Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

AUD > Audit Report > Flashcards

Audit Report Flashcards

1
Q

Group auditor refer/or not refer component auditor - requirement?

A

When part of the audit is performed by a component auditor, the group auditor is required to make inquiries concerning the professional reputation, independence, and competence of the component auditor.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Unmodified opinion

A

omit quarterly financial data required by SEC - emphasis-of-matter
material change in accounting principle - EoM
substantial concern of going concern - EoM
review report special purpose framework (cash-basis) - EOM

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Limit of scope

A

Qualified (or disclaimer) - “except for…”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Review of interim f/s

A

The objective of a review of interim financial information is to provide the accountant with a basis for reporting whether material modifications should be made for such information to conform to the applicable financial reporting framework. limited assurance. analytical procedure, inquiries.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Statement of revenues collected and expenses paid.

A

cash basis

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Special purpose framework F/S audit report - emphasis of matter paragraph

A

Refers to the note to the financial statements that describes the basis of accounting.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Reports are considered special reports when issued in conjunction with

A

Compliance with aspects of regulatory requirements related to audited financial statements.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

SSARSs- Review Engagement

A

A review engagement results in “negative” assurance (that the accountant is not aware of a need for material modification)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Emphasis of Matter - Review Engagement

A

An emphasis-of-matter paragraph addresses an issue that is already properly identified in the financial statements of the entity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Financial statement audits in accordance with Government Auditing Standards require the following reports:

A

1) an audit report;
2) a report on internal control;
3) a report on compliance with laws, regulations, and the provisions of contracts or grant agreements. The compliance report would identify the scope of the auditor’s testing of compliance with laws and regulations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

the earliest date for an auditor’s report

A

The date the auditor has obtained sufficient appropriate audit evidence to support the opinion.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

stated control objective”

A

A stated control objective in the context of an engagement to report on whether a material weakness continues to exist is the specific control objective identified by management that, if achieved, would result in the material weakness no longer existing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Which financial statement is specifically mentioned in the first paragraph of the auditor’s report on an employee benefit plan’s comparative financial statements?

A

Statements of net assets available for benefits.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

A limited-scope audit report includes each of the following, except for

A

An opinion that the employee benefit plan has complied with all applicable requirements of the Employee Retirement Income Security Act of 1974

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

To justify a limited-scope audit, the qualified financial institution holding the plan assets must furnish a certification stating that the investments and related investment activity are

A

“Complete and accurate”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

A “qualified, regulated financial institution” associated with a limited-scope audit engagement of an employee benefit plan may include each of the following types of financial institutions

A

Insurance company
Bank
Trust Company

(Not Investment company)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

A limited-scope audit of an employee benefit plan requires the auditor to evaluate each of the following, except for

A

the plan investments and investment activities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

a practitioner’s review report for an attestation engagement

A

The review report should include a statement that a review is substantially less in scope than an examination, and a disclaimer of opinion should be included

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Accepting an engagement to compile a financial projection for a publicly held company most likely would be inappropriate if the projection were to be distributed to

A

All stockholders of record as of the report date.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

An accountant’s report on a review of pro forma financial information should include

A

a reference to the financial statements from which the historical financial information is derived and a statement as to whether such statements were audited or reviewed. Any modification of the report on the historical financial statements should also be identified.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

When the auditor issues separate reports on internal control over financial reporting and on compliance with applicable laws and regulations,

A

each report should include a separate paragraph that references the other report.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

A CPA’s report on agreed-upon procedures related to management’s assertion about an entity’s compliance with specified requirements should contain

A

A statement of limitations on the use of the report.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Engagement Completion Document

A

A set of materials that identifies all significant findings or issues so that a reviewer can obtain a thorough understanding of such matters.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

In a typical comfort letter, the auditor will provide

A

negative assurance on capsule information.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

The primary objective of procedures performed to obtain an understanding of the internal control structure is to provide an auditor with

A

Knowledge necessary for audit planning.

to determine the nature, timing, and extent of the tests to be performed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Reliance of evidential matter

A

Effective internal control -> assurance increase

persuasive (not necessarily convincing)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

treasurer’s department authority

A

custodial funcition
access to cash
NOT authorizing payment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What is an auditor’s responsibility for supplementary information required by the GASB that is placed outside the basic financial statements?

