Professional Standards and Guidelines Types of Opinions

Standard-Setting
Standard/Guidline Abbreviation Public/Private Description
Body
AUDITS
Provide GAAS for
Statements on Private nonissuers, and GAAS
SAS AICPA
Auditing Standards (Nonissuer) guidance for other
services

Public Company Provide GAAS for

Accounting Oversight issuers, and
PCAOB AS PCAOB Public (Issuer)
Board Auditing guidance for other
Standards services

Provide guidance for

Generally Accepted Governemntal
audits of
Government Auditing GAGAS Accountability Government
government
Standards Office
organizations
OTHER ENGAGEMENTS

Provide guidance for

Statements on attestation Statements included in Basis for Opinion (Issuer)
Standards for engagements RR Responsibility of management, Respo
SSAE AICPA NA
Attestation (Examination, AA Auditor is registered, in Accordance w
Engagements review, agreed-upon
proceedures) PP Plan and Perform
MM free of Material Mistatement
Statements on EE Examined the Evidence
Provide guidance for EE Evaluated the Estimates
Standards for Private
SSARS AICPA unaudited fin stmts
Accounting and (Nonissuer)
or unaudited fin info
Review Services
Auditor Responsibilities for Subsequent Events
P review Post-BS transactions
R review Representation Letter from ma
I Inquiry of legal cousel, mgmt, those ch
M Minutes - review minutes of SH, direc
 E Examine most recent interim FS and c

Client Refusal (to make adjustments or disclosures o

"DAR" them to fix it
D Disassociate,
A alert agencies and
R relying parties

Change in Opinion? Additional paragraph must inclu

D Date of previous audit report
O Opinion previously issued
R Reason for prior opinion
C Changes that have occurred
S Statement that "opinion is different"
 Changes in Auditors Report
Private (Nonissuer)
Qualified Adverse
Section Unmodified
(GAAP/GAAS) (GAAP)
Title
GAAP Adressee
Opinion Δ Δ
Additional Paragraphs (Excluded unless added) EOM/OM/SDGC
Basis for Opinion Δ Δ
KAM/CAM X
Responsibilities of Mgmt
Responsibilities of Auditor
Legal and Regulatory Requirements
Signature of Auditor
Auditor's Address
Date of the Report
(SDGC = Substantial Doubt about the entity's ability to continue as a G

for Opinion (Issuer)

f management, Responsibility of auditors
ered, in Accordance with PCAOB

Mistatement

ubsequent Events
ransactions
ntation Letter from management
cousel, mgmt, those charged with governance
w minutes of SH, directors, other meetings
ecent interim FS and compare with audited FS

ments or disclosures of subsequent events)

l paragraph must include DORCS

s audit report

ve occurred
"opinion is different"
er) Public (Issuer)
Disclaimer Qualified Adverse Disclaimer
Unqualified
(GAAS) (GAAP/GAAS) (GAAP) (GAAS)

Δ Δ Δ Δ
Explanatory + + +
Δ Same/Δ Δ
X X X

entity's ability to continue as a Going Concern)

Elements of Quality Control Five Components of Internal Control
H Human resources CPA Required to understand/have knowledge of
E Engagement/client acceptance and continuance C Control environment
L Leadership responsibilities R Risk assessment
P Perofrmance of the engagement I Information and communication systems
M Monitoring M Monitoring
E Ethical requirements E Existing control activities

Documentation Differences Control Activities in a Strong Internal Control System

Private (Nonissuer) Public (Issuer) P Prenumbering of documents
Keep WPs 5 Years 7 Years A Authorization of transactions
Complete WPs within ___ I Independent checks to maintain asset accountability
from report release date 60 Days 45 Days
D Documentation
T Timely and appropriate financial performance reviews
Partner Rotation Requirements (SEC Required) I Information processing controls
Lead and Concurring Other P Physical controls for safeguarding assets
Rotate Period 5 Years 7 Years S Segragation of duties
Cool off period 5 Years 2 Years
Segregation of Duties
Financial Statement Assertions A Authorization
C Completeness R Record keeping
O cutOff C Custody of related assets
V Valuation, allocation, and accuracy C Control group/team
E Existence and occurrence O Operators Weakness:
R Rights and obligations P Programmers Anyone doing or supervising
UP Understandibility of Presentation and Classification A Analyst (system) another area
L Librarian
Summary of the Five Components of Internal Control
Fraud Triangle Audit Risk Model
The risk that the auditor will issue the wrong opinion

Audit Evidence Hierarchy Sampling Rules

A Auditor knows Rule 1 Assume population is normal/bell-shaped
E External evidence Rule 2 Sample must be unrestricted and randomly selected
I Internal evidence Rule 3 Sample must be large enough to have same statistical characteristics as population
O Oral evidence Rule 4 Standard Deviation is a measure of variability which refers to a range in the population

