Audit Section 3 Flashcards
1
Q
Is record of electronic funds transfers an accounting record
A
yes
2
Q
is a contract an accounting record
A
yes
3
Q
general & sub ledgers are what type of record
A
accounting record
4
Q
Quantity of evidence is affected by ___
A
RMM
5
Q
The higher the quality of evidence, the lower the ____ of evidence
A
quantity
6
Q
Reliability of audit evidence is influenced by its ____ and its ____
A
source and nature
7
Q
Difficulty and ___ is not a factory for omitting an audit procedure when on appropriate alternative is available
A
expense
8
Q
Obtaining an understanding of entity and its environment including I/C is known as what
A
risk assessment procedures
9
Q
Is risk assessment judgmental
A
yes
10
Q
What is an integrated audit
A
an audit of I/C & F/S combined together (issuers only)
11
Q
For issuers, does mangement have to provide an annual report on I/C over financial reporting?
A
yes
12
Q
Management must disclose whether material weaknesses are present or whether or not I/C over financial reporting is effective in a report on I/C over F/R?
A
Yes
13
Q
If a material weakness exists, can management conclude that I/C is effective
A
no
14
Q
In an audit over F/R, the auditor should evaluate whether ____ sufficiently address RMM due to fraud and controls intended to address risk of management override
A
controls
15
Q
____ are very effective to determine the effectiveness of design of controls
A
walk-through
16
Q
Length of time during the audit period the auditor is relying on the operating effectiveness of controls is a factor for the auditor to consider to determine extent of test of controls
A
true
17
Q
Auditor should test teh person performing the control possesses the necessary ___ and ___ to perform the control effectively
A
authority and competence
18
Q
If controls haven’t changed, an auditor should test a control every ____
A
3 years
19
Q
Can auditors rely on audit evidence from controls that have changed
A
no
20
Q
The greater the rate of deviation from a control increases the ____
A
auditor should increase the extent of testing a control
21
Q
For a review of an issuer, should hte accountant understand the I/C?
A
Yes
22
Q
Two types of sampling
A
statistical and nonstatistical
23
Q
The sufficiency of audit evidence is related to the ____ and ___ of an audit sample
A
design and size
24
Q
What type of of risk is human error: Sampling risk or nonsampling risk
A
nonsampling risk
25
What is sampling risk
The sample provides a different conclusion than the population
26
Sampling risk is inversely w/ sample size
true
27
Nonsampling risk is ___
all aspects of audit risk that are not due to sampling
28
What two types of sampling risk affect substantive testing
Risk of incorrect rejection/acceptance
29
Incorrect rejection (control risk too high) relates to the ____ of the audit
Efficiency
30
Incorrect acceptance (control risk too low) relates to the ____ of the audit
effectiveness
31
When considering test of details, the auditor should consider the
relationship of sample to audit objective
preliminary estimates of materiality levels
auditors allowable risk of incorrect acceptance
items comprisnig in the account balance/class of transactions
32
Projected error amount should be added to ___ to compare with the _____ for the account balance
added to errors discovered
| compare with the tolerable reror
33
Consideration should be given to the Qualitative aspects of the errors...which means?
Nature of misstatements
Error or Fraud
Difference in principle & Application
Relationship of misstatement in other phases of audit
34
What are pertinent control procedures?
Procedures that if they were not included in the design of the system, it would have affected the auditor's evaluation of I/C
35
When designing test of controls, auditor should plan to evaluate compliance in terms of deviation from or compliance with ____
pertinent control procedures
36
The auditor should use a low level risk of ___ whether the auditor is using nonstat or stat sampling
overreliance
37
Dual purpose tests are generally ___ (size)
larger
38
In dual purpose test, the auditor should evaluate deviations and monetary misstatements ____
separately
39
Monetary misstatements of dual prupose tests is an indication that a ____ exists when assessing the operating effectiveness of controls
control failure
40
Does stat sampling involve additional costs of training auditors to design and select samples to meet stat requirements?
yes
41
Stat sampling uses what
probability to make statements about population
42
What requirements needs to be met for a sample to be statistical
sample must be stat selection and sample results mathematically evaluated.