A

Apply limited procedures to the information and report deficiencies in, or the omission of, the information.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

what is meant by the term “generally accepted auditing standards”?

A

The Statements on Auditing Standards issued by the Auditing Standards Board.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

When reviewing the financial statements of a nonissuer in accordance with Statements on Standards for Accounting and Review Services, an accountant’s procedures should include

A

Inquiring into actions taken at meetings of the board of directors

NOT Obtaining an understanding of internal control.
(Compile report - also)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

2 categories of professional standards

A

(1) unconditional requirements; and (2) presumptively mandatory requirements.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Covered member criteria

A
  • other partner in the same office
  • If other office or not partner -> 10 hour worth of non-attest service
  • if in the position to influence attestation engagement
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Which of the following nonaudit services may PCH provide to a public company audit client with preapproval from the client’s audit committee?

A

General tax planning

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

In obtaining written representations from management, materiality limits ordinarily would apply to representations related to

A

Amounts concerning related party transactions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

An agreed-upon procedures engagement

A

results in the issuance of a report that identifies the procedures performed and the results obtained. The report would include a list of the procedures performed (or reference thereto) and the findings.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

An auditor may report on condensed financial statements that are derived from a complete set of audited financial statements only if the auditor

A

Indicates whether the information is consistent in all material respects in relation to the complete financial statements.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Procedures performed to evaluate control risk include

A

inquiries of personnel; inspection of documents and records; observation of activities and operations; and reperformance of the control procedure.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

The objective of tests of details of transactions performed as substantive tests is to

A

Detect material misstatements in the financial statements.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

In using the work of a specialist, an auditor may refer to the specialist in the auditor’s report if, as a result of the specialist’s findings, the auditor

A

Becomes aware of circumstances that cause the auditor to express a modified opinion.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Does performance of a review requires independence, ?

A

Yes, so the accountant would not be permitted to accept a review engagement, if even immaterial direct financial interest exists.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

In a review engagement, an accountant would be required to:

A

1) perform a limited set of procedures consisting of inquiry and
2) analytical procedures.
3) required to obtain a management representation letter.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

Examples of conditions and events that may cause an auditor to have doubts about the entity’s ability to continue as a going concern include:

A

1) recurring capital losses,
2) working capital deficiencies,
3) negative cash flows from operating activities, and
4) adverse key financial ratios.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

When engaged to audit a governmental entity in accordance with Government Auditing Standards, an auditor prepares a written report on internal control structure

A

In all audits, regardless of circumstances.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

Maintaining an audit trail for a computer system provides

A

a deterrent to irregularities,
facilitates monitoring,
and enables queries to be answered.
NOT enable analytical procedures to be performed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

An accountant compiles the financial statements of a nonissuer and issues the standard compilation report. Although not specifically stated in this report, it is implied that

A

Substantially all disclosures required by GAAP are included in the financial statements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

whether control risk is assessed at the maximum level or at less than the maximum level, AICPA Prof standard requires the auditor to:

A

document the assessment of the risks of material misstatement at the financial statement level and at the relevant assertion level.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

Which of the following conditions would not violate AICPA independence guidelines?

A

if both immaterial and indirect interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided the

A

Distribution of the report is restricted to the specified users.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

The auditor is required to/may communicate to those charged with governance (such as the audit committee):

A

Required:
process used by management in formulating sensitive accounting estimates and about the basis for the auditor’s conclusions regarding the reasonableness of those estimates.

