1. Chapter Two The CPA Profession

2. Navid
What is “our” operational definition of independence?

3. Independence
A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing professional auditing or attestation services.

4. Independence
Independence enhances the auditor’s ability to act with integrity, to be objective, and to maintain an attitude of professional skepticism. Independence includes independence of fact (mind) Independence of appearance

5. Joseph Talk about the difference between assurance attestation
auditing

7. Assurance – improves the quality of information
Attestation – report regarding the reliability of specific assertions made by management
Audit – opinion regarding management’s assertions embodied in financial statements

9. Hailee
What are the characteristics of a Limited Liability Company, an LLC?

10. LLC Taxed like a general partnership
Limits the owners’ personal liability similar to a corporation

11. Julia B
What are the characteristics of a Limited Liability Partnership, an LLP?

12. LLP Taxed like a general partnership
Partners are not personally liable for negligent acts of other partners and employees not under their supervision
Partners are personally liable for their own actions and the negligent acts of employees under their supervision

13. Jenna GAAS GAAP Which refers to Accounting Standards ?
Which refers to Auditing Standards ?

14. Stephanie
Name of the organization(s) which creates Accounting Standards ?
Name of the organization(s) which creates Auditing Standards ?

15. GAAP FASB primary source
GAAS PCAOB (public companies)
aicpa ASB (private companies)

16. Organizations Securities Exchange Commission
Public Companies Accounting Oversight Board
Financial Accounting Standards Board
American Institute of Certified Public Accountants
State Board of Accountancy
California Society of CPAs

17. Organizations SEC PCAOB FASB
American Institute of Certified Public Accountants
California Board of Accountancy

18. GAAP GAAS FASB FAS ASU PCAOB AICPA AS SAS ASC 310-10-25-3
**public** **private**
PCAOB AICPA
AS SAS

19. Brittney
Describe the Sarbanes Oxley Act of 2002?

20. Daniel
What is the overall objective of an audit?

21. Overall Objective
AU-C Section 200 Overall Objectives of the Independent Auditor and Conduct of an Audit in
.11 The overall objectives of the auditor, in conducting an audit of financial statements, are to
a. obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with an applicable financial reporting framework; and
b. report on the financial statements, and communicate as required by GAAS, in accordance with the auditor's findings.

22. Objectives
 AU-C 200 Overall Objective of the Independent Auditor and Conduct of an Audit in Accordance with Generally Accepted Auditing Standards
AU-C 315 Understanding the Entity and Its Environment and Assessing the Risk of Material Misstatement
AU-C 500 Audit Evidence
AU-C 700 Forming an Opinion and Reporting on Financial Statements
Code of Professional Conduct Objectivity and Independence

23. Mikey
What is the objective of AU-C 315?

24. AU-C 315 Understanding the Entity and Its Environment and Assessing the Risk of Material Misstatement
.03 The objective of the auditor is to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and relevant assertion levels through understanding the entity and its environment, including the entity's internal control, thereby providing a basis for designing and implementing responses to the assessed risks of material misstatement.

25. AU-C 330 Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained
.03 The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement through designing and implementing appropriate responses to those risks.

26. Miki
What is the objective of AU-C 500?

27. AU-C 500 Audit Evidence
.04 The objective of the auditor is to design and perform audit procedures that enable the auditor to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor's opinion.

28. Austin
What is the objective of AU-C 700?

29. AU-C 700 Forming an Opinion and Reporting on Financial Statements
AU-C 700 Forming an Opinion and Reporting on Financial Statements
.10 The objectives of the auditor are to
a. form an opinion on the financial statements based on an evaluation of the audit evidence obtained, including evidence obtained about comparative financial statements or comparative financial information, and
b. express clearly that opinion on the financial statements through a written report that also describes the basis for that opinion.