43
Attribute sampling estimates the ___ of occurrence of a specific quality (attribute)
rate
44
Discovery sampling is used when
expected occurrence rate is extremely low.
45
When is discovery sampling used when the auditor desires a specific chance of observing at least
1 example of an occurrence
46
Variable/Quantitative sampling is used when
auditor wants to estimate/test a client's BOOK VALUE
47
what type of sample do you use to estimate a book value
variable/quantitative
48
___ sampling is used for test of controls whereas ___ sampling is used for substantive
Attribute , Variable
49
Stat sampling allows the auditor to calculate the ____ on the sample for assessing ___
risk of reliance
| control risk
50
Stat sampling enables the auditor to make what kind of statements on the population
objective
51
Objective statements on the population are made from what type of sampling
stat
52
When does the AICPA require stat sampling
never -- not required
53
Can stat sampling eliminate prof judgment?
no
54
PPS (probability proportional to size) sampling randomly selects ____ from a population and audits the balances called ___
dollar amounts
| logical units
55
What type of balances are more prone to be selected under PPS?
Larger balances
56
Population : 1.5 mil
Jims Account balance : 90K
What is jims probability for being selected in the sample under PPS
6% -- 90k/1.5M
57
What type of sampling technique requires you to determine sample size in advance
PPS
58
Is PPS dependent on an estimate of the population deviation rate?
no
59
are PPS samples stratified?
yes
60
What sample technqiue automatically identifies ISI items?
PPS
61
When the auditor expects no errors, PPS sample size is ____
smaller
62
Are overstatements or understatements more prone to be detected under PPS
overstatements
63
The auditor generally knows the ____ value and the ___ value
Recorded Value
| Audited Value
64
When the auditor is aware of both recorded and audited values, the auditor uses _____
Difference estimation
65
What is difference estimation?
Sampling method that results in smaller sample size
66
What is ratio estimation?
Projecting the misstatement for the population by calculating the misstatement of the sample an projecting the percentage to the population.
67
When using attribute sampling, the auditor must ensure that homogeneity exists -- what is it?
All items in the population have similar characteristics
68
When you rely on a control, when you shouldn't this is also called --
risk of assessing control risk too low
69
Minimum reliability level should be what?
90% -- 10 % sampling risk
70
If an attribute is critical to the scope, what reliability should be used?
95% -- 5% sampling risk
71
What type of sampling is associated with Discovery sampling?
Attribute
72
Two conditions must exist (both exist) for an auditor to use sampling:
1
2
1. Auditor expects deviation rate is 0 or near 0
| 2. Auditor is looking for a very critical characteristic (payroll padding is most used for this).
73
If the auditor finds the critical characteristic to exist during discovery sampling, what oes that mean
Wide spread of error or fraud in the F/S
74
What type of procedure is examining journal entries and adjustments
Substantive
75
Test of details focuses on 2 assertions:
Existence and valuation
76
What is the objective of analytical procedures?
Assist auditor w/ overall conclusions of the f/s
77
Is reading the notes an analytical procedure
yes
78
Are forecasts apart of analytical procedures
yes
79
Analytical procedures considers what type of balances or relationships
unusual
80
Can analytical procedures be effective for testing assertions
yes
81
can analytical procedures be apart of a substantive test
yes
82
What is the ratio for "CURRENT RATIO"
Current asset/current liability
83
What does current ratio explain
MEasures company's ability to pay short & long term liabiliteis
84
What limitations does the current ratio have
B/S accounts based on historical value does not represent market value
85
What is the quick acid ratio
Current assets - inventory&prepaids
-----------------------------------------------------
Current liabiliteis
86
What does the quick acid ratio tell you
If company has assets to cover short term liabilities with only liquid assets
87
What are the limitations of quick acid ratio
Receivables that you cant collect on may need to be factored @ less than carrying value. Securities can fluctuate which affects liquid amount
88
What is the inventory turn-over ratio
COGS/Avg inventory
89
What does inventory turn-over tell you
explains how many times a company sold and replace inventory throughout a period (year/monthly/etc)
90
What are limitations of inventory turn-over
inventory valuations using different methods can affect the ratio
91
What is receivable turnover
Net Credit Sales/Avg Receivable
92
What does receivable turnover tell you
Measures how effecitvely a company extends credit and collects.
