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CPA Review AUD > Audit Section 3 > Flashcards

Audit Section 3 Flashcards

1
Q

Is record of electronic funds transfers an accounting record

A

yes

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2
Q

is a contract an accounting record

A

yes

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3
Q

general & sub ledgers are what type of record

A

accounting record

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4
Q

Quantity of evidence is affected by ___

A

RMM

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5
Q

The higher the quality of evidence, the lower the ____ of evidence

A

quantity

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6
Q

Reliability of audit evidence is influenced by its ____ and its ____

A

source and nature

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7
Q

Difficulty and ___ is not a factory for omitting an audit procedure when on appropriate alternative is available

A

expense

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8
Q

Obtaining an understanding of entity and its environment including I/C is known as what

A

risk assessment procedures

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9
Q

Is risk assessment judgmental

A

yes

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10
Q

What is an integrated audit

A

an audit of I/C & F/S combined together (issuers only)

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11
Q

For issuers, does mangement have to provide an annual report on I/C over financial reporting?

A

yes

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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

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13
Q

If a material weakness exists, can management conclude that I/C is effective

A

no

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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

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15
Q

____ are very effective to determine the effectiveness of design of controls

A

walk-through

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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

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17
Q

Auditor should test teh person performing the control possesses the necessary ___ and ___ to perform the control effectively

A

authority and competence

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18
Q

If controls haven’t changed, an auditor should test a control every ____

A

3 years

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19
Q

Can auditors rely on audit evidence from controls that have changed

A

no

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20
Q

The greater the rate of deviation from a control increases the ____

A

auditor should increase the extent of testing a control

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21
Q

For a review of an issuer, should hte accountant understand the I/C?

A

Yes

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22
Q

Two types of sampling

A

statistical and nonstatistical

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23
Q

The sufficiency of audit evidence is related to the ____ and ___ of an audit sample

A

design and size

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24
Q

What type of of risk is human error: Sampling risk or nonsampling risk

A

nonsampling risk

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25
Q

What is sampling risk

A

The sample provides a different conclusion than the population

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26
Q

Sampling risk is inversely w/ sample size

A

true

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27
Q

Nonsampling risk is ___

A

all aspects of audit risk that are not due to sampling

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28
Q

What two types of sampling risk affect substantive testing

A

Risk of incorrect rejection/acceptance

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29
Q

Incorrect rejection (control risk too high) relates to the ____ of the audit

A

Efficiency

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30
Q

Incorrect acceptance (control risk too low) relates to the ____ of the audit

A

effectiveness

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31
Q

When considering test of details, the auditor should consider the

A

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

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32
Q

Projected error amount should be added to ___ to compare with the _____ for the account balance

A

added to errors discovered

compare with the tolerable reror

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33
Q

Consideration should be given to the Qualitative aspects of the errors…which means?

A

Nature of misstatements
Error or Fraud
Difference in principle & Application
Relationship of misstatement in other phases of audit

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34
Q

What are pertinent control procedures?

A

Procedures that if they were not included in the design of the system, it would have affected the auditor’s evaluation of I/C

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35
Q

When designing test of controls, auditor should plan to evaluate compliance in terms of deviation from or compliance with ____

A

pertinent control procedures

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36
Q

The auditor should use a low level risk of ___ whether the auditor is using nonstat or stat sampling

A

overreliance

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37
Q

Dual purpose tests are generally ___ (size)

A

larger

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38
Q

In dual purpose test, the auditor should evaluate deviations and monetary misstatements ____

A

separately

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39
Q

Monetary misstatements of dual prupose tests is an indication that a ____ exists when assessing the operating effectiveness of controls

A

control failure

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40
Q

Does stat sampling involve additional costs of training auditors to design and select samples to meet stat requirements?

A

yes

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41
Q

Stat sampling uses what

A

probability to make statements about population

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42
Q

What requirements needs to be met for a sample to be statistical

A

sample must be stat selection and sample results mathematically evaluated.