May:

  • A material misstatement was noted by the auditor and corrected by management.
  • The auditor is requesting representations regarding the financial statements from management.
  • Management has consulted with other accountants about accounting and auditing matters during the period under audit.

May NOT: No significant deficiencies in internal control exist that would affect the financial statements.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

In a typical comfort letter, the auditor will provide

A

negative assurance on capsule information.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

In order to use the negative form of accounts receivable confirmation, the following conditions must be met:

A

1) the risk of material misstatement (including the assessed level of control risk) is low;
2) a large number of small balances is involved;
3) an expected very low exception rate; and
4) the auditor has no reason to believe that the recipients of the requests are unlikely to give them consideration.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

The auditor is responsible for assessing the risk that errors and fraud may cause

A

the financial statements to contain material misstatements,

and then designing the audit to provide reasonable assurance of detecting material errors and fraud

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

the vouchers payable department would be responsible for reviewing vouchers and related supporting documentation and authorizing them for payment. As a result, the following functions would be performed:

A

1) determining the mathematical accuracy of the vendor’s invoice;
2) matching the receiving report with the purchase order; and
3) having an authorized person approve the voucher.

The control that would NOT be performed is controlling the mailing of the check and the remittance advice. This is a custodial function which should be segregated from the authorization function.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

If a privately held company issues financial statements that purport to present its financial position and results of operations, but omits the statement of cash flows, the auditor ordinarily will express a(n)

A

Qualified opinion.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
55
Q

The clarified SSARSs applicable to preparing financial statements (AR-C 70) apply to each of the following:

A

Preparing a financial statement forecast.
Preparing financial statements in connection with business valuation services.
Preparing financial statements for the review by another accountant (different firm).
NOT Preparing a balance sheet with substantially all disclosures omitted.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
56
Q

“Application and other explanatory material” in the clarified Statements on Standards for Accounting and Review Services is identified by each of the following words

A

May, might, could

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
57
Q

“presumptively mandatory requirement”

A

Should

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
58
Q

A covered member’s financial interest in a mutual fund is Direct OR Indirect?

A

a direct interest in the fund.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
59
Q

Types of threat to compliance that is featured in the Conceptual Framework

A

Adverse interest threats.
Undue influence threats.
Familiarity threats.
NOT Espionage threats.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
60
Q

Possibility of management override of controls.

A

One of the inherent limitations of internal control

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
61
Q

Lead audit partners must be rotated off at least _____

A

five-on and five-off. They must be rotated off at least every five years and stay off for five before they can return in that capacity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
62
Q

Many non-audit services are _______when an accounting firm audits a public company.

A

forbidden. Appraisal and valuation services are among them.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
63
Q

FROR (a person with Financial Reporting Oversight Role)

A

If have a significant leadership position and could definitely influence those employees preparing the financial statements, regardless of her personal financial sophistication. (e.g. general counsel)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
64
Q

When are departures from GAAP appropriate?

A

if there is new legislation, or evolution of a new form of business transaction. But only if GA discloses the departure from GAAP and describes the departure, its approximate effects, and the reasons why compliance with GAAP would mislead.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
65
Q

The firm is always a covered member. True/False?

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
66
Q

independence is not required when performing a compilation? True/False?

A

True. but a lack of independence should be disclosed in the accountant’s compilation report

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
67
Q

Which of the following factors most likely would affect an auditor’s judgment about the quantity, type, and content of the auditor’s working papers

A

The assessed level of control risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
68
Q

To be effective, analytical procedures performed near the end of an audit engagement should be performed by

A

An experienced individual with business and industry knowledge

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
69
Q

If a specified element is, or is based upon, an entity’s net income or stockholders’ equity,

A

the CPA should have audited the complete financial statements in order to express an opinion on the element.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
70
Q

likelihood of loss and the potential amount involved with a material weakness?

A

likelihood of loss - reasonably possible

potential amount - material

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
71
Q

Which of the following procedures would an auditor most likely perform to obtain evidence about an entity’s subsequent events?

