A1- A6 mcqs missed to restudy

Question 1

Does an auditor opinion, to be economically useful, would be formed within and based on evidence obtained at reasonable cost

Answer 1

no. reasonable cost is based on the economic useful is formed withing reasonable time and based on evidence obtained at a reasonable cost. not with obtaining audit evidence

Question 2

what is presumption about the reliability of audit evidence

Answer 2

Reliable audit evidence is enhanced by a satisfactory and effective i/c structure. audit evidence is rely on in a persuasive rather than conclusive manner. corroborative evidence is refer to as the obtaining of sufficient evide

Question 3

if a previous audit opinion was adverse due to lack of adequate disclosure. The statement are properly stated and current year in unmodified. what is the auditor opinion and eom

Answer 3

unmodified with eom after the opinion paragraph.

Question 4

what procedure would an audit perform when auditing scf

Answer 4

reconcile the scf to other f/s amounts

Question 5

what would an auditor least likely considered in the assessment of ia competence, objectivety and applicatiion of systematic discipline approach

Answer 5

results of analytical procedure. this is a criteria of IA assesement.

Question 6

what is not included in required documentation for GAAS

Answer 6

the basis for auditors decision not to perform tests of controls concurently with the obtaining an understanding of i/c. used under PCAOB.

Question 7

MCQ test A1-m2; what is true and not true about test data

Answer 7

true; only one transaction each need to be process ; test on clients computer under the auditors control; test data consist of valid and invalid data the interest auditor. not true; test data consist of all valid and invalid conditions

Question 8

when would an auditor include om paragraph

Answer 8

when there is material inconsistency in other information in a document containing audited f/s that mangement refused to reviised i.e. annual report.

a change in estimates would not be included in om or eom paragraphs.

Question 9

Can a auditor issue a unmodified opinion when there is a departure from gaap

Answer 9

yes. when it is justified

Question 10

for a single audit is the auditor least likely to considered the whole audit opinion

Answer 10

yes.

Question 11

What should a successor auditor ask a predecessor audit after engagement sign

Answer 11

matters of facilitating financial reporting consistency between prior year and current year. not; disagreement btwn auditor and mngmt over accounting principles that is prior to engagement.

Question 12

when is dual dating used

Answer 12

when there is additional or subsequent event after the audit report. Dual dating is not used in a situation where previous auditor report is included in current auditors report

Question 13

when would an auditor refer to a specialist in an opinion

Answer 13

when there is a departure from an unmodified opinion an audit want to discuss in the OM section

Question 14

What are the QC for Auditors; hELPME

Answer 14

1. HR 2. Engagement/client acceptance and continuance 3. Leadership Responsibility 4. Performance of the engagement 5. Monitoring 6 Ethical Requirement

Question 15

is human judgement in decision making an inherent sitiuation

Answer 15

yes. because human can make mistake not an inherent situition is when there is a complex information system; this could be resolved in the design

Question 16

If a government agency declines to include supplemental information required by GASB. the auditor should

Answer 16

give an unmodified opinion with a om paragraph

Question 17

if a cpa completed an audit and client wanted to change opinion to a review due to scope limitation and it was justified the cpa would

Answer 17

the review would be a new engagement. Cpa would just give a statement that review is less than scope.

Question 18

A cpa firm wants to make sure work provided meets qualtiy standard what standard is the firm doing of QC

Answer 18

P = performance in engagement in HELPME. Would review the engagement and audit report . documentation. E would be evaluating the client continuance

Question 19

What is an auditor responsibilty when supplement infor is outside of basic f/s

Answer 19

perform limited procedures on supplement information

Question 20

when using a specialist should the auditor have an understanding of the objective and scope of work

Answer 20

yes

Question 21

a material departure from gaap would be a

Answer 21

qualified a pervasive from gaap= adverse a scope limitation= disclaimer or qualified due to gaas

Question 22

if an auditor is unable to gather information on appplication of accounting principals and no infor on asset and liab at the begin of the year what opinion would he give

Answer 22

would not be able to express an opinion but can express and opinion on statement of financial position using end year numbers

Question 23

what is true about test data and integrated test facility

Answer 23

test data: are process with clients computer and compared to auditors pretermined amounts. itegrated test facility uses dummy accounts ( not invalid data) like test data go through system but extract by codiing and result show under actual situations

Question 24

how does and not considered significant risk

Answer 24

does consider inherent risk alone as start - is first stopped by control risk - then detected by auditor = audit risk audit use professional judgement significant risk exist when inherent risk is high does not considered; when determining risk, whether isignificant impact or not, should ignore internal controls when considering risk factors.

Question 25

if there has been an accounting change but does not change the f/s and is material should the auditor report it

Answer 25

no. and no mention in notes to the f/s. only if there were material modifications and would be mention in EOM or departure from GAAP an material.

Question 26

What statement is a basic element of the auditors report under GAAS

Answer 26

auditor includes evaluating signifcant estimates made by management

Remeber: the statement on assurance is GAAS standard require that we plan and perform the audit to obtain reasonable assurance that f/s are free from material misstatement.

Question 27

why could same invoice number appearing on different invoices be and indicator of fraud instead of same po on difference invoices

Answer 27

each invoice should have its own uniquie number.

but po can be issued for two item and one of the two were back ordered.

Question 28

how do i answer sample size to tolerable risk to incorrect acceptance

Answer 28

there is a direct or expect relationship between sample size and tolerable.

And a inverse between tolerable and incorrect acceptance.

remeber sample and varibility of population does not matter.

So if there is a small sample size there would be a small or equal torerable risk and a higher risk of incorrect acceptance.

