A5 Integrated Audit, Attestation Engagements, Compliance & Government Audits

Question 1

In an integrated audit of a non-issuer, who provides written assessment of the effectiveness of internal control and where does it get reported and on what day is it reported?

Answer 1

Management provides written assessment and it is reported along with the audit report. The date of the report is the same date as the financial statements not the assessment date.

Question 2

What is a subrecipient as defined in the Title 2 of the Code of Federal Regulations (single audit requirements)?

Answer 2

Subrecipient is a nonfederal entity tat expends federal awards received from another entity to carry out a federal program.

Question 3

Which prospective financial statements are appropriate for general use? Financial Forecast or Financial Projection?

Answer 3

Ans: Financial Forecast- general use
Reason: Financial Projection- for limited use

Question 4

According to GAGAS, auditors should report ____________ deficiencies in __________ control.

Answer 4

Significant deficiencies in internal control

Question 5

GAGAS; When should auditors report non compliance?

Answer 5

When it’s identified or suspected noncompliance with laws, regulations, contracts, or grant agreements that have a MATERIAL EFFECT on the financial statements.

Question 6

Are auditors required to communicate significant changes in the entity’s internal control policies? Are they to express an opinion of the effectiveness of internal control over compliance?

Answer 6

No, No.

Question 7

What standards apply to client’s compliance with debt covenants such as bank loans if an auditor is going to issue a report?

Answer 7

Compliance Attestation Standards.

Question 8

SSAE

Answer 8

Statements on Standards for Attestation Engagements: the practitioner engaged to issue a report (issue an opinion) on a subject matter or assertion about the subject. Ex. sq footage of the warehouse, excludes services performed under SSARS. Ex. examination or review of MD&A since it’s review report on another’s assertion.

Question 9

Statements on Standards for consulting services

Answer 9

applies to consulting services where practitioner develops the findings, conclusions and recommendations presented.

Question 10

SSARS

Answer 10

Statements on Standards for Accounting and Review Services. Referred to when performing a preparation, compilation or review of historical financial statements for nonissuers. Ex. Review of financial statements of an non public company.

Question 11

Attest engagements generally result in an _______ report, a ______ report, or an ________report on subject matter that is the responsibility of a party other than practitioner.

Answer 11

examination report, a review report, or an agreed upon procedure report

Question 12

Expanded responsibilities for an audit performed with 2CFR 200 single audit include expanded procedures to test and report compliance with laws, rules, regulations and provision of contracts that have ________effect on major federal award programs.

Answer 12

a DIRECT and MATERIAL effect

Question 13

What is the difference between testing and designing effectiveness of controls in an integrated audit?

Answer 13

Testing effectiveness requires reperformance and recalculation. Designing involves inquiry, observation, and inspection.

Question 14

Under GAS standards, an auditor should report on the scope of their testing of compliance with __________ & _______ and of ___________.

Answer 14

Laws & regulations and of Internal controls.

Question 15

Which is not an appropriate method to test the operating effectiveness of controls during an integrated audit? Recalculation? Reperformance? Confirmation? Inspection?

Answer 15

Confirmation because it’s done during testing of substantive procedures. Operating effectiveness of controls can be tested through 1. inspection 2. reperformance 3. recalculation

Question 16

Risk of material noncompliance is inversely related to:

Answer 16

Detection risk of noncompliance. If the risk of material noncompliance increases, the detection risk of noncompliance decreases to reach desired level of overall audit risk of noncompliance. Same concept as RMM and detection risk.

Question 17

For an attest engagement, use of auditor’s report is restricted to specific parties when performing an assertion-based examination (financial projection), the engaging party is not the responsible party, and a _________ ___________ has not been provided.

Answer 17

written assertion

Question 18

Presumptively mandatory requirement is:

Answer 18

that the requirement must be followed in all cases where the requirement is relevant, except in rare circumstances when auditors agree on the departure and the departure is explained and is justified. GAGAS indicates that it “SHOULD” which indicates presumptively mandatory items.

Question 19

Define: Limited Assurance

Answer 19

(AKA Negative assurance) is already provided or stated in review engagements.

Question 20

Positive assurance is provided to examination engagements in the form of

Answer 20

an opinion.

Question 21

In an examination of prospective financial statements, if the assumptions do not provide a reasonable basis for the prospective financial statements, then the practitioner should express a ___________ opinion.

Answer 21

Adverse.

Question 22

For compliance in connection with a financial statement audit, the auditor must have audited and issued an unmodified or qualified opinion. What kind of assurance can be issued?

Answer 22

A negative assurance due to the unmodified or qualified opinion.

Question 23

CPA needs to be independent is a requirement for which standards?

Answer 23

Assertion Based Examination Engagements (SSAE) and SAS

Question 24

Must include in Management letter: Management’s interpretation of the compliance requirements are subject to different interpretations. True or False?

Answer 24

True.