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SU 1
Engagement Responsibilities
77
Accounting
Undergraduate 4
06/01/2015

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Term
What are the engagement-type services provided by CPAs?
Definition
compilations, reviews, examinations/audits, agreed-upon procedures
Term
compilation
Definition
disclaimer of any assurance
Term
review
Definition
accountant makes inquiries, applies analytical procedures, and obtains management representations. Limited assurance can be expressed. Independence is a must.
Term
audit/examination
Definition
positive assurance (usu. reasonable) or opinion expressed
Term
agreed-upon procedures
Definition
attest engagements include results of agreed-upon procedures performed on subject matter but no assurance. Independence required.
Term
SAS
Definition
Statement on Auditing Standards issued by the ASB; are standards codified within the framework of the 10 standards and are deemed to have the status of GAAS.
Term
ASB
Definition
Auditing Standards Board; issues SAS, SSAE, and SQCS

The AICPA’s senior committee for auditing, attestation, and quality control applicable to the performance and issuance of audit and attestation reports for non issuers.
Term
SSARS
Definition
Statement on Standards for Accounting and Review Services
Term
SSCS
Definition
Statement on Standards for Consulting Services
Term
SOX (in relation to auditing standards)
Definition
created PCAOB that has issued 14+ currently effective auditing standards applicable to audits of issuers by public accounting firms
Term
attest engagement
Definition
practitioner is engaged to issue or does issue an examination, review, or agreed-upon procedures report on subject matter, or an assertion about the subject matter, that is the responsibility of another party
Term
practitioner
Definition
CPA in practice of public accounting
Term
When do attest standards apply?
Definition
Only to attest engagements involving a practitioner.
Term
What can attest services do?
Definition
limited to expressing an opinion on historical F/S on the basis of an audit in accordance w/GAAS.
Term
SSAE
Definition
Statements on Standards for Attestation Engagements; cover only attest engagements, not services to which specific standards apply.
Term
attestation standards (3 types)
Definition
general standards, standards of field work, standards of reporting
Term
general standards
Definition
Training and proficiency
Subject matter knowledge
Suitable and available criteria
Independence in mental attitude
Due professional care
Term
standards of field work
Definition
Planning and supervision
Sufficient evidence
Term
standards of reporting
Definition
Character
Conclusion
Reservations
Term
suitable and available criteria
Definition
Criteria must be objective, measurable, complete, and relevant.
It should be publicly available, clearly included in assertion and in practitioner's report, well understood by most users, and available only to specified parties.
Term
restrictions on standards on reporting occur when...
Definition
Only certain parties can understand the suitable criteria.
When criteria is only available to certain parties.
When reporting on subject matter and a written assertion has not been provided by the responsible party.
When report is on attest engagement to apply agreed-upon procedures to the subject matter.
Term
positive (high-level) assurance
Definition
given in reports that express conclusions on the basis of an examination.
Term
limited (moderate level/negative) assurance
Definition
given in reports that express conclusions on the basis of a review.
Term
scope limitations
Definition
Practitioner should obtain a written assertion provided by the responsible party; failure to obtain this is a limitation when the client is responsible.
Failure to obtain representation letter is also a limitation.
Attest documentation (working papers) should be prepared and maintained.
Term
GAAS (10 standards)
Definition
Training and proficiency
Independence
Due professional care
Planning
Internal control
Sufficient appropriate audit evidence
Conformity w/GAAP
Consistency
Disclosure
Expression of an opinion
Term
objective of independent, external audit
Definition
The objective of an independent, external audit in accordance w/GAAS is to attest to whether an entity's F/S present fairly, in all material respects, its financial position, results of operations, and cash flows in conformity w/GAAP.
Term
management's assertions are given in terms of...
(not asking for what the assertions are)
Definition
recognition, measurement, presentation, and disclosure.
Term
management assertions (CAVE CROC)
Definition
completeness, accuracy, valuation/allocation, existence, cutoff, rights and obligations, occurrence, and classification and understandability.
Term
assertions related to transactions and events
Definition
(IS/SCF)

