Adaptive Drill 3 Flashcards
In determining the effectiveness of an entity’s policies and procedures relating to the existence or occurrence assertion for payroll transactions, an auditor most likely would inquire about and…
Observe the segregation of duties concerning personnel responsibilities and payroll disbursement
Segregating payroll related duties such as authorizing new hires and wage rates, as done by a personnel department, and disbursing payroll checks as done by treasurer, reduces the likelihood that…
Fictitious payroll transactions that did not occur will get recorded
Authorizing new hires and wage rates, who is responsible for this?
Personnel department
Disbursing payroll checks, who is responsible for this?
The treasurer
An auditor using audit software probably would be least interested in which filed in s computerized perpetual inventory file?
Economic order quantity
Economic order quantity would be the least interest to an auditor using audit software for evaluating computerized perpetual inventory files because…
Auditor would be least concerned with inventories purchased
Warehouse location would be of interest to an auditor using audit software for evaluating computerized perpetual inventory files because…
He would be concerned with existence of inventory
A CPA is permitted to disclose confidential client information without consent of client to…
A state CPA society voluntary control review board
If management is using a financial reporting framework for its financial statements and management has no choice of using another financial reporting framework then…
No reference to responsibility for determining the applicable
framework is required
Population size has very little effect on…
The determination of sample size
In determining the sample size for a test of controls, an auditor should consider the likely rate of deviations, the allowable risk of assessing control risk too low and…
The tolerable deviation rate
Accepting an engagement to compile an entity’s financial projection most likely would be inappropriate if the projection is to be included in…
An offering statement of the entity’s initial public offering of
common stock
Financial projections can only…
Be provided to limited audiences
Financial projections can only be provided to limited audiences, one that can…
Discern assumptions and limitations to the financial projections
A mortgage company, bank, labor union or audit committee are…
Why?
All limited audiences
As entity is in direct relationship with each one
Prospective buyers of an entity’s stock are…
A general audience
In order to efficiently establish the correctness of the accounts payable cutoff, an auditor will be most likely to…
Coordinate cutoff tests with physical inventory observation
By coordinating cutoff tests with the physical inventory, auditor’s can determine if…
Items are physically present
Resolving differences reported by customers on confirmation request is an audit technique that…
Could not be performed through computer program
Which of the following bodies promulgates standards for audits of federal financial assistance recipients?
General Accounting Office
Control and distribution of unclaimed checks, the auditor would…
In auditing an entities computerized payroll transactions, least likely
use test data to test these controls
Test data are…
Auditor contrived transactions designed to test controls that are
Imbedded in info technology driven processing programs
Test data for an entity’s computerized payroll transactions would be useful in…3
1 calculation of hours worked
2 withholding of payroll taxes and
3 identifying employee numbers
Test data of payroll transactions is important to identify employee numbers as this data can…2
1 Be fabricated by an auditor and
2 put to a test to determine if they would be detected by controls
Idiots would be least likely to enter dummy checks to determine…
Control of unclaimed checks when whey can observe and inquire
As to whereabouts and disposition of actual checks
What is the correct statement Bout the circumstances under which a CPA firm may or may not disclose the names of its clients without the clients’ express permission?
CPA firm may disclose this information unless disclosure would suggest that the client may be experiencing financial difficulties
A CPA may not disclose the name of a client if doing so…
Disclosed confidential client information
To satisfy the CPA of other auditing procedures when certain customary auditing procedures are not performed is…
Not a valid purpose for a representation letter in an audit
Client representations in any for (written or oral) must be…
Supported by other audit evidence
One example of a “special report” as defined by Statements on Auditing Standards, is a report issued in connection with…
Price-level basis financial statements
There are four types of special reports, one of which in a definite set of criteria having…
Substantial support that is applied to all material items appearing
in financial statements
Price-level financial statements qualify as a…
Basis of accounting having substantial authoritative support
What represents a quality control requirement under government auditing standards?
A CPA seeking to enter into a contract to perform an audit should
provide the CPA’s most recent external quality control review
Report to the party contracting for the audit
Government auditing standards include a general standard stating that each audit organization conducting government audits should have…2
1 an appropriate internal quality control system in place and
2 participate in an external quality control review program
Planning and supervision is…
A general standard that applies to consulting service engagements
4 general standards of Consulting Service engagements
1 professional competence
2 due professional care
3 planning and supervision
4 sufficient relevant data to support conclusions
What is a computer assisted audit technique that permits an auditor to insert the auditor’s version of a client’s program to process data and compare the output with the client’s output?
Parallel simulation
A parallel simulation uses an auditor generated program using…
Generalized audit software into s client’s data base
A parallel simulation uses an auditor generated program using generalized audit software into a client’s data base in use for…
Comparing results of the program to that of the client generated
result using the same client database
In parallel simulation the auditor’s program should include the client database’s…
Why?
Edit checks
So results of processing, rejections/errors related to data base,
Should be same for auditor and the client’s program
Frame relay protocols are used for…
Quick and efficient transmission of information across networks
A remote node router…
Directs network information to appropriate remote locations
In statistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups if…
The population has highly variable recorded amounts
A population is highly variable…
Spread out
Example of a population being highly variable
Individual accounts receivable balances range from $10 to $1,000,000
If Individual accounts receivable balances range from $10 to $1,000,000, the auditor would have to…
Select many items to get a representative sample
To reduce the total sample size and thus be more efficient, the auditor may decide to…
Stratify a population that has highly variable recorded amounts
By dividing it into subpopulations
Stratify a population that has highly variable recorded amounts
By dividing it into subpopulations. Example
$1 to $1,000, $1,000 to $10,000, and over $10,000
PPS sampling automatically stratifies the population by…
Selecting all amounts greater than the sampling interval
Allows the relative frequency of any interval to be determined by knowing only the mean and standard deviation
Normal distribution
Standard deviation is used to…
Measure the extent to which values of items are spread about the
Mean
The mean is…
A measure of central tendency obtained by totaling all values
And dividing by number of items
A concept expressed either quantitatively or qualitatively
Determination of materiality
The determination of materiality requires…
Auditor judgement
Although materiality is often expressed in number terms, it can be expressed in qualitative terms such as…2
1 Key disclosures or
2 items related to laws and regulations that are less than the
material amount
