Audit 202

Question 1

control deficiency

Answer 1

exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis

Question 2

significant deficiency

Answer 2

is a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected

Question 3

Section 102 of the Sarbanes-Oxley Act (SOX)

Answer 3

a statement of the firm’s quality control policies,
a list of the names and license numbers of all accountants associated with the firm,
information regarding criminal, civil, or administrative actions or disciplinary proceedings against the firm (or any person in the firm), and
consent from the firm to cooperate and comply with any request made by the PCAOB in furtherance of its authority and responsibilities.
Once registered, the firm must submit annual reports along with registration and annual fees to the PCAOB.

Question 4

Statement on Quality Control Standards (SQCS) 7,

Answer 4

Leadership responsibilities for quality within the firm
Relevant ethical requirements
Acceptance and continuance of client relationships and specific engagements
Human resources
Engagement performance
Monitoring

Question 5

Changes in accounting principle having a material effect on the financial statements for an audit they require the addition of an emphasis-of-matter paragraph in the independent auditor’s report, the same is required for a compilation or a review.?

Answer 5

Yes

Question 6

Section 408 of the Sarbanes-Oxley Act (SOX

Answer 6

who have issued material restatements of financial statements,
who experienced significant volatility in their stock price,
have the largest market capitalization,
are emerging companies with disparities in price to earnings ratios, and
with operations that significantly affect any material sector of the economy.

Question 7

Section 105 of SOX Title I, “Investigations and Disciplinary Proceedings,” dictates that:

Answer 7

Possible disciplinary actions include temporary suspension or permanent revocation of registration; temporary or permanent suspension of persons; temporary or permanent limitation on activities, functions, or operations of the firm; civil monetary penalties; censure; additional professional education or training; and any other sanction provided for in the PCAOB rules. Additionally, the PCAOB will strictly sanction intentional or knowing conduct, including reckless conduct, that results in violations and repeat violations

Question 8

Title IV of Sarbanes-Oxley

Answer 8

requires that the financial statements reflect all material correcting adjustments, material off-balance-sheet transactions, arrangements, obligations, and other relationships, and that pro forma information, if included, does not contain untrue statements or omissions of material facts.

Question 9

Section 403 of SOX Title IV, “Disclosures of Transactions Involving Management and Principal Stockholders,” dictates that:

Answer 9

Dictates that any person who is directly or indirectly the beneficial owner of more than 10% of any class of any equity security or is a director or an officer of the issuer must file statements required by SOX and the SEC.

Question 10

Which of the following statements regarding the going concern assumption is correct?

Answer 10

The statement “Continuation of an entity as a going concern is assumed in financial reporting in the absence of significant information to the contrary” is correct

Question 11

To ensure that the audit report for an issuer is prepared in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the report must:

Answer 11

attest to and report on the internal control assessment made by the management of the issuer.

Question 12

An examination of prospective financial statements is a professional service that involves:

Answer 12

Evaluating the preparation of the prospective financial statements.
Evaluating the support underlying the assumptions.
Evaluating the presentation of the prospective financial statements for conformity with AICPA presentation guidelines.
Issuing an examination report.

Question 13

Audits of entities receiving federal financial assistance usually have the following common element

Answer 13

Auditors must follow generally accepted auditing standards and government auditing standards.
The auditor’s consideration of internal control is to include obtaining and documenting an understanding of internal control established to ensure compliance with the laws and regulations applicable to the federal financial assistance.
The auditor issues a report on the consideration of internal control.
The auditor is to determine and report on whether funds are administered in accordance with applicable laws and regulations.

Question 14

A CPA is required to comply with the provisions of the Statements on Standards for Attestation Engagements (SSAE) when engaged to:

Answer 14

review management’s discussion and analysis (MD&A) prepared pursuant to rules and regulations adopted by the SEC.

Question 15

Which of the following statements is correct regarding an independent auditor’s reliance on a client’s internal audit staff?

A.
An independent auditor should not reduce the amount of audit testing based on the work of internal auditors.

Answer 15

An internal auditor should provide direct assistance to the independent auditor during preparation of audit workpapers.

Question 16

PPS sampling

Answer 16

s used in the test of details, the auditor would consider two types of risk: incorrect acceptance and incorrect rejection. The auditor controls those risks by determining the risk level for the sample.

Question 17

initially concealed by a forged document ( tradución)

Answer 17

inicialmente oculto por un documento falsificado

Question 18

The vouchers payable department should:

Answer 18

match vendor’s invoice with the related receiving report, which ensures that goods billed were received (i.e., that voucher is valid).
approve vouchers for payment by having an authorized employee sign the vouchers (authorization).
indicate the asset and expense accounts to be debited (ensuring proper classification

Question 19

Section 406 of SOX Title IV, “Code of Ethics for Senior Financial Officers,” dictates that:

Answer 19

ctates that each issuer disclose whether or not they have adopted a code of ethics for senior financial officers. Any change in or waiver of the code of ethics for senior financial officers requires immediate disclosure.

