ACCT 3222 audit test 1 dr Wiley LSU questions with accurate
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detailed answers ||
Assurance Umbrella (most broad to least) || || || || ||
Assurance>Attestation>Audit
Assurance
-Any independent service that improves the quality of information, financial or not
|| || || || || || || || || || ||
-Do not have to be CPA
|| || || || ||
-Covers audit and attestation || || ||
Attestation
-Need to be independent CPA (practitioner) that reports on subject matter prepared by the client
|| || || || || || || || || || || || || || ||
(financial type Information, broader than historical financial statements)
|| || || || || || ||
-basically hiring a CPA to gain some credibility on what the company wants to do
|| || || || || || || || || || || || || ||
(External) Audit ||
-To perform an audit: you need to be an independent (no connection to company you are auditing)
|| || || || || || || || || || || || || || || ||
CPA providing an opinion (not guaranteeing anything, just opinion) on whether the FS statements
|| || || || || || || || || || || || || ||
are presented fairly (not necessarily completely accurate) in accordance with financial reporting
|| || || || || || || || || || || || ||
framework (GAAP) ||
-for internal controls: have to be an Independent CPA providing an opinion on effectiveness of
|| || || || || || || || || || || || || || ||
company's Internal controls over financial reporting (ICFR) || || || || || ||
-NOTE: only have to do both audits for public companies, not private
|| || || || || || || || || || ||
,Accounting rule maker || ||
FASB (puts out GAAP)
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Auditing rule maker || ||
PCAOB (for public companies, issuers) || || || ||
AICPA (for private companies, non-issuers)
|| || || ||
AICPA issues.... ||
The SAS (statements on auditing standards), SSAE, SQCS
|| || || || || || ||
-also creates and grades the CPA exam
|| || || || || ||
PCAOB issues... ||
AS (auditing standards)
|| ||
-created by SOX, considered private sector, non-profit org
|| || || || || || ||
-works closely with SEC/gov
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NASBA is.. ||
National association of state boards of accountancy
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-handles registration and grading of CPA exam, state board is in charge of liceses though
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, Audit report terms || ||
-Unqualified report: "clean report", followed GAAP || || || || ||
-Qualified report: material departure from GAAP or client refuses to make corrections
|| || || || || || || || || || ||
-Adverse: FS are not presented fairly and should not be relied on
|| || || || || || || || || || ||
-Disclaimer of opinion: auditor could not collected appropriate evidence and cannot express
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opinion/auditor is not independent || || ||
SEC classifies public companies into 3 categories:
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-Large accelerated filer: $700 million (Amazon, Walmart)
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-Accelerated filer: $75 million to less than $700 million AND $100 million or more in annual || || || || || || || || || || || || || || || ||
revenues
-Non-accelerated filer: Between $75 and $700 million in outstanding common equity AND less || || || || || || || || || || || || ||
than $100 million in annual revenues AND less than $75 million in outstanding common equity
|| || || || || || || || || || || || || ||
Public companies categorized as non-accelerated filers are....
|| || || || || ||
NOT required to have an audit of ICFR. Other categories do though.
|| || || || || || || || || || ||
What are the limitations of an audit?
|| || || || || ||
-Audits cannot provide absolute assurance, only reasonable assurance.
|| || || || || || ||
-An auditor can only work with the materials provided by the client, thus there is no guarantee of
|| || || || || || || || || || || || || || || || || ||
perfect financial statements of the entity or finding all fraud.
|| || || || || || || || ||
-Also, an auditor cannot test every single transaction of a company and cannot promise the
|| || || || || || || || || || || || || || ||
viability of an entity. || || ||
-Other limitations include time and cost.
|| || || || ||
|| || || || || || || || || || ||
detailed answers ||
Assurance Umbrella (most broad to least) || || || || ||
Assurance>Attestation>Audit
Assurance
-Any independent service that improves the quality of information, financial or not
|| || || || || || || || || || ||
-Do not have to be CPA
|| || || || ||
-Covers audit and attestation || || ||
Attestation
-Need to be independent CPA (practitioner) that reports on subject matter prepared by the client
|| || || || || || || || || || || || || || ||
(financial type Information, broader than historical financial statements)
|| || || || || || ||
-basically hiring a CPA to gain some credibility on what the company wants to do
|| || || || || || || || || || || || || ||
(External) Audit ||
-To perform an audit: you need to be an independent (no connection to company you are auditing)
|| || || || || || || || || || || || || || || ||
CPA providing an opinion (not guaranteeing anything, just opinion) on whether the FS statements
|| || || || || || || || || || || || || ||
are presented fairly (not necessarily completely accurate) in accordance with financial reporting
|| || || || || || || || || || || || ||
framework (GAAP) ||
-for internal controls: have to be an Independent CPA providing an opinion on effectiveness of
|| || || || || || || || || || || || || || ||
company's Internal controls over financial reporting (ICFR) || || || || || ||
-NOTE: only have to do both audits for public companies, not private
|| || || || || || || || || || ||
,Accounting rule maker || ||
FASB (puts out GAAP)
|| || ||
Auditing rule maker || ||
PCAOB (for public companies, issuers) || || || ||
AICPA (for private companies, non-issuers)
|| || || ||
AICPA issues.... ||
The SAS (statements on auditing standards), SSAE, SQCS
|| || || || || || ||
-also creates and grades the CPA exam
|| || || || || ||
PCAOB issues... ||
AS (auditing standards)
|| ||
-created by SOX, considered private sector, non-profit org
|| || || || || || ||
-works closely with SEC/gov
|| || ||
NASBA is.. ||
National association of state boards of accountancy
|| || || || || ||
-handles registration and grading of CPA exam, state board is in charge of liceses though
|| || || || || || || || || || || || || ||
, Audit report terms || ||
-Unqualified report: "clean report", followed GAAP || || || || ||
-Qualified report: material departure from GAAP or client refuses to make corrections
|| || || || || || || || || || ||
-Adverse: FS are not presented fairly and should not be relied on
|| || || || || || || || || || ||
-Disclaimer of opinion: auditor could not collected appropriate evidence and cannot express
|| || || || || || || || || || || ||
opinion/auditor is not independent || || ||
SEC classifies public companies into 3 categories:
|| || || || || ||
-Large accelerated filer: $700 million (Amazon, Walmart)
|| || || || || ||
-Accelerated filer: $75 million to less than $700 million AND $100 million or more in annual || || || || || || || || || || || || || || || ||
revenues
-Non-accelerated filer: Between $75 and $700 million in outstanding common equity AND less || || || || || || || || || || || || ||
than $100 million in annual revenues AND less than $75 million in outstanding common equity
|| || || || || || || || || || || || || ||
Public companies categorized as non-accelerated filers are....
|| || || || || ||
NOT required to have an audit of ICFR. Other categories do though.
|| || || || || || || || || || ||
What are the limitations of an audit?
|| || || || || ||
-Audits cannot provide absolute assurance, only reasonable assurance.
|| || || || || || ||
-An auditor can only work with the materials provided by the client, thus there is no guarantee of
|| || || || || || || || || || || || || || || || || ||
perfect financial statements of the entity or finding all fraud.
|| || || || || || || || ||
-Also, an auditor cannot test every single transaction of a company and cannot promise the
|| || || || || || || || || || || || || || ||
viability of an entity. || || ||
-Other limitations include time and cost.
|| || || || ||