Question 29

Credit approval were 10,000

auditor design a statistical sample that would provide 1% risk of assessing control risk too low (99% confidence)

previous experience 2.5% of sales lacked approval.

this year sample was 200 examined and 7 lacked approval

auditor determine an upper deviation of 8%

what is the sample size risk

Answer 29

the 2.5% previous sales lack is not relevant for this calc nor are the 10000 credit approvals or 1% risk and 99% confidence

Sample size risk = 200/7 lack = 3.5%

8% deviation - 3.5% = 4.5% sample size deviation.

Question 30

when auditor presents unaudit f/s to audit f/s in comparative form, the unaudite should be clearly marked

Answer 30

Either;

the unaudited f/s should be reissused

or

the audited f/s should include a separate paragraph describing the responsibility assumed for the unaudited.

remember the unaudited is contricting the audited f/s

Question 31

the purpose of establish p& p for deciding to accept or continue client relationship is to

Answer 31

key words are ; accept or continue relationship

so auditors will wanted to review and evaluate cleints or management’s integrity.

Question 32

when would an auditor gain a sufficient understanding of client’s i/c related to a process

Answer 32

when audited has a noted narrative that documents the process and can show if process is working the way management assertion says it is.

Question 33

When are non issuer and issuers complete the assembly of the final audit file following the release date

Answer 33

non issuers = 60 day

issuers= 45

Question 34

when the auditor is selecting test or sample size to obtain assurance of a process auditor should considered the tolerable rate and also the likely rate of deviation

Answer 34

when an auditor select test control with a sample size , he will need a tolerable rate and deviation rate.

neve should allowable risk of assessing control risk to high should come into the picture doing this period.

Question 35

when auditor is interviewing managment and verify document or process he is what audit procedures of management assertion of fs

Answer 35

inqiuring and inspecting

and not observing

Question 36

if an auditor gets a copy of an invoice that is not the invoice asked for and staff said original invoice was misplace he sould do waht

Answer 36

Auditor must maintain professional skeptism so he would look at fraud and reevaluate the risk of fraud and design alternative tests for the related transactions.

Question 37

what characteristic most likely would heighten an auditors concern about RMM on the f/s

Answer 37

the entity industry is experiencing declining customer. this may give management the incentive to frauduently misstate f/s

fraud characteristic

rationale, incentive, pressure, opportunity

Question 38

what reporting option is likely and least likely of supplementat information for GAAP

Answer 38

Likely; auditor report supplemental information on om paragraph stating auditor has applied required procedures

a disclaimer of opinion is issued on supplementary information

audit report on f/s includes an opinion regarding whether the supplementary information is fairly stated in all material respect to the f.s as a whole.

not likely

audit report includes an opinion of supplemental and a statement restricting ( is for single f/s)the use of the report.

no such requirement from GAAp

Question 39

Regardless if an auditor does assess level of control risk, will he to substantive testing.

Answer 39

Yes. even with low control risk auditor will still test substantive $$$.

Question 40

What is an analytical procedure perform at the final review stage

Answer 40

determine whether adequate evidence has been gathered in response to unusual or unexpected balances identified during the audit.

Analytical procedure involve comparing and not summarizing.

Question 41

if a change in accounting principle does not material effect current year but may effect furture years, would auditor add an om or eom paragraph to unmodified opinioin

Answer 41

no. if change is not materal and does not effect current audit no om or eom.

Question 42

A predecessor is reissuing the audited f/s. what would he not get from the sucessor auditor

Answer 42

a review of sucessor audit documentation of current year.

would get

-a current copy of comparative f/s

obtain a successor audit rep letter

compare the current period f/s with prior

need f/s do to his job.

Question 43

if an auditor assess control risk too high and was incorrect. his assessment was based on

Answer 43

control risk of auditor sample is greater than the true operating effectiveness of the client control (control risk and sample risk have a direct or expected realationship)

or incorrect in the rejection.

Question 44

what is diffence in IA and independent auditors audits

Answer 44

IA are more indepth into the i/c of the company such as analyzing and reporting on actual ops. independent auditors limited to matreriality effecting the f/s

Question 45

in planning the audit, the auditor knowledge about the design of relevent controls should be used to

Answer 45

indentify types of potential misstatements that could occur

remember AR = ih * cr*dr

then he would document after detection.

Question 46

as a result of test controls, an audit assessed control risk as to low and decrease substance testing. this assessment occured because the true deviation rate was

Answer 46

this is a incorrect acceptance.

If the acutal deviation rate 5% (actual )exceeding the popoulation rate (assumption) 4% controls risk is understated. because the control will be less effective than the sample results would indicate.

Question 47

why would an auditor use classical variable sampling over probability proportional to size pps sampling

Answer 47

for negative balances require special special desings for pps while classical does not.

Question 48

What would an auditor least likely to consider when reporting on a single f/s

Answer 48

The materiality of the f/s as a whole . he consider materialty just for the single audit f/s/

Question 49

when reporting comparative f/s, an auditor should change the prevously issued opinion on the prior year f/x if.

Answer 49

the prior yr are restated to conform with GAAP when it didnt prevousle.

Should not reissue and issued f/s requested by client without justification.

Question 50

Analytical procedures used in planning should focus on

Answer 50

understanding of clients business to assist in the planning of NET of audit procedures that will obtain audit evidence for specific account bal. or classes of transactions,

Question 51

Auditor assess control risk because it

Answer 51

It effects the level of detection risk that audit may accept.

Remember inherent risk is independent of any relevant controls.

Question 52

What is non sampling and sampling examples

Answer 52

non sampling: selecting inappropriate aduit procedures, using inappropriate audit evidnece, and failure by auditor to recognize misstatement . pr non sampling is anythin that is not sampling.

Sampling concluding account balance

i/c being effect or not being effective.

Question 53

Before applying principle sustantive test to an entiy a/r at an interime dates, the auditor should

Answer 53

when audit procedures are performed before y-e, auditor must assessed the incremental risk involved and determined whether sufficient alternative procedures exist to extend the interim conclustion at y-e.