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43
Q

Attribute sampling estimates the ___ of occurrence of a specific quality (attribute)

A

rate

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44
Q

Discovery sampling is used when

A

expected occurrence rate is extremely low.

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45
Q

When is discovery sampling used when the auditor desires a specific chance of observing at least

A

1 example of an occurrence

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46
Q

Variable/Quantitative sampling is used when

A

auditor wants to estimate/test a client’s BOOK VALUE

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47
Q

what type of sample do you use to estimate a book value

A

variable/quantitative

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48
Q

___ sampling is used for test of controls whereas ___ sampling is used for substantive

A

Attribute , Variable

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49
Q

Stat sampling allows the auditor to calculate the ____ on the sample for assessing ___

A

risk of reliance

control risk

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50
Q

Stat sampling enables the auditor to make what kind of statements on the population

A

objective

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51
Q

Objective statements on the population are made from what type of sampling

A

stat

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52
Q

When does the AICPA require stat sampling

A

never – not required

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53
Q

Can stat sampling eliminate prof judgment?

A

no

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54
Q

PPS (probability proportional to size) sampling randomly selects ____ from a population and audits the balances called ___

A

dollar amounts

logical units

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55
Q

What type of balances are more prone to be selected under PPS?

A

Larger balances

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56
Q

Population : 1.5 mil
Jims Account balance : 90K
What is jims probability for being selected in the sample under PPS

A

6% – 90k/1.5M

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57
Q

What type of sampling technique requires you to determine sample size in advance

A

PPS

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58
Q

Is PPS dependent on an estimate of the population deviation rate?

A

no

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59
Q

are PPS samples stratified?

A

yes

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60
Q

What sample technqiue automatically identifies ISI items?

A

PPS

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61
Q

When the auditor expects no errors, PPS sample size is ____

A

smaller

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62
Q

Are overstatements or understatements more prone to be detected under PPS

A

overstatements

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63
Q

The auditor generally knows the ____ value and the ___ value

A

Recorded Value

Audited Value

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64
Q

When the auditor is aware of both recorded and audited values, the auditor uses _____

A

Difference estimation

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65
Q

What is difference estimation?

A

Sampling method that results in smaller sample size

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66
Q

What is ratio estimation?

A

Projecting the misstatement for the population by calculating the misstatement of the sample an projecting the percentage to the population.

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67
Q

When using attribute sampling, the auditor must ensure that homogeneity exists – what is it?

A

All items in the population have similar characteristics

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68
Q

When you rely on a control, when you shouldn’t this is also called –

A

risk of assessing control risk too low

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69
Q

Minimum reliability level should be what?

A

90% – 10 % sampling risk

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70
Q

If an attribute is critical to the scope, what reliability should be used?

A

95% – 5% sampling risk

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71
Q

What type of sampling is associated with Discovery sampling?

A

Attribute

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72
Q

Two conditions must exist (both exist) for an auditor to use sampling:
1
2

A
  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).

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73
Q

If the auditor finds the critical characteristic to exist during discovery sampling, what oes that mean

A

Wide spread of error or fraud in the F/S

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74
Q

What type of procedure is examining journal entries and adjustments

A

Substantive

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75
Q

Test of details focuses on 2 assertions:

A

Existence and valuation

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76
Q

What is the objective of analytical procedures?

A

Assist auditor w/ overall conclusions of the f/s

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77
Q

Is reading the notes an analytical procedure

A

yes

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78
Q

Are forecasts apart of analytical procedures

A

yes

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79
Q

Analytical procedures considers what type of balances or relationships

A

unusual

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80
Q

Can analytical procedures be effective for testing assertions

A

yes

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81
Q

can analytical procedures be apart of a substantive test

A

yes

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82
Q

What is the ratio for “CURRENT RATIO”

A

Current asset/current liability

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83
Q

What does current ratio explain

A

MEasures company’s ability to pay short & long term liabiliteis

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84
Q

What limitations does the current ratio have

A

B/S accounts based on historical value does not represent market value

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85
Q

What is the quick acid ratio

A

Current liabiliteis

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86
Q

What does the quick acid ratio tell you

A

If company has assets to cover short term liabilities with only liquid assets

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87
Q

What are the limitations of quick acid ratio

A

Receivables that you cant collect on may need to be factored @ less than carrying value. Securities can fluctuate which affects liquid amount

