Audit Deck 6

Question 1

Can an engagement partner issue an audit report if a required quality control review has not been performed?

Answer 1

No (they should not issue the report until the quality control review has been performed)

Question 2

When there is more risk associated with a specific control, does an auditor want to perform the tests of controls for that control closer to the balance sheet date? Or does it not matter?

Answer 2

YES, the closer to the balance sheet the better.

Question 3

When management claims that everything is shown in the correct place on the balance sheet, what assertion are they claiming?

Answer 3

Understandability of presentation and classification)

Question 4

Probability proportional to sample size (PPS) sampling is designed to estimate _______ errors

Answer 4

Overstatement

Question 5

Who initiates communication between the successor and predecessor auditor?

Answer 5

The SUCCESSOR auditor (with permission from client)

Question 6

Is making sure that those charged with governance are aware of significant deficiencies a responsibility of an auditor?

Answer 6

Yes, and this would be established at the beginning of the engagement

Question 7

Before a predecessor auditor reissues audited financial statements so that they can be used in comparison with successor auditor financial statements, the predecessor auditor should receive _______ from the successor and the client.

Answer 7

Representation letters

Question 8

When considering the relevance and reliability of Audit Data Analytics, use this acronym:
F
A
C
C
C
T

Answer 8

Freshness
Accuracy
Clarity
Consistency
Completeness
Timeliness

Question 9

When an auditor reviews a client’s accounting policies and procedures, they are probably doing this to understand the client’s ______

Answer 9

Operations and business

Question 10

Can the need for substantive tests ever be eliminated?

Answer 10

NO, no matter how much trust you can put in internal controls, there is always a need for at least SOME substantive tests

Question 11

With agreed-upon procedures, what percentage of finding should the auditor report?

Answer 11

100%, or ALL

Question 12

What two assertions are you confirming when you send confirmations for Accounts Receivable?

Answer 12

Rights and Obligations (does the client actually have a right to the receivable?)
Existence (Does the receivable actually exist?)

Question 13

Does GAAP require that when an auditor reports on supplementary information that the auditor restricts the use of the supplementary information?

Answer 13

NO, there is not requirement to restrict the use of the supplementary information

Question 14

When an auditor is reporting on significant deffeciencies in internal control, do they need to restrict the report?

Answer 14

YES, it is soley intended for management and those charged with governance

Question 15

When an auditor compares cash payments made after the balance sheet date with the accounts payable trial balance, they are searching for ________ payables. This is also called an “________ search”

Answer 15

Unrecorded
Out-of-period

Question 16

Before reissuing a compilation report, the predecessor auditor has to compare it to ______

Answer 16

the current year financial statements

Question 17

_______ analytics provide expected or predicted outcomes based on historical data

Answer 17

Predictive

Question 18

The sample size in a variables sampling application is affected by the variability in the population, the acceptable level of risk, the tolerable misstatement, and the ________ misstatement

Answer 18

Expected

Question 19

Acronym for Quality Control
H
A
R
L
E
M

Answer 19

Human Resources
Acceptance and Continuation of clients
Relevant and Ethical Requirements
Leadership responsibilities
Engagement Performance
Monitoring

Question 20

The purpose of an interim review of financial statements is to determine if any _______ ________ need to be made to conform with GAAP.

Answer 20

Material Modifications

Question 21

Does an auditor’s risk assessment determine whether evidence is relevant?

Answer 21

NO

Question 22

What are the two MAIN types of fraud?

Answer 22

Misappropriation of Assets
Fraudulent Financial reporting

Question 23

At any given deviation rate, the misstatement rate is probably (lower/higher)

Answer 23

LOWER

Question 24

(T/F) When there is a change in accounting principle, the auditor must ALWAYS refer to the change in an emphasis of matter paragraph.

Answer 24

FALSE
If the change in accounting principle has no material affect on the financial statements, they do no need to mention the change at all

Question 25

Vouching Supporting Documents tests the _______ assertion

Answer 25

Occurrence

Question 26

A SOC 1 Type 1 report requires who’s description of the service organization’s system of controls?

Answer 26

Management’s description

Question 27

When management’s representation letter contains a cost-benefit report, does the auditor have to respond to the cost-benefit report?

Answer 27

YES, THEY HAVE TO DISCLAIM AN OPINION ON THE STATEMENT

Question 28

In an audit of a NONISSUER, is an auditor required to report on deficiencies from a prior period again?

Answer 28

NO

Question 29

Does the SEC require public companies to have an audit committee?

Answer 29

NO, but they STRONGLY recommend it

Question 30

An accounts payable clerks should ensure that supporting documents (invoice, receiving report, and purchase order) are in agreement before the _________ is submitted for payment.

Answer 30

VOUCHER

Question 31

When testing the completion of _____, the auditor would see if any restrictions, policies, and compensating balances are reported in the notes

Answer 31

CASH

Question 32

Mean Per Unit Estimation Point Estimate =

Answer 32

(Audited Value of Sample / Sample Size) * Total Population

Question 33

Ratio Estimation Point Estimate =

Answer 33

(Audited Value of Sample / Book Value of Sample) * Total Book Value of Population

Question 34

Difference Estimation Point Estimate =

Answer 34

[(Book Value of Sample - Audited Value of Sample) / Number of items audited] * Population of Items