Question 54

what type of evidnece is gathered by the auditor when a/r confirmation are sent out

Answer 54

Corrabative evidence that provides additiaonal support and validates clients accounting records.

Question 55

what are example of mistatement by the client

Fraudulent

Judgement

Factual

Projected

Answer 55

Fraudulent: no such type

Judgement: unreasonable estimates by clients

Factual: no doubt in facts:

Projected: uses sampling and application to clients population.

Question 56

Can an auditor that disclaim an opinion due to scope limitation give an opinion on one section of the b/s.

Answer 56

No. Not approrpriate would be consider piece mealing and would overshadow the discalimer.

However, an auditor can report one separate separate with agreed upon procedures.

Question 57

Under GAAS when can an auditor issue unmodified w/out eom paragraph

Answer 57

when an auditor makes reference to the audit of a component auditor as a basis in pat of the opinion.

EOM used with Going concern

Significant related parties

Qualified use with omitting omitting scf.

Question 58

Is the entire entity business, operation and business functions part of i/c

Answer 58

yes.

Question 59

In a computer rized payroll system, what is the auditor least likely to use test data

Answer 59

For the proper approval of overtime by supervisor. beause it is generally not recorded in computer.

Question 60

If a client refused to record impairment loss the is significant to f/s what opinion will auditor give

Answer 60

Qualified

It would be an Adverse opinion if it was material and pervasive where f/s can not relied on at all.

Question 61

what is the auditorts primary emphasis in related party transactions

Answer 61

Evaluating disclosure of related party transactons via framework of existing pronouncements.

Question 62

auditor is engaged to report on b/s but not on basic f/s.what is not required by audit

Answer 62

does not have to report on whole v=f/s materiality just materiality in b/s

Question 63

what is the criteria for audit evidence

Answer 63

OREI

Observe

REcalculate

Examine

Inspect

Question 64

When an auditor is required to establish an understanding with client in regards to services performed this generally understanding would inclue

Answer 64

Auditor responsibility to ensure those charge with governace (audit committee) are aware of significant deficiency in i/c.

Question 65

what can predecessor and sucessor commicate about audit of client

Answer 65

before and after the engagement .

Question 66

what is and is not an anlytical procedure

Answer 66

Estimate

Compare and prepare

understand client business (planning)

Convert

Develop

Not an analytical procedeure

project and summarized

Question 67

What audit test would be attriibuted to sampling:

Answer 67

Test control= i/c. not substantive$

i.e. inspectinge employee time card for approval

Test control criteria:

Authoriation (approval), vaiidity (validate),completeness, accuracy, appropriate classification, accounting in confoming withGAAP (or frameword), proper period.

Question 68

What are substantive $ test

Answer 68

Account balances, amount, valuation, presentation, verification, disclosure., estimates, examining , selecting a/r confirm balance.

Question 69

What are example of situations that are and are not relevant to f/s

Answer 69

anything number related and could impact f/s directly such as: income tax comliance

computer passwoard to limit access to data files

production statistical evaaluation variance

not or indirect to f/s

excess use of materials in productions.this mre operation ineffieciency

Question 71

Are consistent application of accounting principles and examination of eviedence on a test basis both implicitly

Answer 71

consistent application of accounting principle is implicit on auditor report and will be explicit mentioned in EOM only if issues with consistency.

There is no explicit on test basis

Question 72

In statistical sampling methods used in substantive testing, auditor would stratify a population into meaningful groups if

Answer 72

the population has highly variable recorded amount and auditor reduce the required sample size by separating items into homegeneous groups related to specific audit evidence

Question 73

If auditor is unable to get sufficient infomation on application of accouting principles and beg bal of asset and laib. The auditor should

Answer 73

No make an opinion on the current years ops and cash flow

Question 74

if an auditor test sample of bank recs. notice several immaterial deposit in transit that did not clear the bank and suspected fruad his respond should be to

Answer 74

consider the implications for the integrity of management and employees and the possible impact of other aspects of the audit.

Auditor would report to managment in a timely basis an not an immediate basis.

Question 75

what would be a consideration in planning a sample of a test of subsequent cash reciepts

Answer 75

In the planning stage of subsequent test there should be a preliminary judgement about material levels

Question 76

Can an auditor express an opinion on entity a/r balance even if disclaim opinion on f/s as a whole.

Answer 76

Yes. as long as the report is separate ( called a element an need not report on current asset portion) form disclaimer opinion.

Question 78

should a auditor considered confimring terms of large complex sales when using RMM assement

Answer 78

when he has done audt procedures for Audit risk for RMM= ir high* cr = minimize detection risk due to extensive control testing.

Question 79

when assessing internal auditor objectivity an auditor should

Answer 79

objectiveity on ia is based on organization level to which ia reports and policies prohibiting internal audit areas where ai lack indepency.

Question 80

what does it mean when i/c has substance over form

Answer 80

management has establish appropriate prpocedures but not enforce compliance with them

Question 81

what is the ultimate puropse of assessing control risks

Answer 81

to see if material misstatement may exist in the f/s.

Question 82

If a company uses framework that is not GAAAP and using comprehensive basis of accounting (CBOA) but statements are not suitable titled auditor would

Answer 82

issure a qualified opinion with a basis of opinion paragraph

Question 83

inherant risk is evaluated to help auditor assess

Answer 83

the susceptibility of f/s assetions to a material misstatement,assuming there are no related controls.

detection risk that procedure implement in place were not detected

control risk: RMM will not be detected or prevented on a timely basis.

Question 84

if client in not in compliance with reg agency. audito should withdraw from engagement if

Answer 84

cleint refuses to accpet aditors reports as modified for noncompliance.

