A2- Quality Control

Question 1

6 elements of quality control

Answer 1

HELP ME
H- Human Resources
E- engagement/ client acceptance and continuance
L- leadership responsibilities
P- performance of the engagement
M- monitoring
E- ethical requirements

Question 2

Audit workpapers should be kept for how long? (Public & private)

Answer 2

Public- 7 years
Private- 5 years

Question 3

Documentation completion dates (how long to assemble final audit documentation file) public and private

Answer 3

Public- 45 days
Private- 60 days

Question 4

For an initial audit, you must correspond with who

Answer 4

Previous auditor

Question 5

Overall audit strategy includes what? (NET)

Answer 5

Nature
Extent
Timing

Question 6

Is a written audit plan REQUIRED?

Answer 6

Yes

Question 7

6 financial statement assertions (COVERUP)

Answer 7

C- completeness
O- cutOff
V- valuation, allocation, and accuracy
E- existence and occurrence
R- rights and obligations
UP- understandability of presentation and classification

Question 8

Tolerable misstatement

Answer 8

Maximum error in a population that the auditor is willing to accept

Question 9

CRIME

Answer 9

Control environment
Risk assessment
Information and communication
Monitoring
Existing control activities

Question 10

Existing Control activities in a strong system of internal control (PAID TIPS)

Answer 10

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

Question 11

Functions that should NOT be combined to achieve segregation of duties (ARC)

Answer 11

Authorization
Record keeping
Custody of related assets

Question 12

Documentation of internal control (FIND)

Answer 12

Flowcharts
Internal control questionnaire or checklist
Narrative
Documentation from client

Question 13

Segregation of duties in IT (COPAL)

Answer 13

Control team
Operator
Programmer
Analyst (systems)
Librarian

Question 14

Explain the relationship between qualify control standards & GAAS standards

Answer 14

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

Question 15

Engagement partner is responsible for which 3 functions

Answer 15

1- planning the audit
2- supervising work of engagement team members
3- complying with relevant audit standards

Question 16

If a firm has poor quality control procedures are they still able to comply with professional standards?

Answer 16

Yes

Question 17

Is an auditor permitted to accept an engagement near or after year end?

Answer 17

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

Question 18

What should an inquiry of the predecessor auditor include when determining whether to accept the engagement or not

Answer 18

The understanding of reasons for change in auditors

Question 19

When electronic transactions will be retained for only a short period of time what does an auditor do to compensate?

Answer 19

Perform several tests during the year rather than only at year end

Question 20

Can internal auditors assist the external auditor in obtaining an understanding of internal control and substantive testing

Answer 20

Yes

Question 21

Is use of a specialist who is related to the client acceptable?

Answer 21

Yes but the auditor needs to determine if the relationship will affect the auditors objectivity

Question 22

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)

Answer 22

True

Question 23

When determining materiality, make sure revenue is

Answer 23

Annualized

Question 24

Sequence of performing test of controls & understanding of internal control

Answer 24

Auditor can perform at same time because it can be more efficient to do so

Question 25

An auditor can refer to the specialist in the auditors report if as a result of specialist findings….

Answer 25

The auditor modifies the opinion

Question 26

Control activities (internal control) PAID TIPS

Answer 26

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