Audit Deck 2

Question 1

An auditor assesses ______ risk because it affects the level of detection risk and helps determine the risk of material misstatement.

Answer 1

Control Risk

Question 2

*Why does using computers in auditing affect the method used to review staff work?

Answer 2

The calculations that the software used to get to the conclusions may not be readily available. You may have to go find the calculations in the software.

Question 3

An auditor considers the tolerable deviation rate, the allowable risk of assessing control risk too low, and the expected deviation rate when they are determining WHAT for a test of controls?

Answer 3

The Sample Size

Question 4

The auditor’s BEST estimate of the deviation rate before actually performing testing is called?

Answer 4

The EXPECTED deviation rate

Question 5

What assertion is the auditor checking when they review the reports of error from customers who management sent monthly statements?

Answer 5

Rights and Obligations. Errors reported by customers could indicate that the company doesn’t have the right to collect

Question 6

Tests to collect evidence that balances, disclosures, and transactions related to the Financial Statements are correct are called tests of ______?

Answer 6

Tests of DETAILS

Question 7

Why would you use a test of details as a test of controls?

Answer 7

To see if controls are operating effectively

Question 8

(Cash + A/R + Marketable Securities) / Current Liabilities = _______

Answer 8

Quick Ratio

Question 9

An auditor states that the audit was conducted in accordance with PCAOB standards in WHAT section of the Audit Report?

Answer 9

The Basis for Opinion Section

Question 10

Comparing current year payroll expenses to prior year payroll expenses is a(n) ___________ review procedure most likely used when reviewing costs and expenses.

Answer 10

ANALYTICAL review

Question 11

What procedures would an auditor perform to gain evidence to form an opinion on the effectiveness of internal controls in an integrated audit of a nonissuer?

Answer 11

Review the misstatements detected and tests of controls performed during financial statement audit, as well as review reports issued during year by internal audit department

Question 12

In an integrated audit of internal control, what opinion should an auditor issue if there is a material weakness in internal control?

Answer 12

Adverse Opinion

Question 13

Consulting services, advocacy services, and return preparation are SPECIFICALLY excluded in _________ engagements.

Answer 13

Attest

Question 14

What should an auditor’s opinion state if inadequate disclosures have a material but not pervasive effect on the financial statements?

Answer 14

“In our opinion, except for the omission of the information described in the basis for qualified opinion section of our report…”

Question 15

What consists of these 6 elements?
- Leadership Responsibilities (Tone at the Top)
- Ethical Requirements
- Acceptance and continuance of clients
- Human Resources
- Engagement Performance
- Monitoring (ongoing quality control efforts)

Answer 15

QUALITY CONTROL SYSTEM for a CPA firm

Question 16

What single form helps you confirm both cash balances on deposit at the bank and collateral pledged on loans originating from the bank? (Two confirmations - One Form)

Answer 16

Standard AICPA BANK CONFIRMATION

Question 17

An _______ test facility is a computer-assisted auditing technique that runs both real and fake data without the client knowing.

Answer 17

INTEGRATED Test Facility

Question 18

What evidence proves that a sale occured?

Answer 18

Shipping Documents

Question 19

(T/F) An auditor is required to have audited a client’s financial statements and issued an unmodified or qualified opinion in order to issue a report on the client’s compliance with contractual agreements or regulatory requirements in connection to a financial statement audit.

Answer 19

True

Question 20

Risk of material noncompliance and risk of material misstatement are both inversely related to:

Answer 20

Detection Risk

Question 21

A ___ _____ _____ Single audit report is a Single Audit expanded to include procedures designed to test and report on compliance matters having a direct and material effect on major federal award programs.

Answer 21

2 CFR 200 single audit report

Question 22

These factors should be considered when assigning what?
1. Engagement Size and Complexity
2. Personnel Availability
3. Special Expertise required
4. Timing of the work to be performed
5. Continuity and periodic rotation of personnel
6. Opportunities for on-the-job training

Answer 22

Personnel to an Engagement

Question 23

“An audit includes evaluating the reasonableness of significant accounting estimates made by management” is a _____ element of the auditor’s report under U.S. auditing Standards.

Answer 23

BASIC element

Question 24

The definition “A nonfederal entity that expends federal awards received from another entity to carry out a federal program” is defining what?

Answer 24

A sub-recipient

Question 25

Typically the agency that provides the most amount of direct funding to a nonfederal entity is called a WHAT agency? (Government Auditing)

Answer 25

Cognizant Agency

Question 26

Does an auditor express an opinion on the effectiveness of internal control over compliance in a COMPLIANCE AUDIT?

Answer 26

NO

Question 27

A disbursement recorded in one accounting period with the receipt occurring in the subsequent period is called a WHAT in transit?

Answer 27

DEPOSIT in transit

Question 28

What is an audit procedure used to test the understandability of the presentation and classification of financial statements with respect to inventory?

Answer 28

Confirming inventories pledged under loan agreements, because those should be properly disclosed in the financial statements

Question 29

An auditor who performs work on the financial information of a component that will be used as audit evidence for the group audit is called a:

Answer 29

Component Auditor

Question 30

An auditor auditing an entity with multiple components or subsidiaries is a WHAT auditor?

Answer 30

GROUP auditor

Question 31

These are the five components of?
1. Control Environment
2. Monitoring
3. Information and Communication Systems
4. Risk Assessment
5. Control Activities

Answer 31

INTERNAL CONTROL

Question 32

What is the most likely substantive procedure to audit Payroll?

Answer 32

Comparing payroll to entity standards or budgets (this is an analytical procedure)

Question 33

The auditor refers to the use of GAAP in which section of the audit report?

Answer 33

The OPINION Section