93
What can receivable turnover indicate
collection problems
94
What limitations of receivable turnover
Seasonal fluctuations
95
Weighted average method in receivable turnover removes what limiation
seasonal fluctuations
96
Total asset turnover is what
Net sales/avg total asset
97
What does total asset turnover tell you
Measures how efficiently a company use assets to produce sales
98
Limitations of toatl asset turnover
Takes into account intangibles that do not help rpoduce sales.
99
Rate of return on total assets is what
net income / avg total assets
100
What does rate of return on total asset tell you
measures productivity of assets in terms of producing net income
101
limitations of rate of return on total asset
accrual net income is subject to estimates and doesn't reflect actual cash return. Rate of return is based on historical asset cost -- which doesnt reflect current value
102
Debt ratio is what
total liability/total asset
103
What does debt ratio tell you
leverage used
104
Limitation of debt ratio
total asset reflects historical cost
105
Debt to equity ratio is what
Total liability / Stock holder equity
106
Debt to equity tells you what
company's ability to pay equity's long-term debt
107
Equity ratio is what
Stock holder equity / Total Asset
108
Equity ratio tells you what
Measures asset investment provided by stockholder
109
Times interest earned is what
Income - Interest Expense - Income taxes / Interest Expense
110
Times interest earned tells you what
ability to cover interest charges
111
Price earning ratio is what
market price per common share / EPS
112
Price earning ratio tells you what
relationship of common stock to net earnings
113
Dividend yield is what
dividend per common share / market price per common share
114
Dividend yield tells you what
shows return to stockholders based on current stock price
115
PRofit margin on sales is what
net income/sales
116
Profit margin on sales tells you what
measures efficiency of earnings income from sales
117
Total asset turn over measures liquidity
NO - it measures return on investment
118
Times interest earned measures what
Solvency -- ability to meet short and long term obligations
119
Book value per common share and cash flow per common share measures Return on Investment
NO - it measures solvency -- ability to meet short and long term obligations
120
Cash from operating activities measures return on investment
no -- it measures solvency -- ability to meet short and long term obligations
121
Cash from operating activities to current liabilities measures solvency
NO - it measures liquidty
122
Accounting methods used to value asset/liability/Stock equity/revenue is a limitation of what procedure
analytical procedures
123
Management policy cannot influence ratios T/F
False -- IT CAN INFLUENCE!
124
What type of analytical procedures do you use in compilations or prepping F/S
NONE
125
Plausible relationship is what
A relationship that is reasonable (they correlate/complement each other)
126
Confirmations are what type of audit procedure (observe, inspect, etc)
Inquiry
127
If there are complex transactions or unusual transaction, should the auditor use a confirmation to confirm these transactions w/ the other party if the inherent risk/control risk is low?
Auditor judgment -- probably not
| If it was high -- then yes
128
returned negative confirmations provide significant evidence that concern the F/S
No
129
can the auditor evaluate PY audit of the company or audits of similar companies when evaluating the effectiveness of confirmations?
Yes
130
Should the client maintain the control over the request and response?
No -- the auditor should
131
What type of evidence are oral confirmations
alternative evidence (not direct)
132
The auditor doesn't have to document the oral response in the wp
False -- they have to document it
133
What should the auditor do if the auditor did not request confirmations of A/R
document why and how the presumption was overcome
134
Does the auditor have to send confirmations if inherent/control risk is low and evidence provided by analytical procedures was sufficient to reduce audit risk to a low level for the F/S
Nope
135
Does the auditor have to send confirmations if inherent/control risk is low and evidence provided by analytical procedures was not sufficient to reduce audit risk to a low level for the F/S
Yes they have to send b/c it wasn't reduced to a low level
136
In a review is management required to corroborate management's response?
No
137
If the auditor is asked to audit the current period and other periods which the auditor hasn't observed physical count of inventory, can the auditor be satisfied regarding the inventory with other procedures? If yes, how?
