A5- Integrated Audits, Attestation, Engagements, Compliance, And Gov Audits

Question 1

What is an integrated audit

Answer 1

Auditing both financial statements and managements assessment of internal control

Question 2

SOX requires each issuers annual report to contain an internal control report that

Answer 2

1- states managements responsibility for establishing and maintaining adequate internal control
2- contains an assessment of effectiveness of the internal controls

Question 3

In an integrated audit, the auditor should evaluate the components of ICFR and determine whether the components are

Answer 3

1- present and functioning in design, implementation, and operation
2- operating together in an integrated manner

Question 4

Is the auditor responsible for supporting an opinion about each internal control or the overall internal control

Answer 4

OVERALL internal control

Question 5

Benchmarking strategy

Answer 5

If automated controls have not changed from one year to the next, the auditor not have to repeat specific testing performed but needs to verify the control hasn’t changed

This is most appropriate in LOW RISK situations

Question 6

Who should the auditor communicate significant deficiencies & material weaknesses to in writing?

Answer 6

Management and those charged with governance IN WRITING

Question 7

A material weakness in internal control forces what opinion

Answer 7

Adverse opinion

Question 8

What is an Attest engagement

Answer 8

When a CPA is engaged to an agreed upon procedure that is NOT the responsibility of the CPA (usually management)

Question 9

Attestation standards differ from GAAS in two ways

Answer 9

1- no reference is made to historical FS
2- no reference is made to GAAP

Question 10

Common concepts of attestation (CAPE CORP)

Answer 10

C- compliance
A- acceptance and continuance
P- preconditions
E- engagement documentation standards

C- acceptance of change when reasonable
O- use work of other practitioner
R- responsibility for quality control
P- professional skepticism

Question 11

Attestation risk formula

Answer 11

Attest risk = inherent risk X control risk X detection risk

Question 12

Amount of assurance and result of examination

Answer 12

Reasonable (positive) assurance, issue opinion

Question 13

Amount of assurance and result of review

Answer 13

Limited (negative) assurance, result is a conclusion

Question 14

Amount of assurance and result of agreed upon procedure

Answer 14

Amount of assurance- none
result- list of findings

Question 15

Conditions of agreed-upon procedures (I AM SURE)

Answer 15

I- independence of practitioner

A- agreement of parties
M- measurability and consistency

S- sufficiency of procedures
U- use of report can be general or restricted
R- responsibility of subject matter
E- engagements to perform AUP on prospective FS

Question 16

Two types of prospective FS

Answer 16

1. Financial forecast
2. Financial projection

Question 17

SOC 1 and SOC 2 reports

Answer 17

System and organization controls (SOC) offer a CPA controls in connection with system level controls at a service organization

Question 18

Type l SOC report

Answer 18

Report on design and implementation of a service organizations controls but does not provide effectiveness of the controls

Question 19

Type 2 SOC report

Answer 19

Report on design, implementation, and operating effectiveness of a service organizations controls

Question 20

If an auditor is asked to report on clients compliance they must have audited the clients financial statements as well and may only issue (positive/negative) assurance

Answer 20

Negative assurance

Question 21

What is negative assurance

Answer 21

A statement that nothing came to the auditors attention

Question 22

For the financial statement audit of a government, the audit report is the same as a standard non-issuer except for 2 changes…

Answer 22

1- auditors responsibility paragraph should state the audit was in accordance with BOTH GAAS and government auditing standards
2- an other matter paragraph should be added to the end of the report referencing the GAGAS (yellow book report)

Question 23

Government audit requires a written report on X

Answer 23

Internal control

Question 24

2 objectives of a single audit

Answer 24

1. Audit of FS and reporting on a separate schedule of expenditures of federal awards
2. Compliance audit of federal awards

Question 25

Materiality in a single audit is to be considered (separately by major program or FS as a whole)

Answer 25

Separately by major program

Question 26

Audit threshold is expenditure of $$$?

Answer 26

$750,000

Question 27

Single audits issue 5 reports …. What are those 5 reports

Answer 27

1. FS report (GAAS)
2. SEFA report
3. GAGAS (yellow book) report
4. Single audit report
5. Schedule of findings and questioned costs

Question 28

How many years must auditor & Auditee retain documentation of a single audit

Answer 28

3 years

Question 29

How are major programs determined?

Answer 29

By the auditor using a risk based approach NOT by management

Question 30

Financial projections are not appropriate for what use

Answer 30

General use

Question 31

Top down approach order

Answer 31

Financial statement level
Entity level
Account level

Question 32

SOC 1 Type 1 report

Answer 32

Managements description of service organizations system

Question 33

Evaluating operating effectiveness of internal control comes in what phase

Answer 33

AFTER planning

Question 34

What does government auditing standards require that GAAS does not in regard to reporting internal control

Answer 34

Report describing the scope of auditors testing on compliance and internal control