CPA Advanced Auditing cheat sheet

Audit risk model: AR = IR × CR × DR. Detection risk is the only component the auditor controls; it moves inversely with the assessed risks of material misstatement (RMM).

Risk of material misstatement (RMM) = inherent risk × control risk. Assessed RMM drives the nature, timing, and extent of further audit procedures under ISA 330 / AS 2301.

Sufficiency relates to quantity of evidence; appropriateness relates to relevance and reliability. Reliability hierarchy: auditor's direct observation and external sources > internal evidence; originals > copies.

Professional scepticism is an attitude of questioning mind, alertness to contradiction and misstatement, and critical assessment of evidence - it is not distrust and is presumed necessary even with prior good faith.

Materiality per ISA 320 / AS 2105: determine overall materiality, performance materiality (usually a percentage of overall materiality), and a clearly trivial threshold for accumulating misstatements.

Audit sampling: sampling risk is the risk the auditor's conclusion differs from one based on the whole population; non-sampling risk is all other error, e.g. inappropriate procedures or misinterpretation.

Going concern (ISA 570 / AS 2415): evaluate management's assessment over at least 12 months from the financial statement date; conclude on appropriateness of the going concern basis and adequacy of disclosure.

Group audits (ISA 600): the group engagement partner is responsible for direction, supervision, and review, and must be satisfied sufficient appropriate evidence exists regarding component work, including for component auditors.

Fraud (ISA 240 / AS 2401): presumed risk of fraud in revenue recognition; management override of controls is a risk in every audit, requiring journal entry testing, retrospective review of estimates, and evaluation of significant unusual transactions.

Auditor's report (ISA 700/701): key audit matters apply to listed entities; a modified opinion is qualified (pervasive? no), adverse (material and pervasive misstatement), or disclaimer (material and pervasive scope limitation).

Emphasis of Matter and Other Matter paragraphs do not modify the opinion and are placed after the Basis for Opinion; KAMs are not a substitute for a modification.

ISA 540 / AS 2501 revised: estimates with high estimation uncertainty require testing of management's methods, assumptions, and data, plus evaluation of management bias indicators across the portfolio of estimates.

ISA 620 / AS 1210: if using an auditor's expert, assess competence, capabilities, and objectivity, understand the expert's field, and evaluate the adequacy of the expert's work as audit evidence.

Related parties (ISA 550 / AS 2410): perform risk assessment procedures to obtain understanding of related party relationships and transactions, remain alert during the audit, and inspect underlying contracts for significant unusual transactions.

ISA 701 / AS 3101 critical audit matters: communicated or required to be communicated to the audit committee, relate to accounts or disclosures material to the financial statements, and involved especially challenging, subjective, or complex auditor judgment.

Quality management (ISQM 1 / ISA 220 revised): the firm's system of quality management addresses engagement performance, governance, resources, and information; the engagement partner remains responsible for overall quality.