Yes
1. Test prior transactions
2. Review record of prior counts
3. Application of gross profit test (only if auditor is satisfied w/ current inventory
138
If the auditor believes that modifying the opinion is not adequate to iniciate the deficiencies in the F/S, what should they do
withdrawl
139
For an initial audit, are opening balances or closing balances an area of focus
opening balances
140
If the auditor finds something that requires revision from the predecessor, the auditor must ask management for all 3 to sit down and fix the issue. If management refuses, the auditor should determine whether to:
withdraw or disclaim
141
Should the auditor reference the report of the predecessor for the auditor's own opinion
NO
142
If opening balances contain a material misstatement and management does not correct them, the auditor should:
QuALIFY OR ADVERSE OPINION
143
Should the auditor read the F/S and auditor's report of the investee when investments in securities are valued based on investees financial results
yes
144
If investee and company have a material effect, the auditor should determine whether management considered
lack of comparability
145
If a company has investments in securities and derivative instruments measured/disclosed at fair value, auditor should determine whether the AFRF specifies ____ and ____
the method to be used to determine fair value AND evaluate whether the fair value determination is consistent
146
What is an impairment loss
current value is below cost
147
If auditor is unable to observe physical count date, can a different date be imposed
yes
148
If auditor's attendance to inventory count is impractical and its not possible to do alt. procedures. the auditor should
modify opinion
149
If material inventory is held by custodian, auditor should
request confirmation regarding quantities and condition
150
Unasserted claims(idk wtf this is) are disclosed if
reasonably possible and assertion if probably
151
is in house legal counsel a substitute for external legal counsel
no
152
When should the auditor consult with external counsel regarding actual/potential litigation
When RMM exists
153
When speaking to an external counsel, the lawyer is asked to indicate 3 things
description of matter
evaluation of outcome
estimate of loss (if estimable)
154
If entity changed attorneys or attorney resigned the auditor should
understand why
155
If management refuses auditor to speak w/ external attorney, auditor should
modify opinion
156
A lawyer's refusal to cooperate is a ____
scope limitation
157
For issuers, if a lawyer refuses to cooperate, can a unmodified opinion be given?
How about for nonissuers
issuers - no
| nonissuers - yes - through alt. procedures
158
If auditor believes that the company is a going concern, the auditor will request from a written rep. from management to provide: (2 things)2\
description of management's plan to mitgate effects/conditions
F/S disclose all matters of which management is aware
159
If auditor believes that management's use of going concern basis of accounting is inappropriate, auditor should express a
adverse opinion
160
If auditor believes that management use of going concern is reasonable and substantial doubt about ability to continue as a going concern is appropriate, auditor should include
an emphasis of matter paragraph
161
Auditor should communicate with gov regarding events that raised substantial doubt for entity's ability to continue as a going concern
yes
162
Auditor should communicate w/ gov regarding management's plan of going concern
yes
163
Auditor should communicate w/ management regarding adequacy of related disclosures in the F/S
no - gov
164
If the auditor is unskilled to perform audit procedures related to fair value, the auditor may use
a specialist
165
what type of analysis does the auditor encourage management to use when determining fair value
sensitive analysis for sensitive assumptions
166
Are disclosures required for fair values made by the entity (estimates)
yes
167
The auditor should obtain what from management regarding the reasonableness of sig. assumptions
written rep letter
168
If aggregate of misstatements the auditor identified approaches materiality levels, they should consider
if there is a greater than acceptable low level of risk to the F/S
169
Should an auditor document a summary of uncorrected misstatements
yes
170
Should the auditor gain an understanding for management not correcting misstatements
yes
171
What is a deficiency
design/operation of control doesn't allow mangement/employee prevent, detect, or correct misstatement
172
deficiency in design exists when
control that is necessary to meet an objective does not exist
Existing control is not properly designed, so if it operates as designed, it will not meet objective
173
Deficiency in operation exists when
when properly designed control doesn't operate as designed
| Person performing control isn't competent/have necessary authorization
174
A deficiency becomes significant dependent upon
magnitude of misstatement
reasonable possibility that entity's control will fail to prevent/detect/correct a misstatement of an account balance/disclosure
175
The severity of a deficiency depends on whether a misstatement has occurred
FALSE -- it doesn't rely on that.
