Audit Notes

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Audit Test 1 notes
Board of Directors hires auditors

Controller pays the auditors

Audit Report is the auditor product

If you find illegal can't tell public but must notify the management and if they don't do anything then maybe report -can then resign and report

ALL auditors are reviewed every 3 years 

AICPA
-makes standards for private companies ?

PCAOB
-sets standards (the SEC sets standard)
-Quasi private public company 
-legal authority to set standards 

Assurance is a broader aspect of Audit
-Many components and could be a couple things
like 1. Review ( cheaper quicker)
2. Agreed upon procedures (specific procedure)

Examples of assurance services
1. performance view
2. Systrust
3. WebTrust

No longer used

Auditing= a systematic process of objectivity obtaining and evaluating evidence regarding assertions about economic actions n events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested users 

Establish criteria- gasp

financial stmts- assertions the company is making
1. footnotes
2. stmt of cash flows
3. income statement
4. balance sheet

Objective outsider = auditor 
-obtains and evaluates evidence 

GAAP
-fasb  - apb   -arb  -gasb  aicpa  -acsec  -eitf  - sec

Assumptions

1st Existence (balances) 
 or
 Occurrences (transactions)
-is it really there

2nd Completeness (balance/transactions) and cut off 
-are those all the components?

3rd Rights and obligations 
-is it really yours

4th Valuation or allocation(balances)  accuracy (trans)
Was it copied over correctly?
is  it the right amount?

Presentation and disclosure 
(classification and understandability with aicpa)

Valuation did you use the RIGHT NUMBER /VALUE CORRECTLY?

Accuracy Did you actually WRITE THE RIGHT Number?

Existence : did you just make it up or actually take on your transcripts

Completeness are all the classes you took in calculation 

Rights and obligations is it really yours (your gap or someone else's)

Valuation : is it computed correctly 

Presentation is it the right format ( did you include 2021 in upper division gap?)

Professional skepticism 
( thanks for telling me that, can I see it?)
auditors tend not to believe managements assertions without sufficient corroboration

As5 know that internal reporting

Aicpa is bobo don't have to follow but on CPA exam

Know issuers 

Presum mandatory= should do it

Unconditional must do this
 Applicable reporting frame work is gaap

Ocboa- cash n tax basis

Beware know for test relying on other auditor

Addtl req is it acceptable to use ....
And get management approval to gaap
And get them to agree to DIP 
Design implementation and placement 

No longer assumed its gaap us

Us public company any exchange and register with sec it is Issuer

Pcaob standards will be applicable to the issuer

Purpose is here's why we have standard 

Objective is here's why and what we set to accomplish

5/20

3 standards

1. Training and proficiency 
Accounting degree/ training

2. independence
-no stock

3. Due professional care
-best defense if sued

Standards of field work

1. Planning and supervision

2. Understanding of entity and environment to assess risk of material misstatement

3. Obtain sufficient appropriate evidence

PERFORMANCE PRINCIPLE 
-to obtain reasonable assurance 
-plan work and supervise
-determine and apply appropriate materiality levels
-identify and assess risks of material misstatement
-obtain sufficient appropriate evidence

express opinion as a whole

10 generally accepted auditing principles

Responsibility
= expertise and experience

independence in appearance  vs independence in fact

stay independent and look independent

Due Care
-level of performance by reasonable auditor in similar circus

Audit evidence
-sufficient = quantity ...
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