CPA Becker AUD A1

Statements on Auditing Standards (SASs)

Standards providing authoritative U.S. auditing guidance for nonissuers, issued by the AICPA Auditing Standards Board

Auditing Standards (***)

Standards providing authoritative U.S. auditing guidance for issuers, issued by the Public Company Accounting Oversight Board (PCAOB)

Audit Purpose

To provide financial statement users with an opinion on whether the financial statements are fairly presented in accordance with the applicable financial reporting framework

GAAS Requirements

Professional Skepticism, Ethical Requirements, Professional Judgment, Sufficient and Appropriate Audit Evidence, Compliance with GAAS

Inherent Limitations of an Audit

Nature of financial reporting, nature of audit procedures, timeliness of financial reporting, balance between benefit and cost

Modification of Auditor's Opinion

Necessary when financial statements are materially misstated (GAAP issue) or when sufficient appropriate audit evidence cannot be obtained (GAAS issue)

Sections of Unmodified Audit Opinion (Nonissuer)

Title, Addressee, Financial statement titles, Dates/periods covered, Statement of audit, Fair presentation statement, Applicable financial reporting framework

Management's Responsibility (Unmodified Opinion)

Preparation and fair presentation of financial statements, design, implementation, and maintenance of internal control, evaluation of going concern

Reference in Unmodified Opinion (Nonissuer)

Applicable financial reporting framework in management's responsibility and opinion sections, GAAS in basis for opinion and auditor's responsibility sections

Key Audit Matter (KAM)

Matters of most significance in the audit, selected from those communicated to those charged with governance, related to audits of nonissuers

Information in KAM Communication

Description of each matter, significance to the audit, how it was addressed in the audit

Prohibition of KAM Communication

When expressing an adverse opinion or disclaiming an opinion, unless required by law or regulation

Auditor's Determination of No KAMs

Allowed based on audit facts and circumstances, with a statement to this effect in the auditor's report

Sections of Unqualified Audit Opinion (Issuer)

Opinion on the Financial Statements, Basis for Opinion, PCAOB standards, Audit procedures and evidence, Reasonable basis for the opinion

First Paragraph under Basis for Opinion (Issuer)

Responsibility of financial statements and management, auditor's responsibility, independence requirement

Second Paragraph under Basis for Opinion (Issuer)

Conduct of audit in accordance with PCAOB standards, audit procedures, evaluation of financial statements, reasonable basis for the opinion

Reference in Unqualified Opinion (Issuer)

Applicable financial reporting framework in opinion section, PCAOB standards in second paragraph under Basis for Opinion section

Requirements for Dated Auditor's Report

Review of audit documentation, preparation of financial statements, management's responsibility for financial statements

Critical Audit Matters (CAMs)

Expected in most audits of issuers, relating to material accounts or disclosures, involving challenging, subjective, or complex auditor judgment

Information in CAM Communication

Identification of CAM, principal considerations, audit addressing, reference to relevant financial statement accounts or disclosures

Prohibition of CAM Communication

When expressing an adverse opinion, unless required by law or regulation

Auditor's Determination of No CAMs

Allowed based on audit facts and circumstances, with a statement to this effect in the auditor's report

Modified Opinions Due to Misstatement

Use of professional judgment to issue qualified or adverse opinions, based on materiality and pervasiveness of misstatements

Circumstances of Material Misstatement

Appropriateness of accounting policies, application of accounting policies, financial statement presentation, adequacy of disclosures

Location of Paragraph Explaining Qualification

Placed immediately following the opinion paragraph, with no heading

Modified Report Paragraphs (Issuer)

Qualified: Except for, standard; Adverse: Do not present fairly, standard; Disclaimer: Engaged to audit, no opinion expressed, standard

Reporting CAMs in Adverse Opinion

Not required in the auditor's report

Modified Opinions Due to Audit Issues

Use of professional judgment to issue qualified or disclaimer opinions, based on scope limitations or inability to obtain sufficient appropriate audit evidence

Examples of Scope Limitations

Time constraints, inability to observe inventory, inability to confirm receivables, inadequacy of accounting records, refusal of client's attorney or management to provide information

