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Notes on Auditing l - Auditing Standard | ACCT 4250, Study notes of Auditing

Audit AU standards Material Type: Notes; Professor: Tan; Class: Auditing I; Subject: Accounting; University: California State University-East Bay;

Typology: Study notes

2011/2012

Uploaded on 03/17/2012

mejiaritch
mejiaritch 🇺🇸

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Inadequate disclsire in the f/s as per GAAP involvoing risks or uncertainty = qualified or adversed opinion. Consider materiality when evaluating the adequacy of dislcosure of matters involving risks or uncertainty Mgt estiamte of the effect of the risk or uncertainty is materially misstated = qualified or adverse opinion Mgt change a/c principle = not GAAP, & mgt has not provided reasonable justificaiton for change = qualified but if material adv the auditor should consider possible effect of that change when reporting on the entity's f/s for subsequent years. Adverse Opinion = f/s taken as a whole not presented fairly in conformity with the GAAP. When auditor express and adverse opinion, should disclose in a separate explanatory paragraph before the opinion -reasons, The adverse opinion paragraph should include a direct reference to a separae paragraph that discloses the baise for adverse Dislcaimer opinion = when auditor has not performed an audit sufficient in scope to eanble to form an opinion. Disclaimer cannot be used when there is material departure from GAAP When disclaiming an opinion because of a scope limitation, state in a separate paragraph reason for disclaimer. Auditor should scope of the audit was not sufficient to express an opinion. The audit should NOT identify procedures that were performed. Au disclose any reservation of presenetation with GAAP When disclaimer or adverse NO piecemeal opinions = piecemeal means opinionn on a certain item of f/s because f/s taken as Report on comparative f/s = f/s taken as a whole applies to one or more prior periods that presented on a comparative basis see p833 for example of standard prior year but qualified on current year f/s report of predecessor auditor report to be reissued in a comparative basis of a subsequent period, predecessor auditor should any subsequent event that make prior year report not comparable, and obtain management representation letter. If predecessor auditor report not presented, then successor aduitor should indicate in the introductory paragraph. The audit report should not be dated earlier than the date on which the aduitor has obtained sufficient evidence to support the A subsequent event requiring adjustment of the f/s occurs after the date of audit report but before the issuance of the f/s and th comes to the attention of the aduitor the f/s should be adjusted or the aduitor should qualify the opinion. If adjusted without dis event , audit report dated as original. The auditor has two methods available for dating the report when a subsequent event disclosed in the f/s occurs after the origi the aduitors report but beofre the issuances of the related f/s. (1) dual dating : dated xxx except for note xxxx as to which the d (2) date the report as to a latter date. Dual dating = audit responsibility of subsequent event is limited to that specified mention Later date then full responsibilty of subsequent event extends to the date of the report. If the princial aduitor is able to satisfy himself as to the independence and professional reputation of the other auditor and take satisfy himself the aduit performed by the others auditor, the principal aduitor may express opinion without reference to the the of the other auditor. Unable to review the other auditor's work or if the compoenent of the f/s audit by other auditor is material = make reference in the audit of the other auditor. = indicate clearly in both the introductory, scope and opinion paragraph, the dividsion of respons between the portion of the f/s covered by his own audit and that by others. The report should disclose the magnitude of the po f/s audited by the other. Name of the other auditor disclosed with other auditors consent and both principal & other audit report if name of other mentioned. see report of different responsibility from AU and textbook. GAAP applies to companies whose accounting practices are prescribed by government regulatory authority Other information = in addition to the audited f/s and the audit report. Auditor's responsibility with respect to informaiton in a document does not extend beyond the f/s identified in his report, and th auditor has no obligation to perform any procedures to corroborate other information contained in a document. Auditor should read the information to see if any material inconsistent. If material inconsistent 1) revise f/s and report, 2) need f/s or report but request client to revise other information. 3) if other information not revised, explanatory paragraph , wihtolding audit report in the doucment and withdrawn from engagement

Requires supplementary information as required by FASB GASB FAASB The identify the supplementary information on page … is not a required part of the basica f/s and we did not audit or apply limi to such information and do not express any asusrance on such information. Auditor has no responsibility to aduit information outside the basica f/s in accordance with GAAP But, required by FASB, GASB, FAASB information becomes essential part of the financial reporting of the entities. The auditor apply limited procedures to required supplementary informaiton and should report deficiencies or ommission of such informaito Audit procedures: 1) inquire of mgt about methods of preparing the information, 2) compare the informaiton consistency with f/

  1. mgt representation include such supplementary informaiton, 4) apply additional procedures to specific type of information 5) Auditor's opinion should not be affected by omission, unable to carry out procedure, materially depart from guideline, doubt ab adherence to guideline. Additional explanatory paragraph for each of the 4 situations but need not present the supplememntar information if ommitted. Going concern is assumed unless reported by auditor. Auditor's responsibility to evaluate going conern not to exceed one year Obtain magt plan & consider plan to dispose assets, debt restricture If auditor consider there is doubt 1) consider the adequacy of disclosure about the going concern 2) to include an expalantory following the opinion. Auditor consider the effects of f/s and adequacy of disclosures. If entity disclosure is inadequate = qulaifi for or adverse opinion. Communicated with governance and document If FASB Statement become effective after f/s date, then required to restate their f/s by prior period adjustment in the period in w statement become effective. Auditor should consider disclosure of the restatemnt is essential data. If mgt not diclose auditor sh qualified or adverse opinion. If mgt disclosed auditor may include explanatory paragraph if effects of change is unusally mater
  2. FASAB statement 2) FASB Technical Bulletins 3) Consensus posiitons of the FASB Emerging Issue Task Force and AICPA Bulletin, 4) AICPA accounting interpretation 5) Other acccounting literature includes: FASB Statement of Financial Accounting AICPA issues papers, Internatial Accounting Standards, GASB Statements -Interpretation-Technical Bulleitns, FASAB - -Interpretation-Technical-Bulletins. Auditor standard report implies that auditor is satisfied that the comparability of f/s between periods has not been materially aff the change in a/c prinicples and that such principles have been consistenly applied between periods Accounting changes = 1) change in ac principle, 2) a/c estimates 3) change in reproting entity Changes in a/c principle havning a material effect on f/s require addition of an explanatory paragraph following the opinion. Other factors affecting comparability = disclosure in the f/s by mgt but not in auditr report. Adequate disclosure of material matters. If mgt ommits from f/s & notes, information that is required by GAAP = qualified or ad should provide the information in his report. Disclaimer if not independent Associated with f/s = auditor has consented to the use of his name in a report document or written communication If associated with f/s the auditor should clearly indicate the character of the auditor's work, responsibility in the audit report. 10 standards Audit standards provide a measure of audit quality and the objectives to be achieved in an audit. Auditing procedures differ fro standards. Audit procedures are acts that the auditor performs during the course of an audit to comply with auditing standards General standards
  3. auditor must have adequate technical training and proficiency to perform an audit.
  4. auditor must have independence in mental attitude in all matters relating to the audit
  5. auditor must exercise due professional care in the performance of the audit and in the preparation of the report. Standards of Field Work