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Audit Final Review > Audit Review > Flashcards

Audit Review Flashcards

1
Q

Common Size

A

Full or Partial statements expressed in percentages of a given base

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2
Q

Vertical, Common Size Statements

A

All statements figures are expressed as a percentage of a base figure from that year’s statement

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3
Q

Segment Reporting/Timeliness

A

A breakdown by major lines of business

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4
Q

Horizontal

A

All statement figures are expressed as a percentage of a base year figures

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5
Q

Interim Reporting

A

Requires estimation of some expense items

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6
Q

Trend Analysis

A

A comparison of financial data over time

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7
Q

Control Risk

A

The clients controls are not functioning as effectively as the auditor had anticipated

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8
Q

Inherent Risk

A

Accounts such as revenue and receivables are highly susceptible to misstatement

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9
Q

Audit Risk

A

The auditors issues an unqualified opinion on the client’s financial statements when a qualified or adverse is more appropriate,

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10
Q

Detection Risk

A

The auditor performs more effective substantive procedures

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11
Q

Completeness

A

Select a sample of receiving reports and trace to inventory record posting of additions

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12
Q

Occurrence

A

Vouch a sample of receiving reports to related purchase orders

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13
Q

Accuracy

A

Trace a sample of voucher debits to general and subsidiary ledger accounts

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14
Q

Occurrence

A

Select a sample of open accounts payable transactions for proper accounts

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15
Q

Accuracy

A

Test a sample of cash disbursement voucher documents for accurate mathematics

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16
Q

Valuation

A

Premiums and discounts on bond and notes payable are properly amortized using the effective interest rate method.

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17
Q

Occurrence and Authorization

A

Any significant debt commitments are approved bu the board of directors or delegated executives

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18
Q

Disclosure-Classification

A

The portion of long term debt due in the next year is classified as a short term liability

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19
Q

Valuation

A

A subsidiary ledger is maintained that contains information about all the long term debt and the amount recorded in this ledger is reconciles to the general ledger.

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20
Q

Management Representation

A

Discusses management responsibility for the fairness of the financial statements

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21
Q

Management Representation

A

Is obtained on the audit completion date

22
Q

Attorney Letter

A

Provides auditors with significant evidence regarding litigation, claims, and assessments.

23
Q

Management Representation

A

Discusses the absence of fraud activity by the client and its personnel

24
Q

Management Letter

A

Is not required by generally accepted auditing standards

25
Q

Attorney Letter and Management Representations

A

Is intended to be returned to auditors as a form and evidence.

26
Q

Attestation (2 Field Work Standard)

A
  • Planning and Supervision

* Appropriate

27
Q

FOUR Reporting Standard

A
  • Subject Matter
  • Significant Reservation
  • Express Conclusion
  • Restrict Use
28
Q

AGREED UPON PROCEDURE

I AM SURE

A

I - independent of the practitioner
A - agreement of the parties
M - measurability and consistency
S - sufficiency of the procedure
U - use of the report is restricted to the specified
parties
R - responsibility for the subject matter
E - engagement to perform agreed upon procedure on prospective financial statements

29
Q

(5) FIVE ATTESTATION GENERAL STANDARD

TIPPY

A

T - training and proficiency
I - independence
P - Performance/due professional care in planning and performance
P - professional, adequate knowledge of subject matter
Y - your belief that the subject matter is capable professional judgment

30
Q

Review Requirements

U LIAR CPA

A

U - understanding with client should be established

L - learn and or obtain sufficient knowledge of the entity business
I - inquiries should be addressed to appropriate individuals
A - analytical procedure should be performed
R - review other procedures should be performed

C - client representation letter should be obtained from management
P - professional judgment should be used to evaluate results
A - accountant (CPA) should communicate results

31
Q

REPORTING ON A COMPILATION

A

C - complied state that the FS have been compiled
A - not audited state that the accountant has
R - not reviewed

M - management
R - responsibility

A - accountants
R - responsibility
S - SSARS issued by AICPA
O - objective of compilation is to assist
M - management
32
Q

S T A F F

A 
S - staff qualification
T - transaction type and frequency
A - accounting basis used to prepare the FS
F - form of the accounting record
F - FS form and content
33
Q

SOX

A
  • Prohibits other services for audit clients
  • Tax prep for corporate audit client is okay
  • Partner rotation every 5 years
34
Q

Quality Control Standard

HELP ME

A

H - human resources
E - engagement/client acceptance and continuance
L - leadership responsibilities (tone at the top)
P - performance of the engagement
M - monitoring
E - ethical requirements

