1. GAAS identifies characteristics of auditors guide and guide the conduct of the audit. The AICPA or PCAOB are responsible.
2. AICPA is for non-public firms. PCAOB is for public firms. SEC has no rule.
3. The two possible sources are the pronouncements from the AIPCA or the PCAOB.
4. GAAS- Responsibilities principle is training, due professional care. Performance principle is the planning, understanding, and evidence. Reporting principle is the compliance and disclosures.
5. Independent in fact is where there is no possible way the person is biased. Independent in appearance is when there seems there is no bias, but there may be.
6. Due care is the level of performance by reasonable auditors in similar circumstances. They must use the performance standards that will ensure the job gets done.
7. Professional skepticism is the appropriate questioning and critical assessment of evidence. Judgment is the application of training, knowledge, and experiences to make informed decisions.
8. These are used throughout the whole audit. Reasonable assurance is when an auditor is reasonably assured things were done correctly. It is impossible to check everything absolutely.
9. Step one is having a plan. Step two is understanding the operations of the firm. Step three is putting in place unbiased communication channels.
10. The audit has to take place after the process/procedure that is being audited has been completed.
11. Materiality recognizes that auditors should focus on factors that are important to the users. This is used throughout the whole audit process.
12. This is so the auditor knows enough about the clients business to forecast risks and weaknesses.
13. If the internal controls are weak an auditor needs more evidence. Vice-versa.
14. Audit evidence is the information used by auditors in arriving at the conclusions in which the audit opinions are based. It includes all data.
15. External evidence is obtained through external sources. External/internal is evidence that has originated outside the clients information process, but has been received and processed by the client. Internal evidence is that which is produced, circulated, and stored within clients information system.
16. Relevance refers to the nature of the information provided by audit evidence. Reliability refers to extent of trust that auditors can place evidence. They both contribute to audit evidence quality.
17. Sources affect its reliability because if the source seems sketchy, such as photocopies or non-originals, the evidence may be unreliable.
18. When auditors have sufficient and appropriate evidence, the detection risk is low because they have good evidence to support and they will have a better opportunity to find misstatements.
19. The financial reporting framework is a set of criteria used to determine the measurement, recognition, presentation, and disclosures of material items and