AUD 5

Question 1

Sampling risk

Answer 1

You picked a bad batch

Question 2

Non-sampling risk

Answer 2

Auditor’s fault

Question 3

Tolerable rate

Answer 3

Highest error I am willing to tolerate before I don’t rely on internal controls

Question 4

Which special purpose frameworks require a description of purpose for which such financial statements are prepared?

Answer 4

Only regulatory basis (whether intended for general use or not) and contractual basis. (Cash basis and tax basis do not!)

Question 5

Which special purpose frameworks require an emphasis-of-matter paragraph alerting readers to the special purpose framework?

Answer 5

Cash basis, tax basis, regulatory basis (if restricted), and contractual basis do. (Only regulatory basis intended for general use does not require such an alert!)

Question 6

Type 1 Report

Answer 6

Controls placed in operation at the service organization

Question 7

Type 2 Report

Answer 7

Operating effectiveness of internal controls at the service organization

Question 8

Other-matter paragraph

Answer 8

Applies to topics that are not reported in the financial statements, such as the accountant’s role in the review engagement or other engagement-related issues.

Question 9

Emphasis-of-matter paragraph

Answer 9

Applies to topics that are appropriately reported in the financial statements to which the accountant wishes to draw attention.