Scribd
Upload
17 views3 pages

AFA518 Chapter 2 Notes

Uploaded by

raphial100
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
17 views3 pages

AFA518 Chapter 2 Notes

Uploaded by

raphial100
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

AFA518 Chapter 2

The Public Accounting Profession and Audit Quality

Organizations Affecting the Canadian Public Accounting Profession

 CPA Canada:
o Supports the setting of accounting, auditing, and assurance standards for business, not-for-profit
organizations, and government.
o Collaborate with Canadian Public Accountability Board (CPAB) to enhance audit quality
o Developing uniform standards of qualification for admission of CPAs and maintaining appropriate
standards of professional conduct
 Auditing and Assurance Standards Board (AASB)
o An independent board of CPA Canada that has the responsibility for issuing auditing and assurance
standards (GAAS) for financial statement audits and other types of assurance and related services
engagements.
 International Auditing and Assurance Standards Board (IAASB)
o Independent standard-setting body that sets international standards for auditing and assurance, and
other related standards.
 Canadian Public Accountability Board (CPAB)
o Contribute to the public’s confidence in the integrity of financial reporting in reporting issuers in Canada
by promoting effective regulation and high-quality, independent auditing.
o Created after Sarbanes-Oxley Act of 2002 that was passed in the US creating PCAOB.
 Public Company Accounting Oversight Board (PCAOB)
o Overseen by the U.S. SEC
o The PCAOB conducts inspections of registered accounting firms to assess their compliance with the rules
of the PCAOB and SEC, professional standards, and each firm’s own quality control policies.

Canadian Auditing Standards (CAS)

Standards for the financial statement audit, consists of:

 Section 200–299: General Principles and Responsibilities


 Section 300–499: Risk Assessment and Response
 Section 500–599: Audit Evidence
 Section 600–699: Using Work of Others
 Section 700–799: Audit Conclusions and Reporting
 Section 800–899: Specialized Areas

Principles Underlying the Financial Statement Audit (CAS 200)

1. Purpose of an audit (Purpose) = provide opinion about the F/S


2. Personal responsibilities of the auditor (Responsibilities)
a. Possess appropriate competence and capabilities
b. Comply with ethical and independence requirements
c. Maintain professional skepticism and exercise professional judgement
3. Auditor actions in performing the audit (Performance) = obtain reasonable assurance about whether F/S are
free of material misstatement  How? Obtain sufficient evidence, identify risk, and assess internal controls.
4. Reporting (Reporting) = express opinion on F/S (qualified or unqualified)
Purpose of the Financial Statement Audit

1. Provide financial statement users with an opinion issued by the auditor on whether the financial statements are
presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
2. To ensure that management prepare the financial statements in accordance with the applicable financial
reporting framework selected.
3. Assess internal controls relevant to the preparation and presentation of financial statements that are free of
material misstatements.

Personal Responsibilities as an Auditor

1. Exercise Professional Competence and Due Care


 Having a formal education in auditing and accounting (knowledge and skills)
 Adequate practical experience
 Continuing professional education to maintain
2. Comply with Ethical and Independence Requirements
 Integrity, objectivity, confidentiality, professional behaviour
 Follow the code of conduct and maintain independence
3. Maintain Professional Skepticism and Exercise Professional Judgment
 Professional Skepticism: an attitude that includes a questioning mind, being alert to conditions that
might indicate possible misstatements due to fraud or error, and critically assessing audit evidence.
 Professional Judgment: auditors are responsible for applying relevant training, knowledge, and
experience in making informed decisions.

Performance Responsibilities

1. Adequate Planning and Supervision


 Supervise less experienced staff members
 Set out the engagement team responsibilities, the nature of the entity’s business, risk-related issues,
problems that may arise, and a detailed approach to perform the engagement
2. Determine and Apply Materiality Levels
 A misstatement is considered material if knowledge of the misstatement will affect a decision of a
reasonable user of the financial statements
3. Identify and Assess Risks of Material Misstatement
 The auditor must have an understanding of the client’s business and industry, which helps the auditor to
identify significant client business risks and the risk of significant misstatements in the F/S
 The level of comfort on the internal controls dictate the amount of audit evidence required for
reasonable assurance
4. Sufficient Appropriate Evidence
 Decisions about how much and what types of evidence to accumulate for a given set of circumstances
require professional judgment.
 Depends on the internal controls and risks associated

Reporting

The report describes the financial statements being audited, the auditor’s unqualified/unmodified opinion, and the
basis for the opinion; it also describes the responsibilities of management, those charged with governance of the entity
being audited, and the auditor.
The Drivers of Audit Quality

1. Build the Right Teams = finding the right people will technical competence and industry experience
2. Provide the Right Support
3. Conduct In-Process Reviews = conduct reviews during the audit engagement to have a greater impact on audit
quality
4. Assign Accountability for Audit Quality = firm leadership “tone at the top”

Quality Control

 Comprises the methods used to make sure that the firm meets its professional responsibilities to clients and
others. It includes: the organizational structure and procedure.
 Elements of Quality Control:
o Canadian Auditing Standard (CAS) 220 = To ensure that the requirements of the auditing standards are
met on every audit, a public accounting firm must follow specific quality control procedures consistently
on every engagement.
o Each firm should document its quality control policies and procedures.
 Leadership responsibilities for quality within the firm (“tone at the top”)
 Relevant ethical requirements
 Acceptance and continuation of clients and engagements
 Human Resources
 Engagement performance
 Monitoring

 External Inspections
o The provincial CPA organizations conduct practice inspections for two reasons:
 (1) to protect the public interest by ensuring that public accountants are adhering to
professional standards set out in the CPA Canada Handbook—Assurance
 (2) to help public accountants improve their professional standards.

You might also like