6/2 Flashcards
The objective of tests of details of transactions performed as substantive tests is to
Detect material misstatements in the FS
Which of the following activities most likely could be perpetrated due to lack of effective internal controls in the revenue cycle
- Obsolete items included in inventory balances are rarely reduced
- Write off of receivables by personnel who receive cash permits
- Fictitious transactions are recorded that cause an understatement of revenue and overstate AR
- Merchandise received is not promptly reconciled to the outstanding purchase order file
Write off of receivables by personnel who receive cash permits the misappropriation of cash.
A person identified as an audit committee financial expert of an issuer generally must have acquired the attributes of a financial expert through any except
- As a principal financial officer, principal accounting officer, controller, public accountant, or auditor
- Serving on at least one other issuer’s audit committee or disclosure committee of the board of directors
- Actively supervising a principal financial officer or principal accounting officer
- Assessing the performance of public accountants with respect to preparation, auditing or evaluation of FS
Serving on at least one other issuer’s audit committee or disclosure committee of the board of directors
Which of the following would an auditor least likely consider with respect to fair values
- Effect on fair value measurement and disclosures of information available subsequent to the audit
- Segregation of duties between entry of transactions and valuations of those transactions
- Role of information technology in determining fair value measurements and disclosures
- Whether the valuation methods used are appropriate in relation to the industry in which the entity operates
Effect on fair value measurement and disclosures of information available subsequent to the audit
key is subsequent to the audit.
How is the scope, procedures, and purpose of tests of controls in an audit of the internal control of a nonissuer compare to those for obtaining and understanding of internal control and assessing risk as part of a FS audit of a nonissuer
They are all different. In an audit of internal control the scope and procedures are more extensive and the purpose is directed primarily toward internal control report.
Concerning an auditor’s communication of significant deficiencies identified during the FS audit of a nonissuer
Any report issued should indicate that providing assurance on internal control was not the purpose of the audit.
In performing a FS audit in accordance with GAS, and auditor is required to report on the entity’s compliance with laws and regulations. This report should
- Provide negative assurance of legal compliance
- Provide an opinion on overall compliance with laws and regulations
- Describe the laws and regulations that the entity must comply with
- State the audit should be planned to obtain reasonable assurance about whether noncompliance could have a material effect on the entity programs
State the audit should be planned to obtain reasonable assurance about whether noncompliance could have a material effect on the program audited.
Which of the following statements is incorrect regarding the SEC’s partner rotation rules?
- Other audit partners are subject to a two year time out period
- All audit partners must rotate off the audit engagement after five years
- The lead and concurring partners are subject to a five year time out period
- Small firms may be exempted from the partner rotation requirement
All audit partners must rotate off the audit engagement after five years
Which of the following reporting options is least likely with regard to supplementary information that is required by GAAP
- The auditor’s report on the financial statements include both an opinion on the supplementary information and a statement restricting the use of the report
- The auditor report on the FS includes a separate section stating that the auditor has applied the required procedures
- A disclaimer of opinion is issued on supplementary information
- The auditor report on the FS includes an opinion regarding the supplementary info is fairly stated
The auditors report on the FS includes both an opinion on the supplementary info and a statement restricting the use of the report
Which is true regarding communication requirements an auditor must follow when providing tax services to an audit client who is an issuer under SOX
- Auditor must communicate to the audit committee, in writing, regarding the proposed tax services and related fees
- Auditor must communicate to the audit committee, in writing, when the proposed tax services involve contingent fees
- Auditor must discuss with audit committee the potential effects of the proposed tax services on firm independence
1 and 3
Which of the following should a practitioner include in an AUP report
- negative assurance whether subject matter is fairly stated
- Statement that nothing came to my attention that caused me to believe subject matter is not presented based on criteria
- All findings from application of AUP
- Positive assurance about whether the subject matter is fairly stated
Practitioner should include all findings from the AUP in the report
What is true about negative confirmation requests
Unreturned negative confirmation requests rarely provide significant evidence
The primary purpose of a bank acting as a registrar of capital stock is to
Verify the stock is issued in accordance with authorization from BOD and company articles of incorporation
For a combined report on compliance and internal control over compliance reporting. Does the auditor express an opinion on internal control over compliance?
No, the report should include a statement that the auditor does not express an opinion over internal control over compliance.
What situation will a practitioner disclaim an opinion on an examination of prospective FS
- FS fail to disclose significant assumptions
- Not able to perform certain procedures deemed necessary
- FS depart from AICPA presentation guidelines
- significant assumptions do not provide a reasonable basis for the statements
Not able to perform certain procedures deemed necessary
This is a scope limitation that could be material and pervasive thus disclaim an opinion.
