Flashcards in Audit 12 Deck (20)
Auditor has audited same people for 4 years.- What affect on audit risk of any?
Decraese Audit risk
Employees are paid - biweekly- What affect on audit risk of any?
No effect on audit risk
Changed method of preparing F.S from cash to GAAP- What affect on audit risk of any?
Increase in audit risk - change in method even if positive increase likelihood of mistatement
Sold half of controlling interest and retained significant interest -- What affect on audit risk of any?
- Increased audit risk - now do it on equity method - harder to get information and increase RMM
A litigation loss contingency included LY was dropped.- What affect on audit risk of any?
-Decreased audit risk
Undisclosed related party transactions -- What affect on audit risk of any?
Increased audit risk
enter into a barter transaction that is unusual that create a contingent liability- What affect on audit risk of any?
- Increased audit risk - creates a contingent liability
Increased insurance coverage from historical cost to replacement cost -- What affect on audit risk of any?
No affect on audit risk
New policy to refund money if the work fails inspection that leads to increase in revenue
- What affect on audit risk of any?
increase audit risk - guaranteeing refund if failing creates a contingent liability
an initial public offering is planned for next year- What affect on audit risk of any?
- Increased audit risk - greater incentive to overstate profitability
Audit committee must be independent of the entity - they are a subcommittee of the BoD
They aren't responsible for DIM nor are they managers from within the company
-1 must have financial background - don't need to be a CPA
What are examples of consulting services
- advisory services
-EDP system implementation services
-Staff and other support services
- product services
- reviewing and commenting on a client's financial statements
Why does the CPA profession find it essential to promulgate ethical standards and to establish means for ensuring their observance
The CPA profession does this to emphasize the professions responsibility to the public. Not one that sees its primary role merely in serving the interests of its own members and clients
SOX established who?
PCAOB - for public companies who are issuers who report to the SEC
Who sets rules for Private firm audits
FASB does what?
FASB is responsible for establishing GAAP for all entities -public and non public
They do NOT regulated CPA firms
- AICPA Code of Prof conduct
- Internal Rev Code
- Treasure Department Practice Rules (Circular 230)
All have what?
Formal administrative authority
-AICPA statements on Responsibilities in Tax Practice - is merely advisory
A CPA must act with both integrity and objectivity in any professional engagement.
Independence is only required for attest engagements
Don need to be independent for consulting engagements (which is nonattest)
Who is required to be independent in both fact and appearance
A CPA in public practice providing auditing and other attestation services