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CPA AUD > Audit Final Review > Flashcards

Audit Final Review Flashcards

1
Q

Are integrated audits required for nonissuers?

A

No

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2
Q

True or false.

The AICPA code of professional conduct governs any service that a member of the AICPA performs, including compilations and reviews.

A

True

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3
Q

True or false.

Rules surrounding independence applies to all AICPA members.

A

False

EXPLANATION: Rules surrounding independence do not apply to AICPA members not in public practice. Independence rules apply to AICPA members in public practice that perform audit and other attestation services.

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4
Q

True or false.

The AICPA code of professional conduct applies only to members of the AICPA in public practice.

A

False

EXPLANATION: The AICPA code of professional conduct applies to all AICPA members, although there are some differences in the applicability of specific rules.

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5
Q

Does a risk assessment based on the effective operation of IC involve performing more extensive tests w/ larger samples sizes than originally planned?

A

No

EXPLANATION: A risk assessment based on the effective operation of IC increases allowable detection risk, which reduces the required extent of substantive testing.

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6
Q

If the auditor’s risk assessment is based on the effective operation of IC, must the auditor test the controls to support that assessment?

A

Yes

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7
Q

Is the following explicitly included in an audit report expressing an unmodified opinion:

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the F/S

A

Yes

EXPLANATION: The auditor’s responsibility paragraph of the unmodified opinion audit report explicitly states that an audit includes performing procedures to obtain audit evidence about the amounts and disclosures in the F/S.

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8
Q

Would an auditor express an unmodified opinion with an emphasis of matter paragraph added to the report for a justified change in accounting principle?

A

YES

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9
Q

Would the auditor express an unmodified opinion with an emphasis of matter paragraph added to the report for an unjustified change in accounting principle?

A

No

EXPLANATION: An unjustified change leads to a qualified or adverse opinion.

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10
Q

Would the auditor express an unmodified opinion with an emphasis of matter paragraph added to the report for a justified change in accounting estimate?

A

No

EXPLANATION: A change in estimate does not require an emphasis-of-matter paragraph.

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11
Q

The PCAOB is subject to oversight by the ____, and only accounting firms registered with the PCAOB may prepare audit reports for SEC issuers.

A

SEC

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12
Q

Proper authorization of write-offs of uncollectible accounts should be approved in which department?

A

Treasurer

EXPLANATION: The treasurer has no billing responsibility, resulting in a better segregation of duty.

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13
Q

For the most effective IC, monthly bank statements should be received directly from the banks and reviewed by whom?

A

Internal auditor

EXPLANATION: The internal auditor generally is independent of other functions relating to cash.

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14
Q

True or false.

A report issued on significant deficiencies in IC noted during a F/S audit should contain a statement of compliance with laws and regulations.

A

False

EXPLANATION: No statement of compliance with laws and regulations is required in the report. The definition of material weaknesses, a restriction on the use of the report, and an indication that the purposes of the audit was to report on the F/S all should be part of the report.

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15
Q

The auditor concluded that the disclosures made in the F/S did not adequately inform F/S users about the company’s ability to continue as a going concern. Under these circumstances, what should the auditor issue?

A

Qualified (except for) or adverse opinion, depending on level of materiality

EXPLANATION: Improper disclosure of a going concern situation is a GAAP violation, so a qualified or adverse opinion should be issued.

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16
Q

Is “training” a principle of professional ethics for professional accountants under the Int’l Code of Ethics for assurance engagements?

A

No

EXPLANATION: The Int’l Code of Ethics for assurance engagements includes the following fundamental principles of professional ethics - integrity, objectivity, professional competence and due care, confidentiality, and professional behavior.

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17
Q

Is failure to return client records upon request considered an act discreditable to the profession (under AICPA Code of Professional Conduct)

A

Yes

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18
Q

Is negligence in preparing client records considered an act discreditable to the profession (under AICPA Code of Professional Conduct)?

A

Yes

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19
Q

Does a credit card balance of $9,999 impair independence?

A

No

EXPLANATION: A CC balance in excess of $10,000 impairs independence.

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20
Q

Adequate disclosure is _____ in the independent auditor’s report, but is not specifically mentioned.

A

Implied

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21
Q

True or false.

The independent auditor’s report states that an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the F/S.

