Auditing
just skim the section on
Generally Accepted Auditing Standards
Page 32-36
April 1, 2015
1

Auditing
April 1, 2015
2

Auditing
What are the characteristics of a Limited
Liability Company, an LLC?
April 1, 2015
3

Auditing
LLC
 Taxed like a general partnership

Limits the owners’ personal liability similar to a corporation
April 1, 2015
4

Auditing
What are the characteristics of a Limited
Liability Partnership, an LLP?
April 1, 2015
5

Auditing
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
April 1, 2015
6

Auditing
Which refers to Accounting Standards ?
Which refers to Auditing Standards ?
April 1, 2015
7

Auditing
Name of the organization(s) which creates Accounting Standards ?
Name of the organization(s) which creates Auditing Standards ?
April 1, 2015
8

Auditing
GAAP
GAAS
FASB primary source
PCAOB
(public companies) aicpa ASB (private companies)
April 1, 2015
9

Auditing
April 1, 2015
10

Auditing
ASU Accounting Standards Updates
 Effective July 1, 2009, changes to the source of authoritative U.S. GAAP, the
FASB Accounting Standards
Codification, are communicated through an Accounting Standards Update
(ASU). ASUs will be published for all authoritative U.S. GAAP promulgated by the FASB,
April 1, 2015
11

Auditing
FASB Accounting Standards Codification
The Codification is the single source of authoritative nongovernmental U.S. GAAP. The Codification is effective for periods ending after September 15, 2009.
All previous level (a)-(d) US GAAP standards issued by a standard setter are superseded. Level (a)-(d) US
GAAP refers to the previous accounting hierarchy.
All other accounting literature not included in the
Codification will be considered nonauthoritative.
April 1, 2015
12

Auditing
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
April 1, 2015
13

PCAOB
SEC
FASB
Auditing
American Institute of Certified Public Accountants
California Board of Accountancy
April 1, 2015
14

Auditing
GAAP
FASB
FAS
ASC 310-10-25-3
ASU
GAAS
**public**
PCAOB
AS
**private**
AICPA
SAS
April 1, 2015
15

Auditing
What is the Sarbanes Oxley Act of 2002?
April 1, 2015
16

What is the overall objective of an audit?
Auditing
April 1, 2015
17

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.
Auditing
April 1, 2015
18

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
Auditing
April 1, 2015
19

What is the objective of AU-C 315?
Auditing
April 1, 2015
20

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.
Auditing 21
April 1, 2015

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 .
Auditing 22
April 1, 2015

What is the objective of AU-C 500?
Auditing
April 1, 2015
23

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.
Auditing 24
April 1, 2015

What is the objective of AU-C 700?
Auditing
April 1, 2015
25

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.
Auditing 26
April 1, 2015

Auditing
April 1, 2015
27

Auditing
April 1, 2015
28

Auditing
What are the four paragraphs in an unmodified opinion?
April 1, 2015
29

Report on the Financial Statements
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)
Auditing 30
April 1, 2015

Auditing
In which paragraph does the auditor
“ express an opinion ” regarding the financial statements?”
April 1, 2015
31

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]
Auditing 32
April 1, 2015

Auditing
Which paragraph discusses
“ the degree of responsibility the auditor is taking ?”
April 1, 2015
33

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]
Auditing 34
April 1, 2015

Auditing
Which paragraph discusses
“ management’s responsibility ?”
April 1, 2015
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.
April 1, 2015
36

Auditing
Which paragraph
“ describes the characteristics of the auditor’s work?”
April 1, 2015
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. 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]
Auditing
April 1, 2015
38

Auditing
Where in the auditor’s report does it state whether the financial statements are presented in accordance with generally accepted accounting principles
April 1, 2015
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]
Auditing
April 1, 2015
40

Auditing
What four different opinions can an auditor can issue for an audit ?
April 1, 2015
41

Auditing
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
April 1, 2015
42

Auditing
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
April 1, 2015
43

 Selected Objectives

Unmodified Auditor’s Report

Management’s Assertions p. 59
Auditing
April 1, 2015
44

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
Auditing
April 1, 2015
45

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]
Auditing
April 1, 2015
46

Auditing
April 1, 2015
47

Auditing
April 1, 2015
48

Auditing stockholders board of directors management
April 1, 2015 auditors
49

stockholders audit comm ind auditor board of directors compensation comm managment comm
Auditing managment
April 1, 2015
50

Auditing
April 1, 2015
51

Auditing
April 1, 2015
52

Auditing
April 1, 2015
53

Auditing
April 1, 2015
54

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]
Auditing
April 1, 2015
55

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.
Auditing
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 315 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.
April 1, 2015
AU-C 700 Forming an Opinion and Reporting on Financial Statements
56