Question 85

what are some risk factors

Answer 85

lack of independent checks would represent fraud risk of missapropriation of assets

inability to generate cf from ops represents incentive for fraudulent financial reporting

strain relationship with cleint and auditors represents an attitude is considerd fraudulent financial reporting

hihg turn of senior managment = unstable organization structure theat provides fraudulent finanical reporting.

Question 87

In assess control and substance risk an auditor uses what techniques

Answer 87

Test of controls: Reperformance

Test of Substance:

Analytical procedures

Verification

Confirmation

Question 88

During an auditors information gathering procedure session, auditors will discuss the best characteristic of a mind set of

Answer 88

Questioning : using an attitude of professional skepticism.

Question 89

An auditor would express an adverse opinion is a

Answer 89

situation where something highly material and pervasive that f/s are not in conformity with GAAP. rules regarding capitalizing leases.

Question 90

A sucessor auditor would most likely make specific inquiries of the predecessor auditor regarding

Answer 90

disagreement with management as to auditing procedures, integrity of management, disagreement as to accounting principles and communicating with governance regarding fruad, acts of noncompliance with laws and regulations, matters on i/c, predecessor understanding as to reason for change.

Question 92

CPA issuing a disclaimer on audit (GAAs issue) due to non conform of GAAP on capitalize leases. CPA suggest appropriate revision but management refuses to accept. What is the CPA to do

Answer 92

Do the discliamer and describe the nature of the disclaime in audit report if pacticable.

Question 93

would a flowchart be affective in i/c for auditors

Answer 93

no. just in understandig i/c via staff direct reports.

Question 94

what is an inaccurate statement of sufficiency of audit evidence

Answer 94

amount audit evidence gathering has indirect impact on level of detection. which is not true. it is the opposite.

Question 96

What type of evidence is gathered when a/r confirmation is sent

Answer 96

Corroborating evidence is confirmed when sent

Substantive evidence is when confirmed is recieved and part of audit evidence

Question 97

what is statistical sampling in tests of controls

Answer 97

Deviatations rate (or best estimate of population ) from control activities (p &p) does not result in misstatement. therefore pertinent (relevant) control activities (p&p) at a give rate would result in misstatement at a lower rate

Question 98

analytical procedures done in the final stages that suggest several accounts with unexpected relationship would result in

Answer 98

Additioanal test of details are required on accounts involved. the results could be irregularities exist among relevant account balances.

Question 99

before applying substantive tests $ to the detail of accounts at an interim date prior to balance sheet dates an auditor should

Answer 99

should consider if year-end balances selected for interim testing are reasonable predictable amounts, relative significants and composition.

Question 100

For math problem, read dates for calculation and answers

Answer 100

yes.

Question 101

Are substantive testing required for analytical procedures

Answer 101

not required but can be used.

Question 102

what are the differences between receiving reports and shipping reports

Answer 102

receiving porting are a/p would not be something shipped to some one address via fraud.

We pay a vendor

Shipping is an a/r would verify address someone that needs to pay entity because they recieved merchandise

Question 103

from a4 mcqs what expression would be included in the management letter by the auditor

Answer 103

a statement about subsequent events such as no events have occured subsequent to b/s date the requires subsequent event to or disclosure in the f/s

other expression pertain to

Representation letter : management provides information on the f/s, completeness, recognition , measurement and disclosure and subsequent events

Question 104

when looking at bank transfer misstatement question from a cash is cash out

how do you review

Answer 104

if cash was disbursed to you on 1/4/y2 you could not have received cash on 12/31/y1.

Question 105

if auditor is testing valuation , allocation and accuracy he would and would not test

Answer 105

he would test overhead rate

he would not test ; voucher sample of corresponding prenumber of invoices

Question 106

what is an auditor primary method to corroborate information on litigation claims and assement

Answer 106

primary is first thing which is review the correspondence from clients lawyers to a letter of audit inquire

could be second: Examining invoices to lawyers letter is a substance test to a particular matter

Question 107

if employees are ordering merchandise over the internet and approving invoices for payment, paying them an them destroying invoices how would auditor test

Answer 107

through the cash disbursement report to the invoice via existence

Question 108

what are the a/r confirmation for useful in negative request;

Answer 108

Assess level of control risk is low (if high, it would be a positive confirmation)

number of small balances are many

consideration by the recipient is likely

Question 109

If an event that did not exist at year of audit but aros after year end. the events maybe important to the auditor. how would the auditor handle

Answer 109

If he think th event is important, he would disclose in the f/s so not to be misleading

Question 110

When is there a reduction in the plan reliance on a prescribed control for statistical sampling

Answer 110

the happens when the upper deviation = sample deviatIon ( auditor guess based on his bell curve) + allowances for sampling. If upper deviation sampling risks exceeds tolerable rate, then test for control will be reduced.

if sample deviation risks + allowwance for sampling is less than tolerable rate, then test of control will be increased

Question 111

What is the best way to test for existence in inventory

Answer 111

Best way is to observe the inventory

and vouch back from source doc to je

Question 112

what is the difference between completness testing and existence testing in source doc. and list

Answer 112

Complete= tracing forward from source document to journal entrties ior listing.

So. tracing listing to general ledger inventory account (this is not a source doc or invoice) is completeness

Existence = vouch backwards= journanl entries or listing back to the source document.

Question 113

Is making suggestions by auditor to improve clients i/c or designing effective substantive testing a primarry objective in knowledge of i/c

Answer 113

no; on making improvement to client. make be used in engagement letter

yes. on design of substantive test. since it must br done along with i/c.

Question 114

is there a difference in missapropriation of assets and fraudulent financial reporting

Answer 114

yes. missapropriation of assets is stealing. could be done through employees knowing there ar large amount of assets that can be converted to liquid assets quickly

Fraudulent financial reporting could happen when there is pressure to get good financial number on the books, or compensation for good sales. or overly large complex organization structure with unsual lines of authority. for example the purchase order manager can also sign checks.