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88
Q

What is the inventory turn-over ratio

A

COGS/Avg inventory

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89
Q

What does inventory turn-over tell you

A

explains how many times a company sold and replace inventory throughout a period (year/monthly/etc)

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90
Q

What are limitations of inventory turn-over

A

inventory valuations using different methods can affect the ratio

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91
Q

What is receivable turnover

A

Net Credit Sales/Avg Receivable

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92
Q

What does receivable turnover tell you

A

Measures how effecitvely a company extends credit and collects.

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93
Q

What can receivable turnover indicate

A

collection problems

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94
Q

What limitations of receivable turnover

A

Seasonal fluctuations

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95
Q

Weighted average method in receivable turnover removes what limiation

A

seasonal fluctuations

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96
Q

Total asset turnover is what

A

Net sales/avg total asset

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97
Q

What does total asset turnover tell you

A

Measures how efficiently a company use assets to produce sales

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98
Q

Limitations of toatl asset turnover

A

Takes into account intangibles that do not help rpoduce sales.

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99
Q

Rate of return on total assets is what

A

net income / avg total assets

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100
Q

What does rate of return on total asset tell you

A

measures productivity of assets in terms of producing net income

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101
Q

limitations of rate of return on total asset

A

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

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102
Q

Debt ratio is what

A

total liability/total asset

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103
Q

What does debt ratio tell you

A

leverage used

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104
Q

Limitation of debt ratio

A

total asset reflects historical cost

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105
Q

Debt to equity ratio is what

A

Total liability / Stock holder equity

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106
Q

Debt to equity tells you what

A

company’s ability to pay equity’s long-term debt

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107
Q

Equity ratio is what

A

Stock holder equity / Total Asset

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108
Q

Equity ratio tells you what

A

Measures asset investment provided by stockholder

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109
Q

Times interest earned is what

A

Income - Interest Expense - Income taxes / Interest Expense

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110
Q

Times interest earned tells you what

A

ability to cover interest charges

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111
Q

Price earning ratio is what

A

market price per common share / EPS

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112
Q

Price earning ratio tells you what

A

relationship of common stock to net earnings

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113
Q

Dividend yield is what

A

dividend per common share / market price per common share

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114
Q

Dividend yield tells you what

A

shows return to stockholders based on current stock price

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115
Q

PRofit margin on sales is what

A

net income/sales

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116
Q

Profit margin on sales tells you what

A

measures efficiency of earnings income from sales

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117
Q

Total asset turn over measures liquidity

A

NO - it measures return on investment

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118
Q

Times interest earned measures what

A

Solvency – ability to meet short and long term obligations

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119
Q

Book value per common share and cash flow per common share measures Return on Investment

A

NO - it measures solvency – ability to meet short and long term obligations

120
Q

Cash from operating activities measures return on investment

A

no – it measures solvency – ability to meet short and long term obligations

121
Q

Cash from operating activities to current liabilities measures solvency

A

NO - it measures liquidty

122
Q

Accounting methods used to value asset/liability/Stock equity/revenue is a limitation of what procedure

A

analytical procedures

123
Q

Management policy cannot influence ratios T/F

A

False – IT CAN INFLUENCE!

124
Q

What type of analytical procedures do you use in compilations or prepping F/S

A

NONE

125
Q

Plausible relationship is what

A

A relationship that is reasonable (they correlate/complement each other)

126
Q

Confirmations are what type of audit procedure (observe, inspect, etc)

A

Inquiry

127
Q

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?

A

Auditor judgment – probably not

If it was high – then yes

128
Q

returned negative confirmations provide significant evidence that concern the F/S

A

No

129
Q

can the auditor evaluate PY audit of the company or audits of similar companies when evaluating the effectiveness of confirmations?