32. Jane
What are the four sections of an unmodified opinion?

33. Independent Auditor’s Report
Report on the Financial Statements Introduction
Management’s Responsibility for the Financial Statements
Auditor’s Responsibility
Basis for XXXX Opinion (if a modified opinion)
Auditor’s Opinion
Emphasis-of-Matter / Other-Matter
Signature of the Auditor (city, state and date)

34. Julia L
In which paragraph does the auditor “express an opinion” regarding the financial statements?”

35. Independent Auditor’s Report
Report on the Financial Statements
We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.2 Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
[Auditor's signature, city and state, date of report]

36. Dana Which section discusses
“the degree of responsibility the auditor is taking ?”

37. Independent Auditor’s Report
Report on the Financial Statements
We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.2 Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
[Auditor's signature, city and state, date of report]

38. John
Which paragraph discusses
“management’s responsibility ?”

39. Independent Auditor’s Report Report on the Financial Statements
We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.2 Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
[Auditor's signature, city and state, date of report]

40. Malcolm
Which section
“describes the characteristics of the auditor’s work?”

41. Independent Auditor’s Report Report on the Financial Statements
We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
[Auditor's signature, city and state, date of report]

42. obtain audit evidence about
amounts in the financial statements.
disclosures in the financial statements.
evaluating the appropriateness of
accounting policies used
reasonableness of significant estimates made by management
overall presentation of the financial statements.

43. Samuel
Annika
Where in the auditor’s report does it state whether the financial statements are presented in accordance with generally accepted accounting principles

44. Independent Auditor’s Report Report on the Financial Statements
We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.2 Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
[Auditor's signature, city and state, date of report]

45. Mitchell
What four different opinions can an auditor can issue for an audit ?

46. AUDIT REPORTS handouts
Unmodified -fairly presented
Qualified -fairly presented ‘except for’ a very limited number of conditions where the statement’s don’t conform to GAAP
Qualified -fairly presented ‘except for’ a very limited number of situations where the audit procedures were unable to satisfy GAAS
Adverse -don’t conform to GAAP
Disclaimer -Scope limitation – unable to audit

47. AU-C 220 Quality Control of ..
Leadership Responsibilities
Ethical Requirements
Responsibilities The public interest
Integrity Objectivity and independence
Due care
Acceptance and Continuation of clients
Assignment of Engagement Teams
Engagement Performance
direction, supervision & performance
Review
Consultation
Engagement Quality Control Review
Monitoring
Documentation

48. Important Selected Objectives Unmodified Auditor’s Report
Management’s Assertions p. 159 (167)

49. Objectives
 AU-C 200 Overall Objective of the Independent Auditor and Conduct of an Audit in Accordance with Generally Accepted Auditing Standards
AU-C 315 Understanding the Entity and Its Environment and Assessing the Risk of Material Misstatement
AU-C 500 Audit Evidence
AU-C 700 Forming an Opinion and Reporting on Financial Statements
Code of Professional Conduct Objectivity and Independence

50. Independent Auditor’s Report
Report on the Financial Statements
We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.2 Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
[Auditor's signature, city and state, date of report]

51. Table 6-3
Page 159 (167)

52. role of audits in capital markets
stockholders
board of directors
management
auditors

58. Independent Auditor’s Report Report on the Financial Statements
We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.2 Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
[Auditor's signature, city and state, date of report]

59. AU-C Section 200 Overall Objectives of the Independent Auditor and Conduct of an Audit in Accordance with Generally Accepted Auditing Standards .11 The overall objectives of the auditor, in conducting an audit of financial statements, are to a. obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with an applicable financial reporting framework; and b. report on the financial statements, and communicate as required by GAAS, in accordance with the auditor's findings. AU-C 315 Understanding the Entity and Its Environment and Assessing the Risk of Material Misstatement .03 The objective of the auditor is to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and relevant assertion levels through understanding the entity and its environment, including the entity's internal control, thereby providing a basis for designing and implementing responses to the assessed risks of material misstatement. AU-C 330 Performing Audit Procedures in Response to Assessed Risks and Evaluating the audit Evidence Obtained .03 The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement through designing and implementing appropriate responses to those risks. AU-C 500 Audit Evidence .04 The objective of the auditor is to design and perform audit procedures that enable the auditor to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor's opinion. AU-C 700 Forming an Opinion and Reporting on Financial Statements .10 The objectives of the auditor are to a. form an opinion on the financial statements based on an evaluation of the audit evidence obtained, including evidence obtained about comparative financial statements or comparative financial information, and b. express clearly that opinion on the financial statements through a written report that also describes the basis for that opinion. AU-C 708 Consistency of Financial Statements. 03 The objectives of the auditor are to a. evaluate the consistency of the financial statements for the periods presented and b. communicate appropriately in the auditor's report when the comparability of financial statements between periods has been materially affected by a change in accounting principle or by adjustments to correct a material misstatement in previously issued financial statements.