Question 115

what factors would an auditor assess when assessing an IA for objectivety, and competency

Answer 115

Objectivety- audit committee reviews employment decision of the director of IA

Competency= attending comprehensive CPE

Certified IA

Prior work experience

Question 116

what is the accronym for test account balance for management assertion.

Answer 116

Test of account balance for management assertions: CVER

Completeness, Valuation, accurarcy, allocation, Existence and occurance, rights and obligations

Question 117

What is the accronym for test of transactions and events for management assertion

Answer 117

Test of transactions and events = COVEU

Completeness

Cutoff

Valuation, allocation and accuracy

Existence and occurrence

Understandability and classification

Revenue transactions; existence and occurance / supports for overstatement and completeness/coverage for expense understatements

Question 118

What is the accronym for presentation and disclosure for management assertion

Answer 118

Presentation of disclose

CVRU

Completeness

Valuation, allocation and accuracy

Understandability and classification

Question 119

what is in CRIME five components of i/c

Answer 119

CRIME

Control Environment= overall tone of the organization

Risk Assessment; management id of risk

Information and Communication= recording transaction and communication of responsibilties

Monitoring= assessment of i/c overtime

Existance of control activities; control policies and procedures

Question 120

Would control activities be part of information and communciation

Answer 120

no. information and communication is recording of transactions and assigning responsibilites.

Where as control activities are p&p

Question 121

when auditing a clients fv of investments for presentation and discloure and auditor would do the following test of assertions

Answer 121

CVRU

Completeness , valuation and accuracyt, rights and obligation, and understanding,

IT would not determine how future value of fv for client

Question 123

When an auditor primary concerned with i/c is

Answer 123

the impact on financial staements

Question 124

when an auditor is using the analytical review the primary audit procedure he is looking for the reasonable of

Answer 124

Completion of recorded investment.

Completion is synomis with reasonable

Classificaton of g/l based on evaluating appropriate accounting principles

existance and ownership evaluated on inspection, reveiw or confirmation with outside broker on securities.

Question 126

When looking at size sample and varibility on left side and specific tolerable rate and specific risk of incorrect acceptance on the right side how should you view columns for ccorrect answers

Answer 126

if size does not matter. YOu are only looking at specific tolerable rate and specific risk of incorrect acceptance on the rights side.for correct answers

focus on the right side.

for example if specific tolerable is smaller that means auditor wants lower risk. There fore the sample size would be larger. This mean if the specific incorrect higher this mean he wants higher risk and the sample should be smaller

Higher incorrect risk = smaller sample size

Smaller tolerable = larger sample

Lower incorrect risk = larger sample size

higer tolerable - smaller sample.

Lowe

Question 127

An auditor would design test of details to ensure that sufficient audit evidence supports

Answer 127

the planned of level assurance at the relevant assertion levels by managment because auditors are looking for misstatements.

Question 128

what is and is not a i/c questionnaire for PPE

Answer 128

Are i/c : are request for purchase of equipment reviewed for consideration of bids.

are request for major reparis approved

are prenumbered pos used for equipment and periodically account for

are not procedures in palce t monitor and perperly restricted access to equipment. this is more of a physical security questions.

Make sure to read are of questions.

Question 129

when would an auditor most likely increase test of control

Answer 129

when IT systems is extensivley integrated through out the company accounting system ; less substantive and more test of controls

Manual systems = test of control would not be used and subtance testing would be used

Question 130

How are the opinions for qualified, disclaimer Adverse

Answer 130

Qualified; material but not pervasive (adverse) or due to scope: In our opinion, except for the effects of the matter describe in the basis-for-qualified-opinion paragraph ...are presented fairly the financial postion

Disclaimer: GAAS due to scope : Because of the significance of the matter described….Accordingly, we do not express an opinion on these f/s.

Adverse GAAP issue very material and pervasive: In our opinion, becasue of the significance of the matter described in the basis-for-adverse-opinion paragrapj, the consolidated f/s referred to above do not presented fairly the financial postion

Question 131

what is an inheranct limitation that i/c can’t stop.

Answer 131

Mangagment override ; a ceo request a check without a po or not following p&p.

collusion by two or more empployees

employee error.

Question 132

what is an is not an effective i/c to reduce billing errors

Answer 132

is: using computer programs on pricing and mathematical accuracy

matching shipping docs with sales orders before invoicing

comparing control totals for shipping documents with corresponding total of sales invoices

is not: reconciling g/l to sales total. errors could happen.

Question 133

what is the best and reliable audit evidence structure

Answer 133

effective i/c provides more assurance about reliability of audit evidence

effected I/c enhances audit evidence.

Question 134

What would and would not not have an impact in determining the Scope of an existing client audit

Answer 134

Scope are situation that would asssit an audiotr in during his job:

effect on IT

current regulation and staturory reporting requirements

aknowledge gained from prior experience with client

would not ; prelinary evaluataion of material and audit risk; these are focus on the audit.

Question 135

if there is an insignificant portion of clients inventory in an off site. what type of evidence of existence should be used.

Answer 135

for insignificant it would be confirmation

for significant it would be inspection and observe.

Question 136

what is a factor i whether group auditor list comonent auditor will or will not reference component auditor

Answer 136

the group may not list component audit in opinion wheter is unmod or qualified is ased on group audito satiified as to the idependnece and prefessional reputation of component .

Question 137

what is matter that auditor is to communication with governance

Answer 137

any adjustment that were recommended to management that have a significant impact on the financial reporitng.

Auditor does not have to report to governance on his risk of fraud assessment.

