2009 A-2 Class Notes

2009 A-2 Class Notes - Becker CPA Review Auditing 2 Class...

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Becker CPA Review – Auditing 2 Class Notes 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. AUDITING 2 CLASS NOTES I. AUDITING 2 A. QUALITY CONTROL STANDARDS 1. A CPA firm must adhere to a sound system of quality control no matter what level of service they provide. a. The five interrelated elements of quality control must be memorized. (AICPA) (1) Acceptance (look for management integrity, evaluate audit firm capability, and consider risk) (2) Independence (be familiar with new responsibilities due to Sarbanes- Oxley) (3) Continuous Monitoring (such as second partner review and peer review) (4) Personnel Management (hiring, staffing, development, and advancement) (5) Assurance Regarding Engagement Performance (policies/procedures to ensure that professional standards are met) b. The type of policies that a firm establishes will vary based on its size, structure, complexity, etc., as well as on cost-benefit considerations. c. You must understand the difference between Quality Control Standards (which apply to the firm) and Generally Accepted Auditing Standards (which apply to individual engagements). These are not synonymous terms, and this concept is frequently tested on the exam. B. SPECIAL REPORTS 1. You must know the five types of special reports : a. OCBOA : Other comprehensive basis of accounting (e.g., cash basis, tax basis, etc.) This is a positive assurance report. Questions often focus on the required explanatory paragraph. b. Specified elements , accounts or items in FS (such as royalties, profit sharing and accounts receivable). This is a positive assurance report. c. Compliance with contractual or regulatory requirements related to audited FS . This is a negative assurance report, and it is restricted as to use. d. Financial presentations to comply with contractual agreements or regulatory provisions. This is a positive assurance report, and it is typically restricted as to use. e. Financial information presented in prescribed forms or schedules. 2. Be aware of how the format of each special report differs from the three paragraphs of the standard unqualified report. C. COMPILATION AND REVIEW OF FINANCIAL STATEMENTS 1. Statements on Standards for Accounting and Review Services ( SSARS ) govern the performance of compilations and reviews. 2. Know when SSARS apply ("submission" of the FS of nonissuers ).
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Becker CPA Review – Auditing 2 Class Notes 2 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. 3.
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2009 A-2 Class Notes - Becker CPA Review Auditing 2 Class...

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