CPA Exam - AUD (Section 1) || with 100% correct answers.
Statements on Auditing Standards (SAS) correct answers standard-setting body: AICPA auditing
standards board
SAS provide GAAS for audits of non issuers (private)
& provides guidance for other services, such as review of interim financials and letters to
underwriters
PCAOB Auditing Standards correct answers standard-setting body: PCAOB accounting
oversight board
PCAOB AS provide GAAS for the audits of issuers (public) & provides guidance for other
services, such as review of interim financials and letters to underwriters
Generally Accepted Government Auditing Standards (GAGAS) correct answers standard-setting
body: governmental accountability office (GAO)
GAGAS provide guidance for audits of government orgs, programs, activities, and of entities
that receive government funds
Statements on Standards for Attestation Engagements (SSAE) correct answers standard-setting
body: AICPA
applies to: examination, a review, or agreed-upon procedures report on a subject matter, or an
assertion about a subject matter, that is the responsibility of another party
Statements on Standards for Accounting and Review Services (SSARS) correct answers
standard-setting body: AICPA accounting and review services committee
provide guidance for UNaudited financials of non issuers (private)
Code of Professional Conduct correct answers standard-setting body: AICPA
provides MEMBERS with guidelines for BEHAVIOR in the conduct of their professional affairs.
,also provides assurance to the public that the profession intends to maintain high standards and
to enforce compliance with these standards by its members
applies to: members of the AICPA
Statements on Quality Control Standards (SQCS) correct answers standard-setting body: AICPA
provides guidance to CPA FIRMS about a quality control system.
applies to: CPA firms providing auditing, attestation, and accounting and review services
quality control system correct answers consists of policies and procedures deisgned,
implemented, and maintained to ensure that the firm complies with professional standards and
appropriate legal and regulatory requirements, and that any reports issued are appropriate in the
circumstances
The GAAS Hierarchy (most authoritative to least) correct answers SAS (nonissuers) & PCAOB
AS (issuers)
Interpretive Publications
Other Auditing Publications
SAS (non issuers) & PCAOB AS (issuers) correct answers auditor should use professional
judgement & be prepared to justify any departures from presumptively mandatory requirements
SAS (non issuers) & PCAOB AS (issuers) - LANGUAGE correct answers clarifies the auditor's
level of responsibility
- "must" or "is required" indicates and unconditional requirement, which must be followed in all
cases in which the requirement is relevant
- "should" indicates a presumptively mandatory requirement, which must be followed in all cases
where relevant except in rare circumstances when departure is permitted if justified
- "may," "might," and "could" indicate explanatory material that does not impose a professional
requirement for performance
,Interpretive Publications correct answers are recommendations regarding how SASs should be
applied in specific situations.
- not considered to be auditing standards
- ex: auditing interpretations of GAAS, exhibits to GAAS, auditing guidance provided in AICPA
Audit and Accounting Guides, & AICPA Auditing Statements of Position (SOP)
Other Auditing Publications correct answers have NO authoritative status but may be helpful to
the auditor
- ex: Auditing articles in the Journal of Accountancy (or other professional journal), auditing
articles in the AICPA CPA Letter, continuing professional education materials, textbooks, and
other auditing publications
purpose of an audit correct answers to provide financial statement users with an opinion on
whether the financial statements are presented fairly, in all material respects, in accordance with
the applicable financial reporting framework (GAAP, IFRS, & special purpose frameworks)
Management and those charged with governance are responsible for: correct answers 1. the
preparation and fair presentation of the FS in accordance w the applicable financial reporting
framework
2. the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of FS that are free of material misstatement due to error or fraud; and
3. providing the auditor with access to information and persons within the entity needed to
complete the audit
the preparation and fair presentation of the FS requires: correct answers 1. identification of the
applicable financial reporting framework
2. preparation and fair presentation of the FS in accordance w the framework; and
3. inclusion of an adequate description of the framework in the FS
Auditor Responsibilities correct answers the auditor is responsible for expressing an opinion on
the FS based on the audit as well as:
, 1. maintaining professional skepticism
2. complying with relevant ethical requirements
3. exercising professional judgment throughout the planning and performance of the audit
4. obtaining sufficient appropriate audit evidence; and
5. complying with GAAS
professional skepticism correct answers recognition that circumstances may exist that cause the
financial statements to be materially misstated
auditors should be alert for:
-audit evidence that contradicts other audit evidence obtained
-info that calls into question the reliability of documents and responses to inquiries that may be
used as audit evidence
-conditions that indicate possible fraud
-circumstances that suggest the need for audit procedures in addition to those required by GAAS
environment that creates potential fraud correct answers pressure
opportunity
rationalization
Ethical Requirements correct answers must be independent in both fact and appearance
-ethical requirements include the AICPA Code of Professional Conduct and the rules of the state
boards of accountancy and applicable regulatory agencies that are more restrictive
Professional Judgment correct answers should exercise PJ in planning & performing the audit
professional judgment is necessary when making decisions about:
-materiality
-audit risk
Statements on Auditing Standards (SAS) correct answers standard-setting body: AICPA auditing
standards board
SAS provide GAAS for audits of non issuers (private)
& provides guidance for other services, such as review of interim financials and letters to
underwriters
PCAOB Auditing Standards correct answers standard-setting body: PCAOB accounting
oversight board
PCAOB AS provide GAAS for the audits of issuers (public) & provides guidance for other
services, such as review of interim financials and letters to underwriters
Generally Accepted Government Auditing Standards (GAGAS) correct answers standard-setting
body: governmental accountability office (GAO)
GAGAS provide guidance for audits of government orgs, programs, activities, and of entities
that receive government funds
Statements on Standards for Attestation Engagements (SSAE) correct answers standard-setting
body: AICPA
applies to: examination, a review, or agreed-upon procedures report on a subject matter, or an
assertion about a subject matter, that is the responsibility of another party
Statements on Standards for Accounting and Review Services (SSARS) correct answers
standard-setting body: AICPA accounting and review services committee
provide guidance for UNaudited financials of non issuers (private)
Code of Professional Conduct correct answers standard-setting body: AICPA
provides MEMBERS with guidelines for BEHAVIOR in the conduct of their professional affairs.
