AUD 5-6

Question 1

The accountant may compile F/S that omit substantially all disclosures provided that:

Answer 1

1. Report clearly indicates the omission by including a fourth paragraph disclosing such omissions; and
2. Omission is not intended to mislead users

Note: need not disclose the reason for omission of the disclosures

Question 2

Additional auditor responsibilities related to a GAGAS audit includes:

Answer 2

• Obtaining an understanding of the possible effects of the identified laws and regulations on the F/S
• Assessing whether MGMT has identified laws and regulations that have a direct and material impact on the amounts in the F/S
• Communication of the inadequacy of a GAAS audit if additional regulatory requirements exist

(Does no include expression of an opinion on internal control over compliance)

Question 3

What kind of assurance does a report on compliance with contractual agreements or regulatory requirements related to audited F/S provide?

Answer 3

Negative assurance

Question 4

When can negative assurance be rendered on a client’s compliance with regulatory requirements?

Answer 4

• When the auditor has expressed an unmodified or qualified opinion
• No identified instances of noncompliance, and
• Regulatory requirements have been subjected to the audit procedures as part of the audit

NOTE: If adverse/disclaimer issued, then only issue a report on compliance when there are identified instances of noncompliance

Question 5

When the group engagement partner decides not to assume responsibility for the component auditor’s work, the group engagement team should request the component auditor to communicate:

Answer 5

1. Whether the component auditor complied with ethical requirements (independence, competence)
2. Identification of the financial information of the component
3. The component auditor’s overall findings, conclusions, or opinion

Details need not be communicated

Question 6

When an auditor detects noncompliance with requirements that have a material effect on a major program, what opinion should be issued?

Answer 6

Qualified or adverse opinion

Question 7

In an examination of an entity’s compliance with specific requirements, what is required of management regarding representations?

Answer 7

MGMT representations must be in writing. Oral representations are not significant.

Question 8

What actions result from a scope limitation?

Answer 8

The auditor may disclaim an opinion or withdraw

Question 9

What kind of opinion results from a material weakness in internal control?

Answer 9

Adverse opinion

Question 10

When audited F/S are presented in comparative form with compiled F/S from a prior year, what should the auditor do?

Answer 10

• Auditor should either reissue their report on the compiled statements; OR
• Include a separate paragraph in the current year report describing the responsibility assumed for the compiled statements

Question 11

What does Section 404 of the SOX Act of 2002 require of auditors for issuers?

Answer 11

Requires auditors to attest to, and report on, the internal control assessment made by management of the issuer