A2 - Engagement quality & acceptance, planning, and internal control

Question 1

Acceptance and Continuance

Answer 1

Firm’s ability to meet reporting deadlines.

Firm’s ability to staff engagement.

Independence.

Integrity of client management.

Group audits.

Question 2

Elements of Quality Control

Answer 2

HELP ME:
Human Resources
Engagement/client acceptance and continuance.
Leadership responsibilities
Performance of engagement
Monitoring
Ethical requirements

Question 3

Quality Control Nature & Extent

Answer 3

Firm size
Organizational structure
Nature & complexity of practice
Degree of operating autonomy
Cost-benefit considerations

Question 4

Engagement quality standards for Nonissuer engagements

Answer 4

Engagement partner responsibilities for quality.
-Overall quality of engagement

Engagement quality control review.
-Evaluation of significant judgments and conclusions.

Question 5

Engagement quality standards for Issuer engagements

Answer 5

Engagement quality reviewer.
-Partner not associated with engagement.

Engagement quality review process.
-Evaluate significant judgments, assessments, and responses to risk.

Concurring approval of issuance.
-Only if no significant engagement deficiencies.

Question 6

Retention & Completion

Answer 6

SAS rules (Nonissuers)
-Five years from report release date.
-Final audit documentation file assembled within 60 days following report release date.

PCAOB rules (Issuers)
-Seven years from report release date.
-Documentation completion date is 45 days following the report release date.

Question 7

COSO Framework

Answer 7

CRIME:

Control environment
-Commitment to ethics & integrity
-Board independence & oversight
-Organizational structure
-Commitment to competence
-Accountability

Risk assessment
-Specify objectives
-Identify & analyze risks
-Consider potential for fraud
-Identify & assess changes

Information & communication
-Obtain & use information
-Internally communicate information
-Communicate with external parties

Monitoring activities
-Ongoing and/or separate evaluations
-Communication of deficiencies

(Existing) Control activities
-Select & develop control activities
-Select & develop technology controls
-Deployment of policies & procedures

*Not strategic objectives

Question 8

Control Activities

Answer 8

PAID TIPS:

-Prenumbering of documents
-Authorization & approval of transactions
-Independent checks to maintain asset accountability
-Documentation
-Timely & appropriate financial performance reviews
-Information processing controls
-Physical or logical controls for safeguarding assets & information
-Segregation of duties (Authorization, Record keeping, Custody of related assets)
-Auditor’s understanding of control activities

Question 9

Financial Statement Assertions

Answer 9

COVERUP:

Completeness
Cutoff
Valuation, Allocation, & Accuracy
Existence & Occurrence
Rights & Obligations
Understandability of presentation & classification

Question 10

Audit Risk

Answer 10

Auditor unknowingly fail to appropriately modify opinion of material misstatement.

Occurs because of reasonable assumption rather than absolute.

Risk should be reduced to an appropriately low level before opinion is expressed.

Question 11

Inherent Risk

Answer 11

Susceptibility of an assertion about a class of transactions, account balance, or disclosure to a material misstatement without regard to controls.

Question 12

Control Risk

Answer 12

Material misstatement that could occur in an assertion about a class of transactions, account balance, or disclosure will not be prevented or detected on a timely basis by internal control.

Question 13

Detection Risk

Answer 13

That the auditor will not detect material misstatement that exists in relevant assertion.