Auditing - CPA Exam 2023/2024

Auditing - CPA Exam 2023 /2024 Auditing Standards Board (ASB) - ANS-✔✔ Technical body within the AICPA that holds the authority to set the rules for appropriate audits of organizations that do not issue securities to the public (often referred to as privately held organizations). Statements on Auditing Standards (SAS) - "Should" - ANS-✔✔ Presumptively Mandatory Statements on Auditing Standards (SAS) - "Must" - ANS-✔✔ Unconditional requirement Generally Accepted Accounting Principles (GAAP) - ANS-✔✔ a set of accounting standards that is used in the preparation of financial statements. Encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. Who may be deemed to be "Those Charged with Governance" - ANS-✔✔ Corporate trustee, board of directors, audit committee, and/or executive management Auditor's Responsibilities - ANS-✔✔ -Required to assess the risk of fraud -Comply with relevant ethical requirements -Plan and perform audit with professional skepticism -Exercise professional judgment -Obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level Planning Phase of an Audit - ANS-✔✔ 1. Discuss the timing of the audit procedures with the client's management Percentage of Coverage Rule - Low Risk - ANS-✔✔ 20% of federal funding spent by the entity Percentage of Coverage Rule - NOT low risk - ANS-✔✔ 40% and above of federal funding spent by the entity Generally Accepted Government Auditing Standards (GAGAS) "Yellow Book" - ANS-✔✔ Provides framework for auditors of government entities, entities that receive governme nt awards and other gov orgs. GAGAS requirements are in ADDITION to the requirement contained in the AICPA standards requires irregularities or illegal acts to be reported to the counterparty to the contract Office of Management and Budget (OMB) - ANS-✔✔Has the primary authority to develop requirements for performing federal program compliance audits in Accordance with Single Audit Act Cognizant Agency - ANS-✔✔ federal agency responsible for reviewing, negotiating, and approving cost allocation plans, in direct cost rates and more. This is under OMB most likely assigned to auditee who the fed agency provides the most funding to the auditee Single Audit - Which Guidelines to Follow? - ANS-✔✔ both GAAS and GAGAS guidelines are applicable Single Audit Requi red When - ANS-✔✔ the entity spends $750,000 or more per fiscal year in federal awards, grants, or funds the entity spends funds from one or more than one federal program if the entity only expends funds from one program, it "may" be eligible for a program -specific audit versus a single audit. Agreed -Upon Procedures - ANS-✔✔ practitioner is engaged to issue a report of findings based on specific procedures performed on unde rlying subject matter. CPA must be Independent!! practitioner's report should include list of the procedures perform and related findings. Compilation Engagement - ANS-✔✔ -No Assurance Given -Does not need to be Independent -Goal is to assist management in present financial info in the form of FS -Accountant is required to read the FS & consider if they are good Compilation Report Requirement - ANS-✔✔ A compilation report is only required whenever the accountant is engaged to subject the financial stateme nts to compilation procedures. Review Engagement - ANS-✔✔ -Limited Assurance -Must be Independent -Collect Evidence through observations, inquiry, analytical procedures -NOT responsible for inquires of outside parties (legal counsel) -NOT responsible for s afeguards or internal controls Standards Review Report Should Include: - ANS-✔✔ 1. title that includes "independent" accountant for a review engagement