Question 20

Sectio 402 403 404 SOX

Answer 20

ection 402 of Title IV of the Sarbanes-Oxley Act (SOX) dictates that it is unlawful for any issuer to extend or maintain credit in the form of a personal loan to or for any director or executive officer of that issuer.

Section 403 requires disclosures from a person who is directly or indirectly a beneficial owner of more than 10% of any class of any security registered pursuant to Section 12 of the Securities Exchange Act of 1934.

Section 404 requires that an internal control report be filed with each annual report. Management must acknowledge responsibility for establishing and maintaining adequate internal control.

Question 21

Materiality

Answer 21

recognizes the importance of some matters for fair presentation of financial statements in conformity with GAAP, in contrast with other matters,
involves judgments which depend upon the surrounding circumstances, and
necessarily involves both quantitative and qualitative judgments.
In addition, materiality is influenced by the auditor’s perception of the needs of a reasonable person who will rely on the financial statements.

Question 22

Section 402 of SOX Title IV, “Enhanced Conflict of Interest Provisions,” dictates that:

Answer 22

ictates that it is unlawful for any issuer to extend or maintain credit in the form of a personal loan to or for any director or executive officer of that issuer.

Question 23

Which of the following statements represents a quality control requirement under Government Auditing Standards?

Answer 23

quality control system is not in place.

B.
A CPA seeking to enter into a contract to perform an audit should provide the CPA’s most recent external quality control review report to the party contracting for the audit.

Question 24

ee arrangements generally would not be permitted under the ethical standards published in the Treasury Department Circular 230?

Answer 24

A contingent fee for preparing a client’s income tax return

Question 25

Section 11(A) of the Securities Act of 1933:

Answer 25

shifts the burden of proof in a lawsuit from the investor to the CPA who audited the financial statements.desplaza la carga de la prueba en una demanda por parte del inversor a la CPA que auditó los estados financieros.

Question 26

To determine whether a particular assertion is relevant to a significant account balance or disclosure, the auditor should evaluate

Answer 26

the nature of the assertion, the volume of transactions or data related to the assertion, and the nature and complexity of the systems, including the use of information technology, by which the entity processes and controls information supporting the assertion. No the individual transaction

Question 27

IT poses specific risks to an entity’s internal control, including the following:

Answer 27

Reliance on systems or programs that are inaccurately processing data, processing inaccurate data, or both Unauthorized access to data, including the recording of unauthorized or nonexistent transaction or inaccurate recording of transactions Possibility of IT personnel gaining access privileges beyond those necessary to perform assigned duties Unauthorized changes to data in master file Unauthorized changes to systems or programs Failure to make necessary changes to systems Inappropriate manual intervention Potential loss of data or inability to access data

Question 28

The accountant's documentation in a review engagement should include the followi

Answer 28

Any additional procedures performed in response to significant unexpected differences arising from the analytical procedure and the results of such additional procedures The significant matters covered in the accountant's inquiry procedures and the responses thereto Any findings that are significant Unusual matters that the accountant considered during the performance of the review procedures, including their disposition Communications, whether oral or written, to the appropriate level of management regarding fraud or noncompliance with laws and regulations that come to the accountant's attention The representation letterThe engagement letter The analytical procedures performed The expectations when the expectations are not otherwise readily determinable from the documentation of the work performed, and factors considered in the development of those expectations Results of the comparison of the expectations to the recorded amounts or ratios developed from recorded amounts Management's responses to the accountant's inquiries regarding fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount Any additiona

Question 29

A registered public accounting firm must make representations to the audit committee:

Answer 29

at least annually and prior to accepting the initial engagement

Question 30

A change in accounting estimate (such as a change in the useful life of a depreciable asset) is accounted for prospectively and does not affect the comparability of financial statements between periods

Answer 30

Since the auditor's standard report implies that consistency exists, no modification to the report is necessary.

Question 31

. Procedures for adequate planning (prior to the start of fieldwork) would include:

Answer 31

B. The minimum amount of misstatements that may be considered to be significant deficiencies Correct C. The schedules and analyses that the client's staff should prepare D. The effects that inadequate controls may have over the safeguarding of assets You are correct, the answer is C. The auditor must adequately plan the work and must properly supervise any assistants. Procedures for adequate planning (prior to the start of fieldwork) would include: reviewing correspondence files, prior year's working papers, permanent files, financial statements, and auditor's reports; discussing matters that may affect the audit with firm personnel responsible for nonaudit services to the entity; inquiring about current business developments affecting the entity; reading the current year's interim financial statements; discussing the type, scope, and timing of the audit with management of the entity, the board of directors, or its audit committee; considering the effects of applicable accounting and auditing pronouncements, particularly new ones; coordinating the assistance of entity personnel in data preparation; determining the extent of involvement, if any, of consultants, specialists, and internal auditors; establishing the timing of the audit work; and establishing and coordinating staffing requirements. The auditor would discuss the schedules and analyses that the client's staff should prepare when discussing general audit strategy with management prior to the start of fieldwork