Question 138

Sim 3 test of control v test of substantive procedure

Answer 138

test of substantive procedures is $ balances

id procedure proper class

exam and approv= inspect and control test

compared this year exp with last year = analyltical proc and substantive

request from directly from customer= inquire and we are request $ amount substantive

questioned managment of subsequent event= we are inquiring on $ amount of a future event that may impact this year f/s = inquiry and substantive

observing cash reciept clerk deposit check. observaton and clerk is doing a procedure= test of control

examine additions to the fa accounts; this is an inspection and $ to account = substantive testing

agreed sales invoices to credit file to determine that customer had approved credit; agreed to credit file, this is auditor reperforming and not reculating no math steps invoived and authorizatio = test of control

ask accounting manager how often is deposit made and by whom = this is an inquiry and test of control no $ amount involved just a procedure test of control

Question 139

a1-a5 mcqs study 2/16/20; during an audit, an auditor identifies a business risk associated with plans for a new products lines. what should the auditordo as a results

Answer 139

analyze the new id risk in conjunction with other know business risk and consider whether there is an immediate consequence for the risk of material misstatement at various level of the audit (f/s).

Question 141

sample to test i/c are intended to provide a basis for an auditor to conclude whether

Answer 141

the control activities are operating effectively

sample test = control operating effective

Question 142

when performing analytical procedures in the planning stage, the auditor most likely would independent develop expectations by reviewing

Answer 142

analytical procedures involve comparison ofrecorded amounts . in the planning stage, substantial amounts included; use of general financial data,

unaudited informataton from internal quarterly reports

Question 143

an auditor would perform the following on contingency of litigations, claims, an assessments

Answer 143

contingency are things that have not happen yet.

on of the procedures that an auditor would perform is obtain assurance from management that it has disclosed all unasserted claims that its lawyer has advised are probable of assertions = accrue and disclosed on f/s.

Question 144

in obtaining an understanding of an entitys i/c in f/s audit, an auditor is not obligated to

Answer 144

search for significant deficiency in ops of i/c

Question 146

would a segregation of duties such as separating authorize to dispose of equipment and those authorize to approve removal work prevent improper disposal of equipment

Answer 146

yes

Question 148

would action would an auditor take after determining taht performing substantive test on inventory will take less time thant perfroming test of contorls

Answer 148

if it is more effecient, assess control risk low, and no reason to test controls( there is not a high degree of eletronic payments) than only do substantive testing

Question 149

in an audit of an issuer, an auditor is least likely to include in the critical audit matter paragrah

Answer 149

A critical audit matter, or CAM, is any matter communicated or required to be communicated to the audit committee and that both relates to material accounts or disclosures that are material to the financial statements and involves “especially challenging, subjective, or complex auditor judgment.

such things as audit disclaimer responsibity, qualifyng, restriction or minimizing auditors responsibity for CAM would not be appropriate.

Question 150

in addition to making management inquiries on contingent information, what infor is needed and not need

Answer 150

contingent = things that have not happen yet’

needed; obtaining a client rep letter

reviewing status of l-t leases

discussing sales contract with sales managers

non needed; reviewing derivative transactions reflected in the quarterly b/s. this has already happen

Question 151

would significant accounting est made by management and cpa’s assessment of sampling factors be appropriate for gaas reporting

Answer 151

yes to significant accounting est.

no ; to cpa’s assessment of sampling factors of risk. not included in the report.

Question 152

how should a previous communicated significant defiency that has not been corrected be communicated again

Answer 152

in writing during the current audit

Question 154

A1-A5 mcq study 2/18/20: In the previous year, an auditor expressed a qualified opinion on the f/s due to lack of adequate disclossure. since then, the they have been restated in current years comparatives. the auditors updated report on the prior year should include a;

Answer 154

Expressed unmodified opinion on th restated f/s of the priors. an state the substantive reasons for the change of opinion in the EOM i or OM following the opinion paragraph.

Question 155

A misstatement discoved that was immaterial from previous year should covered in what in current year’s audit

Answer 155

Considered part the evaluation of audit finding for te current. due to immaterial could be aggrated to material in the current year but no restatement or EOM or OM.

Question 157

What is a statement is a standard applicable to the f/s audit in accordance to Government Auditing Standards

Answer 157

The auditor should report on the scope of auditors testing of i/c.

Remember that the auditor WOULD (and not should) determine the extent to which the entitys programs achivee the desired levels of results

Question 158

Under the third standard of fieldwork, the auditor must obtain sufficient and appropriate audit evidence by performing audit procedures to afford a reasonable basis for opinion of F/s

what is the appropriate audit evidence required by this standard is

Answer 158

The standard on this is based on th level of assurance of substantive testing of $ amount procedures from f/s for sufficient and appropriate audit evidence

this can be done with analytical procedures

Question 159

new mcqs 2/20/20: would an independent auditor share judgement with IA on material of misstatements and evaluating accounting est.

Answer 159

no. This is the independent auditors responsibility. he would use audit in support role only.

Question 160

why would an auditor fine blank confirmation better than positive

Answer 160

because recipient would have to research information and not sign in the case of positive confirmation.

Question 161

if an auditor is engaged to provide an opinion on complete f/s and an opinion on a/r. the complete has a qualified due to materiality in a/r. what would the a/r opinion be

Answer 161

Adverse the modified f/s is due to the a/r materiality. the a/r material is very material and pervasive.

Question 162

What is adequately disclosed when there is a substantial doubt about companys

Answer 162

Auditor would disclosed in unmodified opinino (adequate) and state in the report;

EOM report that follows the opinion paragraph

going concern

substantial doubt.

Question 163

in developing an audit plan which includes outlining audit procedurs to be performed. what procedure would be used to detect material $$ misstatments

Answer 163

substantive procedure $$

Test of details and not TEST of controls would be a procedure for RMM

TEST of CONTRols use to evaluate operating effective of existing control in preventing or detecting material misstatements.