A

Obtain a letter from the entity’s attorney describing any pending litigation, unasserted claims, or loss contingencies.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
72
Q

A covered member may not borrow money from

A

an attest client or any of its officers, directors, or 10% shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
73
Q

Which is correct concerning the external auditors’ use of the work of others in an audit of internal control performed for a public company?

A

Ordinarily the work of internal auditors and others is used primarily in low-risk areas.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
74
Q

audit firm should not perform management responsibilities for audit clients. Which of the following is an example of a permitted activity?

A

YES - Recommending a job description for a position that the client needs to fill.
No - Taking custody of client assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
75
Q

Which of the actuaries activity impairs independence?

A

high subjectivity - relating to financial statement

76
Q

When an auditor concludes that there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time, the auditor’s responsibility is to

A

Consider the adequacy of disclosure about the entity’s possible inability to continue as a going concern.

77
Q

Which statement should be included in an auditor’s letter on significant deficiencies (in the internal control)?

A

(1) audit’s purpose was to report on the financial statements and not to express an opinion on internal control, (2) include the definition of a significant deficiency, and (3) restrict distribution of the report.

78
Q

Presentation and disclosure - assertion

A

to ensure that it was properly presented at the balance sheet date and that related disclosures were adequate.

79
Q

walkthrough

A

(1) confirm the auditor’s understanding of the flow of transactions and the design of controls, (2) evaluate the effectiveness of the design of controls, and (3) to confirm whether controls have been implemented.

80
Q

An accountant who was initially engaged to perform an audit may, at the client’s request, change the engagement to a compilation provided that the following are considered:

A

1) the reason for the client’s request; 2) the additional effort required to complete the audit; and 3) the estimated additional cost to complete the audit.

81
Q

Significant deficiencies - auditor communication

A

An auditor may communicate significant deficiencies either during an audit or after the audit’s completion.

82
Q

Documentation form and extent

A

No one particular form of documentation is necessary, and the extent of documentation may vary.

83
Q

Financial projection v. financial forecast

A

financial projection - no general use

finacial forecast - yes general use

84
Q

The framework most likely to be used by management in its internal control assessment under requirements of the Sarbanes-Oxley Act of 2002 is the

A

COSO internal framework

85
Q

In reviewing client’s financial statement, SSARS requires:

A

obtain knowledge of clien’ts industry

86
Q

Which of the following factors would a CPA ordinarily consider in the planning stage of an audit engagement?

A

I. Financial statement accounts likely to contain a misstatement.

II. Conditions that require extension of audit tests.

87
Q

Analytic procedure focuses identifying:

A

Areas that may represent specific risks relevant to the audit.

88
Q

comfort letter for underwritters - negative assurance on:

A

The conformity of the entity’s unaudited condensed interim financial information with generally accepted accounting principles (GAAP).

89
Q

When is Analytical Procedure required?

A

Analytical procedures are required during planning and in the final review stage. They may be, but are not required to be, used as substantive tests.

90
Q

A letter issued regarding significant deficiencies relating to an entity’s internal control observed during an audit of financial statements should include a

A

Restriction on the distribution of the report.

91
Q

When assessing the internal auditor’s objectivity, the auditor should consider

A

(1) the organizational status of the internal audit function; and (2) the policies affecting the internal auditor’s objectivity about areas audited

92
Q

The control environment is comprised of the following elements:

A

(1) communication and enforcement of integrity and ethical values; (2) commitment to competence; (3) participation of those charged with governance; (4) management’s philosophy and operating style; (5) the entity’s organizational structure; (6) the entity’s assignment of authority and responsibility; and (7) human resource policies and practices.

93
Q

The exercise of due professional care requires that

A

a critical review of the work completed and the judgments made be performed at every level of supervision.

94
Q

A CPA firm would be reasonably assured of meeting its responsibility to provide services that conform with professional standards by

A

Having an appropriate system of quality control.

