Audit Deck 6 Flashcards
Can an engagement partner issue an audit report if a required quality control review has not been performed?
No (they should not issue the report until the quality control review has been performed)
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?
YES, the closer to the balance sheet the better.
When management claims that everything is shown in the correct place on the balance sheet, what assertion are they claiming?
Understandability of presentation and classification)
Probability proportional to sample size (PPS) sampling is designed to estimate _______ errors
Overstatement
Who initiates communication between the successor and predecessor auditor?
The SUCCESSOR auditor (with permission from client)
Is making sure that those charged with governance are aware of significant deficiencies a responsibility of an auditor?
Yes, and this would be established at the beginning of the engagement
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.
Representation letters
When considering the relevance and reliability of Audit Data Analytics, use this acronym:
F
A
C
C
C
T
Freshness
Accuracy
Clarity
Consistency
Completeness
Timeliness
When an auditor reviews a client’s accounting policies and procedures, they are probably doing this to understand the client’s ______
Operations and business
Can the need for substantive tests ever be eliminated?
NO, no matter how much trust you can put in internal controls, there is always a need for at least SOME substantive tests
With agreed-upon procedures, what percentage of finding should the auditor report?
100%, or ALL
What two assertions are you confirming when you send confirmations for Accounts Receivable?
Rights and Obligations (does the client actually have a right to the receivable?)
Existence (Does the receivable actually exist?)
Does GAAP require that when an auditor reports on supplementary information that the auditor restricts the use of the supplementary information?
NO, there is not requirement to restrict the use of the supplementary information
When an auditor is reporting on significant deffeciencies in internal control, do they need to restrict the report?
YES, it is soley intended for management and those charged with governance
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”
Unrecorded
Out-of-period
Before reissuing a compilation report, the predecessor auditor has to compare it to ______
the current year financial statements
_______ analytics provide expected or predicted outcomes based on historical data
Predictive
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
Expected
Acronym for Quality Control
H
A
R
L
E
M
Human Resources
Acceptance and Continuation of clients
Relevant and Ethical Requirements
Leadership responsibilities
Engagement Performance
Monitoring
The purpose of an interim review of financial statements is to determine if any _______ ________ need to be made to conform with GAAP.
Material Modifications
Does an auditor’s risk assessment determine whether evidence is relevant?
NO
What are the two MAIN types of fraud?
Misappropriation of Assets
Fraudulent Financial reporting
At any given deviation rate, the misstatement rate is probably (lower/higher)
LOWER
(T/F) When there is a change in accounting principle, the auditor must ALWAYS refer to the change in an emphasis of matter paragraph.
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
Vouching Supporting Documents tests the _______ assertion
Occurrence
A SOC 1 Type 1 report requires who’s description of the service organization’s system of controls?
Management’s description
When management’s representation letter contains a cost-benefit report, does the auditor have to respond to the cost-benefit report?
YES, THEY HAVE TO DISCLAIM AN OPINION ON THE STATEMENT
In an audit of a NONISSUER, is an auditor required to report on deficiencies from a prior period again?
NO
Does the SEC require public companies to have an audit committee?
NO, but they STRONGLY recommend it
An accounts payable clerks should ensure that supporting documents (invoice, receiving report, and purchase order) are in agreement before the _________ is submitted for payment.
VOUCHER
When testing the completion of _____, the auditor would see if any restrictions, policies, and compensating balances are reported in the notes
CASH
Mean Per Unit Estimation Point Estimate =
(Audited Value of Sample / Sample Size) * Total Population
Ratio Estimation Point Estimate =
(Audited Value of Sample / Book Value of Sample) * Total Book Value of Population
Difference Estimation Point Estimate =
[(Book Value of Sample - Audited Value of Sample) / Number of items audited] * Population of Items
