Podcast
Questions and Answers
What is one method an auditor might use to select documents for testing?
What is one method an auditor might use to select documents for testing?
How does an auditor systematically sample documents from a population?
How does an auditor systematically sample documents from a population?
What information should an auditor record when making inquiries of specific entity personnel?
What information should an auditor record when making inquiries of specific entity personnel?
What must an auditor document when conducting an observation procedure?
What must an auditor document when conducting an observation procedure?
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According to Section 220A, what is required of the auditor regarding the review of audit work performed?
According to Section 220A, what is required of the auditor regarding the review of audit work performed?
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What must management acknowledge in the terms of engagement for an audit of special purpose financial statements?
What must management acknowledge in the terms of engagement for an audit of special purpose financial statements?
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Why is management's responsibility for internal control significant in an audit?
Why is management's responsibility for internal control significant in an audit?
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What does the term 'internal control' encompass according to the content?
What does the term 'internal control' encompass according to the content?
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When should a predecessor auditor limit their response to an auditor's inquiries?
When should a predecessor auditor limit their response to an auditor's inquiries?
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What is the inherent limitation of internal control mentioned in the content?
What is the inherent limitation of internal control mentioned in the content?
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What is required of the auditor regarding the internal control maintained by management?
What is required of the auditor regarding the internal control maintained by management?
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What responsibility does management have concerning the predecessor auditor?
What responsibility does management have concerning the predecessor auditor?
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What does the independent audit conducted in accordance with GAAS imply regarding internal control?
What does the independent audit conducted in accordance with GAAS imply regarding internal control?
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What should the auditor do if the predecessor auditor provides no response to inquiries?
What should the auditor do if the predecessor auditor provides no response to inquiries?
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Which document should be created when an engagement is accepted after inquiries?
Which document should be created when an engagement is accepted after inquiries?
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What is one responsibility of management related to the internal control system?
What is one responsibility of management related to the internal control system?
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How should the auditor approach terms from a previous engagement during recurring audits?
How should the auditor approach terms from a previous engagement during recurring audits?
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What is not implied by the agreement obtained from management regarding internal control?
What is not implied by the agreement obtained from management regarding internal control?
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What is expected of the predecessor auditor’s response regarding known facts?
What is expected of the predecessor auditor’s response regarding known facts?
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What does SAS No. 147 specifically address regarding audits of financial statements?
What does SAS No. 147 specifically address regarding audits of financial statements?
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What factors can lead to a 'limited response' from a predecessor auditor?
What factors can lead to a 'limited response' from a predecessor auditor?
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What must an auditor document regarding significant findings or issues discussed with management?
What must an auditor document regarding significant findings or issues discussed with management?
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When documenting audit procedures performed, which of the following is NOT required?
When documenting audit procedures performed, which of the following is NOT required?
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What should an auditor include in audit documentation related to significant contracts or agreements?
What should an auditor include in audit documentation related to significant contracts or agreements?
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In cases of departure from a mandatory requirement, what must an auditor document?
In cases of departure from a mandatory requirement, what must an auditor document?
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What must be documented if an auditor finds information inconsistent with their final conclusion?
What must be documented if an auditor finds information inconsistent with their final conclusion?
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What two aspects must the auditor document when performing additional procedures after the audit report date?
What two aspects must the auditor document when performing additional procedures after the audit report date?
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Who is responsible for documenting the review of the audit work performed?
Who is responsible for documenting the review of the audit work performed?
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What information does an auditor NOT typically need to include in audit documentation?
What information does an auditor NOT typically need to include in audit documentation?
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What is necessary for auditors to obtain during the audit process?
What is necessary for auditors to obtain during the audit process?
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Which action may an auditor take if the audit results are not as expected?
Which action may an auditor take if the audit results are not as expected?
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What must be acknowledged and agreed to by ABC Company regarding the audit process?
What must be acknowledged and agreed to by ABC Company regarding the audit process?