A

True

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22
Q

Audit objectives should be developed based on F/S _____.

A

Assertions

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23
Q

True or false.

A purchase order is considered external evidence.

A

False; internal documentation

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24
Q

True or false.

A canceled check is considered internal documentation.

A

False; external evidence

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25
Q

Is a written audit program required for every audit?

A

Yes

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26
Q

The DOL’s independence guidelines apply to rendering an opinion on what?

A

Employee benefit plans

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27
Q

The DOL’s independence guidelines prohibit the accountant from maintaining what sort of records for the employee benefit plan?

A

Financial records

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28
Q

What is the primary reason an auditor requests that letters of inquiry be sent to a client’s attorney?

A

To provide auditor w/ the corroboration of info furnished by management about litigation, claims, and assessments

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29
Q

In a review of annual F/S, is an assessment of fraud risk required?

A

No

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30
Q

In a review of annual F/S, is obtaining a rep letter from management required?

A

Yes

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31
Q

Is a report on management’s assertion on the effectiveness of IC a restricted use report?

A

No

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32
Q

True or false.

A report on management’s assertion on the effectiveness of IC would include a statement that the examination was made in accordance with AICPA standards, and that the examination provides a reasonable basis for the opinion.

A

True

33
Q

True or false.

A report on management’s assertion on the effectiveness of IC would include an opinion paragraph addressing the fairness of the management assertion in all material respects based on stated criteria.

A

True

34
Q

Will a review that is incomplete prevent the issuance of a review report?

A

Yes

35
Q

Does a compilation report provide any assurance?

A

No assurance

36
Q

An auditor selects a sample from the files of invoices to determine if shipping documents were prepared. This test is performed to support which management F/S assertion?

A

Existence

EXPLANATION: The auditor is testing for items that were billed, but perhaps not shipped. This test addresses the existence assertion - did a valid sale (as evidenced by a shipment of goods) really occur?

37
Q

The PCAOB consists of exactly __ CPAs and ____ non-CPAs.

A

2 CPAs

3 non-CPAs

38
Q

Do departures from GAAP (including inadequate disclosure) require modification of the review report?

A

Yes

39
Q

Does the standard compilation report on the F/S of a nonissuer that omit substantially all disclosures include a paragraph disclosing such omissions?

A

Yes

40
Q

Does the standard compilation report on the F/S of a nonissuer that omit substantially all disclosures include a disclaimer of opinion?

A

Yes; indicate accountant does not express an opinion, a conclusion, nor provide any assurance w/r/t F/S presentation

41
Q

During a review engagement, should the accountant make inquiries about material subsequent events?

A

Yes

42
Q

True or false (Compliance testing, fieldwork responsibilities)

Design audits to provide reasonable assurance that F/S are free of MM resulting from violations of laws/regulations or noncompliance w/ contracts/grant agreements that have a direct and material effect on FS amounts

A

True

43
Q

True or false (compliance testing, reporting resp.)

Prep written report describing the scope and the results of compliance testing relative to laws and reg, inform the audit committee of any noncompliance with laws and regulations, and inform appropriate levels of management of discovered fraud.

A

True

44
Q

What is an auditor’s responsibility w/r/t SASs?

A
  • Have sufficient knowledge of the SASs to id relevant provisions
  • Be prepared to justify any departures from such provisions
45
Q

True or false.

GAAS applies to all audits, whereas specific audit procedures will vary from one engagement to the next.

A

True

46
Q

Entities that expend more than $ _________ in Federal Financial Assistance are required to receive an audit that complies with the provisions of the Single Audit Act.

A

$750,000

47
Q

Auditing standards require that the independent auditor’s report shall contain either an expression of opinion regarding the F/S, taken as a whole, or an assertion to the effect that an opinion cannot be express. Is the following prohibited by auditing standards:

The auditor disclaims an opinion on the I/S and on the statements of CFs, but renders an unmodified opinion on the B/S.

A

Not prohibited

48
Q

Auditing standards require that the independent auditor’s report shall contain either an expression of opinion regarding the F/S, taken as a whole, or an assertion to the effect that an opinion cannot be express. Is the following prohibited by auditing standards:

An auditor is hired to render an opinion on the B/S only.

