Accy_131-Final_Study_Guide - Unit #1 Possible Short Answer...

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1. (Ch 2) Auditors must be concerned with both generally accepted audit standards (GAAS) and generally accepted accounting principles (GAAP) in performing an audit. Compare these two sets of standards. Generally Accepted Accounting Principles- Issued by the FASB, overseen by the SEC. Principles for preparing financial statements in the US. Generally Accepted Auditing Standards - 10 broad statements guiding the conduct of financial statement auditing. o GAAS- GENERAL o The audit is to be performed by a person or persons having adequate technical training and proficiency as an auditor. o In all matters relating to the assignment, independence in mental attitude is to be maintained by the auditor or auditors. o Due professional care is to be exercised in the planning and performance of the audit and the preparation of the report. GAAS-FIELDWORK o The work is to be adequatley planned and assitants, if any, are to be properly supervised. o A sufficient understanding of interal controls is to be obtained to plan the audit and dertermine the nature, timing, and extent of tests to be performed. o Sufficient, competent evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial statements under audit. GAAS- REPORTING The report shall state whether the financial statements are presented in accordance with GAAP. The report shall identify those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period. Informative disclosures in the financial statements are to be regarded as reasonably adequate unless otherwise stated in the report. The report shall contain either an expression of opinion regarding the financial statements, taken as a whole, or an assertion to the effect that an opinion cannot be expressed. When an overall opinion cannot be expressed, the reasons therefore should be stated. In all cases where an auditor's name is associated with financial statements, the report should contain a clear-cut indication of the character of the auditor's work, if any, and the degree of responsibility the auditor is taking. 2. (Ch 3) Name three distinct categories of threats to independence and provide a specific example of a threat within each of these categories. Financial Self-Interest A potential benefit to the accountant from a financial interest in, or some other financial relationship with, an attest client. Adverse Interest Actions between the accountant and client that place the parties in direct opposition. Familiarity
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Accy_131-Final_Study_Guide - Unit #1 Possible Short Answer...

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