176
How should sig. deficiencies and material weaknesses be communicated to gov?
written
177
When should management rep letters be dated?
date of auditor's report
178
IF current management wasn't present during all periods, should the auditor still obtain written rep letters for all periods by the new management
yes
179
if predecessor auditor is asked to reissue report, they must receive a _____
What should be included in the ___
written management rep letter
Should include if any info. has come to management's attention for them to believe previous representations should be modified
Any events occurred after B/S date of latest F/S that requires adjustment or disclosure in those F/S
180
If management refused to give a rep letter, the auditor should:
issue a qualified or disclaimed opinion
Qualified opinion is appropriate based on nature
181
When should the auditor request a rep letter from management during a compilation
never -- dont need 1 for compilation
182
Is a rep letter needed for reviews?
yes
183
What duration should management rep letters cover for review engagements
all periods covered during the review report
184
During a review, if management refuse to give a management rep letter, auditor should
discuss w/ management and gov.
185
If management refuses to give management rep letter and after discussion, auditor doesn't trust management's integrity, auditor should
withdraw
186
If management refuses to give management rep letter and after discussion, auditor trusts management's integrity, auditor should
continue w/ engagement
187
For a review, when should the management rep letter be dated
date of review report
188
if the client is NOT a responsible party in an audit/review, auditor should obtain
written rep letter from client
189
It is required for auditor to obtain a rep letter in an agreed upon procedure engagement
NOPE
190
It is NOT required for an auditor to obtain a rep letter in an agreed upon procedure engagement over compliance
False - it is always required when it involves compliance
191
If responsible party refuses a written rep letter in an AUDIT, is it still possible to obtain a satisfactory response? How? what type of report will be issued?
What happens if alt procedure fails?
Yes -- oral response -- restricted use report
If alt. procedure fails, then issue a qualified/disclaimed opinion or withdrawl.
192
If responsible party refuses a written rep letter in an review, is it still possible to obtain a satisfactory response?
Nope - withdraw from engagement
193
If responsible party in agreed-upon-procedure engagement refuses to give rep letter, what happens
disclose the inability to obtain letter
Withdraw (compliance engagements only)
Change scope of engagement
194
How far out should the auditor review subsequent events
up to date of audit report
195
What are the two types of subsequent events
Adjustment type and disclosure type
196
What is an adjustment type
requries adjustment of F/S. Event that provided additional evidence that existed at the B/S date
197
What is disclosure type
requries disclosure only. No adjustment and did not exist at B/S date.
198
In extreme cases of subsequent events for disclosure, what should teh auditor do
generate pro form F/S
199
subsequent event: Product changes would require disclosure
no (notice how it wouldn't involve a JE)
200
subsequent event: strikes/proxy fights would require disclosure
NOPE (notice how it wouldn't involve a JE)
201
What are 2 procedures that are performed after B/S date
cut off procedure
| subsequent collection of receivable
202
what is a subsequent discovery
discovery of facts that existed at the date of the audit report, but not known at the time
203
Subsequent discovery happens AFTER the report date
False -- before or at the audit report date
204
A subsequent discovery is a resolution of a contingency
Nope -- it is NOT a resolution of a contingency
205
If a subsequent discovery happens at or before the audit report date, but the auditor finds out afterwards, the auditor should
```
Consult w/ attorney
determine if discovery is reliable
Determine if existed at or before report date
material to report (change opinion)
Applicable to report
```
206
If all conditions exist in flash card 205 exist, then auditor should
reissue statement and audit report
make disclosure in F/S
notify users of F/S
Discuss w/ SEC/appropriate body if appropriate
207
If client refuses to make disclosure in note 206, auditor should notify
and make a statement that ___
the client's gov that the audit report cant be associated w/ F/S
Regulatory bodies
Users of F/S
make a statement that the client refused to cooperate
208
If a subsequent discovery exists in a REVIEW, auditor should
discuss w/ management
| determine if revision is needed
209
If auditor determines that a revision is needed and the client refuses to do so, the auditor will____
modify the review report
210
For a review, if the revision of F/S changes the auditor's conclusion, the auditor should ___
have an emphasis of matter paragraph
211
Does the auditor have the responsibility to detect subsequent events?
