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AUD Test > Audit 6 > Flashcards

Audit 6 Flashcards

1
Q

Who can revoke or suspend your CPA license?

A

The state board and ONLY the state board

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2
Q

AICPA code of professional conduct

A
  • applicable to all AICPA members
  • distinguishing mark of the profession
  • high degree of responsibility towards the public
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3
Q

Covered member

A

= audit team and office/boss “chain of command”

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4
Q

Immediate family

A

= spouse and dependents

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5
Q

Close relatives

A

= parents, siblings, and adult kids

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6
Q

Instances when independence is NOT impaired

A
  1. fully collateralized car loans
  2. cash advance or credit card balances not exceeding $10,000
  3. bank account that is fully insured
  4. passbook loan
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7
Q

Independence impaired by FINANCIAL interests

A
  1. direct material financial interest
  2. material indirect financial interest
  3. covered member or immediate family has a loan to or from client
  4. acceptance of a gift > token gift
  5. close relative has financial interest that the covered member knows & material or significant influence
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8
Q

Independence impaired by EMPLOYMENT relationships

A
  1. former client employee is on the engagement team (if covers period of employment)
  2. immediate family in key position
  3. partner or professional leaves firm and is employed by client in a key position
  4. audit member seeking or discussing employment with client
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9
Q

Independence impaired by BUSINESS relationships

A
  1. make management decisions for client
  2. if client is over 1 year overdue on payment
  3. actual or threatened litigation MAY impair

** acting as an honorary trustee or being in the same trade association / country club does not impair indpendence

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10
Q

Professional competence

A

knowledge or technical subject matter of ability to obtain knowledge

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11
Q

What are the exceptions to the rule that you cannot disclose confidential client info?

A
  1. subpoena
  2. quality/ peer review
  3. inquiry by state CPA society
  4. your legal defense team needs it cause they’re suing you
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12
Q

When are contingent fees permitted?

A
  1. fixed by courts
  2. tax matters with regard to a court proceeding
  3. compilations to be used by third party if disclose lack of independence
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13
Q

What is the most highly tested in the “Acts Discredible Rule”?

A

Failure to return records to a client after they have demanded them

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14
Q

What type of advertising and solicitation is not allowed?

A

Any that is False, Misleading or Deceptive

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15
Q

Adverse interest threat

A

objectivity impaired- opposing interests

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16
Q

Advocacy threat

A

objectivity and independence compromised- promote client’s interests/position

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17
Q

Familiarity threat

A

sympathetic or too accepting

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18
Q

Management participation threat

A

acting as management

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19
Q

Self-interest threat

A

get benefits

20
Q

Self-review threat

A

evaluating your own work

21
Q

Undue influence threat

A

subordinate judgment

22
Q

What are the PCAOB’s duties?

A
  1. register public accounting firms
  2. establish rules for audits of issuers
  3. conduct inspections, investigations and disciplinary proceedings
23
Q

PCAOB inspection rules for auditors of issuers

A

Once a year if > 100 issuers

Every 3 years if less than or = 100

24
Q

Audit partner rotation rule (SOX)

A

lead and concurring partner-must rotate every 5 years for 5 years (5 on- 5 off)
other audit partners- 7 years (2 year time-out)

25
Q

How long is the “cool off” period?

A

ONE year

26
Q

When is pre-approval of non-audit services not required?

A
  1. services don’t exceed 5% of total revenues from client
    AND
  2. promptly brought to attention of the audit committee
    AND
  3. approved before completion of audit
27
Q

With regard to tax services, what can an audit firm not do?

A
  1. tax services involving certain confidential or aggressive tax transactions
  2. tax returns for officers or immediate family members (of client)
28
Q

What are the three broad categories of misconduct?

A
  1. while performing accounting services
  2. outside the scope of accounting services
  3. criminal conviction
29
Q

What 5 penalties can the state accountancy board impose?

A
  1. suspension or revocation of license
  2. monetary fine
  3. reprimand or censure
  4. probation
  5. CPE requirement
30
Q

Audit documentation should…

A
  • indicate that accounting records = financial statement compliance with standards
  • be prepared enough for an experienced auditor with no previous connection to understand
31
Q

How long must work papers be kept?

A

5 years or SAS

7 years for PCAOB

32
Q

How long does the auditor have to complete the workpapers?

A 
SAS = 60 days after report release
PCAOB = 45 days after report release
33
Q

What does the permanent file include?

A

audit documentation that has a continuing interest from year to year

Examples: contracts, pension plans, leases, stock options, bylaws, articles of incorp., minutes, bond indentures, internal info

34
Q

What does the current file include?

A

all audit documentation applicable to the year under audit

Examples: audit plan, financial statements, working trial balance, letters of confirm, letters of rep, analyses, worksheets, abstracts or copies of docs, summaries of significant audit findings/issues, records of tests of controls, etc.

35
Q

Transaction tagging

A

electronically mark specific transactions and follow them through the client’s system

36
Q

Embedded Audit modules

A

sections of the application programs code that collect transaction data for the auditor
-usually built into the application program

37
Q

Test data

A

process a set of test data using the client’s system, but off-line and under the auditor’s control

  • you already know the result that you should get
  • test things such as invalid #’s, excess pay rate, excess hours
38
Q

Integrated test facility

A

test data is commingled with live data

  • don’t tell the client
  • on-line
39
Q

Parallel simulation

A

Reperformance test

-re-process some of client’s data using own software and compare results

40
Q

What are the government auditing standards?

A

GAGAS
Generally accepted government auditing standards
**These are also called the yellow book standards

41
Q

Audit risk of noncompliance

A

= RMM x DR

risk of material noncompliance * detection risk

42
Q

Risk of material noncompliance

A

= Inherent risk x Control risk

43
Q

Quality control and assurance necessary for performing GAGAS audits

A
  1. maintain a system of quality control

2. have an external peer review every 3 years

44
Q

Quality control elements

A 
"HELP ME"
Human resources
Engagement/ client acceptance and continuance
Leadership responsibilities
Performance of the engagement
Monitoring
Ethical requirements
45
Q

Does failed quality control = failed GAAS

A

NOPE

AUD Test (7 decks)

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