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audit final
ACCT 407 lawson
68
Chemical Engineering
Graduate
12/12/2011

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Term
60 days
Definition
How many days after year end do large accelerated filers have to file with the SEC? (greater than $700 million market cap)
Term
75 days
Definition
How many days after year end do accelerated filers have to file with the SEC? (greater than $75 million, less than $700 million market cap)
Term
90 days
Definition
How many days after year end do non accelerated filers have to file with the SEC? (less than $75 million market cap)
Term
1. attorney letter
2. mgmt rep letter
3. audit opinion
4. mgmt letter
5. audit committee communications
Definition
major documents at year end
Term
revenue and expense accounts
attorney letters
management representations
audit documentation review
subsequent events
Definition
activities between end of year and last day of fieldwork
Term
inquiry of clients
minutes of meetings
review contracts/loan agreement
review taxing/governmental agencies
guarantees from bank confirmations
legal services documentation
Definition
procedures for contingent liabilities, hidden liabilities, litigation, claims and assessments
Term
cannot issue audit opinion unless you have management representations letter
Definition
Term
audit report date (aka audit completion date)
Definition
what is the date of the management representations letter?
Term
alleviates liability on auditors, shows management responsibility for the fairness of the financial statements and fraud program and controls
Definition
purpose of the management representations letter?
Term
rollover method
Definition
considers the current period income effects of misstatement
Term
iron curtain method
Definition
considers the aggregate effect of the adjustments on the entity's balance sheet
Term
review latest interim financial statements
inquire officers/other executives
read minutes of meetings
obtain attorney letters
obtain mgmt representations letter
Definition
procedures in subsequent period
Term
Type I subsequent events
Definition
provide new information about conditions existing at balance sheet date
Term
adjust financial statmenets to reflect new information
Definition
What do you do with Type I subsequent events
Term
Type II Subsequent Events
Definition
involve events occurring after balance sheet date
Term
disclose in financial statements
(if extreme, prepare pro forma financial statements)
Definition
What to do with Type II subsequent events
Term
Type II subsequent events
Definition
non-recognized subsequent events
Term
Type I Subsequent events
Definition
recognized subsequent events
Term
subsequent discovery of facts
omitted procedures
communication with audit committee
management letters
Definition
activities following issuance of auditor's reports
Term
significant deficiency
Definition
a control deficiency that adversely affects the accounting and reporting function such that there is more than a remote likelihood that a more than inconsequential F/S misstatement will not be prevented or detected
Term
material weakness
Definition
significant deficiency that results in more than a remote likelihood that a material F/S misstatement will not be prevented or detected
Term
management letters are NOT required under GAAS
Definition
Term
management letters
Definition
provide recommendations to client for improving effectiveness and efficiency of operations, delivered by auditor to client following audit engagement
Term
subseuent discovery of facts
omitted porcedures
communication with those charged with governance
management letters
Definition
review following audit report release date
Term
within 60 days of report release date
Definition
documentation completion date for ALL audits (public and private)
Term
1. all audit documentation is reviewed
2. F/S prepared (and footnotes)
3. signed mgmt rep letter by CEO/CFO
Definition
3 requirements for the earliest the opinion date can be
Term
test basis
materiality
significant estimates
Definition
specific references in the scope paragraph of the standard report
Term
unqualified opinion
adverse opinion (material weakness)
disclaimer
Definition
types of internal control opinions
Term
qualified
Definition
issued when departure from GAAP is material but not pervasive
Term
circumstance imposed scope limitation
Definition
situation in which matters beyond auditors' and client's control limit procedures performed by the auditor
Term
client imposed scope limitation
Definition
situation in which client specifically limits auditors procedures (use disclaimer)
Term
qualified opinion
Definition
issued when scope limitation material, but not pervasive
Term
disclaimer of opinion
Definition
issued when pervasive scope limitation (usually client imposed)
Term
disclaimer of opinion
Definition
if serious going concern uncertainty, issue
Term
rule 203
Definition
allows for unqualified opinions on FS that are not in conformity with GAAP if GAAP would be misleading
Term
financial relationships
management relationships
Definition
two general types of relations that can compromise auditors independence
Term
qualified
unqualified
disclaimer
adverse
Definition
4 types of audit opinions
Term
1. assess fraud risk
2. design the audit to detect fraud
3. report findings to appropriate persons
Definition
3 SAS 99 activities that must be performed
Term
nature of audit procedures
Definition
effectiveness of tests; type of procedures preformed; quality of evidence
Term
timing of audit procedures
Definition
when the procedures are performed
Term
extent of the audit procedures
Definition
how many procedures are performed; quantity
Term
early planning stages and wrap up
Definition
when are analytical procedures required during audit engagements?
Term
ar = ir * cr * dr
Definition
audit risk model
Term
effective internal controls;
increase detection risk
Definition
what can lower assessment of control risk? how does this impact detection risk?
Term
tracing
Definition
are all transactions recorded? moving forward from original source documents to see if recorded in general ledger/FS
Term
completeness
Definition
what management assertion is associated with tracing?
Term
vouching
Definition
taking the accounts/transactions and looking back to determine their original source
Term
existence
Definition
management assertion associated with vouching
Term
independence in fact
Definition
auditors' mental attitude and impartiality with respect to the client
Term
independence in appearance
Definition
the extent to which others perceive auditors to be independent
Term
detection risk
Definition
the risk that the audit team's procdres will fail to detect a material misstatement
Term
control risk
Definition
the probability that material misstatement will not be prevented or detected on a timely basis by the entity's internal controls
Term
inherent risk
Definition
the probability that a material misstatement will occur
Term
errors
Definition
unintentional misstatements or omissions
Term
fraud
Definition
knowingly making material misrepresentations of fact with the intent of inducing someone to believe the falsehood and act on it and thus suffer loss or damage
Term
schedules and analysis to be prepared by the client's employees
Definition
an audit engagement letter should normally included what matters of agreement between the auditor and the client
Term
identifying related parties
Definition
would be performed during planning
Term
1. attempt to contact the predecessor auditors
2. evaluate the integrity of management
3. assess the firm's resources to ensure that they are sufficient to permit them to accept the engagement
Definition
prior to accepting a new audit engagement, a public accounting firm should:
Term
performing tests of controls
Definition
major stage of the audit that is closely related to attributes sampling
Term
the expected population deviation rate with probability equal to the risk of over reliance that the population deviation rate is higher
Definition
the interpretation of the upper limit rate of deviation in an attributes sampling application
Term
use attributes sampling in selecting purchase orders for indication of proper authorization
Definition
Term
simpler to use
Definition
primary benefit of using non statistical sampling
Term
examine sample items and determine the sample estimate
Definition
step normally performed last in a sampling application
Term
provide objective basis for quantitatively evaluating sampel risk
Definition
an advantage of statistical sampling over non statistical sampling methods is that statistical methods:
Term
Compliance
Efficiency and effectiveness
Reliability
Definition
The COSO provides a definition of internal controls which includes the following 3 categories from most important to least important
Term
Observation
Inquiry
Document examination
Reperformance
Definition
There are several phases to the auditor’s evaluation of a client’s internal controls. Phase 3 requires that auditors perform tests of controls and reassess risk of material misstatement rely on 4 different testing methods. What are they?
Term
Custody
Authorization
Recording
Reconciliation
Definition
List 4 different separation of duties
Term
Vouching and Tracing
Definition
Primary PCAOB assertion for each of the 2 cycles? (Revenue and Collection)
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