AUD 5.1 - Integrated Audit Procedures

Question 1

Who is required to perform an integrated audit yearly?

Answer 1

Large accelerated filers that are issuers

Question 2

Large accelerated filers are considered:

Answer 2

Has a worldwide market value of outstanding common equity held by non affiliates of $700M or more

Question 3

An accelerated filer is considered:

Answer 3

An issuer with a worldwide market value of outstanding common equity held by non affiliates of $75M or more but less than $700M

Question 4

Who governs the audit and report of a nonissuers internal control over financial reporting that is integrated with a financial statement audit?

Answer 4

SAS 130

Question 5

What is the objective in an audit of internal control?

Answer 5

To express an opinion on he effectiveness of the entity’s internal control over financial reporting

Question 6

An entity’s internal controls cannot be considered effective if:

Answer 6

One or more material weaknesses exist

Question 7

Section 404 of the sarbanes-oxley act of 2002 requires each issuers annual report to contain an internal control report that:

Answer 7

States managements responsibility
And
Contains an assessment of the effectiveness of the internal control structure and procedures for financial reporting

Question 8

An audit of internal control can only be performed for nonissuers if management does what?

Answer 8

1. Accepts responsibility for the effectiveness of internal controls
2. Evaluates the effectiveness of the internal control
3. Supports its assessment about the effectiveness of internal control with evidence
4. Provides written assessment about the effectiveness of the entity’s internal controls

Question 9

An auditor for issuers and nonissuers should obtain a written representation letter from management in which management:

Answer 9

1. Acknowledges its responsibility for establishing and maintaining effective internal control
2. Assesses their internal control as of a specified date
3. That management didn’t rely on the auditors prcedures for their assessment
4. Disclosed all deficiencies in design and operation
5. Describes fraud resulting in material misstatement or involved senior management
6. Significant changes to internal control after the “as of” date of the report

Question 10

Failure to obtain a written representation will result in?

Answer 10

A withdrawn or disclaimer (but usually withdrawal)

Question 11

This approach is used in selecting controls to test. The auditor would evaluate overall risk at the financial statement level, consider controls at the entity level, and then focus on accounts, disclosures, and assertions for which there is a reasonable possibility of material misstatement ;

Answer 11

Top down approach

Question 12

Entity level controls include controls related to:

Answer 12

The control environment
Management override
The company’s risk assessment process
Centralized processing
Monitoring the results of operations
Monitoring other controls
Period end financial reporting
Policies that address significant business on troll and risk management practices

Question 13

The auditor should test controls that are:

Answer 13

Important in addressing the risk of material misstatement

Question 14

In an integrated audit, the auditor should evaluate the components of ICFR and determine whether the components are:

Answer 14

Present and functioning in design, implementation, and operation
AND
Operating together in an integrated manner

Question 15

Components of internal control over financial reporting (ICFR) are:

Answer 15

Control environment
Risk assessment
Information and communication systems
Monitoring
Existing control activities

Question 16

In testing controls, the auditor should:

Answer 16

Evaluate the design effectiveness of the controls
AND
Test and evaluate the operating effectiveness of the controls

Question 17

This is done to determine where the controls, if applied as prescribed, satisfy the company’s control objectives and can effectively prevent or detect and correct material misstatements:

Answer 17

Evaluating the design and effectiveness of controls

Question 18

This is done to determine whether the controls are operating as designed and whether the persons implementing the controls are qualified to implement them effectively:

Answer 18

Test and evaluate the operating effectiveness of the controls

Question 19

The auditor should determine whether identified deficiencies represent a significant deficiency or a material weakness. This determination should be based on:

Answer 19

1. The magnitude of the potential misstatement resulting from the deficiency
2. Whether there is a reasonable possibility that the control will fail to prevent, or detect and correct a material misstatement

Question 20

For issuers and nonissuers, if the auditor determines that the required disclosures for one or more material weaknesses have not been included in managements report, what should happen?

Answer 20

This should be stated in the auditors report

Question 21

Fo issuers and nonissuers, if managements report is incomplete or improperly presented, what should happen?

Answer 21

The auditor should modify the own report to discuss the situation

Question 22

For issuers and nonissuers, if managements report contains additional information beyond what is required, what should happen?

Answer 22

The auditor should disclaim an opinion on such additional information

Question 23

What is different between a financial statement audit and an integrated audit for a nonissuer in regards to the relevant period?

Answer 23

FS Audit: a longer period such as a year
Integrated: a point in time

Question 24

What is different between a financial statement audit and an integrated audit for a nonissuer in regards to the extent of testing?

Answer 24

FS audit: the auditor is not required to test controls over ALL relevant assertions
Integrated audit: the auditor should obtain evidence about the effectiveness of selected controls over ALL relevant assertions

Question 25

What is different between a financial statement audit and an integrated audit for a nonissuer in regards to the communication of control deficiencies?

Answer 25

FS Audit: significant deficiencies and material weaknesses should be communicated within 60 days of the report release date and include restricted use language
Integrated audit: significant deficiencies and material weaknesses should be communicated by the port release date an no restricted use language is required