5/24 Flashcards
Would an auditor share responsibility with internal auditor for Materiality of Misstatements or evaluation of accounting estimates
No, the auditor has ultimate responsibility for opinion, judgements for risk, materiality of misstatements, sufficiency of tests, evaluation of estimates, any other matters affecting auditors report.
What would be considered an attest engagement subject to attestation standards
SSAE excludes services performed in accordance with SSARS. Any review would not be considered.
What auditing procedure most likely would assist an auditor identify conditions and events that may indicate substantial doubt about an entity’s ability to continue as a going concern?
Confirming with third parties the details of arrangements to maintain financial support.
Misstatements discovered by the auditor were immaterial in aggregate in prior years. Such misstatements should be
Considered in the evaluation of audit findings in the current year.
They may become material.
What is not a reason an auditor may apply audit data analytics (ADA) when concluding an audit?
Verify the assertions of accuracy and occurrence for all material transactions
Use ADA to assist when forming an overall conclusion, advanced or deeper knowledge of client, update existing analytics with numbers revised during audit.
An accountant has a work program that consists entirely of the following
- Obtain knowledge of accounting principles and industry
- Obtain knowledge of the client
- Make inquiries of management
- Perform analytical procedures
- Obtain rep letter
What type of engagement is this?
Review, reviews are based on inquiry and analytical procedures.
For an integrated audit of a nonissuer, an auditor should issue an adverse opinion on the effectiveness of internal control when
A material weakness exists
When would an auditor most likely modify the audit opinion
The financial statements as a whole are materially misstated.
Statements on Standards for Attestation Engagements do not apply when
Testifying as an expert witness, Compiling hypothetical financial statements.
Which paragraphs of a nonissuer audit report on financial statements under US standards should refer to GAAP
Opinion and Management responsibility
According to PCAOB standards, what would not be considered management bias?
Management reporting all insurance purchases as expense then adjusting the unexpired into prepaid insurance at year end.
What party should request inquiry of a client’s lawyer
Client Management
What is not a procedure used to evaluate the reasonableness of an accounting estimates
Confirm via management rep letter that management has disclosed all significant estimates
What would an auditor most likely us in determining preliminary judgement about materiality
PY Financial statements.
What is the primary objective of probability proportional to sample size
Identify overstatement errors
Samples to test internal control are intended to provide a basis for an auditor to conclude whether
control activities are operating effectively
When an auditor does not receive positive replies to year end balances
Ask the client to contact the customer
When an accountant compiles projected financial statements, the accountant report should include a statement that
Describes the limitations on the projection’s usefulness
What is the auditors responsibility for supplemental financial information?
Perform limited procedures
The report on a compilation of a projection should not include a statement that
Hypothetical assumptions used in the projection are reasonable in the circumstances
Audit Objective
AR represents all amounts owed to the entity at the balance sheet date
Procedure
Perform sales cut-off test to ensure recorded in proper period
Audit Objective
AR stated at net realizable value
Procedure?
Review the aged trial balance for significant past due accounts
Audit objective
AR properly described and presented in the FS
Procedure?
Review the AR trial balance for amounts due from officers and employees
Audit objective
Net property and equipment are properly valued at the balance sheet date
Procedure
Review provision for depreciation expense and determine that depreciable lives and methods used are consistent with prior year.
Material weakness or significant deficiency communication required no later than
60 days following the report release date.
Entity comparative FS include FS of prior year that were audited by a predecessor auditor who report is not present. If the predecessor’s report was qualified, the successor should
Indicate the substantive reasons for the qualification in the predecessor auditor’s opinion.
What internal control procedure most likely would deter lapping of collections from customers
Segregation of duties between receiving cash and posting the accounts receivable ledger.
What investment in a client is not considered to be a direct financial interest?
Investment held through a client regulated mutual fund.
What statement from a lawyer concerning litigation would most likely cause the auditor to request clarification
“I believe that the action can be settled for less than damages claimed”
Request clarification before determining reduction was reasonable.
What best describes the documentation completion date for issuers
45 days from the report release date for PCAOB standards
Auditor assesses control risk as 2% and tolerable rate at 5%. A sample of 100 invoices is selected and only one is lacking appropriate control. One invoice selected cannot be located. What conclusion can the auditor draw?
There is not enough information given to determine whether the auditor should rely on this control.