NO
212
When determining if F/S are free from material misstatement, an auditor should consider
```
Uncorrected misstatement (known and likely)
Qualitative factors (not sure what this means)
```
213
What is a qualified opinion
When there is a material misstatement, but it doesnt apply to the whole F/S.
Also means
Auditor cant obtain evidence and concludes that effects could be material AND are not universal to the F/S
214
If management refuses to include cash flow statement in audit report, auditor should
qualify opinion
215
Adverse opinion is when
there are material misstatement and universal to the F/S
216
Can an audit report be addressed to a third party
yes
217
Can an audit report be addressed to its stockholder
yes
218
What word must be included in the title of an audit report
INDEPEDNENT
219
If a report is qualified what paragraphs should be included
emphasis of matter or other matter
220
What words must be included when having a qualified opinion
Except or exception
221
if a going concern is present what type of paragraph should be included
emphasis of matter
222
What type of paragraph is required when a special reporting framework is used
emphasis of matter
223
Where in the report is the emphasis of matter paragraph
after audit opinionf
224
The emphasis of matter paragraph should reference what
the notes/disclosures that would that fully describe the matter can be found in the F/s
225
If the opinion is unmodified, the auditor should reference what in the emphasis of matter paragraph
Reference that the opinion is not modified with respect to the matter emphasized
226
Where should other matter paragraphs be at in the audit report
after opinion & emphasis of matter paragraph (if Emphasis paragraph exists)
227
Does information presented or disclosed in the F/S be included in the other matter paragraph
No - only emphasis of matter
228
Matters relevant to the user's understanding, auditor's responsibility, or audit report should be included in what paragraph
other matter paragraph
229
What is general use vs restricted use
General use -- used by anybody
| restricted uses -- used only by specific parties
230
When should a report be restricted
if the report is a subject matter of the audit report
measurement/disclosure criteria contained in contract agreements
Regulatory provisions that aren't in conformity w/ GAAP
Special purpose framework
Byproducts
231
A report that is restricted should include these statements
Report is for use of specified parties
identification of specified parties
Statement shouldn't be used by anyone else
232
How much responsibility does the auditor have post audit report date
NONE
233
Auditor has 2 methods to date the report when a subsequent event disclosed inthe F/S occurs after original audit report date.
Dual Date
| Date the report as of a later date
234
What is dual dating
dating a report, except for note *xyz* which is *new date*
235
What is the only responsibility of auditor after audit report date
SEC filing
236
Auditor should use headings throughout the audit report to distinguish each section
T/F
True
237
For issuers, what must be referenced in an audit report
That it was conducted in accordance with PCAOB
238
For issuers, what is the first section of audit report? 2nd section?
1st Opinion on the F/S
| 2nd Basis for Audit Opinion
239
For issuers, who is addressed in the audit report
Shareholders and BoD
240
For issuers, audit reports can be addressed to Plan administrators/participants & Trustees
Yes
241
For issuers, auditor indepndence is included in what paragraph
basis for opinion
242
For issuers, what statement is required for independence
accounting firm is registered w/ PCAOB and required to be independent w/ respect to the company in accordance with US federal securities law and regulations of the SEC and PCAOB
243
For issuers, what statement is required that reports the auditor beginning to serve as the company's auditor
Auditor Tenure
244
If the auditor has a separate report for ICFR (Internal Control over Finacial Reporting) the auditor must
reference this report in the "Opinion on the F/S" section
245
If the auditor isn't auditing the ICFR, the auditor must include a explanatory language in the
basis for opinion section.