A

Yes

130
Q

Should the client maintain the control over the request and response?

A

No – the auditor should

131
Q

What type of evidence are oral confirmations

A

alternative evidence (not direct)

132
Q

The auditor doesn’t have to document the oral response in the wp

A

False – they have to document it

133
Q

What should the auditor do if the auditor did not request confirmations of A/R

A

document why and how the presumption was overcome

134
Q

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

A

Nope

135
Q

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

A

Yes they have to send b/c it wasn’t reduced to a low level

136
Q

In a review is management required to corroborate management’s response?

A

No

137
Q

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?

A

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
Q

If the auditor believes that modifying the opinion is not adequate to iniciate the deficiencies in the F/S, what should they do

A

withdrawl

139
Q

For an initial audit, are opening balances or closing balances an area of focus

A

opening balances

140
Q

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:

A

withdraw or disclaim

141
Q

Should the auditor reference the report of the predecessor for the auditor’s own opinion

A

NO

142
Q

If opening balances contain a material misstatement and management does not correct them, the auditor should:

A

QuALIFY OR ADVERSE OPINION

143
Q

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

A

yes

144
Q

If investee and company have a material effect, the auditor should determine whether management considered

A

lack of comparability

145
Q

If a company has investments in securities and derivative instruments measured/disclosed at fair value, auditor should determine whether the AFRF specifies ____ and ____

A

the method to be used to determine fair value AND evaluate whether the fair value determination is consistent

146
Q

What is an impairment loss

A

current value is below cost

147
Q

If auditor is unable to observe physical count date, can a different date be imposed

A

yes

148
Q

If auditor’s attendance to inventory count is impractical and its not possible to do alt. procedures. the auditor should

A

modify opinion

149
Q

If material inventory is held by custodian, auditor should

A

request confirmation regarding quantities and condition

150
Q

Unasserted claims(idk wtf this is) are disclosed if

A

reasonably possible and assertion if probably

151
Q

is in house legal counsel a substitute for external legal counsel

A

no

152
Q

When should the auditor consult with external counsel regarding actual/potential litigation

A

When RMM exists

153
Q

When speaking to an external counsel, the lawyer is asked to indicate 3 things

A

description of matter
evaluation of outcome
estimate of loss (if estimable)

154
Q

If entity changed attorneys or attorney resigned the auditor should

A

understand why

155
Q

If management refuses auditor to speak w/ external attorney, auditor should

A

modify opinion

156
Q

A lawyer’s refusal to cooperate is a ____

A

scope limitation

157
Q

For issuers, if a lawyer refuses to cooperate, can a unmodified opinion be given?
How about for nonissuers

A

issuers - no

nonissuers - yes - through alt. procedures

158
Q

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\

A

description of management’s plan to mitgate effects/conditions
F/S disclose all matters of which management is aware

159
Q

If auditor believes that management’s use of going concern basis of accounting is inappropriate, auditor should express a

A

adverse opinion

160
Q

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

A

an emphasis of matter paragraph

161
Q

Auditor should communicate with gov regarding events that raised substantial doubt for entity’s ability to continue as a going concern

A

yes

162
Q

Auditor should communicate w/ gov regarding management’s plan of going concern

A

yes

163
Q

Auditor should communicate w/ management regarding adequacy of related disclosures in the F/S

A

no - gov

164
Q

If the auditor is unskilled to perform audit procedures related to fair value, the auditor may use

A

a specialist

165
Q

what type of analysis does the auditor encourage management to use when determining fair value

A

sensitive analysis for sensitive assumptions

166
Q

Are disclosures required for fair values made by the entity (estimates)

A

yes

167
Q

The auditor should obtain what from management regarding the reasonableness of sig. assumptions

A

written rep letter

168
Q

If aggregate of misstatements the auditor identified approaches materiality levels, they should consider

A

if there is a greater than acceptable low level of risk to the F/S

169
Q

Should an auditor document a summary of uncorrected misstatements

A

yes

170
Q

Should the auditor gain an understanding for management not correcting misstatements