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What might be included in an auditor's report if there are unusual circumstances?
What might be included in an auditor's report if there are unusual circumstances?
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Which part of the audit letter is signed to indicate agreement?
Which part of the audit letter is signed to indicate agreement?
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What is expected upon completion of the audit of financial statements?
What is expected upon completion of the audit of financial statements?
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What occurs if the auditor discovers discrepancies during the audit?
What occurs if the auditor discovers discrepancies during the audit?
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What is one of the key responsibilities of the auditor related to other information?
What is one of the key responsibilities of the auditor related to other information?
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What is the primary objective of the auditor concerning documentation?
What is the primary objective of the auditor concerning documentation?
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What does the term 'audit documentation' refer to?
What does the term 'audit documentation' refer to?
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What is meant by 'documentation completion date'?
What is meant by 'documentation completion date'?
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Who qualifies as an 'experienced auditor'?
Who qualifies as an 'experienced auditor'?
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What must the auditor's documentation enable an experienced auditor to do?
What must the auditor's documentation enable an experienced auditor to do?
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Which of the following is NOT a required aspect of audit documentation according to GAAS?
Which of the following is NOT a required aspect of audit documentation according to GAAS?
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What does 'GAAS' stand for?
What does 'GAAS' stand for?
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What is the purpose of an audit file?
What is the purpose of an audit file?
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Study Notes
AU-C Section 210 - Terms of Engagement
- Objective: The auditor's objective is to accept an audit engagement for a new or existing client only when the basis upon which it is to be performed has been agreed upon. This includes establishing that certain preconditions for an audit are present and confirming a common understanding of the terms of the audit engagement between the auditor and management, and when appropriate, those charged with governance.
- Effective Date: Effective for audits of financial statements for periods ending on or after December 15, 2012, unless otherwise indicated. Amendments effective for engagements conducted in accordance with generally accepted auditing standards for periods beginning on or after December 15, 2025.
- Preconditions for an Audit: The preconditions involve management using an acceptable financial reporting framework in preparing and presenting the financial statements; and the agreement of management, and, when appropriate, those charged with governance, with the premise on which the audit is conducted. Recurring audits should also follow the preconditions for new engagements.
- Requirements for Audit Engagement Acceptance: The auditor should determine if the financial reporting framework used is acceptable and obtain agreement from management they acknowledge and understand their responsibilities for the preparation and fair presentation of the financial statements, in accordance with the applicable financial reporting framework.
- Documentation of Engagement Terms: The agreed-upon terms of the audit engagement should be documented in an audit engagement letter, and should include the objective, scope, responsibilities of the auditor and management and a statement that some material misstatements may not be detected, even with a properly planned and executed audit.
- Initial and Recurring Audits: Before accepting an initial audit engagement, the auditor should request management to authorize the predecessor auditor to respond fully to inquiries regarding matters that will assist the auditor in determining whether to accept the engagement. Recurring audits require the auditor to assess whether circumstances require a revision in the terms of the audit engagement.
- Change in Engagement Terms: The auditor should not agree to a change in the terms of the engagement if there isn't a reasonable justification. The auditor must document any such changes.
- Other Considerations: If law or regulation prescribes unique requirements for the auditor's report, the auditor must evaluate whether the requirements would cause users to misunderstand the report. The auditor also must consider whether users would understand alternative approaches that don't violate GAAS, in such cases.
- Objective and Scope: The auditor's objective includes accepting an audit engagement, and clearly defining the scope of work.
- Responsibilities of Auditor and Management: The auditor's responsibilities and management's responsibilities are specified, and how this affects the engagement acceptance process is outlined in the documentation.
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Description
This quiz covers essential auditing procedures, including document selection, sampling methods, and internal control responsibilities. You will explore the requirements for auditors and management in the context of special purpose financial statements and the role of predecessor auditors. Test your knowledge on these critical aspects of the auditing process.