Question 164

if an auditor has an substantial doubt about a entity ability as going concern. If the entity does not disclose would the auditor issue a qualified opinion

Answer 164

yes. disclosure is required by GAAP. if failure to disclose results in qualified opinion.

Question 165

Can an auditor issue an unmodified opinion when there is material departure form GAAP

Answer 165

yes. when it is justified. unmodified with EOM paragraph.

Question 166

in assessing objectivity of IA, the independent auditor would considered

Answer 166

level where IA reports

policy prohibuting IA lack of indepency

external peer reviews

professional auditing standard used and developed via Institute of IA

Question 167

what would be a procedures on test of completion of assertions

Answer 167

1. source doc to listing
2. perform cutoff procedures provides assurance that goods in transits (shipped or received) are appropriately included or excluded from inventory.

Completion = cash disburesment and a/p

Examine would include paid invoices but excludes not yet paid.

Question 168

A good i/c would have employee who prepare remittance listing that is forwarded to cashier should also include

Answer 168

a listing sent to a/r bookkeeping to update the subsidiary ledge account receivable records.

Question 169

when an auditor plans to rely on controls that have changed since the last tested what would be the course of action for the current year

Answer 169

change in i/c, an auditor would test the operating effectiveness of such control in the current audit.

Question 170

what is a basic element of the independent audit report

Answer 170

performing procedures to obtain audit evidence about the amoutn and disclosures in the f/s

disclosed all information required by GAAP is implied but not mentioned.

Question 171

mcq 2/25/20; what control is least likely to be used in a safegaurd for cash

receiving report

segregation of duites

lock box

bank statement

Answer 171

receiveing report would not be used for safe gaurd of cash

Question 172

in an audit of an issuer, what would least like be put in the critial matter paragraph in the audit report

Answer 172

A critical audit matter, or CAM, is any matter communicated or required to be communicated to the audit committee and that both relates to material accounts or disclosures that are material to the financial statements and involves “especially challenging, subjective, or complex auditor judgment.

the paragraph would include information such as; reference to the relevant financial statement account that relates to CAM

description of how CAM was addressed

description of principan consideration that led the auditor to determine CAM

IT DOES NOT INCLUDE INFORMATION OF DISCLAIM AUDITORS RESPONSIBILITY FOR CAM

Question 173

An auditor issued an audit report that was dual dated for a subsequent event occuring after the original date of the auditor report but before the issuance of related f/s. what is the auditors responsibility

Answer 173

to limited to the specified event referenced.

Question 174

other information on critical audit matters or CAM

Answer 174

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment. Critical audit matters are not a substitute for the auditor’s departure from an unqualified opinion (i.e., a qualified opinion, adverse opinion, or disclaimer of opinion on the financial statements as described in

Question 175

An auditor that is engaged to do an audit of Service organizations i/c placed in ops as of a specific date. the report will be useful to the clients audit. what would the type 1 opiion be

Answer 175

type 1 opinion is Management’s description of the services organization system

type 2; provided inform on operating effectiveness of i/c

Question 176

more on type one and type 2

Answer 176

The short answer is that a Type 1 report just provides a report of procedures / controls an organization has put in place as of a point in time. A Type 2 report has an audit period and provides evidence of how an organization operated its controls over a period of time

Question 177

what would provide the most reliable evidence of management assertions of rights and obligation

Question 178

what procedure would an accountant perform during an engagment to compile prospective f/s`

Question 179

what procedure would an auditor to in planning a f/s audit

Question 180

what is the auditor tyring to accomplish when he reviews the reconciliaton of payroll tax form the client files

Question 181

when reporting on condition of the observing of non issuer i/c auditor will

Answer 181

restrict use of the report due to not a requirement for issuer but an option on add to engagement via integrative reporting

Question 182

If an auditor wants to test the account balance on a clients f/s. to test the valuation, allocation and accuracy of management assertion , he would not

Answer 182

vouching back a sample from g/l to documentation is test of existence and occurance assertion use in transaction accounts. so audit would not use this.

He would use

reconciling supporting schedule to g/l

footing and cross footing account and supporting schedule

perform recalc of est pertaining to account balance.

Question 183

what is a services that accountant can charge contigency fees

Answer 183

nonattest client in an irs examination

Question 184

two crucial requirements to achieving audit effeciency and effectiveness with computers are selecting

Answer 184

remember computers = process, applicatinon this give output of data.

they identification of the approriatness of audit task

appropriate software t perform task

can not

assess ,

determine

speak to specific industries

Question 185

an auditor is unable to complete a procedure during an audit. what opinion is he least likely to give

Answer 185

an avderse opininion = this is a very material and pervasive departure from framework or GAAp

He would give either disclaimer or qualied based on the severity of the limited scope.

a unmodified would be give it was immaterial or if an alternative procedures could be performed.

Question 186

what percedure would an auditor perform in the planning stage

Answer 186

high level analytical procedure: such comparing recorded financial information or f/s with anticipated results from budget and forecast.

Question 187

CPA believes there is substantial doubt about a clients ability to continue as a going concern for a reasonable period of time. CPA evaluate entity plan. what would be a mitiagating factor in companies plan

Answer 187

the reduction in required dividends. this mean company is conserving cash.

accumulating treasury stocks. no cash outflow to buy back stocks.

Question 188

2/22/20

Question 189

what is correct about i/c

Answer 189

that i/c is relevant to the entire entity or to any of its ops unit or business functions.

and there is a direct relationship entitys objective and i/c

however not all objective and related i/c relevant to f/s.