A

yes

171
Q

What is a deficiency

A

design/operation of control doesn’t allow mangement/employee prevent, detect, or correct misstatement

172
Q

deficiency in design exists when

A

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
Q

Deficiency in operation exists when

A

when properly designed control doesn’t operate as designed

Person performing control isn’t competent/have necessary authorization

174
Q

A deficiency becomes significant dependent upon

A

magnitude of misstatement
reasonable possibility that entity’s control will fail to prevent/detect/correct a misstatement of an account balance/disclosure

175
Q

The severity of a deficiency depends on whether a misstatement has occurred

A

FALSE – it doesn’t rely on that.

176
Q

How should sig. deficiencies and material weaknesses be communicated to gov?

A

written

177
Q

When should management rep letters be dated?

A

date of auditor’s report

178
Q

IF current management wasn’t present during all periods, should the auditor still obtain written rep letters for all periods by the new management

A

yes

179
Q

if predecessor auditor is asked to reissue report, they must receive a _____

What should be included in the ___

A

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
Q

If management refused to give a rep letter, the auditor should:

A

issue a qualified or disclaimed opinion

Qualified opinion is appropriate based on nature

181
Q

When should the auditor request a rep letter from management during a compilation

A

never – dont need 1 for compilation

182
Q

Is a rep letter needed for reviews?

A

yes

183
Q

What duration should management rep letters cover for review engagements

A

all periods covered during the review report

184
Q

During a review, if management refuse to give a management rep letter, auditor should

A

discuss w/ management and gov.

185
Q

If management refuses to give management rep letter and after discussion, auditor doesn’t trust management’s integrity, auditor should

A

withdraw

186
Q

If management refuses to give management rep letter and after discussion, auditor trusts management’s integrity, auditor should

A

continue w/ engagement

187
Q

For a review, when should the management rep letter be dated

A

date of review report

188
Q

if the client is NOT a responsible party in an audit/review, auditor should obtain

A

written rep letter from client

189
Q

It is required for auditor to obtain a rep letter in an agreed upon procedure engagement

A

NOPE

190
Q

It is NOT required for an auditor to obtain a rep letter in an agreed upon procedure engagement over compliance

A

False - it is always required when it involves compliance

191
Q

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?

A

Yes – oral response – restricted use report

If alt. procedure fails, then issue a qualified/disclaimed opinion or withdrawl.

192
Q

If responsible party refuses a written rep letter in an review, is it still possible to obtain a satisfactory response?

A

Nope - withdraw from engagement

193
Q

If responsible party in agreed-upon-procedure engagement refuses to give rep letter, what happens

A

disclose the inability to obtain letter
Withdraw (compliance engagements only)
Change scope of engagement

194
Q

How far out should the auditor review subsequent events

A

up to date of audit report

195
Q

What are the two types of subsequent events

A

Adjustment type and disclosure type

196
Q

What is an adjustment type

A

requries adjustment of F/S. Event that provided additional evidence that existed at the B/S date

197
Q

What is disclosure type

A

requries disclosure only. No adjustment and did not exist at B/S date.

198
Q

In extreme cases of subsequent events for disclosure, what should teh auditor do

A

generate pro form F/S

199
Q

subsequent event: Product changes would require disclosure

A

no (notice how it wouldn’t involve a JE)

200
Q

subsequent event: strikes/proxy fights would require disclosure

A

NOPE (notice how it wouldn’t involve a JE)

201
Q

What are 2 procedures that are performed after B/S date

A

cut off procedure

subsequent collection of receivable

202
Q

what is a subsequent discovery

A

discovery of facts that existed at the date of the audit report, but not known at the time

203
Q

Subsequent discovery happens AFTER the report date

A

False – before or at the audit report date

204
Q

A subsequent discovery is a resolution of a contingency

A

Nope – it is NOT a resolution of a contingency

205
Q

If a subsequent discovery happens at or before the audit report date, but the auditor finds out afterwards, the auditor should

