2

Question 1

Four procedures for testing controls

Answer 1

Reperformance
Inspection
Inquiry
Observation

Question 2

Who is covered member?

Answer 2

Anyone who is in a position to influence an audit or who is closely associated with the firm performing the audit.

-The firm or the firm’s employee benefit plan

Question 3

What report does auditor need when the prior year’s FS have not been audited?

Answer 3

Unmodified report with an Other-Matter Paragraph

Question 4

Opinion states “except for” the issue

Answer 4

Qualified Opinion

Question 5

Which paragraph Related party transactions are included?

Answer 5

Enphasis-of-matter (EOM)

Question 6

3 Uses of analytical procedures

Answer 6

1. Risk assessment (planning)
   -Enhance understanding of entire
   -Identify high risk accounts/assertions
2. Substantive tests
   -Verify reasonableness of accounts/assertions
3. Overall review
   -Confirm FSs are consistent with overall understanding of the entity
   -Ensure all unexpected amount/relationships have been explained

Question 7

Sampling risk
If setting control is too low, does it affect effectiveness or Efficiency?
If setting control is too high, does it affect effectiveness or efficiency?

Answer 7

Too low-effectiveness
Too high-efficiency

Question 8

Variables sampling vs Probability proportional

Answer 8

Variables - understatement
Probability - overstatement

Question 9

What is the stratification as the sampling method?

Answer 9

To decrease the effect of variance in the total population

Question 10

What are four procedures for testing controls?

Answer 10

Reperformance
Inspection
Inquiry
Observation

Question 11

Analytical procedures

Answer 11

To evaluate relationship among data-Develop expectations and acceptable ranges of deviation before comparing expectations to actual data.

Client vs industry
Related accounts
Actual vs budget
Financial vs nonfinancial
This year vs last year

Question 12

Audit Data Analysis- Five-step approach

Answer 12

1. Plan the ADA
2. Access and prepare the data for purposes of the ADA
3. Consider the relevance and reliability of the data used
4. Perform the ADA
5. Evaluate the results

If auditor concludes that the data is relevant and reliable, ADAs may be performed regardless of the circumstances (new client, volatility, inherent risk)

Question 13

Appropriateness of audit evidence

Answer 13

Relevance and reliability

Question 14

Steps of analytical procedures

Answer 14

-Develop expectation of amount based on other information
-Compare expectation to recorded amounts and consider whether differences are reasonable
-Investigate significant differences

Question 15

Independent Auditor’s Report about going concern

Answer 15

Include “Substantial doubt about the entity’s ability to continue as going concern”

Question 16

Changing report date vs dual date

Answer 16

-Change the date
auditors responsibility through the new report date (subsequent event date)

-Dual date
auditor’s responsibility through original report date and just one subsequent event date

Question 17

Engaged to prepare the FS, but also compile, review, or audit

Answer 17

Consider a bookkeeping service and not SSARS

Question 18

Attestation engagements

Answer 18

Examination-Opinion
Review-Conclusion
Agreed-upon procedures-findings

Question 19

Accounting engagements

Answer 19

Assurance
-Audit
-Reviews-SSARS

No Assurance
-Compilation-SSARS
-Preparation-SSARS
-Bookkeeping, Tax, Consulting

Question 20

Substantive procedures

Answer 20

Substantive analytical procedures -Test the reasonableness of amounts (trend analysis)
Tests of detail-Test directly for misstatements