A2- Quality Control Flashcards
6 elements of quality control
HELP ME
H- Human Resources
E- engagement/ client acceptance and continuance
L- leadership responsibilities
P- performance of the engagement
M- monitoring
E- ethical requirements
Audit workpapers should be kept for how long? (Public & private)
Public- 7 years
Private- 5 years
Documentation completion dates (how long to assemble final audit documentation file) public and private
Public- 45 days
Private- 60 days
For an initial audit, you must correspond with who
Previous auditor
Overall audit strategy includes what? (NET)
Nature
Extent
Timing
Is a written audit plan REQUIRED?
Yes
6 financial statement assertions (COVERUP)
C- completeness
O- cutOff
V- valuation, allocation, and accuracy
E- existence and occurrence
R- rights and obligations
UP- understandability of presentation and classification
Tolerable misstatement
Maximum error in a population that the auditor is willing to accept
CRIME
Control environment
Risk assessment
Information and communication
Monitoring
Existing control activities
Existing Control activities in a strong system of internal control (PAID TIPS)
Pre-numbering of documents
Authorization of transactions
Independent checks to maintain asset accountability
Documentation
Timely and appropriate financial performance reviews
Information processing controls
Physical controls for safeguarding assets
Segregation of duties
Functions that should NOT be combined to achieve segregation of duties (ARC)
Authorization
Record keeping
Custody of related assets
Documentation of internal control (FIND)
Flowcharts
Internal control questionnaire or checklist
Narrative
Documentation from client
Segregation of duties in IT (COPAL)
Control team
Operator
Programmer
Analyst (systems)
Librarian
Explain the relationship between qualify control standards & GAAS standards
Quality control standards pertain to conduct of all professional activities of an entity’s practice as a whole
GAAS standards relate to conduct of each individual audit engagement
Engagement partner is responsible for which 3 functions
1- planning the audit
2- supervising work of engagement team members
3- complying with relevant audit standards
If a firm has poor quality control procedures are they still able to comply with professional standards?
Yes
Is an auditor permitted to accept an engagement near or after year end?
Yes but they should consider whether late appointment will pose limitations on the audit that may lead to a qualified opinion or disclaimer of opinion
What should an inquiry of the predecessor auditor include when determining whether to accept the engagement or not
The understanding of reasons for change in auditors
When electronic transactions will be retained for only a short period of time what does an auditor do to compensate?
Perform several tests during the year rather than only at year end
Can internal auditors assist the external auditor in obtaining an understanding of internal control and substantive testing
Yes
Is use of a specialist who is related to the client acceptable?
Yes but the auditor needs to determine if the relationship will affect the auditors objectivity
When materiality levels for the financial statements as a whole are revised, the materiality levels for particular classes of transactions, account balances, or disclosures may also need to be revised (true / false)
True
When determining materiality, make sure revenue is
Annualized
Sequence of performing test of controls & understanding of internal control
Auditor can perform at same time because it can be more efficient to do so
An auditor can refer to the specialist in the auditors report if as a result of specialist findings….
The auditor modifies the opinion
Control activities (internal control) PAID TIPS
Prenumbering of documents
Authorization of transactions
Independent checks
Documentation
Timely and appropriate performance reviews
Information processing controls
Physical controls for safeguarding assets
Segregation of duties