Procedures to Obtain Evidence Sampling Calculations

C Confirmation Sampling Tolerable Misstatement
=
F Footing, Cross-Footing, Recalculation Interval Reliability Factor
I Inquiry
V Vouching BV of Sample - AV of Sample
Tainting =
E Examination/Inspection BV
C Cutoff Review
A Analytical Procedures Misstatement Projection Calculations
R Reperformance Mean-Per-Unit = Avg Audited Value x Population
R Reconciliation Estimation
O Oberservation
T Tracing Difference Estimation:
W Walk-through Step 1)
A Auding Related Accounts Simultaneously BV of Sample - AV of Sample
Projected Error = x Population
R Representation Letter # of items audited
S Subsequent Events Review
Sampling Term Definitions
Attribuite Sampling Estimates rate of occurrence of specific characteristic (TOC)
Beta Risk Risk of incorrect acceptance of bad sample results, risk of assessing control risk too low, effectiveness (TOC)
Alpha Risk Risk of incorrect rejection of good sample results, risk of assessing control risk too high, efficiency (TOC)
Variable Sampling Estimates dollar value of population (Substantive Testing)
Incorrect Acceptance Accepting a test that is materially misstated (Substantive Testing)
Incorrect Rejection Rejecting a test that is not materially misstated (Substantive Testing)
cs as population
ge in the population

Sample BV of Population
=
Size Sampling Interval

Projected = Sampling Interval x Tainting

Error

ction Calculations
Ratio Audited BV
= x Total BV
Estimation BV of sample

Step 2)
Point = BV of Population - projected error
Estimate
o low, effectiveness (TOC)
high, efficiency (TOC)
Transaction Cycles
Cycle Concern Most Relevant Assertions Procedure
Revenue Overstatement Existence/Occurrence, Cutoff Vouch

Trace
Completeness, Receiving Report
Expenditure Understatement Valuation/Allocation/
Accuracy Match: Vendor Invoice
Purchase Order
Cash Overstatement Cutoff Bank Reconciliation

Completeness, Existence,
Inventory Observation
Accuracy, R/O
Completeness, Existence,
Investment
Valuation/Alloc., R/O

Factors That Indicate Substantial Doubt (Going-Concern)

F Financial Dificulties
I Internal Matters
N Negative Trends
E External Matters
 Communication for FS Audit ONLY (compare with charts in A5)
Notes:
ficticious sales, hold sales journal open, ship
goods not ordered

Lapping - Todays CR covers yesterdays theft

Kiting - Cash in two places at once

Complex b/c measured at FV

Integrated Audit Communication of Deficiencies in Internal Control Attestation Service Reporti

Preparations and compilati

Engagement Summary

Conditions needed to perf

I
A
M
S
U
R
Dodd-Frank Act on the Issuer Integrated Audit Requirement E
If <$75 M outstanding CE held by non-affiliates
then Prospective Financial State
exempt from integrated audit requirement
ttestation Service Reporting Options Reporting on the Controls of a Service Organization

Type 1
(design, implementation)

Type 2
(design, implementation,
and operating effectiveness)

Reporting for Governmental Audits

eparations and compilations are also allowed for prospective financial statements (governed by SSARS)

gagement Summary

nditions needed to perform Agreed-Upon Procedures

Independece
Agreement of the Parties
Measurability and Consistency
Sufficiency of the Procedures (client takes responsibility)
Use of the report can be general or restricted to specified parties
Responsibility for the subject matter (client or third party)
Engagements to perform Agreed-Upon Procedures on Prospective Financial Statements Comparison of Single Audit, GAGAS, and GAAS

ospective Financial Statement Summary

trols of a Service Organization
SOC 1 (FS Controls) SOC 2 (Broad Range)
Report on the design and Report on the design and implementation of broad
implementation of financial statement range of controls
controls
Report on the design, implementation Report on the design, implementation, and
and operating effectiveness of operating effectiveness of a broad range of controls
financial statement controls

mental Audits

Audit, GAGAS, and GAAS

Basic Summary of Engagements
Opinion or
Engagement Public/Private Guidelines Assurance? Independence? Report Attest?
Conclusion?
Preparation Private only SSARS None Not required None None Non-attest
Not Required Compilation
Compilation Private only SSARS None None Attest
(Disclose if not) Report
Private (only reviews) SSARS Conclusion
Review Private (w/ YE Audit) SAS Limited Required "we do not express Review Report Attest
such an opinion"
Public PCAOB
Private SAS Auditor's
Audit Reasonable Required Opinion Attest
Public PCAOB Report

Detailed Summary of Engagements

 Review Requirements
Important U Understanding with the client (engagement letter)
Notes
Documentation L Learn and obtain knowledge of business
Engagement Letter Each page says no assurance provided I Inquiries
Restricted use not required, can omit substantial disclosures A Analytical procedured
Engagement Letter
if disclosed R Review - other procedures should be performed
C Client representation letter
Engagement Letter -DOESNT:test/understand IC/assess fraud risk (SSARS), express opinion
-Report states review is less in scope, each page says see independent
Representation Letter accountant's review report P Professional judgement
A Accountant should communicate results
Engagement Letter
Representation Letter

Differences in Preparation, Compilation, R

Audit (Reasonable Assurance, Attest)

ngagement letter)

d be performed

reparation, Compilation, Review, and Audit

Contact Prior Understand

Auditor Internal Contro
(also required for (Test, if
Reviews under reporting/relyi
SAS and PCAOB)
on operating
effectiveness

onable Assurance, Attest)

ntact Prior Understand Draft Audit Assess Risk of Inquiries Substantive
Auditor Internal Controls Plan Material (outside Procedures
required for (Test, if Misstatement organization)
iews under reporting/relying (due to Fraud
and PCAOB)
on operating or Error)
effectiveness)