- Chapter I Definitions: FS audit, IC audit, compliance audits, operational audits, materiality Limitations of an audit Mgmt responsibilities vs auditor responsibilities Impact of SOX 2002 What do the following regulators do: SEC, PCAOB, AlCPA, FASB Difference btwn limited assurance (review, see Ch. 16) vs reasonable assurance (audit) - Chapter 2 Definitions: independence in fact, independence in appearance, due care defense When does a CPA need to be independent (also see Ch.16 for prep, compilation, \& review requirements). - Chapter 3 Definitions: engagement letter, performance materiality, professional skepticism, audit risk, risk of material misstatement, test of controls, substantive procedures, brainstorming Things to consider when accepting a new or continuing with an existing client Different phases of the audit and what is done in each Qualitative vs. Quantitative factors for materiality Inherent risk and what affects it and how it affects evidence needed (increase or decrease) Control risk and what affects it and how it affects evidence needed (increase or decrease Reliance on controls vs substantive approach Be familiar with the fraud triangle - Chapter 4 Definitions: analytical procedures, trend analysis, common size analysis, related parties, corporate governance, board of directors, audit committee When analytical procedures are performed (what phase and what they uncover), also what phases are analytical procedures required in - Chapter 5 - Definitions: assertions, vouching, tracing, inspection, observation, confirmation, inquiry, recalculation, reperformance, internal auditors, Be familiar with the definitions of each assertion and how to apply them to situations Types of misstatement: factual, judgmental, projected - Cash How the bank reconciliation process is done Definitions: Kiting, lapping, cutoff bank statement, bank confirmation - Accounts Payable Management assertions and how they are tested for AP - SURL testing - Accounts Receivable Positive vs. negative confirmations Confirmation process Management assertions and how they are tested for AR - Inventory - Management assertions and how they are tested for inventory How inventory counts are done - Statistical Sampling-none - Chapter 15 Definitions: loss contingency (main issue is completeness), legal letter, engagement quality control reviewer, going concern assumption, mgmt. representation letter Do not need to know how to account for loss contingency Type 1 vs. Type 2 subsequent event and examples of each Types of misstatement: factual, judgmental, projected Who owns working papers What is meant by assembly completion deadline and what can and cannot be done in that time frame - Chapter 16 Definitions: critical audit matters End of fieldwork date location and meaning on audit report Be familiar with different types of audit opinions and when they can be given - Departure from gaap vs scope limitation vs independence issue Know the differences between a public vs private report Private=aicpa standards, audits are done for banking, creditors Public=pcaob standards, audits are required Be familiar with additional wording paragraphs: going concern section, FS consistency, emphasis of matter paragraph Types of misstatement: factual, judgmental, projected - Cash How the bank reconciliation process is done Definitions: Kiting, lapping, cutoff bank statement, bank confirmation - Accounts Payable Management assertions and how they are tested for AP - SURL testing - Accounts Receivable Positive vs. negative confirmations Confirmation process Management assertions and how they are tested for AR - Inventory - Management assertions and how they are tested for inventory - How inventory counts are done - Statistical Sampling-none - Chapter 15 Definitions: loss contingency (main issue is completeness), legal letter, engagement quality control reviewer, going concern assumption, mgmt. representation letter Do not need to know how to account for loss contingency Type 1 vs. Type 2 subsequent event and examples of each Types of misstatement: factual, judgmental, projected Who owns working papers What is meant by assembly completion deadline and what can and cannot be done in that time frame - Chapter 16 Definitions: critical audit matters End of fieldwork date location and meaning on audit report Be familiar with different types of audit opinions and when they can be given - Departure from gaap vs scope limitation vs independence issue Know the differences between a public vs private report Private=aicpa standards, audits are done for banking, creditors Public=pcaob standards, audits are required Be familiar with additional wording paragraphs: going concem