AUD SU2

Question 1

What is the code of professional conduct?

Answer 1

responsibilities, protect public interest, act with integrity, be objective and independent, act w/ due professional care, follow the scope and nature of services

Question 2

How is independence impaired?

Answer 2

If covered member...
has direct financial interest
has loans to or from attest client
has indirect material financial interest
loan executor of trust
owns 5% or more in the company
litigation

Question 3

Activities that do not impair independence

Answer 3

preparing taxes, business risk consulting, advisory services, non-issuer book-keeping, payroll processing

Question 4

General standards state:

Answer 4

Professional competence, due professional care, plan and supervise, sufficient relevant data

Question 5

SOX professional responsibility

Answer 5

must disclose fees in proxy statement, mandatory audit rotation, retain work papers for 7 years

Question 6

RMM=

Answer 6

Inherent Risk x Control Risk

Question 7

AR=

Answer 7

Inherent Risk x Control Risk x Detection Risk

Question 8

Definition of materiality

Answer 8

professional judgement about whether or not a misstatement could reasonably influence the economic decision of users a group

Question 9

Types of Misstatement

Answer 9

Factual (real, no doubt)
Judgmental misstatements (unreasonable accounting estimate or inappropriate accounting policy)
Projected ( auditor estimates the number of misstatements in the population based on audit samples)

Question 10

5 sources of info for analytical procedures

Answer 10

1. financial info from comparable prior periods
2. anticipated results
3. Relationships among elements of financial information
4. Comparable information from a client’s industry
5. relationships between financial and relevant non-financial information (# of hours worked and labor costs)

Question 11

Fraud Triangle

Answer 11

Opportunities, pressure, and rationalization

Question 12

Components of internal control

Answer 12

CRIME: Control Activities, Risk Assessment Process, Information System, Monitoring of controls, Control Environment

Question 13

Control Activities

Answer 13

authorization, performance reviews, information processing, segregation of duties

Question 14

Information systems for internal control

Answer 14

Identify and records all valid transactions, classifies properly, measure properly, and presents and disclosed properly.