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D215- Auditing questions and answers graded A+ 2024/2025
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D215- Auditing questions and answers graded A+ 2024/2025
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D215- AuditingAudit Expectation Gap
Difference between expectations of auditors and F.S users beliefs that do not align with auditor's
professional responsibilities
Audit Services
Audit of financial statements and audit of ICFR
Attestation Services
independent practitioner engaged to issue a report on subject matter that is the responsibility of
another party
Audit of financial statements
provides financial statement users with an opinion from auditors on whether financial statements
are presented fairly and in accordance with GAAP
Audit of ICFR
provides F.S. users with opinion of auditor on design and operating effectiveness of ICFR
Examples of attestation services
Financial forecasts
Detailed schedules of specific accounts
Review of historical financial statements
Agreed-upon procedures
Assurance Services
independent professional services that improve the quality of information, or its context, for
decision makers
Types of Assurance Services
Financial Statement Audits
Compliance Audits
Operational (Performance) Audits
,Internal Audits
Limitations of an audit caused by
1. Nature of financial reporting- judgment of F.S
2. Nature of audit procedures- reliance on evidence, materiality
3. Need for audit to be conducted in a certain amount of time
Materiality
whether an item is large enough to likely influence the decision of an investor or creditor
Compliance Audit
examination of organizational compliance with applicable laws, regulations, policies, and
procedures
ex: income tax audit
Operational (Performance) Audit
an assessment of the economy, efficiency, and effectiveness of an organization's operations
Internal Audits
Conducted by employees of organization (or outsourced); evaluating/improving risk
management, internal control procedures, elements of governmental processes
Sources of demand for audit and assurance services
remoteness, complexity, competing incentives, reliability
Auditor responsibility
obtain reasonable assurance FS are free of material misstatements
Professional Skepticism
a state of mind that is characterized by appropriate questioning and a critical assessment of
audit evidence
SEC
Mission is to protect investors, maintain fair and efficient markets, facilitate capital formation,
enforce and interpret securities laws
, PCAOB
non-profit corporation that oversees audits to protect investor interests; regulation and
standard-setting for audits of public companies
*Sets AS
Auditing Standards
Minimum requirements and guidance for auditing services
AICPA
private professional membership organization of CPA's representing accounting professionals;
ASB part of AICPA
Auditing Standards Board
The arm of the AICPA that is responsible for issuing auditing standards for private and nonprofit
organizations (Statements for Auditing Standards)
Financial Accounting Standards Board (FASB)
the private board that establishes the generally accepted accounting principles used in the
practice of financial accounting
Committee of Sponsoring Organizations of the Treadway Commission (COSO)
private sector group that provides guidance to management and expertise in areas of internal
control, enterprise risk management, fraud deterrence
State Boards of Accountancy
Issue CPA certificates
All boards require successful completion of CPA examination
Education and experience requirements vary
National Association of State Boards of Accounting (NASBA)
Unmodified (Unqualified) Opinion
An opinion which concludes that the financial statements present an entity's financial condition,
results of operations, and cash flows in conformity with GAAP
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