A

Not prohibited

49
Q

Do quality control standards affect the performance of a firm’s practice overall?

A

Yes

50
Q

Do quality control standards affect a firm’s performance on specific engagements?

A

Yes

51
Q

Attest engagements generally result in an examination report, a review report or an agree-upon procedures report on subject matter that is the responsibility of whom?

A

Another party

52
Q

A review of a nonpublic company’s F/S is conducted under _______.

A

SSARS

53
Q

Who bears responsibility to oversee the obligations, financial reporting process, and strategic direction of an entity?

A

Those charged w/ governance

54
Q

Can the PCAOB impose the following sanction:

Financial penalties

A

Yes

55
Q

Can the PCAOB impose the following sanction:

Suspension or revocation of PCAOB registration

A

Yes

56
Q

Can the PCAOB impose the following sanction:

Required CPE course

A

Yes

57
Q

In an examination engagement, what type of assurance does the auditor provide reg. whether the F/S are presented in conformity with AICPA guidelines, and whether the underlying assumptions provide a reasonable basis for the F/S?

A

Positive assurance

58
Q

What type of assurance does an auditor provide in a compilation engagement?

A

No assurance

59
Q

Reports on prospective F/S are covered under _____.

A

SSAE

60
Q

Compilations of the F/S of a nonpublic entity are covered under ______.

A

SSARS

61
Q

Is the following an appropriate segregation of duties:

The cash receipts clerk credits customer accounts when PMT is received.

A

No

EXPLANATION: The cash receipts clerk should not have both recordkeeping responsibilities and custody of assets.

62
Q

Is the Int’l code of Ethics for assurance engagements based on a set of specific rules?

A

No; based on a conceptual framework approach

63
Q

Generally inventory quantities are confirmed, not _____ values.

A

dollar

64
Q

Positive or negative assurance.

A report on a specified account in a F/S.

A

Positive assurance

65
Q

Positive or negative assurance.

A report on a financial presentation to comply with contractual agreements or regulatory requirements.

A

Positive assurance

66
Q

Positive or negative assurance.

A report on OCBOA F/S

A

Positive assurance

67
Q

Positive or negative assurance.

A report on compliance with contractual or regulatory requirements related to audited F/S

A

Negative assurance

68
Q

An uncertainty may results in what type of opinion?

A
  • Unmodified
  • Qualified
  • Adverse
  • Disclaimer

EXPLANATION: An uncertainty may result in an unmodified opinion if management’s analysis is supported and properly recorded or disclosed. An uncertainty for which the auditor is unable to obtain sufficient audit evidence would result in either a qualified opinion or a disclaimer of opinion. If the F/S are MM due to improper accounting for the uncertainty, a qualified or adverse opinion would result.

69
Q

Is payment of fees for assurance services a circumstance that may impair independence, as described in the Int’l Code of Ethics for assurance engagements?

A

No

EXPLANATION: Payment of fees for assurance services does not generally impair independence and is not listed in the Int’l Code of Ethics for assurance engagements.

70
Q

Should the audit committee pre-approve a review engagement?

A

Yes

71
Q

Does the audit committee need to pre-approve non-audit services that do not exceed 5% of total revenues?

A

No; as long as the non-audit services are promptly brought to the attention of the audit committee and approved before completion of the audit

72
Q

If IC was evaluated as part of an audit, must the auditor restrict use of the report on IC?

A

Yes

73
Q

Is the following an improper segregation of duties related to payroll:

The department supervisor, who approves employee time sheets, distributes paychecks to the employees in his department.

A

Yes

EXPLANATION: Approving timesheets is an authorization f(x) which should be separated from custody of assets (i.e. the payroll checks).

74
Q

May internal auditors assist the external auditor in obtaining an understanding of IC or in performing tests of controls or substantive tests?

A

Yes

75
Q

What does a high risk of incorrect acceptance mean?

A

it is quite possible that auditor will incorrectly accept a balance as fairly stated, when in fact it is not

76
Q

GAS requires a written report on ____ ______ in every audit.

A

Internal control

77
Q

Level of assurance.

Examination of a financial forecast.

A

Positive assurance

78
Q

Is there a restriction on use for the following:

Compilation of the unaudited F/S of a nonpublic co.

A

Yes; restriction on use

CPA AUD (7 decks)

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