level.
How is independence impaired? - ✔✔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? - ✔✔Covered member should not assume management
responsibilities.
Expert witness services, managing internal audit, tax advocacy services, appraisals all impair
independence.
NOT impaired by preparing taxes, business risk consulting, advisory services.
NOT impaired for non-issuer bookkeeping, payroll processing.
Integrity and Objectivity - ✔✔Must be objective and act with integrity and be free from conflicts of
interest, not knowingly misrepresent facts, and not subordinate his or her judgment.
Can conflicts of interest be permitted? - ✔✔Yes, if disclosed, and consent is obtained from appropriate
parties. This does not apply to independence.
Page 4/32
©EmilyCharlene 2024. All Rights Reserved.
