Audit Diagnostic Exam

Question 1

When does an Auditor reference a specialist in the report?

Answer 1

When the auditor issues a modified opinion because of a matter related to the specialist’s findings.

Question 2

What is the purpose of est. quality control policies/procedures for deciding whether to accept a new client?

Answer 2

Minimize the likelihood of association with clients whose mgmt lacks integrity

Question 3

If an auditor performs attestation procedures the auditor should comply with

Answer 3

statements on standards for attestation engagements

Question 4

What is inherent risk?

Answer 4

the risk that a material misstatement will occur in an assertion without taking internal control into account.

Question 5

The risk that an auditor will conclude that a material error does not exist, when an error DOES exist is referred to as

Answer 5

detection risk

Question 6

What would raise a question concerning possible illegal acts?

Answer 6

the client prepared several large checks payable to cash during the year.

Question 7

What is an auditor required to communicate to an entitys audit committee

Answer 7

Significant audit adjustments
Changes in significant accoutning policies
Mgmt’s consultation with other accountants about significant acct matters.

Question 8

How do inherent risk and control risk differ from detection risk?

Answer 8

they exist independently of the FS audit. they are functions of the client and environment while detection risk is not.

Question 9

if bribes are discovered and told to the board but the board did nothing bc of immateriality, the auditor should..

Answer 9

consider withdrawing from the audit and disassociating from future relationships with the client

Question 10

if an auditor finds several errors that are not material in the aggregate that the client prefers to not correct, what should the auditor do

Answer 10

document the errors in the summary of uncorrected errors and document the conclusion that the errors do not cause the FS to be misstated

Question 11

what is the auditors responsibility regarding the FS

Answer 11

Auditors main task is to express an opinion. An auditor may draft the FS based on info from mgmt’s acct system - however it is mgmts responsibility to present FS in accordance with GAAP.

Question 12

What do analytical proceudres do

Answer 12

aid in the identification of unusual transactions and events. designed to disclose differences from expectations

Question 13

WHat does an auditor consider when planning a new engagement?

Answer 13

1. nature of the engagement
2. type of report to be issued
   3 nature of the FS, schedules, or other info on which they are reporting
3. nature and condition of the clent’s records
4. assessed level of control risk
   6 the needs in the particular circumstances for supervision and review of the work

Question 14

GAAS requires an auditor to obtain..

Answer 14

“sufficient appropriate audit evidence”

Question 15

in AICPA standards, the word should indicates

Answer 15

presumptively mandatory requirements from which the CPA may depart in rare circumstances

Question 16

the exercise of due professional care requires that an auditor

Answer 16

critically review the judgment exercised at every level of supervision

Question 17

List interpretive publications

Answer 17

1. Appendices to Statements on Auditing Standards.
2. Auditing guidance included in AICPA audit and accounting guides.
3. auditing interpretations of the statements on auditing standards
   (Articles in the AICPA’s Journal of Acct. have no authoritative guidance)

Question 18

the auditor has a duty to disclose:

Answer 18

1. irregularities to the SEC when the client reports an auditor change
2. to a successor auditor when the successor makes appropriate inquiries.
3. to a gov funding agency from which the client receives financial assistance.

Question 19

Which party should initiate communication between the predecessor auditor and the successor auditor?

Answer 19

the successor auditor. they should contact them prior to final acceptance of the engagement