95
Q

Attestation engagement

A

Issue a written communication expressing a conclusion about the reliability of a written assertion that is the responsibility of another party.

96
Q

PCAOB inspects registered public accounting firms that audit more than 100 issuers every

A

annually; But those that audit 100 or fewer issuers must be inspected every three years.

97
Q

PCAOB requirement:

A

Establishing audit standard, oversee registration of and inspect registered accounting firms
BUT NOT establish accounting standard

98
Q

Which of the following would an auditor most likely use in determining the auditor’s preliminary judgment about materiality?

A

The entity’s annualized interim financial statements.

99
Q

Risk of failing to discover material misstatements.

A

Detection risk

100
Q

4 factors that determine the effectiveness and efficiency of analytical procedures used for substantive purposes:

A

(1) the nature of the assertion, (2) the plausibility and predictability of the relationship, (3) the availability and reliability of the data used to develop the expectation, and (4) the precision of the expectation

101
Q

Analytical procedures used in planning an audit should focus on identifying

A

Areas that may represent specific risks relevant to the audit.

102
Q

Fraud that has been detected by the auditor and which is immaterial to the financial statements (and which does not involve senior management) should be reported to

A

the appropriate level of management, at least one level above where the fraud is believed to have originated.

103
Q

Any fraud involving senior management, whether material or not, should be reported

A

to those charged with governance.

104
Q

The auditor is required to communicate to the audit committee (or those charged with governance)

A

both significant audit adjustments recorded by the entity and
management’s consultations (disagreements, even if resolved) with other accountants about significant accounting matters

105
Q

Although the auditor would discuss with the audit committee the qualitative aspects of the entity’s significant accounting policies (and any indications of management bias),

A

those matters would be discussed at the end of the audit.

106
Q

Audit risk

A

is the risk that the auditor will issue an unqualified opinion on the financial statements when in fact the financial statements are materially misstated. The statement in the auditor’s report that indicates that the auditor obtains reasonable assurance about whether the financial statements are free of material misstatement recognizes the existence of audit risk.

107
Q

The successor auditor normally reviews the predecessor’s audit documentation relating to planning, internal control, audit results, balance sheet accounts, and contingencies

A

planning, internal control, audit results, balance sheet accounts, and contingencies

108
Q

Which of the following internal controls would be most likely to reduce the risk of diversion of customer receipts by an entity’s employees?

A

A bank lockbox system.

109
Q

Adequate segregation of duties provides for the separation of

A

authorizing, recording, and custodial duties.

110
Q

Mailing disbursement checks and remittance advices should be controlled by the employee who

A

Signs the checks last.

111
Q

The safeguarding of inventory most likely includes

A

periodic reconciliation of detailed inventory records with the actual inventory on hand by taking a physical count.

112
Q

An auditor generally tests the segregation of duties related to inventory by

A

Personal inquiry and observation.

113
Q

4 assertions applicable to account balances at the period end:

A

(1) existence; (2) completeness; (3) rights or obligations; and (4) valuation and allocation

114
Q

While the accounting records - including the general and subsidiary ledgers, the journals, and supporting worksheets - are considered to constitute evidence in support of the financial statements, ________, by itself, cannot be considered sufficient support for the financial statements.

A

accounting data,

The auditor must test the accounting data in order to develop persuasive evidence to support the opinion.

115
Q

Which assertion is not acknowledged in PCAOB but is in AICPA standard?

A

cut off

116
Q

”differences in estimates, such as a difference in a fair value estimate”

A

“judgmental misstatement”

117
Q

After the documentation completion date, the auditor is prohibited from _____ any of the existing audit documentation.

A

deleting

118
Q

Audit documentation associated with public companies must be retained for at least

A

7 years

119
Q

In evaluating the reasonableness of an accounting estimate, an auditor concentrates on key factors and assumptions that are:

A

significant to the accounting estimate;
sensitive to variations;
deviations from historical patterns; and
subjective and susceptible to misstatement and bias.