Circumstances Resulting in Disclaimer of Opinion

Pervasive inability to obtain sufficient appropriate audit evidence, lack of independence, going concern uncertainty without adequate disclosure

Location of Paragraph Explaining Modification

After the opinion paragraph, with an appropriate heading based on the type of modification

Modified Report Paragraphs (Nonissuer)

Qualified: Except for, standard; Adverse: Do not present fairly, standard; Disclaimer: Engaged to audit, no opinion expressed, content limited

Modified Report Paragraphs (Issuer)

Qualified: Except for, standard; Adverse: Do not present fairly, standard; Disclaimer: Engaged to audit, disclaimer, content limited

Effect of Uncertainties on Auditor's Report

May result in unmodified opinion with a separate report section or explanatory paragraph, or a disclaimer of opinion

Purpose of Emphasis-of-Matter Paragraph

Reference to a matter of fundamental importance in the financial statements

Reporting Requirements for Emphasis-of-Matter Paragraph

Use of appropriate heading, description of emphasized matter and relevant disclosures, indication of unmodified opinion with respect to the matter

Circumstances Requiring Emphasis-of-Matter Paragraph

Change in reporting entity, justified change in accounting principle, subsequent discovery leading to change in opinion, use of special purpose framework

Contingencies under U.S. GAAP

Accrue and disclose when probable, disclose only when reasonably possible, generally ignore when remote

Reporting Requirements for Other-Matter Paragraph

Use of appropriate heading, description of service performed, date of prior period report, nature of modifications, statement of limited scope or lack of assurance

Reporting Requirements for Explanatory Paragraph

Use of appropriate heading, description of emphasized matter and relevant disclosures, placement following the opinion paragraph

Action upon Discovering Material Affecting Report

Advise immediate disclosure, discussion with regulatory agencies, ensure appropriate steps by the client

Use of Dual Dating

When subsequent events require financial statement adjustment after the original report date, extending responsibility for that specific event

Auditor's Responsibility for Other Information

Discuss with management, read for consistency with audited financial statements, reference in the auditor's report

Procedures during Subsequent Period

Review post-balance sheet transactions, obtain representation letter, inquire about subsequent events, review minutes, examine interim financial statements

Actions regarding Subsequent Events

No active responsibility after report date, except in exempt offering documents or registration statements

Actions upon Discovering Material Affecting Report

Advise immediate disclosure, discussion with regulatory agencies, ensure appropriate steps by the client

Use of Dual Dating

When subsequent events require financial statement adjustment after the original report date, extending responsibility for that specific event

Auditor's Responsibility for Other Information

Discuss with management, read for consistency with audited financial statements, reference in the auditor's report

Procedures during Subsequent Period

Review post-balance sheet transactions, obtain representation letter, inquire about subsequent events, review minutes, examine interim financial statements

Actions regarding Subsequent Events

No active responsibility after report date, except in exempt offering documents or registration statements

Actions upon Discovering Material Affecting Report

Advise immediate disclosure, discussion with regulatory agencies, ensure appropriate steps by the client

Use of Dual Dating

When subsequent events require financial statement adjustment after the original report date, extending responsibility for that specific event

Auditor's Responsibility for Other Information

Discuss with management, read for consistency with audited financial statements, reference in the auditor's report

Procedures during Subsequent Period

Review post-balance sheet transactions, obtain representation letter, inquire about subsequent events, review minutes, examine interim financial statements

Actions regarding Subsequent Events

No active responsibility after report date, except in exempt offering documents or registration statements

Actions upon Discovering Material Affecting Report

Advise immediate disclosure, discussion with regulatory agencies, ensure appropriate steps by the client

Use of Dual Dating

When subsequent events require financial statement adjustment after the original report date, extending responsibility for that specific event

Auditor's Responsibility for Other Information

Discuss with management, read for consistency with audited financial statements, reference in the auditor's report

Procedures during Subsequent Period

Review post-balance sheet transactions, obtain representation letter, inquire about subsequent events, review minutes, examine interim financial statements

Actions regarding Subsequent Events

No active responsibility after report date, except in exempt offering documents or registration statements

