Professional Standards/Auditing Guidance

What type of companies are classified as 'non-issuers' in the context of an audit?

Private companies, such as local 'mom and pop' shops.

Which set of standards should an auditor follow when auditing a non-issuer?

Statements on Auditing Standards (SAS).

What type of companies are classified as 'issuers' in the context of an audit?

Public companies that file with the Securities and Exchange Commission (SEC).

Which organization sets the auditing standards for audits of issuers?

The Public Company Accounting Oversight Board (PCAOB).

What standards are followed for audits of government organizations or entities receiving governmental funds?

Generally Accepted Government Auditing Standards (GAGAS).

Audits primarily focus on what type of financial information?

Historical financial information.

What standards apply to CPA reports on subject matters other than historical financial statements?

Statements on Standards for Attestation Engagements (SSAE).

Term: Financial Forecast

Definition: A financial statement based on the expected financial results of a future period.

What are the three types of engagements included under the Statements on Standards for Attestation Engagements (SSAE)?

Examinations, reviews, and agreed-upon procedures.

What standards apply to engagements involving unaudited financial statements of non-issuers?

Statements on Standards for Accounting and Review Services (SSARS).

Under Statements on Standards for Accounting and Review Services (SSARS), What would a CPA perform? and issued to whom?

• Preparation

• Compilation

• Review

non-issuer's financial statements

Which professional guideline provides the 'ethical background' for the CPA profession?

The AICPA Code of Professional Conduct.

What is the purpose of the AICPA Code of Professional Conduct regarding the public?

It reassures the public that CPAs are held to high ethical standards beyond just technical rules.

At what level do Statements on Quality Management Standards (SQMS) apply?

The firm level.

What is the goal of a firm's system of quality management?

To ensure work complies with professional and legal requirements and that issued reports are reliable.

What are the three levels of audit guidance hierarchy from most to least authoritative?

1. SAS or PCAOB standards, 2. Interpretive publications, 3. Other auditing publications.

Why must an auditor use professional judgment when reading auditing standards?

To interpret how the guidance applies to the unique circumstances and complexities of a specific engagement.

In auditing standards, what does the term 'must' or 'is required' signify?

An unconditional requirement that the auditor has no exceptions to follow.

In auditing standards, what does the term 'should' signify?

A presumptively mandatory requirement.

If an auditor departs from a 'presumptively mandatory' requirement, what action must they take?

They must document the reason for the departure from the requirement.

In auditing standards, what do the terms 'may,' 'might,' or 'could' signify?

A suggestion or recommendation rather than a required action.

Category: Interpretive Publications

Definition: Recommendations for applying standards, such as auditing interpretations, AICPA audit guides, and statements of position.

True or False: Interpretive publications are considered official auditing standards.

False.

What types of materials are classified as 'Other Auditing Publications'?

The Journal of Accountancy, professional journals, textbooks, and CPE courses.

What is the authoritative status of 'Other Auditing Publications' in the audit guidance hierarchy?

They are the least authoritative and are non-authoritative.

Which standard-setting body applies specifically to public reporting companies?

The Public Company Accounting Oversight Board (PCAOB).

Engagements under SSARS apply to which type of financial statements?

Unaudited financial statements.

According to auditing standards, what level of independence is required to issue an audit opinion?

The auditor must be independent; there are no exceptions.

Which level of the audit hierarchy includes 'Statements of Position'?

Interpretive publications (the second level).

Which level of the audit hierarchy includes 'AICPA Audits and Accounting Guides'?

Interpretive publications (the second level).

SAS is the acronym for which auditing standards?

Statements on Auditing Standards.

PCAOB is the acronym for which board?

Public Company Accounting Oversight Board.

SSAE is the acronym for which standards?

Statements on Standards for Attestation Engagements.

SSARS is the acronym for which standards?

Statements on Standards for Accounting and Review Services.

SQMS is the acronym for which standards?

Statements on Quality Management Standards.

How does the focus of SSAE differ from traditional auditing standards?

SSAE focuses on subject matters other than historical financial statements.

Which SSARS engagement type involves providing a limited level of assurance rather than a reasonable level?

Review.

Which SSARS engagement type involves only the creation of financial statements for a client?

Preparation.

The AICPA Code of Professional Conduct is intended to serve as the _____ background of the profession.

Ethical.

What are the two most authoritative sources for planning, performing, and reporting on an audit?

AICPA Statements on Auditing Standards (SAS) and PCAOB Auditing Standards.

What is the primary difference between a 'must' and a 'should' in auditing standards?

A 'must' is unconditional, while a 'should' is mandatory unless unusual circumstances justify a departure.

What is a CPA's primary goal when applying Statements on Quality Management Standards at the firm level?

To establish policies and procedures ensuring work complies with standards and reports are reliable.

What are the three specific types of engagements falling under SSARS?

Preparations, compilations, and reviews.

What are the three specific types of engagements falling under SSAE?

Examinations, reviews, and agreed-upon procedures.

Where can an auditor find auditing interpretations of SAS or Case standards?

Within interpretive publications (the second level of hierarchy).

Why is it beneficial for students to return to previous audit sections during the review stage?

They gain a 'full picture' of the audit process, making previously difficult questions much easier.

What is the role of 'Other Auditing Publications' if they are not authoritative?

They can help the auditor in their audit by providing additional guidance or context.

Audit engagements focus on _____ financial information, whereas SSAE engagements can focus on future-oriented info like forecasts.

Historical.

Which set of standards applies if a client asks a CPA to examine their financial forecast?

Statements on Standards for Attestation Engagements (SSAE).

Which regulatory body is associated with 'issuers'?

The Securities and Exchange Commission (SEC).

Which level of the audit hierarchy includes textbooks and professional journals?

Other Auditing Publications.

Standard auditing procedures for non-issuers are derived from the _____.

AICPA.

Which professional guideline applies to the firm as a whole rather than an individual engagement?

Statement on Quality Management Standards (SQMS).

Which standards govern the audit of a city's municipal financial records?

Generally Accepted Government Auditing Standards (GAGAS).

In the hierarchy of audit guidance, auditing interpretations are considered _____ authoritative than SAS.

Less.

True or False: SSARS engagements apply to both issuers and non-issuers.

False (they apply to non-issuers).

The phrase 'presumptively mandatory' corresponds to which specific word in auditing standards?

Should.

The term 'unconditional requirement' corresponds to which specific word in auditing standards?

Must.

What level of assurance is generally NOT provided in SSARS preparation or compilation engagements?

Reasonable assurance.

Which specific standard-setting body would a CPA look to for a public company audit?

The PCAOB (Public Company Accounting Oversight Board).