Nature and scope of engagements
Area 1: Ethics, Professional Responsibilities, and General Principles (15-25%)
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Topics
- Overall objectives of the auditor
- Financial statement assertions
- Reasonable vs. limited assurance
Study Frameworks
Engagement Types Comparison
| Feature | Audit | Review | Compilation | Agreed-Upon Procedures |
|---|---|---|---|---|
| Level of assurance | Reasonable | Limited | None | None (findings only) |
| Key procedures | Inspect, confirm, observe, recalculate | Inquiry, analytical procedures | Read for obvious errors | Specified by engaging parties |
| Report opinion | Positive — FS are fairly stated | Negative — nothing came to our attention | No assurance expressed | Report findings only |
| Independence required | Yes | Yes | No (but must disclose lack) | Yes |
PCAOB vs. AICPA GAAS
| Feature | PCAOB (Issuers) | GAAS (Non-Issuers) |
|---|---|---|
| Standard setter | PCAOB (SEC oversight) | AICPA Auditing Standards Board |
| Quality oversight | PCAOB inspections (annual or triennial) | Peer review (every 3 years) |
| Internal control opinion | Required (integrated audit) | Not required |
| Partner rotation | Required by SOX (5-year rotation) | Not required for most |
| CAMs/KAMs | Required in audit report | Not required |
| Auditor tenure disclosure | Required in report | Not required |