Audit 6

Question 1

Direct Financial Interest

Answer 1

Stock ownership, even if owned in a blind trust

Financial interest in a client through a partnership and the member is a general partner

Financial interest in a trust when the member is the trustee

Question 2

Indirect financial interest examples

Answer 2

Member owns shares in a mutual fund that invests in the attestation client

Member owns a direct financial interest in Company A and Company A has a direct financial interest in the attestation client

Question 3

Independence is NOT impaired in a financial institution client by (ordinary course of business)

Answer 3

Collateralized (Fully) car loans with a financial institution client

Cash advance or credit card balances not exceeding $10,000

A bank account that is fully insured by the government

A passbook loan

Question 4

General standards include

Answer 4

Professional Competence

Due Professional Care

Planning and Supervision

Sufficient Relevant Data

Question 5

Member is obligated to disclose confidential information even without the consent of the client in the following circumstances

Answer 5

Subpoena or summons

Quality review of the member’s professional practices by the AICPA

Inquiry either by the ethics division or the trial board

Question 6

Types of services where receiving a commission is acceptable (MUST DISCLOSE)

Answer 6

C-ompilation
A-dvisory
T-ax

Question 7

The PCAOB is subject to oversight by the SEC and has the duty to

Answer 7

Register public accounting firms

Establish rules

Conduct Inspections

Question 8

Broad categories of misconduct

Answer 8

While performing audit

Outside the scope of accounting services

Criminal conviction

Question 9

Audit documentation should

Answer 9

Assist with planning, conducting, and supervising the audit

Show that the accounting records reconcile with the F/S

Be prepared in enough detail so that an EXPERIENCED Auditor who has no previous connection with the audit can understand including the NET(nature, extent, timing)

Question 10

Document retention

Issuers (PCAOB )

Answer 10

Documentation retained 7years

Documentation completion date 45 days following the report release date

Question 11

Document retention

NON-issuers(SAS)

Answer 11

Documentation retained 5 years

Final audit documentation file to be assembled within 60 days following the report release date

Question 12

Significant audit findings include matters that

Answer 12

Are related to the selection and application of accounting principles

Are related to matters that give rise to significant risks

Are related to possible material misstatements in the F/S

Cause significant difficulty in applying necessary audit procedures

May result in modification of the auditor’s opinion or the inclusion of an emphasis-of-matter paragraph in the auditor’s report

Need to revise the auditor’s previous risk assessment

Question 13

Areas that must be separated in IT

Answer 13

C-ontrol team
O-perators
P-rogrammers
A-nalyst(System)
L-ibrarian

Question 14

Audits of recipients of federal financial assistance should be conducted in accordance with both GAAS and GAGAS. The following also apply

Answer 14

Expanded IC documentation and testing requirements

Expanded reporting to include formal written reports on the consideration of IC and the assessment of control risk

Expanded reporting to include whether the federal financial assistance has been administered in accordance with applicable laws and regulations

Applications of single audit standards to federal financial assistance

Question 15

Attestation requirements under GAGAS/GAS could include

Answer 15

Compliance with laws, regulations, rules, contracts, or grants

Effectiveness of IC over compliance with specified requirements

Presentation of MD&A

Reliability of performance measures

Question 16

Objectives of performance audits

Answer 16

I-C
C-ompliance
E-ffectiveness, Economy, and Efficiency

Question 17

Audit risk of noncompliance=

Answer 17

Risk of material noncompliance X Detection risk

As risk of noncompliance increases

CPA should decrease  detection risk=(More audit work)

Question 18

Types of government reports

Answer 18

R-eport on IC over compliance
O-pinion of compliance
C-ombined report on compliance and IC over compliance

Question 19

Required documentation is includes the following

Answer 19

The assessed risk of material noncompliance

Responses to the risk assessment

The basis or rationale for materiality levels

Compliance with supplemental requirements

Question 20

GAGAS includes the following ethical principles

Answer 20

Serving the public interest

Integrity

Objectivity

Proper Uses of Government Information, Resources, and Positions

Professional Behavior

General Standards

Question 21

General Standards are made up of?

Answer 21

Independence

Professional judgment

Competence

Quality Control and Assurance

Question 22

GAGAS Requirements for performing Financial Audits

Answer 22

Previous Audits and Attestation Engagements

Fraud, noncompliance, and abuse

Develop a Finding

Audit Documentation

Question 23

Elements of a finding include

Answer 23

Criteria

Condition

Cause

Effect or potential effect

Question 24

GAGAS Requirements for Reporting on Financial Audits

Answer 24

Auditor’s compliance with GAGAS

Report on IC and Compliance with Provisions of Laws, Regulations, Contracts and Grant Agreements

Communicate Deficiencies in IC, Fraud, and Noncompliance

Question 25

Content of report on IC of Governmental entities

Answer 25

Assertion that evaluating compliance with laws, rules, and regulations with a direct and material effect on the F/S is part of developing an opinion on F/S

The Assertion that specific controls relating to financial reporting are considered

An indication wither no weaknesses were found or that significant deficiencies were found, and an indication whether those deficiencies were material.

Question 26

Threats to Independence

Answer 26

Self-Interest Threat

Self-Review Threat

Bias Threat

Familiarity Threat

Undue Influence Threat

Management Participation Threat

Structural Threat

Question 27

Documentation of Independence must include

Answer 27

Threats to independence
Safeguards
Considerations
The auditor’s understanding

Question 28

The interrelated elements of quality control are:

Answer 28

H-uman resources
E-ngagement/client acceptance and continuance
L-eadership responsibilities
P-erformance of the enegagement

M-onitoring
E-thical requirements