Financial reporting framework – set of criteria used to determine the measurement, recognition, presentation, and disclosure of material items in the F/SoGAAPoIFRSoOr special purpose framework: Cash or tax basesUnmodified (or unqualified) opinion - concludes that the entity’s F/Ss present its financial condition, results of operations, and cash flows in conformity with frameworkAdverse opinion – F/Ss are not presented in conformity with financial reporting frameworks
Qualified opinion – concludes that except for a relatively isolated (usually limited) departure, the entity F/Ss are presented in conformity with the frameworkDisclaimer of opinion – an opinion cannot be expressedSystem of quality control – provide the firm reasonable assurance that the firm and its personnel oComply with professional standards and applicable regulatory and legal requirementsoIssue reports that are appropriate in the circumstancesQuality Control Elements required of public accounting firms under the Sarbanes-Oxley act; 1.Leaderships responsibilities for quality within the firm (“tone at the top”)a.Rewarding on quality of workb.Devoting sufficient resourcesc.Ensure management objectives do not override the quality of the work performed 2.Relevant ethical requirementsa.Communicate independence requirements to personnelb.Identify circumstances that could threaten independence and reduce them3.Acceptance and continuance of client relationships and specific engagements should depend on; a.The integrity and business reputation of the clientb.The firm’s ability to adequately perform the engagement with an appropriate level of professional competencec.The firm’s ability to comply with legal and ethical requirement related to the engagement4.Human resources- Enroll quality control policies. 5.Engagement performance a.Engagement quality control reviews: Reviewing and evaluating the engagement and methods of judgment used. 6.Monitoringa.Purpose – to provide the firm with reasonable assurance that policies and procedures composing the system of quality control are operating effectively and complied with in practice. [ex.] reviews of selected administrative and personnel record[ex.] reviews of engagement documentation, reports, and the client’s F/S[ex.] discussions with firm personnel[ex.] Assessments of the (1) appropriateness of the firm’s guidance materials and professional aids (2) compliance with policies and procedures on independence, (3) effectiveness of continuing
professional education, and (4) decisions regarding the acceptance and continuance of client relationships and specific engagementsEngagement quality control reviews – an internal evaluation of the significant judgements made by the audit team and the conclusions reached in formulating its report.