Auditing and More White Book Hogan

Question 1

What is auditing?

Answer 1

Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested users.

Question 2

What is the audit process?

Answer 2

Accept or retain a client
Plan the engagement
Gather and assess evidence
Report results

Question 3

Statement on Auditing Standard (SAS) are prepared by and apply to?

Answer 3

Prepared by ASB of the AICPA and apply to nonissuers

Question 4

Audit Standard (AS) is prepared by and apply to?

Answer 4

Prepared by PCAOB and apply to issuers

Question 5

International Standard on Auditing(ISA) prepared by and apply to?

Answer 5

Prepared by IAASB of the IFAC (international auditing and assurance standards board) apply to Foreign Companies.

Question 6

Governmental Auditing Standards (GAS) prepared by and apply to?

Answer 6

Prepared by GAO (U.S. Government accountability office) apply to Government entities and entities that receive government awards/funds.

Question 7

Statement on Standards for Attestation Engagements (SSAE) Prepared by and apply to?

Answer 7

Prepared by AICPA and apply to Attesting to Info other than historical F/S

Question 8

Statement on Standards for Accounting and Review Services (SSARS) prepared by and apply to ?

Answer 8

Prepared ARSC of the AICPA and apply to nonissues. Compilations (assembling F/S, with no assurance), and review (with limited assurance)

Question 9

Do you need to be independent for consulting services?

Answer 9

Do not need to be independent.

Question 10

IAASB writes

Answer 10

International auditing standards

Question 11

IASB writes

Answer 11

international accounting standards

Question 12

Is opinion on Internal control required for international reports?

Answer 12

No, international do not require audit of IC, so no opinion on IC is required.

Question 13

For international standards, is and auditor required to confirm AR?

Answer 13

No, this requirement is not in the ISA

Question 14

For international standards, is inquiry of client’s lawyer required?

Answer 14

Not a specific requirement in the ISA’s (unless auditor assesses a risk of material misstatement)

Question 15

SOX only applies to?

Answer 15

Public companies.

Question 16

To help maintain independence, there is a cooling off period before an auditor can assume a key financial reporting role at the audit client, how long is the waiting period?

Answer 16

1 year cooling off period

Question 17

A public company must have an audit committee that is:

Answer 17

Comprised exclusively of outside/independent directors
Should have at least 1 financial expert (need not be a CPA)
Hires and fires the auditor
Oversees the company’s accounting policies
Preapproves any acceptable non audit services
Oversees internal audit activities and reports
Publicly reports its charter/duties

Question 18

How often must an engagement audit partner, and concurring partner rotate off the audit?

Answer 18

After 5 years.

Question 19

What is whistle blowing protection?

Answer 19

Company can’t retaliate against the employee- cannot unduly punish/ fire for “blowing the whistle” on fraud or other wrongful conduct.

Question 20

SOX prohibited services(If audit a public company, you can not also do)?

Answer 20

Bookkeeping or other services relating to the F/S or accounting records
Financial info systems design and or implementation
Appraisal services
Internal audit outsourcing services
Management and human resource functions
Actuarial services
Investment or broker-dealer services
Certain tax services, such as tax planning for potentially abusive tax shelters
Other service that would affect independence as determined by the PCAOB.

Question 21

how long must an auditor retain workpapers?

Answer 21

for at least 7 years.

Question 22

The SEC appoint the PCAOB’s five board members which consist of?

Answer 22

2 CPAs and 3 non CPAs

Question 23

What is the nature and timing of communications between an accounting firm performing an initial audit of an issuer and the issuer’s audit committee?

Answer 23

Prior to accepting the engagement, the firm should describe in writing all relationship that, as of the date of the communication, may reasonably be thought to bear on independence.