Occurrence- recorded transactions/events actually occurred
Completeness
Accuracy
Cutoff (proper period)
Classification (proper accounts)
Term
account balances at period-end
Definition
(B/S)

Existence- assets, liabilities, and equity positions actually exist.
Rights and Obligations- entity controls the assets in question and has the liabilities as obligations
Completeness
Valuation and Allocation
Term
presentation and disclosure
Definition
(notes to F/S)

Occurrence
Rights and Obligations
Completeness
Classification and Understandability- clearly expressed
Accuracy and Valuation
Term
PCAOB's 5 Assertions
Definition
Existence/Occurrence
Completeness
Valuation/Allocation
Rights and obligations
Presentation and disclosure
Term
Who is responsible for F/S? What is the auditor's responsibility?
Definition
Management. Auditor's responsibility is confined to the expression of an opinion.
Term
purpose of auditing standards
Definition
address the quality of audit performance and the objectives to be attained; professional judgment is needed.
Term
Who is bound to auditing standards?
Definition
Both AICPA and non-AICPA practitioners.
Term
intepretive publications
Definition
provide recommendations on the application of the SASs but do not have the status of auditing standards.
Term
Accounting and Review Services Committee
Definition
Designated by AICPA bylaws as the senior technical committee authorized to issue pronouncements in connection with the unaudited financial statements or other unaudited financial information of a nonissuer.
Term
compilation of F/S
Definition
presentation in statement form of information that is the representation of management. The accountant expresses no assurance but a disclaimer. Independence not needed to compile F/S.
Term
review
Definition
Term
prospective financial statements (PFS)
Definition
Includes summaries of significant assumptions and accounting policies.
Examine, compile, or apply agreed-upon procedures to PFSs if they are expected to be used by a third party. Independence required.
Term
financial forecast
Definition
prospective F/Ss (PFSs) that present to the best of the responsible party's knowledge and belief, an entity's expected financial position, results of operations, and cash flows.
Term
financial projection
Definition
based on responsible party's assumptions reflecting conditions it expects would exist, or premises, and the course of action it expects would be taken, given one or more hypothetical assumptions.
Term
pro forma financial information (PFFI)
Definition
what the significant effects on historical financial information would have been had a consummated or proposed transaction/
event occurred at an earlier date.
Term
examination of internal control over financial reporting (ICFR)
Definition
Practitioners may perform an examination on a nonissuer's ICFR and express an opinion in coordination w/ the F/S audit.
Independence required.
Term
compliance attestation
Definition
Independent practitioners can perform examinations leading to an opinion on company compliance or the effectiveness of IC over compliance.
Term
management's discussion and analysis (MD&A)
Definition
written assertion that may be examined by an independent practitioner, but the report cannot be filed w/the SEC.
Term
assurance services
Definition
independent professional services that improved the quality of information- or its context- for decision makers.

Encompass audit, attestation, and non-standard services.
Term
traditional vs. new audit/attestation/assurance services
Definition
Traditional audit-related services are highly structured and considered to be relevant to a large number of users, while newer assurance services are more customized and are intended to be highly useful in limited circumstances.
Term
focus of assurance services
Definition
focus on improving information, not providing

Capture information, improve information reliability, and improve decision making.
Term
three types of assurance services
Definition
assurances about risks, performance, systems,
Term
assurances about risks
Definition
CPA risk advisory
ElderCare Services (PrimePlus)
Term
assurances about performance
Definition
CPA performance review
Healthcare effectiveness
Term
assurances about systems
Definition
SysTrust
WebTrust
Term
CPA performance review
Definition
assesses the degree to which the entity's objectives are achieved or how its performance compares with that of its competitors
Term
SysTrust
Definition
assesses whether an entity's internal IS provide reliable info for operating and financial decisions.

