Audit 303

Question 1

Ratio estimation

Answer 1

is based on ratios between audited amounts and recorded amounts. This approach is most efficient when the ratio is not equal to one.

Question 2

Report audit on regulatory basis and gaap, unmodified is correct.

Answer 2

No

Question 3

The introductory paragraph in the auditor’s report should:

Answer 3

identify the entity whose financial statements have been audited,
state that the financial statements have been audited,
identify the title of each statement that the financial statements comprise, and
specify the date or period covered by each financial statement that the financial statements comprise.

Question 4

An accountant’s report on the application of accounting principles to a specific transaction should include a

Answer 4

statement that any difference in the facts, circumstances, or assumptions presented may change the report. This is necessary since the accountant’s conclusion as to the application of generally accepted accounting principles may be significantly influenced by certain facts, circumstances, or assumptions, and changes could result in the financial statements becoming misleading. An engagement to report on the appropriate application of generally accepted accounting principles is performed in accordance with standards established by the American Institute of Certified Public Accountants. The report encourages management to consult with their continuing accountants and provides a description of the appropriate accounting principles (i.e., not negative assurance).

Question 5

he auditor’s report on an examination of internal control should include which of the following

Answer 5

A definition of internal control

Question 6

The only Statemente in a compilation

Answer 6

Management is responsible for the accompanying financial statements.

Question 7

The 2 statement in a review report

Answer 7

we are not aware of any material modifications that should be made to the accompanying financial statements” and “substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole

Question 8

Statement in a audit report

Answer 8

“to obtain reasonable assurance about whether the financial statements are free from material misstatement”

Question 9

If the compiled financial statements are not expected to be used by a third party

Answer 9

he accountant is required to issue a compilation report.

Question 10

Under PCAOB Auditing Standard 3, audit documentation should be retained no fewer than how many years following the report release date?

Answer 10

5 year

Question 11

An entity must have a single audit in any year when:

Answer 11

the entity spends $750,000 or more per fiscal year in federal awards, grants, or funds,
the entity spends funds from one or more than one federal program, and
if the entity only expends funds from one program, it “may” be eligible for a program audit versus a single audit.

Question 12

Examples of discrepancies in accounting records that could be used to assess the risk of material misstatement due to fraud include the following

Answer 12

Transactions that are not recorded in a complete or timely manner or are improperly recorded as to amount, accounting period, classification, or entity policy
Unsupported or unauthorized balances or transactions
Last-minute adjustments that significantly affect financial results
Evidence of employees’ access to systems and records inconsistent with that necessary to perform their authorized duties
Tips or complaints to the auditor about alleged fraud
The other answer choices are examples of conflicting or missing evidential matter that could be used to assess the risk of material misstatement due to fraud.

Question 13

If management declines to present supplementary information required by the Governmental Accounting Standards Board (GASB), the auditor should issue:

Answer 13

an unqualified opinion with an additional explanatory paragraph

Question 14

Title III, Section 303 of SOX deals

Answer 14

with any action taken to fraudulently coerce, manipulate, or mislead the auditor. It prohibits any director or officer from acting in this manner, as well as anyone acting under their direction. Refusal to answer auditor questions honestly could be considered an attempt to mislead the auditor

Question 15

Regarding the predictability of analytical procedures in a financial statement audit

Answer 15

Relationships involving income statement accounts tend to be more predictable than relationships involving only balance sheet accounts.

Question 16

An auditor can report on financial statements prepared in conformity with a special-purpose framework, but the report will:

Answer 16

identify the financial statements by names other than those used with GAAP (in this case, “statement of cash receipts and disbursements” instead of “income statement”),
state the basis of presentation and that it is other than GAAP,
refer to a note disclosure for more information about the basis, and
state that the financial statements are fairly presented (as appropriate) according to this basis.

Question 17

When third-party use of prospective financial statements is expected, an accountant may not accept an engagement to

Answer 17

Review,

compilation,examinations, agreed upon procedures,yes

Question 18

The auditor’s overall responses to address the assessed risks of material misstatement at the financial statement level may include the following:

Answer 18

Emphasizing to the audit team the need to maintain professional skepticism in gathering and evaluating audit evidence
Assigning more experienced staff or those with specialized skills such as specialists
Providing more supervision
Incorporating additional elements of unpredictability in the selection of further audit procedures to be performed
Substantive responses, further audit procedures, and test of controls are specific responses, not an overall response.