120
Q

The primary source of information to be reported about litigation, claims, and assessments is the

A

Client’s management. The information provided by management is corroborated by the client’s lawyer.

121
Q

The management representation letter should

A
  • address all periods of the financial statements covered by the auditor’s report.
  • must match the date of the auditor’s report.
  • related to detection of fraud (involving management).
  • all information provided by the client.
122
Q

Dual date

A

When a subsequent event disclosed in the financial statements occurs after audit report date but before release of the report, the auditor may elect to dual date his/her report. In doing so, the auditor is limiting responsibility for events occurring subsequent to the audit report date to the specific event referenced.

123
Q

Subsequent event date

A

When a subsequent event occurs requiring adjustment of the financial statements but no disclosure of that subsequent event is made, the report will still be dated when sufficient appropriate audit evidence had been obtained.

124
Q

“Except for…”

A

is language used to identify a qualification for a departure.

125
Q

“substantial doubt about the entity’s ability to continue as a going concern.”

A

Phrased used in the Emphasis of Matter para of the unmodified audit report to address the going concern issue.

126
Q

Kiting

A

Kiting occurs when transfers are made from one bank account to another, but the disbursing and receiving transactions are not recorded in the same time period.

127
Q

If an auditor was unable to observe the physical count of inventory for an initial audit,

A

the auditor still may be able to perform alternative audit procedures to verify the reasonableness of the entity’s beginning inventory.

128
Q

The auditor analyzes repair and maintenance expense to

A

identify amounts expensed that should have been capitalized.

129
Q

Unrecorded trade accounts payable may be detected by

A

reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period

130
Q

Monthly statements sent to customers, as well as follow-up on discrepancies reported by customers, provide outside validation and are key controls supporting ______________in the sales and collection cycle that will be tested by auditors.

A

existence and occurrence

131
Q

Management assertions concerning ____________involve whether components of the financial statements are appropriately described and disclosed. In accounts receivables, the concern is primarily whether there are any factored or pledged receivables that should be disclosed. This area is not usually tested via tests of controls.

A

presentation and disclosure

132
Q

When there are “many differences” at the account-balance level for accounts receivable (particularly when those do not involve misstatements), the auditor may choose to focus on specific transactions represented by __________ for audit sampling purposes. That may make it easier for customers to respond accurately.

A

individual invoices

133
Q

In testing for unrecorded retirements of equipment, an auditor most likely would

A

Select items of equipment from the accounting records and then locate them during the plant tour.

134
Q

The risk of incorrect rejection -

The risk of incorrect acceptance -

A

relates to

  • the efficiency of the audit.
  • the effectiveness of the audit.
135
Q

______refers to any error unrelated to sampling risk that the auditor might commit when performing an audit sampling task, such as failing to recognize a misstatement or otherwise misinterpreting the audit evidence.

A

Nonsampling risk

136
Q

The term “attributes sampling” is used in the context of

A

testing internal control issues

137
Q

To determine the sample size for a test of controls, the auditor considers

A

the tolerable deviation rate, the allowable risk of assessing control risk too low, and the expected deviation rate.

138
Q

Allowance for sampling risk will be equal to

A

the achieved upper precision limit less the sample error rate

139
Q

Stratified mean per unit (MPU) sampling is a statistical technique that may be more efficient than unstratified MPU because it usually

A

Produces an estimate that has a desired level of precision with a smaller sample size.

140
Q

The use of the ratio estimation sampling technique is most effective when

A

The calculated audit amounts are approximately proportional to the client’s book amounts.

141
Q

_______, which includes such methods as mean per unit, would be used to provide a numerical estimate of a population.

A

Variables sampling

142
Q

PPS Sampling

A

Inclusion of zero and negative balances generally require special design considerations.

143
Q

In an audit of a nonissuer’s financial statements, projected misstatement is

A

An auditor’s best estimate of misstatements in a population extrapolated from misstatements identified in an audit sample.

