AUD3 Flashcards
which is correct about auditor’s responsibility to report fraud?
1. fraudulent activities involving senior management of which the auditor becomes aware should be reported directly to the SEC
2. the disclosure of fraudulent activities to parties other than the client’s senior management and those charged with government is not ordinarily part of the auditor’s responsibility.
[2]
1–> should report to governance, not SEC
which would not help in assessing the competence, objectivity, and application of a systematic and disciplined approach by the entity’s internal audit function?
1. discussions with management personnel
2. the results of analytical procedures
[2]
2–> may be used to enhance the auditor’s understanding of the business or to evaluate financial statement assertions, but not competence
an auditor who discovers that the client’s employees paid small bribes to municipal officials most likely would withdraw from the engagement if:
1. the client receives financial assistance from a federal government agency
2. management fails to take the appropriate remedial action.
[2]
2–> even if the act of noncompliance is immaterial, it would occur because the implications of management’s failure to act appropriately may affect the auditor’s ability to rely on managements representations
which would not be considered an entity control?
1. biannual distribution of the code of conduct via intranet
2. period-end financial reporting controls
[2]
2–> control acitivity related to the existence of specific assets, not an entity-level control.
when it is determined that the client’s internal controls over the payroll are effective, the focus on the audit procedures performed should be to test:
1. completeness
2. valuation and allowance
3. rights and obligations
[2]
1–> in the event auditor decided to test completeness, the auditor should search for unrecorded liabilities
3–>to test rights and obligations, the auditor would review the client’s supporting documentation to ascertain whether the payroll accrual represents the obligation of the client
two assertions for which confirmation of accounts receivable balances provides primary evidence are:
1. completeness and existence
2. valuation and rights and obligations
3. rights and obligations and existence
4. completeness and valuation
[3]
3–>
rights and obligations–>does the client have a right to the reveible?
existence–> does the receivable really exist?
an auditor discovers a material effect on the client’s financial statements, the auditor would withdraw from the engagement if:
1. the client does not take the remedial action that the auditor considers necessary
2. the auditor has already assessed control risk at a high level
[1]
1–> even when the act of noncompliance is not material to financial statements, the auditor may conclude that withdraw is necessary if [1]
2–> assessment of control risk at a high level would cause an auditor to modify the nature, timing or extent of audit procedures, but not withdraw
which factors would an auditor consider in evaluating the control environment for an audit client?
1. monthly bank reconciliations with supervisor sign-oof
2. the ethical values demonstrated by government
[2]
1–> A sample of control activity. control activities are impacted by the control environment buo not part of the control environment
which would assist an auditor in identifying related party transactions?
1. performing analytical procedures for indications of possible financial difficulties
2. Review confirmations of loans receivable and payable for indications of guatantees.
[2]
1–>不存在對外關係
2–> 常用於確定關聯方是否存在
which management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?
1. inventory is complete
2. inventory is properly valued.
[1]
1–>this is done in conjunction with inventory objection, through testing the physical inventory report by tracing test counts to the report to verify that reported inventory is complete
2–> testing whether management properly valued its inventory would not satisfy the audit objective, but testing for completeness would.
which least likely to be used to safeguard cash?
1. bank statement
2. receiving reports
[2]
2–> may help to prevent the theft inventory, not cash
which is not an appropriate testing method when testing the operating effectiveness of controls during an integrated audit?
1. confirmation
2. inspection
[1]
operating effectiveness of controls can be tested through inspection, reperformance, or recalculation.
in the first audit of a new client, an auditor was able to extend auditing procedures to gather sufficient evidence about consistency. under these circumstances, the auditor should:
1. state that the accounting principles have been applied consistently
2. not refer to consistency in the auditor’s report
[2]
1–>consistency deals with the comparability of financial statements from year to year. unless the auditor’s report explicitly otherwise it implies that the financial statements are comparable between periods.
2–> the auditor’s standard report implies that the auditor is satisfied that the comparability of financial statements between periods has not been materially affected by changes in accounting principles and that such principles have been consistently applied between or among periods. since the auditor has gathered sufficient evidence about consistency, no reference need to be made in the report.審計師的標準報告意味著審計師確信會計原則的變化並未對各期間財務報表的可比性產生重大影響，並且這些原則在各期間之間得到了一致的應用。 由於審計師已收集了足夠的一致性證據，因此報告中無需提及。
during the review of work performed for a review engagement, the supervising accountant becomes aware that information provided by management is incorrect. in this situation, the accountant should:
1. make inquiries of management regarding the intent to commit fraud
2. request that management consider the effect of the related matter on the financial statements.
[2]
1–> The accountant does not need to assume that management has the intent to commit fraud.
2–> if the supervising accountant becomes aware that information provided by management is incorrect, then the accountant should request that management consider the effect of the related matters on the financial statements.
performing inquiry and analytical procedures is the primary basis for an accountant to issue a:
1. review report on prospective financial statements that present an entity’s expected financial position, given one or more hypothetical assumptions.
2. review report on comparative financial statements for a nonisssuer in its second year of operations.
[2]
1–> Prospective financial statements that present an entity’s expected financial position may be subject to
1) an examination
2) a complication
3) a preparation
4) agree-upon procedures
but not a review
2–> Performing inquiry and analysis procedures is the primary basis for an accountant to issue a review report on comparative financial statements for a nonissuer in its second year of operations.
