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CPA Flashcards > AUD 5 > Flashcards

AUD 5 Flashcards

1
Q

What opinion would result from a material weakness in internal controls?

A

Adverse only

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2
Q

Who should you report material weaknesses and significant deficiencies to?

A

In writing, Management and audit committee/TCWG

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3
Q

Who should you report control deficiencies to?

A

In writing, Management only (optional)

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4
Q

What are all the attestation services?

A
  1. Agreed upon procedures
  2. Prospective FSs
  3. Pro forma FSs
  4. Compliance
  5. MD&A
  6. Service Organizations
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5
Q

What are the standards for attestation engagements? (CAPECORP)

A

C. Compliance with all standards
A. Acceptance and continuance of client relationship
P. Preconditions for an attestation engagement are present.
E. Engagement documentation
C. Change in terms acceptance
O. Other practitioner is allowed
R. Responsibility for quality control
P. Professional skepticism

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6
Q

What preconditions are required for Agreed-upon procedures? (I AM SURE)

A
  1. Independence
  2. Agreement between parties
  3. Measurability and consistency
  4. Sufficiency of procedures
  5. USE of the report can be general or specific
  6. Responsibility for the subject matter is the client
  7. Engagements to perform AUP on prospective FSs
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7
Q

What assurance is a AUP and compilation? Why?

A

No assurance, since it is based off management assumptions.

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8
Q

What should be included in a compilation report?

A
  1. Identification of the entity, FSs were subject to a compilation and the periods covered
  2. A statement that management is responsible for FS information.
  3. Statement in accordance to SSARS
  4. Statement that it is not a review or examination
  5. A caveat that the results may not be achieved
  6. Statement practitioner takes no responsibility
  7. Signature of practictioner
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9
Q

What should be included in a examination report on prospective FSs?

A
  1. Title with “Independent”
  2. Identification of FSs presented
  3. Statement that practicioner’s responsibility is to express and opinion.
  4. A statement that management is responsible for FS information.
  5. Statement in accordance to SSARS
  6. Statement that examination provides a reasonable basis for opinion based on hypothetical assumptions.
  7. Statement that the examination was to express an opinion.
  8. Statement of the nature of an examination.
  9. Statement indicating prospective results may not be achieved.
  10. Statement that practitioner assumes no responsibility of subsequent events.
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10
Q

What is the differnce between a financial forecast and a financial projection?

A

Financial forecast is general use
and a financial projection is limited use

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11
Q

What should pro forma FSs include?

A

Pro forma FSs include Significant assumptions, All direct and indirect effect, and source of the historical information

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12
Q

How much assurance does the auditor need for examination, agreed upon procedures, and compliance report of audited FSs?

A
  1. Compliance report - Negative assurance
  2. Agreed upon procedure - No assurance
  3. Examination - Limited assurance
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13
Q

What are the requirements for a compliance examination?

A
  1. Perform a risk assessment
  2. Design responses to the risk assessment
  3. Determine if supplementary audit requirements exist
  4. Obtain written representations from management
  5. Prepare reports
  6. Prepare required documentation
    Risk of material non-compliance
    Inherent risk
    Control risk
    Responses to the risk
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14
Q

What should be included on seperate report on internal control of a governmental audit?

A
  1. MUST report on internal controls with laws and regulations
    Deficiencies and material weaknesses in internal control
    Instances of fraud and non-compliance
    List of findings and management’s responses
    Reporting to outside parties
    Legal or regulatory requirements
  2. MUST include the auditor’s scope of testing of internal controls
    GAGAS does not require opinion on internal controls
    Only requires the scope of auditor’s testings and findings
  3. Distributes report to
    Those charged with governance
    Entity officials
    Oversight bodies
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15
Q

What are the reporting requirements for single audits?

A
  1. Opinion of FSs and supplementary information
  2. Report on IC with provisions to laws and regualtions
  3. Report on compliance and IC over each program
  4. Schdule of findings and questioned costs
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16
Q

What are the enhanced audit requirements for federal financial assistance?

A
  1. Expanded internal control documentation
  2. Expanded written reports of internal control and control risk
  3. Expanded reporting of compliance
  4. Application of single audit standards
17
Q

What is the additional objectives of a single audit?

A
  1. Audit FSs and report on separate schedule of expenditures
  2. Report on compliance and IC over each program
18
Q

What is the difference between a type 1 and type 2?

A

Type 1 is at a point in time
Type 2 is a period of time

19
Q

When should you use SSAE professional guidelines?

A

practitioner is engaged to issue a report on subject matter or on an assertion about the subject matter (in this case, the square footage of the warehouse), that is the responsibility of a party other than the practitioner (in this case, management).

19
Q

What is included in a agreed upon procedure report? (9)

A
  1. Title
  2. Engageing party, subject matter, nature or purpose of engagement.
  3. Statement that subject matter is responsibility of the responsibile party.
  4. Statement engageing party acknowledged that procedures are appropriate
  5. Statement that report may not be suitable for other purposes.
  6. Statement that AUP is performed according to attestation standards and AICPA.
  7. Description of procedures performed and the findings
  8. Statement the the practitioner did not conduct an examination or a review.
  9. Statement that the practitioner is required to be independent.
20
Q

What is the difference between a SOC 1 and SOC 2?

A

SOC 1® report is a report on the internal controls over financial reporting at a service organization

SOC 2® report is a report on internal controls related to one or more of the Trust Services Criteria. The Trust Services Criteria include security, availability, confidentiality, privacy, and processing integrity.

21
Q

What procedures must an auditor perform with service organizations?

A
  1. Access the suitability of criteria
  2. Gain an understanding
  3. Obtain evidence regarding management’s description, design of controls, operating effectiveness (SOC 2)
  4. Representation from management.
22
Q

What kind of assurance is compliance of an audit?

A

Negative assurance

23
Q

What kind of assurance is compliance of an examination?

A

reasonable assurance

24
Q

GAGAS defines 3 types of engagements. What are they?

A

Financial audits, attest engagements, and performance audits.

25
Q

What is the auditor reporting on for a GAGAS audit?

A
  1. Compliance
  2. Internal controls (Risk assessment)
  3. Prospective analysis
  4. Effectiveness and efficient
26
Q

Does a governmental audit require to have an opinion?

A

No, it requires reasonable assurance about whether noncompliance could have a material effect on the entity’s programs.

27
Q

In a preparation, what actions are appropriate when management will not include “no assurance” statement on each page of the financial statements?

A

Either withdrawl, issue disclaimer making it clear that no assurance is provided, or do a compilation

28
Q

Which attest services should have an opinion on pro-forma FSs?

A

Examination, review, audit

CPA Flashcards (7 decks)

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