246
where section would an auditor put information about the engagemnet partner/other accounting firms participating the audit
Information about certain audit participants
247
When can an auditor accept to review an entity I/C
NEVER
248
If a material weakness exists, can I/C be effective
no
249
What is the title of an an ISSUER's I/C audit report
Report of Independent Registered Public Accounting Firm
250
On ICFR, if a sig. deficiency results in 1 or more material weaknesses, the auditor should give a ___ opinion
adverse
251
In agreed upon procedures engagement, the objective
is to perform procedures on a subject matter or assertion and report the finding w/o providing an opinion or conclusion
252
Should an auditor be named as an outside attest provider if they prepped F/S w/o appropriate independent safeguards
No
253
What is a prospective F/S
financial forecast or projections
254
What is a financial forecast
prospective F/S that presents an entity's expected financial position with conditions expected to exist and course of action they expect to take
255
What is a financial projection
based on one or more HYPOTHETICAL assumptions, an entity's financial position
256
What is a hypothetical assumption
not expected to happen, but consistent w/ prupose of hte projection
257
There are two use for prospective F/S
general use & limited use
258
What prospective F/S is ONLY for general use
financial forecast
259
Can a financial projection be general use
NO
260
Financial projections are limited use . Only ___ can use them
company's directly negotiating w/ the entity
261
Can an auditor provide attest services for prospective F/S if no disclosure is included for summary of sig. assumptions
NO
262
What disclosure must be included for an auditor to audit prospective F/S
Summary of sig. assumptions
263
what standards should auditors follow for auditing prospective FS on agreed-upon procedures
Standards for Attest Engagements
264
Prospective F/S for agreed-upon procedures are what kind of use reports
restrictive
265
Pro forma F/S show sig effects on ___ financial information that could've occurred at _____
Historical
| an earlier date
266
Changes of capitalization is a great example for a reason to generate ___
Pro Forma F/S
267
Pro forma financial information should be labeled to distinguish it from historical costs
T/F
True
268
Can you do compilations for Pro Forma F/S
Yes
269
An auditor doesn't have to be independent for agreed-upon procedures
false -- have to be independent
270
what type of use is for the report on agreed upon procedures
restricted
271
Who takes responsibility for agreed upon procedures
Specified parties
272
Does the audit report identify specified and responsible parties
yes
273
A statement must be included in the audit report for agreed upon procedures that it was conduct in accordance with standards established by SEC
False - AICPA
274
What is a service auditor
reports on controls over the service organization
275
What is a type 1 report for service organizations
Report on managements description of a service org's system and suitability of design of controls
276
the info. necessary to report on management's description of a service org's system is obtained through ___
discussion with personnel and various documentation
277
service auditor doesn't have to be independent
false -- yeah you do
278
who accepts responsibility if CPA assists in prepping F/S and recommends a judgment
management
279
If a CPA preps F/S for a company and it contains a known departure from the AFRF, the accountant must
disclose the material misstatement(s) in the F/S
280
Can an accountant perform a compilation 1 F/S
yes
281
If the auditor is not independent, in a compilation report, where should the disclosure of no independence be at?
Last paragraph of the report
282
Can an auditor provide an emphasis paragraph in a compilation
yes
283
Is a predecessor auditor required to reissue review/compilation reports
no
284
If predecessor reissues review/compilation report, successor should either
reference predecessor report
| perform compilation/review of F/S of prior period and report on them
285
can a CPA review 1 f/s and not others
yes -- if scopes are not restricted
286
if a cpa cannot issue a review report due to restrictions, should consider
doing a compilation
287
A review of special purpose framework is inappropraite unless it includes
description of special purpose framework/policies
| informative disclosures similar to those required by GAAP
288
do you have to quantify differences between GAAP & special purpose frameworks
no
289
For F/S prepped in accordance w/ contractual basis of accounting, an auditor should modify the review report if the F/S don't adequately describe
sig. interpretations of the contract
290
When a review report on the F/S contain a changed reference to a departure from AFRF, the report should include
other matter paragraph indicating previous review report date
291
For REVIEWS, where should emphasis of matter paragraphs be? Where should other matter paragraphs be
EOM - after conclusion paragraph
| OM -After conclusion and after EOM if applicable
292
For Reviews, what should known departure paragraphs be called
Known Departure from the "Framework"
293
For a review, if modification to review report isn't enough, auditor should
withdraw
294
Does the auditor have to determine effects of departure for a review?
No
295
In a review, if an auditor uses the work of other accountants and doesn't assume responsibility for their work, the CPA should
make reference to the audit/review of other accountants in the review report
