A2 - Quality Control, Engagement Acceptance, Planning and IC

Question 1

Difference between GAAS and quality control

Answer 1

Quality control = conduct of all professional activities. GAAS = individual audit engagement

Question 2

Six elements of QC (quality control)

Answer 2

"HELPME"
H = human resources
E = engagement/client acceptance and continuance
L = leadership responsibilities
P = performance of the engagement
M = monitoring
E = ethical requirements

Question 3

Documentation retention date

Answer 3

SAS (non issuer) 5 years

PCAOB (issuer) 7 years

Question 4

Documentation completion date - how many days following the report release date?

Answer 4

SAS (non issuer) 60 days following the report release date

PCAOB (issuer) 45 days following the report release date

Question 5

What auditors must not do after the documentation completion date？

Answer 5

They must not delete existing documentation.

Question 6

During planning, the auditor is required to:

Answer 6

Obtain knowledge of the client’s business and indsutry
Develop the audit strategy
Develop the audit plan
Perform risk assessment procedures to obtain understanding of the entity and its environment.

Question 7

Financial statement assertions

Answer 7

"COVERUP"
Completeness
cutOff
Valuation, allocation, and accuracy
Existence and Occurrence
Rights and Obligations
Understandability of Presentation and classification

Question 8

When using internal auditors, what are the things an independent auditors should consider?

Answer 8

Their objectivity - the organizational level to which the internal auditors report
Competency - quality of the internal auditor’s WPS documentation, their educational level

Question 9

Can independent auditors share responsibility with an entity’s internal auditor or specialists who are assessed to be both competent and objective?

Answer 9

No - independent auditor is solely responsible for reporting on FS

Question 10

what is materiality for planning purposes?

Answer 10

Smallest aggregated level of misstatements

Question 11

AP is required at which stage of audit?

Answer 11

Planning and overall review stage

Question 12

After AP is done, auditors use the result to ___

Answer 12

Identify risk of RoMM due to fraud

Question 13

Three types of inherent limitations

Answer 13

Management’s override of IC
Human errors
Collusion of two or more people

Question 14

An entity’s objectives of IC

Answer 14

Reliability of financial reporting
Effectiveness and efficiency of operations
Compliance with applicable laws and regs.

Question 15

In obtaining an understanding of an entity’s IC, an auditor is required to obtain knowledge about

Answer 15

Design of controls

Question 16

Test of operating effectiveness is performed when

Answer 16

Only when the auditor’s risk assessment is based on the assumption that controls are operating effectively or when substantive procedures alone is not sufficient.