Audit FINAL

Question 1

Intro Paragraphs need

Answer 1

Identify Entity

State Fin Stmts have been Audited

Identify Title of Each Fin Stmt

State Dates or Period covered by each Fin Stmt

Question 2

Manager Paragraph needs

Answer 2

Mgmt is responsible for prep and fair presentation of fin stmts

and

responsible for Internal Controls

Question 3

1st Part of Auditors Paragraph aka?

Needs what?

Answer 3

Scope Paragraph

Responsibility to Express Opinion

Conducted with audit standards generally accepted in America

And that requires auditor to obtain reasonable assurance that fin stmts are free from material misstatement

Question 4

2nd Auditors Paragraph needs

Answer 4

Audit involves performing procedures to obtain audit evidence

Procedures depend on auditors judgement

Considers how the entity’s Internal Controls affect the prep of fin stmts

Evaluates acct polices and estimates Mgmt uses

Question 5

Unmodified Opinion Paragraph needs

Answer 5

to say presented fairly

and

in accordance with the applicable financial reporting framework

Question 6

Mean Per Unit Estimation Equation

Answer 6

Average Audit Value (Audit Value of Sample Total divided by # of audited items)

times

Total number of items in the population

Question 7

Ratio Estimation

Answer 7

Audit Value of Sample Total

divided by

Book Value of Samples Total

times

TOTAL BOOK Value

Question 8

Difference Estimation

Answer 8

Book Value of Samples Total

minus

Audit Value of Sample Total

divided by

of audited sample items

times

TOTAL # of items

Question 9

Parallel simullation

Answer 9

is when the auditor uses client data and auditor-controlled software to obtain output. The auditor’s output is compared to the output from the client. Differences indicate potential weaknesses or problems with the client’s software.

Question 10

Test data

Answer 10

is introduced into the client’s computer system using the same program to operate the application being tested. This type of control testing is not under the auditor’s control, as it uses the client’s actual program.

Question 11

An integrated test facility

Answer 11

An integrated test facility introduces a fictitious entity (such as a fake employee or customer) with real entries in the master files of the client’s computer system. The auditor then compares the processing of data through the fictitious entity with what should be there in order to test that the data processing is reliable. Like the test data (or test deck) approach, an integrated test facility uses the client’s system and is not under the auditor’s control.

Question 12

What is the auditor not required to do in pro forma FS

Answer 12

evaluate IC

Question 13

Accountant’s compilation report on financial forecast would state what…?

Answer 13

1. contain the statement that forecasted results may not be achieved (there will usually be differences between the forecasted and actual results),
2. explain that the CPA assumes no responsibility to update the report for future events and circumstances occurring after the date of the report

Question 14

Auditing report of non- for profit organization in accordance with GAS should state what type of assurance?

Answer 14

report regarding tests of compliance should contain positive and negative assurances.
A positive assurance consists of a statement that the tested items were in compliance with applicable laws and regulations.
A negative assurance is a statement that nothing came to the auditor’s attention as a result of specified procedures that caused the auditor to believe that the untested items were not in compliance with applicable laws and regulations.

Question 15

Auditor ordinarily consider the greatest risk regarding an entity’s use of electronic data interchange (EDI)?

Answer 15

Improper distribution of EDI transactions

Question 16

For uncorrected misstatements, the auditor should document all of the following,

Answer 16

The auditor should include in the audit documentation:

the amount below which misstatements would be regarded as clearly trivial;
all misstatements accumulated during the audit and whether they have been corrected; and
the auditor’s conclusion about whether uncorrected misstatements are material, individually or in aggregate….

Question 17

Describe the test data approach to test accounting system

Answer 17

Test data is processed by the client’s computer programs under the auditor’s control.
The test data need consist of only those valid and invalid conditions that interest the auditor.
Only one transaction of each type need be tested.

Question 18

What is the benefit of using electronic funds transfer for international cash transactions

Answer 18

Reduction of the frequency of data entry errors

Question 19

a step in an auditor’s decision to assess control risk below the maximum?

Answer 19

1.Identify specific control activities that are likely to detect or prevent material misstatements.
2. perform test of controls (NOT DETAIL)
DOCUMENT ALL

Question 20

Examination of prospective FS involves what?

Answer 20

An examination of prospective financial statements is a professional service that involves:

Evaluating the preparation of the prospective financial statements.
Evaluating the support underlying the assumptions.
Evaluating the presentation of the prospective financial statements for conformity with AICPA presentation guidelines.
Issuing an examination report.

Question 21

When there has been a change in accounting principle, but the effect of the change on the comparability of the financial statements is not material, the auditor should:

Answer 21

not refer to consistency in the auditor’s report.