Question 190

in an integrative audit of a non issuer, an auditor will issue and adverse opinion (material departure from gaap) on effectiveness of i/c when it is a

Answer 190

material weakness that is existing.

going concern not relevant

finanical statement misstatement = qualified or adverse. this question specifically state adverse opinion.

Question 191

auditor has a materialty threshold of $100K. auditor has accumulated audit evidence that supports and allow for bad range of $1.5m to $1.8m. the client record only $800K what is the proper adjusment in summary of adjustment`

Answer 191

take the audit evidence number closet to the audit range = $1.5m less $800k

client recorded = summuary adjustment $700k

DR bad exp 700

Cr allw for bad debt exp 700

Question 192

In auditing a/r, a negative confirmation form would be used when

Answer 192

conbined assess level of inherent and control risk are low to a/r.

not due to a/r totla is immaterial. if immaterial, don’t send confirmation.

Question 193

why is negative confirmation of a/r less effective than positive

Answer 193

A negative confirmation is a document issued by an auditor to the customers of a client company. … A positive confirmation is one in which the customer is required to send back a document, either confirming or disputing the account information sent to it by the auditor

Discuss the advantages and disadvantages of using negative accounts receivable confirmations rather than positive confirmations. The primary advantage of negative confirmations is that they are less expensive than positive confirmations because there are no second requests and no follow-up of nonresponses.

since with a negative confirmation there is second request need, all may not verified accounts information.

Question 194

which of the following management assertion is the auditor most likely testing if the auditor objective that all inventory on hand is reflected in the ending inventory balance.

Answer 194

the auditor will want to test the completeness of inventory.

value of inventory would not satisfy auditor

and properly presented on f/s would not be true could be errors.

Question 195

What department would have proper authorization of write offs of uncollectible accounts

Answer 195

look at segregation of duties ARC

Authorization

Recording

and custody

Authorization should come from somewhat not recording or has custody

like the Treasurer office

Question 196

what is the auditor responsibility if a previously reported i/c weakness is subsequently eliminated and managment engaged an independent auditor to attest to improvement

Answer 196

before auditor can attest he must perform procedures, once done that express an opinion on whether the weakness has been eliminated.

Question 197

what professional standard is auditor meeting to conform with professional standard

Answer 197

quality control which is inclusive of independence of professional standards

where as GAAS relates to individual audit engagements

Question 198

what information should a services corp auditor give when his i/ opinion is on a decription of controls placed in ops.

Answer 198

there are 2 type opinion he can give

type 1; report on control placed in operation; less intense

type 2; report on placed in ops and test of ops effective.

this auditor did type one which is description of the scope and nature of auditors procedures.

Question 199

a company being audited has a IA that is both competent and objective. what type of assigned task can a independent auditor give to the IA

Answer 199

Can give him test of controls and of details (substantive$ test)

but not

auditing major subsidiary of programs

or using analytical procedures

Question 200

what is auditor responsibility for a required supplementary information that is outside basic f/s but required for FASB

Answer 200

when audited f/s has supplement informatio that is outside of basic f/s, the auditir should apply limited procedures to the required supplement and add OM paragraph to f/s audit.

Question 201

when there is a letter of transmittal that accompany’s an annual report or CAFR for state goverement that is attached to audited f/s and the auditor reviewed the CAFR and id a material inconsistency with the f/s. the f/s was fine. what should auditor do

Answer 201

After reivewing report and determing that the audit is fine, Request that client revised the letter of transmittal

Question 203

2/26/20

Question 204

a group engagement partner decides not to refer to the audit of a component auditor. After making inquires about the components auditors professionalism, reputation and independence, the group auditor wold do what next

Answer 204

Group auditor is taking responsibility for the entire audit, should contact the component auditor and review his audit program and working papers pertaining to component audit

Question 205

what management assertion is auditor doing when he is inquiring of warehouse personnel concerning obsolete inventory and slow moving inventory

Answer 205

this would be valuation: has inventory been claim at LCM or written of.

Question 206

an audit is testing the reasonableness of dividend income form investments. what could auditor used to compute the amount of dividend income that has been received and recorded by client

Answer 206

electronic assess the details of divendends records on internet by using dividend rates of investments. or with invesment brokers statements.

Question 207

when performing search for unrecorded fix asset auditor would perform

Answer 207

existence; vouch back asset on ledger to what it is in hand. via inspect ledger and insurance and tour facility.

Question 208

what duties can an IA do for an external audit

Answer 208

1. test of controls and understanding controls
2. substanive test
3. assessing risk

4.

Question 209

Whe an accountant compiles projected f/s. the report should state

Answer 209

Describe the limitation in the financial projections on the usefulness of the projections by including a caveat that the prospective results may not be achieved.

Other useful inform

compilation of projections does not disclaim historical info.

there is no assurance in the compilation of projection report

hypothethical assumption are examination of prepared projection and not compilations.

Question 210

mcq test 2/28/29; a auditor will test the reasonableness of dividend income by getting information from

Answer 210

the dividends records produce by investment advisory services = investment statement

Question 211

what does a compilation report contains

Answer 211

Remember compilation reports can included projections

Compilation does contain

there will usually be a difference between the projection andthe actual results because events and circumstances frequently do not occur as expected.

Compilation does not contain

1. evaluations and examination of the support of the underlying projections
2. projection is limited to presenting, in the form of a f/s, information that is accountants representation. this is management function.

accountant note in a compilation that their are no report on future events and circumstances.

Question 212

the audior would report significant deficiency to

Answer 212

would report;to specific legislative and regulatory bodies when reporting under GAGAS.

would report to the audit committee or if no audit committee a formal oversight committee

not report ;Due to code of professional conduct, Would not repor to the SEC

would not report to sharehoders due tocode of professional conduct

Question 213

is observing safeguard over access to an use of assets part of a review under SSARS

Answer 213

no; this is a i/c evaluation not conducted under a review.