5/28 Flashcards
Report for Agreed Upon Procedures
Sections
Title - Independent Accountants Report on Applying Agreed-Upon Procedures
1st Par - We have performed procedures enumerated below…
2nd Par - Client has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of…
3rd- Findings
4th - We were engaged by client to perform this agreed-upon procedures engagement and conducted our engagement in accordance with federal and state standards
5-We are required to be independent
6- this report is intended for the information and use of management
Auditor performing integrated audit identifies one or more material weaknesses in a nonissuers internal control, the auditor should
Express an adverse opinion on the entity’s internal control
What is a true statement concerning use of negative confirmation requests
Unreturned negative confirmation requests rarely provide significant evidence
An audit of internal control of a nonissuer will generally
Be more extensive in scope than the assessment of control risk made during FS audit
What procedure most likely would provide evidence that an entity’s internal control activities are suitably designed to prevent or detect material misstatements
Observing the entity’s personnel applying the activities
Unaudited FS for PY are presented with audited FS for CY. They should be clearly marked and
Either reissue PY report or include separate paragraph on CY report assuming responsibility
Samples to test internal control are intended to provide a basis for an auditor to conclude whether
Control activities are operating effectively
What would an accountant most likely perform when reviewing the FS of a nonissuer in accordance with SSARs
Ask management about the entity’s procedures for recording transactions
After performing risk assessment procedures an auditor decided not to perform tests of controls. The auditor most likely decided that
It would be inefficient to perform tests of controls that would result in a reduction of substantive tests
The auditors report is addressed to
The entity that engaged them.
PY FS omitted substantially all disclosures required by GAAP. CY includes all GAAP disclosures. Can the auditor issue comparative FS
No. PY would need disclosures
Auditing FS of nonissuer, required to communicate significant deficiencies to management
Always
Auditing FS of nonissuer, required to communicate significant deficiencies to those charged with governance
Always
Audit of nonissuer, report on significant deficiencies on internal control should be made available to stockholders
Never
Audit of nonissuer, report on internal control matters noted during the audit should indicate that the purpose of the audit was to provide assurance on internal control
Never
Opinion/ assurance is for FS. Never for internal control
Audit of nonissuer, report on internal control matters noted during the audit is a restricted use report
Always, intended solely for information and use of management.
What would not be considered an attest engagement
- Examine financial forecast
- Examine management assertion about subject matter
- Review the financial statements of a nonpublic company
- Review pro forma financial statements
Review the financial statements of a nonpublic company
This is a SSARs engagement. The others are SSAE engagements
What of the following most accurately describes the process of a walkthrough?
- Testing and documenting the results of tests of selected controls
- Inspection of selected documents, records and internal control documentation
- Following a transaction from its origination until it is reflected in the FS
- Observation of an entity’s activities and operations
Following a transaction from its origination until it is reflected in the financial statements
An auditor would consider a cashier’s job description compatible with receiving mailroom remittances and preparing
- Daily deposit slips
- Remittance advices
- Prelist of individual checks
- Monthly bank reconciliation
Daily deposit slip
The usefulness of the standard bank confirmation request may be limited because the bank employee who completes the form may
Be unaware of all the financial relationships that the bank has with the client.
When an accountant compiles projected FS, the accountant should include a separate para that
Describes the limitations on the projection’s usefulness
What would be a complete and accurate list of the walkthrough procedures usually performed in an issuer’s integrated audit
Inquiry, observation, inspection of documentation, reperformance of controls
Auditor of a manufacturer would most likely question whether that client has committed acts of noncompliance with laws and regulations if the client has
Been forced to discontinue operations in a foreign country.
The key is “been forced to discontinue”
For FS audits performed in accordance with GAS, auditors should report
- noncompliance with provisions of laws, regulations, contracts or grant agreements
- Significant deficiencies in internal control
- Significant changes in internal control policies
- All violations of private grant agreements, regardless of materiality
Significant deficiencies in internal control
Which of the following factors most likely would cause a CPA to not accept a new audit engagement
- CPA lack of understand of client industry
- Indications that management has not investigated employees in key positions
- Inability to review the predecessor auditor working papers
- Prospective client’s unwillingness to permit inquiry of its legal counsel
Client unwillingness to permit inquiry of its legal counsel
It would likely result in a disclaimer of opinion.
GAS define standards associated with what type of engagements
Financial audits, attest engagements, performance audits
Which of the following factors most likely would cause a CPA to decline that accept a new audit engagement
- CPA is unable to review the predecessor auditor’s WP
- Management is unwilling to permit inquiry of its legal counsel
- Management acknowledges that the entity has had recurring operating losses
- CPA does not understand the entity’s operations and industry
Management unwilling to permit inquiry of its legal counsel
After issuing report, and auditor has no obligation to make continuing inquiries or perform other procedures concerning the audited FS unless
Information, which existed at the report date and may affect the report, comes to the auditor’s attention.
While testing a sample of an audit client’s bank reconciliation an audit notices that several immaterial deposits in transit did not clear the bank in a timely manner. The auditor suspects that there may be fraud. What would be the most appropriate response
Consider the implications for the integrity of management or employees and the possible effect on other aspects of the audit.
CPA is auditing FS of a nonissuer. In auditing the LT investment account the CPA is unable to obtain audited FS for an investee located in a foreign country. How would this affect the auditor report
- effect is immaterial
- effect is moderate
- effect is high
Immaterial - Unmodified option, no changes to auditor’s responsibility, opinion or basis of opinion
Moderate - This would be a scope limitation. Issue a qualified opinion, which would modify the opinion and basis for opinion. No changes to auditor responsibility
High - This would be material effect thus the auditor should issue a disclaimer of opinion. This would modify the auditor’s responsibility, opinion and basis for opinion.
