Roger Philipp, CPA, CGMA, describes Financial Statement Audits. This clip is a sample of the CPA Exam review lecture from the Roger CPA Review AUD course.
Roger discusses concepts such as professional skepticism, reasonable assurance, materiality, and how to determine the scope of a financial audit. Topics such as these are heavily tested on the CPA Exam.
Connect with us:
Are you accounting faculty looking for FREE CPA Exam resources in the classroom? Visit our Professor Resource Center: https://www.rogercpareview.com/professor-resource-center/
Video Transcript Sneak Peek:
Now, the CPA exam focuses mainly on this one right here, called a financial statement audit. What is a financial statement audit? That's where you go out to the company and you pick up management’s financial statements. Now, these are management’s statements. In other words, management is responsible for the presentation. Management is responsible for the content.
Our job as an auditor, should we decide to accept it, is to obtain sufficient, appropriate audit evidence, enough good audit evidence, so we can give an opinion on management’s representations. So, that is our goal as an auditor. We’re called an external, independent, objective. We have to be independent, objective, unbiased, neutral...you can't own stock in the company or you can't do that audit because you're not independent.
So, a financial statement audit is basically an examination or an audit for the purpose of giving an objective opinion as to the fairness of financial statement presentations. So, let's break that down. What is a financial statement audit? It's an examination or an audit. So it's an audit. It is an audit for the purpose of giving an objective opinion. You’re giving an objective, unbiased, neutral, clear mental attitude opinion because when you go out and pick up...Whose statements are these? Management's.
When you pick up management’s statements, you are giving an opinion on all this brown stuff, right? How appropriate. So, our opinion covers only this brown stuff. The fun stuff...this is called other information.
This is the stuff that management puts in there. We have a responsibility to look it over, read it, make sure it's reasonable, but our opinion really covers this because our whole purpose of this is to give this audit opinion which says, ”In our opinion the statements referred to above presents fairly in all material respects to the financial position of X Co. as of 12/31/x1. The results of its operations are in conformity with US GAAP.” So, we're giving an opinion on GAAP. Are these statements presented fairly in conformity with United States generally accepted accounting principles?
So, in order to do an audit, it's an examination or an audit for the purpose of giving what we call an objective, unbiased, neutral opinion. We're giving an opinion because these statements are not ours.