Audit 6 - Professional Responsibilities, Audit Doc, IT, Gov, QC

Question 1

What may justify a departure from GAAP?

Answer 1

Unusual circumstances, such as new legislation or the evolution of a new form of business transaction.

Question 2

What is independence required for?

Answer 2

Attestation engagements (audits and reviews)
Compilations and tax return prep are not attestation engagements.

Question 3

When are contingent fees permitted for compilations?

Answer 3

Only if the member includes a statement that the member is not independent.

Question 4

According to AICPA, when is independence impaired?

Answer 4

Having 1 of following:

1. Direct financial interest (regardless of materiality)
2. Material indirect financial interest in attestation client.

Question 5

Principal purposes of audit documentation

Answer 5

Should be sufficient to show that accounting records agree or reconcile with the FS.

1. Principal support for auditor’s report
2. Assistance in planning, conduct, and supervision of the audit
3. Accoutability
4. Useful information

Question 6

Factors affecting nature and extent of audit documentation include:

Answer 6

1. Risk of MM
2. Extent judgement required in performing work and evaluating results
3. Nature of the specific auditing procedures
4. Significance of the evidence obtained
5. Nature and extent of any problems identified
6. Need to document conclusions that may not be obvious

Question 7

Documentation Complete Date (window of time after report release date)

Answer 7

SAS (nonissuers) = 60 days following report release date

PCAOB (iisuers) = 45 days following report release date

Question 8

What are contingent fees strictly prohibited for?

Answer 8

Audits
Review of FS
Examinations of prospective financial information

Question 9

When are commissions & referral fees prohibited?

Answer 9

Audits or review of FS
Compilation of FS when member does not disclose lack of independence
Examination of prospective financial information

Question 10

For PCAOB, how long must audit documentation be maintained?

Answer 10

7 years

Lead audit or coordinating partner must rotate off every 5 years

Question 11

SEC - required time off period

Answer 11

Lead partners and concurring partners= 5 years

Other audit partners = 2 years

Question 12

Single Act Thresholds

Answer 12

$500,000 or more- threshold for application of the Single Audit Act
$300,000 or more - threshold for classification of a program as a major program

Question 13

Quality Control Standards

Primary purpose of a second partner review

Answer 13

To ensure that the financial statements are presented in accordance with GAAP.

Question 14

6 Interrelated elements of quality control

H.E.L.P.M.E.

Answer 14

“Help Me” maintain good quality in my accounting and auditing practice.

H. -Human Resources
E. Engagement/client acceptance and continuance
L. Leadership responsibilities
P. Performance of the engagement
M. Monitoring
E. Ethical Requirements

Question 15

Additional requirements applied to GAGAS

Answer 15

In addition to GAAS:

1. Expanded IC documentation and testing reqs
2. Expanded reporting to include formal written reports on consideration of IC and assessment of control risk.
3. Reporting whether federal financial assistance has been administered in accordance with applicable laws and regulations.
4. Application of single audit standards to federal financial assistance

Question 16

Detection risk of noncompliance is inversely related to:

Answer 16

Risk of material noncompliance