,also provides assurance to the public that the profession intends to maintain high standards and
to enforce compliance with these standards by its members
applies to: members of the AICPA
Statements on Quality Control Standards (SQCS) correct answers standard-setting body: AICPA
provides guidance to CPA FIRMS about a quality control system.
applies to: CPA firms providing auditing, attestation, and accounting and review services
quality control system correct answers consists of policies and procedures deisgned,
implemented, and maintained to ensure that the firm complies with professional standards and
appropriate legal and regulatory requirements, and that any reports issued are appropriate in the
circumstances
The GAAS Hierarchy (most authoritative to least) correct answers SAS (nonissuers) & PCAOB
AS (issuers)
Interpretive Publications
Other Auditing Publications
SAS (non issuers) & PCAOB AS (issuers) correct answers auditor should use professional
judgement & be prepared to justify any departures from presumptively mandatory requirements
SAS (non issuers) & PCAOB AS (issuers) - LANGUAGE correct answers clarifies the auditor's
level of responsibility
- "must" or "is required" indicates and unconditional requirement, which must be followed in all
cases in which the requirement is relevant
- "should" indicates a presumptively mandatory requirement, which must be followed in all cases
where relevant except in rare circumstances when departure is permitted if justified
- "may," "might," and "could" indicate explanatory material that does not impose a professional
requirement for performance
,Interpretive Publications correct answers are recommendations regarding how SASs should be
applied in specific situations.
- not considered to be auditing standards
- ex: auditing interpretations of GAAS, exhibits to GAAS, auditing guidance provided in AICPA
Audit and Accounting Guides, & AICPA Auditing Statements of Position (SOP)
Other Auditing Publications correct answers have NO authoritative status but may be helpful to
the auditor
- ex: Auditing articles in the Journal of Accountancy (or other professional journal), auditing
articles in the AICPA CPA Letter, continuing professional education materials, textbooks, and
other auditing publications
purpose of an audit correct answers to provide financial statement users with an opinion on
whether the financial statements are presented fairly, in all material respects, in accordance with
the applicable financial reporting framework (GAAP, IFRS, & special purpose frameworks)
Management and those charged with governance are responsible for: correct answers 1. the
preparation and fair presentation of the FS in accordance w the applicable financial reporting
framework
2. the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of FS that are free of material misstatement due to error or fraud; and
3. providing the auditor with access to information and persons within the entity needed to
complete the audit
the preparation and fair presentation of the FS requires: correct answers 1. identification of the
applicable financial reporting framework
2. preparation and fair presentation of the FS in accordance w the framework; and
3. inclusion of an adequate description of the framework in the FS
Auditor Responsibilities correct answers the auditor is responsible for expressing an opinion on
the FS based on the audit as well as:
, 1. maintaining professional skepticism
2. complying with relevant ethical requirements
3. exercising professional judgment throughout the planning and performance of the audit
4. obtaining sufficient appropriate audit evidence; and
5. complying with GAAS
professional skepticism correct answers recognition that circumstances may exist that cause the
financial statements to be materially misstated
auditors should be alert for:
-audit evidence that contradicts other audit evidence obtained
-info that calls into question the reliability of documents and responses to inquiries that may be
used as audit evidence
-conditions that indicate possible fraud
-circumstances that suggest the need for audit procedures in addition to those required by GAAS
environment that creates potential fraud correct answers pressure
opportunity
rationalization
Ethical Requirements correct answers must be independent in both fact and appearance
-ethical requirements include the AICPA Code of Professional Conduct and the rules of the state
boards of accountancy and applicable regulatory agencies that are more restrictive
Professional Judgment correct answers should exercise PJ in planning & performing the audit
professional judgment is necessary when making decisions about:
-materiality
-audit risk
