CPA REVIEW: AUDIT 1 AUI3702 QUESTINS WITH COMPLETE SOLUTIONS

Audited Financial Statements- The Basics 1-01 What is the objective of the independent audit? CORRECT ANSWER to express an opinion stating whether the financial statements, taken as a whole, are fairly presented in all material respects in conformity with accounting principles generally accepted in the U.S. Audited Financial Statements- The Basics 1-02 Which standards provide the most authoritative U.S. auditing guidance for nonissuers and issuers and who issues those standards? CORRECT ANSWER NonIssuers: Statements on Auditing Standards (SASs), issued by the AICPA Auditing Standards Board. Issuers: Auditing Standards (ASs), issued by the Public Accounting Oversight Board (PCAOB) plus all SAS adopted by PCAOB. Audited Financial Statements- The Basics 1-03 What is the three general Standards? TIP CORRECT ANSWER The auditor must have adequate technical TRAINING and proficiency to perform the audit. The auditor must maintain INDEPENDENCE in mental attitude in all matters relating to the audit. The auditor must exercise due PROFESSIONAL CARE in the planning and performance of the audit and the preparation of the report. Audited Financial Statements- The Basics 1-04 What are the three standards of fieldwork? PIE CORRECT ANSWER The auditor must adequately PLAN the work and must properly supervise any assistants. The auditor must obtain a sufficient understanding of the entity and its environment, including its INTERNAL CONTROL, to assess the risk of material misstatement of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures. The auditor must obtain sufficient appropriate audit EVIDENCE by performing audit procedures to afford a reasonable basis for an opinion regarding the F/S under audit. Audited Financial Statements- The Basics 1-05