144
Q

projected error of the sample is

A

the amount of the difference between the book value and the audit value when the amount of the account examined is greater than the sampling interval.

145
Q

______ would document the work completed to date on the project (ideally) and enable an analyst to take over.

A

system documentation

146
Q

In an EDI system, a standard format is adopted. _______ is the process by which the elements in the client’s computer system are related to the standard data elements

A

Mapping

147
Q

_________system links minicomputers in remote locations with a centralized computer. The controls of greatest concern to the auditor are access controls

A

distributed data processing

148
Q

In a well-designed system of internal control, the following duties must be segregated:

A

systems analysis, programming, computer operations, transaction authorization, library functions, and data control.

149
Q

_______document the trail of accounting data (and transactions) through the system

A

Network and sender/recipient acknowledgments

150
Q

___would reveal unauthorized program changes

A

A comparison of the compiled object program code with the original program

151
Q

general IT controls include controls over the following:

A

(1) data center and network operations; (2) system software acquisition, change, and maintenance; (3) program change; (4) access security; and (5) application system acquisition, development, and maintenance

152
Q

____(i.e., screening based upon specified criteria) is something that generalized audit software is well suited to do.

A

Filtering data

153
Q

Automated controls are especially well suited for processing small/large?, recurring/unusual? transactions that are ___.

A

small, recurring, routine

154
Q

______ is a meaningless total computed to verify the accuracy and completeness of input.

A

A hash total

155
Q

_______ ensure that only valid transactions are processed. The direct output of edit checks for a sales order processing system would most likely be a file of all rejected sales transactions. These transactions would need to be researched and corrected so that they could be re-entered into processing.

A

Edit checks

156
Q

______ and ______ tests are both processing controls designed to ensure the reliability and accuracy of data processing. Both as examples of input controls, they can also be utilized as processing controls.

A

Limit test

validity check

157
Q

An advantage of computer-assisted audit techniques, such as IDEA or ACL, is

A

the capability of analyzing very large (even entire) populations of data.

158
Q

EDI - Preventive control vs. Detective

A

Preventive controls are generally more important than detective controls in EDI systems.

159
Q

_____is the means by which an accounting transaction can be traced through an accounting information system. I

A

The audit trail

160
Q

EDI advantage:

A

An electronic data interchange environment enables the business cycle to be reduced (or compressed).

161
Q

Which of the following statements is correct concerning the security of messages in an electronic data interchange (EDI) system?

A

Encryption performed by physically secure hardware devices is more secure than encryption performed by software.

162
Q

_____are simulated data that include both valid and invalid conditions. They are processed using the client’s programs, which should accept the valid data and reject invalid data. Results are compared to the auditor’s predetermined results to check the accuracy of the computer processing of transactions.

A

Test data

163
Q

When financial statements contain a departure from GAAP because, due to unusual circumstances, the statements would otherwise be misleading, the auditor should explain the unusual circumstances in a separate paragraph and express an opinion that is

A

Unmodified

164
Q

A former client requests a predecessor auditor to reissue the prior-year’s audit report in connection with the issuance of comparative financial statements by the client. What is the predecessor auditor’s responsibility?

A

Read the current report, compare it to the previous report, and obtain a letter of representation from the successor auditor.

165
Q

The accounting principles utilized in the preparation of the financial statements should:

A

1) be prepared in accordance with the identified financial reporting framework;
2) be appropriate in the circumstances;
3) provide information about matters that may affect the use, understanding, and interpretation of the financial statements;
4) classify and summarize information in a reasonable manner; and
5) reflect transactions in a manner that presents the financial position, results of operations, and cash flows stated within a range of reasonable and practicable limits.

166
Q

Form AP, which must be filed with the PCAOB for every audit of an issuer, addresses each of the following matters except for

A

The year when the auditor first began serving consecutively as the company’s auditor.