Tests for fair statement of online privacy, security, processing integrity, availability, and confidentiality.

Practitioners test the policies, communications, procedures, and monitoring systems using suitable criteria to assess the fairness of management's assertions about a particular principle.
Term
WebTrust
Definition
uses the same criteria as SysTrust
Term
information security (IS)
Definition
address reporting concepts and systems, transaction processing systems, management reporting systems, and risks within a business.
Term
practice-monitoring program requirement
Definition
You must be in an AICPA-approved practice-monitoring program to be in the AICPA.
Term
quality control evaluation
Definition
Quality control over audits of issuers will be evaluated during periodic PCAOB inspections. If a nonissuer, follow AICPA standards.
Term
GAAS vs. quality control
Definition
GAAS apply to individual engagements, and quality control standards apply to the conduct of a firm's practice as a whole. Thus, quality control may affect audits, yet deficiencies in quality control do not in themselves signify a departure from GAAS.
Term
SQCS
Definition
Statements on Quality Control Standards; require that a CPA firm have a system of quality control.
Term
six elements of a quality control system (LECHEM)
Definition
Leadership responsibilities for quality within the firm (tone at the top).
Relevant ethical requirements.
Acceptance and continuance of client relationships and specific engagements.
Human resources
Engagement performance (responsibilities for performance, supervision, and review).
Monitoring
Term
administration of quality control system
Definition
Responsibility for designing and maintaining policies and procedures be assigned to appropriate individuals.
Those policies and procedures be communicated so as to provide reasonable assurance that they are understood and complied with.
Consideration be given to whether and to what extent policies and procedures must be documented for effective communication, and
The firm appropriately documents the control policies and procedures as well as compliance with them.
Term
peer review
Definition
part of AICPA practice-monitoring.
Includes engagements under SAS, SSARs, SSAEs, and GAS.
Term
system review
Definition
on-site review required for a firm that performs the highest level of services; provides the reviewer with a reasonable basis for expressing an opinion on the firm's system of quality control
Term
engagement review
Definition
for a firm not required to have a system review but not qualifiying for a report review. Provides a reasonable basis for expressing limited assurance on whether the F/S or reported information submitted materially conform with professional standards.
Term
report review
Definition
for a firm that provides only compilations omitting substantially all disclosures. Report consists of comments and recommendations after review of sample of engagements. Comments based on professional standards.
Term
SOX requirements for auditors
Definition
a registered (public) accounting firm must adopt quality control standards.
Term
required of all audit reports under SOX is...
Definition
second partner review and approval
Term
How often must the lead auditor and reviewing partner be rotated off the audit?
Definition
every 5 years
Term
Which rules have been expanded under SOX?
Definition
Independence rules- restricting non-audit services to clients.
Penalties for destroying documents have been expanded.
Term
Management's responsibilities under SOX
Definition
Management must assess the effectiveness of internal control and issue a report on its effectiveness.
Term
Auditors' responsibilities under SOX
Definition
The auditor must audit internal control and opine on its effectiveness.
Term
engagement quality review (EQR)
Definition
An engagement quality review (EQR) and concurring approval of issuance are required for each audit of an issuer.
Reviewer's objective is to evaluate the significant judgments made and the related conclusions reached.
Term
criteria for review in EQR
Definition
The reviewer must be an associated person of a registered public accounting firm; may be outside the firm.
The reviewer must have the competence to serve as a partner on the engagement.
The reviewer must have independence, integrity, and objectivity.
But an engagement partner on either of the two preceding audits ordinarily may not be the reviewer.
Term
EQR reviewer should evaluate
Definition
Significant judgments
Risk assessment
Identified misstatements and control deficiencies
Audit firm independence
Engagement completion document
Statements, IC report, and audit report
Other information filed w/SEC
Consultations and communications regarding issues
Term
concurring approval of issuance
Definition
no significant engagement deficiencies are spotted.
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