Actions upon Discovering Material Affecting Report

Advise immediate disclosure, discussion with regulatory agencies, ensure appropriate steps by the client

Use of Dual Dating

When subsequent events require financial statement adjustment after the original report date, extending responsibility for that specific event

Auditor's Responsibility for Other Information

Discuss with management, read for consistency with audited financial statements, reference in the auditor's report

Procedures during Subsequent Period

Review post-balance sheet transactions, obtain representation letter, inquire about subsequent events, review minutes, examine interim financial statements

Actions regarding Subsequent Events

No active responsibility after report date, except in exempt offering documents or registration statements

Actions upon Discovering Material Affecting Report

Advise immediate disclosure, discussion with regulatory agencies, ensure appropriate steps by the client

Use of Dual Dating

When subsequent events require financial statement adjustment after the original report date, extending responsibility for that specific event

Auditor's Responsibility for Other Information

Discuss with management, read for consistency with audited financial statements, reference in the auditor's report

Procedures during Subsequent Period

Review post-balance sheet transactions, obtain representation letter, inquire about subsequent events, review minutes, examine interim financial statements

Actions regarding Subsequent Events

No active responsibility after report date, except in exempt offering documents or registration statements

Actions upon Discovering Material Affecting Report

Advise immediate disclosure, discussion with regulatory agencies, ensure appropriate steps by the client

Use of Dual Dating

When subsequent events require financial statement adjustment after the original report date, extending responsibility for that specific event

Auditor's Responsibility for Other Information

Discuss with management, read for consistency with audited financial statements, reference in the auditor's report

Procedures during Subsequent Period

Review post-balance sheet transactions, obtain representation letter, inquire about subsequent events, review minutes, examine interim financial statements

Actions regarding Subsequent Events

No active responsibility after report date, except in exempt offering documents or registration statements

Actions upon Discovering Material Affecting Report

Advise immediate disclosure, discussion with regulatory agencies, ensure appropriate steps by the client

Use of Dual Dating

When subsequent events require financial statement adjustment after the original report date, extending responsibility for that specific event

Auditor's Responsibility for Other Information

Discuss with management, read for consistency with audited financial statements, reference in the auditor's report

Procedures during Subsequent Period

Review post-balance sheet transactions, obtain representation letter, inquire about subsequent events, review minutes, examine interim financial statements

Actions regarding Subsequent Events

No active responsibility after report date, except in exempt offering documents or registration statements

Actions upon Discovering Material Affecting Report

Advise immediate disclosure, discussion with regulatory agencies, ensure appropriate steps by the client

Use of Dual Dating

When subsequent events require financial statement adjustment after the original report date, extending responsibility for that specific event

Auditor's Responsibility for Other Information

Discuss with management, read for consistency with audited financial statements, reference in the auditor's report

Procedures during Subsequent Period

Review post-balance sheet transactions, obtain representation letter, inquire about subsequent events, review minutes, examine interim financial statements

Actions regarding Subsequent Events

No active responsibility after report date, except in exempt offering documents or registration statements

Actions upon Discovering Material Affecting Report

Advise immediate disclosure, discussion with regulatory agencies, ensure appropriate steps by the client

Use of Dual Dating

When subsequent events require financial statement adjustment after the original report date, extending responsibility for that specific event

Auditor's Responsibility for Other Information

Discuss with management, read for consistency with audited financial statements, reference in the auditor's report

Procedures during Subsequent Period

Review post-balance sheet transactions, obtain representation letter, inquire about subsequent events, review minutes, examine interim financial statements

Actions regarding Subsequent Events

No active responsibility after report date, except in exempt offering documents or registration statements

Actions upon Discovering Material Affecting Report

Advise immediate disclosure, discussion with regulatory agencies, ensure appropriate steps by the client

Use of Dual Dating

When subsequent events require financial statement adjustment after the original report date, extending responsibility for that specific event

Auditor's Responsibility for Other Information

Discuss with management, read for consistency with audited financial statements, reference in the auditor's report

Procedures during Subsequent Period

Review post-balance sheet transactions, obtain representation letter, inquire about subsequent events, review minutes, examine interim financial statements