35
Q

Under Condensed Audited FS

The Auditor Must Indicate

A
  1. The auditor audited and expressed an opinion on the complete FS
  2. The date of the auditors report on the complete FS
  3. The type of opinion expressed and
  4. Whether the info. in the condensed FS is fairly stated in all material respect in relation to FS from which it has been derived
36
Q

AUDIT PROCEDURE

A
  • Inquire of management
  • Determine whether the form and content of the info complies with the applicable criteria
  • Obtain an understanding of the methods used to prepare the info
  • Compare and reconcile the info to the audited FS
  • Inquire regarding any significant assumptions
  • Evaluate the appropriateness and completeness of info
  • Obtain written representation from management regarding the information
37
Q

Reporting On Supplementary Info in Relation to FS as a whole. (Auditor has 2 Objectives in such engagements)

A
  • To evaluate the presentation of the supplementary info in relation to the FS as a whole and
  • To report on whether the supplementary info is fairly stated in all material respect in relation to the FS as a whole
38
Q

If Client Refuses to Follow Procedure ( DAR )

A

D - dissociate - notify the client the auditors report must no longer be associated with the FS
A - alert agencies - notify if applicable any regulatory agencies having jurisdiction over the client that the auditors report should no longer be relied on and
R - Relying parties - notify persons known to be relying or like to rely on FS that the auditors

39
Q

Auditors Responsibility to Investigate Subsequent Event during FIELD WORK ( PRIME TEST)

A

P - post BS transactions- review for proper cutoff and to better evaluate year end balances
R - representation letter should be obtained from management (usually CEO & CFO) regarding whether any events occurred during the subsequent period require adjustment to or disclosure to FS
I - inquiry
M - minutes of stockholders or other committee meetings
E - examine latest available interim FS

40
Q

Events Occurring After Year End Subsequent Event

A
  • Recognized (Type I) events - conditions existing on or before BS date ($$recorded looking back)
  • Non-recognized (Type II) events - conditions existing after the BS date (Footnote looking forward)

GR: CPA responsibility - up to date of audit report

41
Q

REPORT OF A PREDECESSOR AUDITOR - PRESENTED

A
  • Read statements for the current period
  • Compare the statements audited with the
  • Current period statements
  • Obtain a letter from the successor auditor
  • Obtain a letter of representation from management
42
Q

Updated changed opinion when now in conformity with GAAP

A
  • Date of the auditors previous report
  • Opinion type previously issued
  • Reason for the prior year opinion
  • Changes that have occurred
  • Statement that the opinion is different
43
Q

Reason For Disclaimer of Opinion

A
  • Lack of Independence

* Unaudited FS

44
Q

Disclaimer Opinion

A

Intro: use words “were engaged to audit” instead of “have audited” and deletion of the Reference to the auditors responsibility
Scope paragraph omitted
Explanatory (middle paragraph)
* reason for disclaimer
* statement not in accordance with GAAP
Opinion - disclaimer of opinion is given on the FS taken as a whole

45
Q

Qualified Opinion

A

The nature of the scope limitation should be described in an explanatory paragraph (preceding the opinion paragraph) and should be referred to in both the scope and opinion paragraph of the auditors report

46
Q

LACK OF CONSISTENCY

A

GAAP acceptable/justified = modified unqualified

NON GAAP unacceptable/unjustified = Qualified or Adverse

47
Q

UNQUALIFIED OPINION ( 3 Paragraph)

A

Intro Paragraph
RR - management responsibility/auditors responsibility
AA - statement audit was conducted in accordance with US GAAS
PP - statement audit was planned and performed to obtained measurable assurance that the FS are free
MM - from material misstatement
EE - statement that the audit included examining evidence on a test basis
AA - assessing the accounting principle use and significant estimates
MM - made by management and evaluating the overall presentation
OPINION paragraph - EXPLICIT
Fair presentation of FS and regarding conformity with US GAAP

48
Q

DISCLOSURE - silent - OK
(Standard of Reporting)
( ACDO )

A

Auditors determine that informative disclosure are not reasonably adequate the auditors must state in the auditors report (IMPLICIT in auditors report)

49
Q

ACCOUNTING

ACDO

A

GAAP must state your opinion auditor must state in the auditors report whether the FS are presented in accordance with generally accepted accountant principles (GAAP) EXPLICIT statement in auditors report

50
Q

CONSISTENCY - silent - OK

ACDO

A

auditors must identify in the auditors report (IMPLICIT) in auditors report must comparability predictability

51
Q

EXPRESS OPINION - must state

ACDO

A

EXPLICIT statement in auditors report

Audit Final Review (13 decks)

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