Name the elements of a CPA firm's system of quality control for its auditing, attest, and accounting and review services. correct answers "Quality control will HELP ME!"
Human resources
Engagement/client acceptance & continuance
Leadership responsibilities
Performance of the engagement
Monitor...
AU2 || All Answers Are Correct 100%.
Name the elements of a CPA firm's system of quality control for its auditing, attest, and accounting and review services. correct answers "Quality control will HELP ME!"
Human resources
Engagement/client acceptance & continuance
Leadership responsibilities
Performance of the engagement
Monitoring
Ethical requirements
What are the objectives of an auditor when implementing quality control procedures at the engagement level? correct answers Provide reasonable assurance:
1. that the audit complies with professional standards and any legal or regulatory requirements
2. that the report issued by the auditor is appropriate for the engagement
Explain the relationship between quality control standards and GAAS standards. correct answers Quality control standards pertain to the conduct of all professional activities of an entity's practice as a whole.
GAAS standards relate to the conduct of each individual audit engagement.
Which four areas do auditors address in special consideration engagements? correct answers 1) Audits of FS prepared in accordance with a special purpose framework
2) Audits of single FS and specific elements, accounts, or items of a FS
3) Reporting on compliance with aspects of contractual or regulatory requirements associated with audited financials
4) Engagements to report on summary FS
Give examples of special purpose frameworks correct answers - cash basis
- tax basis
- regulatory basis
- contractual basis
What type of information should an auditor gather prior to auditing a single FS or a specific element of a FS? correct answers - purpose for preparing the single FS or specific element of a FS
- intended users, and
- steps taken by mgt to ensure that the applicable financial framework is acceptable under the circumstances
What are some limitations surrounding an auditor's report on a single FS, or a specified element, account, or item of a FS? correct answers - if based on OE, should perform procedures to express
opinion about financial position
- if based on NI, should perform procedures to express opinion about financial position and results of operations - if adverse opinion or disclaimer, may not report on items that constitute a major portion of FS (may report on nonmajor items but not accompany the report).
Under US auditing standards, when may an auditor issue a special report on a client's compliance
with contractual agreements or regulatory requirements? correct answers - must have audited the client's FS and expressed an unmodfied or qualified opinion (no adverse or disclaimer)
-may only give negative assurance on compliance
What type of opinion can an auditor issue on summary financial statements and when is that opinion appropriate? correct answers Either unmodified or adverse on summary FS (no qualified).
Unmodified if summary FS are consistent, in all material respects, with corresponding audited FS.
Adverse if summary FS are not consistent, in all material respects, with corresponding audited FS and mgt does not make changes
Name the five elements of compilation and review engagements. correct answers 1) a three-party
relationship
2) financial reporting framework
3) FS or financial information
4) sufficient, appropriate evidence (review only)
5) written communication report
Compilation and review standards require that an accountant establish a understanding with the client as to the services to be performed. What should be included in this understanding? correct answers Engagement letter is presumptively mandatory and should include:
- description of specific service performed
- objectives of engagement
- limitations of service including: (engagement cannot be relied upon to disclose errors, fraud or illegal acts; entity will be informed if fraud or illegal acts are found)
- other accounting services, if any, to be performed
Identify the performance requirements that are necessary when engaged in a compilation. correct
answers - knowledge of acctg principles and practices in industry
- general understanding of client's business
- read compiled FS if appropriate form and free from obvious errors
- follow up w/ mgt when aware of fraud or illegal acts, going concern issues, or subsequent events. Consider impact of follow-up on FS, evaluate mgt conclusions, and consider effect on compilation report
How does the expected use of compiled FS affect reporting requirements? correct answers - if FS
expected to be used by third parties, compilation report is required
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