167
Q

The auditor report must use the following labels associated with the major sections of the audit report:

A

(1) Opinion on the Financial Statements, (2) Basis for Opinion, and (3) Critical Audit Matters.

168
Q

An audit report that has a disclaimer of opinion (or an adverse opinion) should not include any communication of ______

A

critical audit matters

169
Q

Satisfaction with the work performed might be obtained by

A

visiting the component auditor and discussing the procedures performed and the related results, reviewing the audit programs, and/or reviewing the documentation of the component auditor, including the internal control work performed.

170
Q

five considerations that may influence the decision to obtain a separate engagement letter under the circumstances when an auditor of a parent nonissuer is also the auditor of a component:

A

(1) who engages the component auditor; (2) whether a separate auditor’s report is to be issued on the component; (3) legal requirements regarding the appointment of the auditor; (4) the degree of ownership by the parent; and (5) the degree of independence of the component management from the parent entity.

171
Q

When an entity omits a statement of cash flows, the auditor ________ an engagement to audit the other financial statements,

A

may accept
but should qualify the opinion, since a statement of cash flows is required when general-purpose financial statements present financial position and results of operation.

172
Q

A footnote stating that certain related party transactions were consummated on terms equivalent to those obtainable in transactions with unrelated parties would

A

not be acceptable to the auditor unless the auditor verified that the representations were correct. If no verification occurred (or this perhaps were not possible), the opinion might be modified as a result.

173
Q

A _______ in internal control should be reported to those charged with governance, but would not be reported in an unmodified audit report.

A

material weakness

174
Q

A disclaimer is issued when the scope limitations pertaining to the audit are __________that the auditor in unable to express an opinion.

A

so pervasive

175
Q

A disclaimer report omits the______ paragraph (the second paragraph in the auditor’s responsibility section that describes an audit) and adds a separate paragraph explaining why the audit did not comply with ______ (Basis for Disclaimer of Opinion)

A

scope

generally accepted auditing standards

176
Q

If a change in accounting principle has occurred and the auditor concurs with the change, the only requirement that must be met is

A

to refer to the change in an emphasis-of-matter paragraph following an otherwise unmodified opinion.

It is not necessary for the auditor to concur explicitly with the change nor is it appropriate for the opinion to be qualified as a result of the change.

177
Q

When there is a change in accounting principle, the auditor is required to evaluate four matters:

A

(1) whether the newly adopted principle is GAAP; (2) whether the method of accounting for the effect of the change conforms to GAAP; (3) whether the disclosures related to the change are adequate; and (4) whether the company has justified that the alternative accounting principle is GAAP.

178
Q

When the audited financial statements are presented in a client’s document containing other information,

A

the auditor is required to read the other information to determine whether it is consistent with the audited financial statements.

179
Q

Failure to include supplementary information required by the Governmental/Financial Accounting Standards Board would result in

A

an unmodified opinion with an other-matter paragraph.

180
Q

In addition to determining that such supplementary information is not omitted,

A

the auditor has some basic responsibility to evaluate whether the supplementary information appears to be presented according to GASB guidelines.
The auditor should apply certain limited procedures to the supplementary information and report deficiencies in, or omissions of, such information.

181
Q

The auditor should obtain management’s representation that the

A

methods of measurement or presentation have not changed from those used in the prior period. However, the auditor’s report does not include such a statement.

182
Q

In reporting on supplemental information under PCAOB auditing standards,

A

a written confirmation from the regulatory authority would not be obtained.

183
Q

A review of interim financial information requires that

A

the accountant read the minutes of meetings of those charged with governance and perform a limited number of other procedures.

184
Q

The SEC requires that, when an auditor’s review report on interim financial information is included in a registration statement, the prospectus must include a statement indicating that

A

the accountant’s review report is not a part of the registration statement within the meaning of the Securities Act of 1933.

185
Q

The alert to restrict the distribution of the auditor’s report is presented

A

at the end of the auditor’s report.

AUD (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions