AUD 5 Flashcards
MCQs
How do the scope, procedures, and purpose of tests of controls in an audit of the internal control of a nonissuer compare to those for obtaining an understanding of internal control and assessing control risk as part of a financial statement audit of a nonissuer?
ALL DIFFERENT. In an audit of an entity’s internal control, the scope and procedures are more extensive, and the purpose is directed primarily toward the internal control report. In an audit, the scope is less extensive, and the purpose is to determine the nature, timing, and extent of auditing procedures. Audit procedures (testing) is more extensive when rendering an opinion on internal controls because the auditor should obtain evidence on selected controls over all relevant assertions, whereas in a financial statement audit the auditor is not required to test controls over all relevant assertions.
An engagement to audit the internal control of a nonissuer will generally:
Be more extensive in scope than the assessment of control risk made during a financial statement audit.
When planning an audit of the effectiveness of the entity’s internal control in an integrated audit of a nonissuer, an auditor would be least likely to consider which of the following factors?
When planning an audit of the effectiveness of the entity’s internal control in an integrated audit of a nonissuer, a practitioner would be least likely to consider the evaluation of the operating effectiveness of the controls. The evaluation of the operating effectiveness of controls occurs after the planning stage.
If a service auditor is unable to obtain a written assertion from the service organization’s management regarding its system and the suitability of the design and operating effectiveness of controls, it would be most appropriate for the auditor to:
Withdraw from the engagement unless prohibited by law.
In an audit of an issuer:
I.
Management must assess and report on internal control.
II.
The auditor must assess and report on internal control.
Both I and II
In an integrated audit of a nonissuer, which of the following is the responsibility of an auditor with regard to testing controls at a company with multiple business units?
Testing controls over specific risks at business units that are material to the company’s consolidated financial statements.
Negative assurance may be expressed when an accountant is requested to report on the:
Results of performing a review of management’s assertion.
A CPA in public practice is required to comply with the provisions of the Statements on Standards for Attestation Engagements (SSAE) when:
Testifying as an expert witness
in accounting and auditing
matters given stipulated facts
Compiling a client’s financial
projection that presents a
hypothetical course of action
No
No
In an attest engagement, use of the accountant’s report should be restricted to specified parties in all of the following situations, except:
When reporting on an assertion about the subject matter instead of reporting directly on the subject matter.
A practitioner reporting on pro forma financial information does not possess an understanding of the client’s business and the industry in which the client operates. The practitioner should take which of the following actions?
Review industry trade journals.
When a service organization provides services that affect the initiation, execution, processing, or reporting of a user company’s transactions, those services are:
Considered to be part of the user company’s information system.
Quick Service Center processes the payroll for a variety of clients, including James Industries. Adams, CPA, is Quick’s auditor, while Robinson, CPA, is the auditor for James Industries. Which of the following is not required of Adams?
Making inquiries regarding the professional reputation of Robinson, CPA.
A client uses a service organization to process its payroll. Which of the following statements is correct regarding the user auditor’s use of the service auditor’s report on internal controls placed in operation?
The client’s auditor can use the service auditor’s report in its assessment of the client’s internal controls.
Which of the following procedures should a user auditor include in the audit plan to create the most efficient audit when an audit client uses a service organization for several processes?
Review the service auditor’s SOC 1® report. A SOC 1® report is intended to be used by a user entity and user auditor in evaluating the impact that certain relevant controls at the service organization have on the financial statements of the user entity.
Which of the following factors is an auditor least likely to consider when reporting on compliance with aspects of contractual agreement in connection with audited financial statements in accordance with Statements on Auditing Standards?
The appropriate opinion to render in the report on compliance with aspects of the contractual agreement.