A 
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
Q

If all conditions exist in flash card 205 exist, then auditor should

A

reissue statement and audit report
make disclosure in F/S
notify users of F/S
Discuss w/ SEC/appropriate body if appropriate

207
Q

If client refuses to make disclosure in note 206, auditor should notify

and make a statement that ___

A

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
Q

If a subsequent discovery exists in a REVIEW, auditor should

A

discuss w/ management

determine if revision is needed

209
Q

If auditor determines that a revision is needed and the client refuses to do so, the auditor will____

A

modify the review report

210
Q

For a review, if the revision of F/S changes the auditor’s conclusion, the auditor should ___

A

have an emphasis of matter paragraph

211
Q

Does the auditor have the responsibility to detect subsequent events?

A

NO

212
Q

When determining if F/S are free from material misstatement, an auditor should consider

A 
Uncorrected misstatement (known and likely)
Qualitative factors (not sure what this means)
213
Q

What is a qualified opinion

A

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
Q

If management refuses to include cash flow statement in audit report, auditor should

A

qualify opinion

215
Q

Adverse opinion is when

A

there are material misstatement and universal to the F/S

216
Q

Can an audit report be addressed to a third party

A

yes

217
Q

Can an audit report be addressed to its stockholder

A

yes

218
Q

What word must be included in the title of an audit report

A

INDEPEDNENT

219
Q

If a report is qualified what paragraphs should be included

A

emphasis of matter or other matter

220
Q

What words must be included when having a qualified opinion

A

Except or exception

221
Q

if a going concern is present what type of paragraph should be included

A

emphasis of matter

222
Q

What type of paragraph is required when a special reporting framework is used

A

emphasis of matter

223
Q

Where in the report is the emphasis of matter paragraph

A

after audit opinionf

224
Q

The emphasis of matter paragraph should reference what

A

the notes/disclosures that would that fully describe the matter can be found in the F/s

225
Q

If the opinion is unmodified, the auditor should reference what in the emphasis of matter paragraph

A

Reference that the opinion is not modified with respect to the matter emphasized

226
Q

Where should other matter paragraphs be at in the audit report

A

after opinion & emphasis of matter paragraph (if Emphasis paragraph exists)

227
Q

Does information presented or disclosed in the F/S be included in the other matter paragraph

A

No - only emphasis of matter

228
Q

Matters relevant to the user’s understanding, auditor’s responsibility, or audit report should be included in what paragraph

A

other matter paragraph

229
Q

What is general use vs restricted use

A

General use – used by anybody

restricted uses – used only by specific parties

230
Q

When should a report be restricted

A

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
Q

A report that is restricted should include these statements

A

Report is for use of specified parties
identification of specified parties
Statement shouldn’t be used by anyone else

232
Q

How much responsibility does the auditor have post audit report date

A

NONE

233
Q

Auditor has 2 methods to date the report when a subsequent event disclosed inthe F/S occurs after original audit report date.

A

Dual Date

Date the report as of a later date

234
Q

What is dual dating

A

dating a report, except for note xyz which is new date

235
Q

What is the only responsibility of auditor after audit report date

A

SEC filing

236
Q

Auditor should use headings throughout the audit report to distinguish each section
T/F

A

True

237
Q

For issuers, what must be referenced in an audit report

A

That it was conducted in accordance with PCAOB

238
Q

For issuers, what is the first section of audit report? 2nd section?

A

1st Opinion on the F/S

2nd Basis for Audit Opinion

239
Q

For issuers, who is addressed in the audit report

A

Shareholders and BoD

240
Q

For issuers, audit reports can be addressed to Plan administrators/participants & Trustees

A

Yes

241
Q

For issuers, auditor indepndence is included in what paragraph

A

basis for opinion

242
Q

For issuers, what statement is required for independence

A

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
Q

For issuers, what statement is required that reports the auditor beginning to serve as the company’s auditor

A

Auditor Tenure

244
Q

If the auditor has a separate report for ICFR (Internal Control over Finacial Reporting) the auditor must

A

reference this report in the “Opinion on the F/S” section

245
Q

If the auditor isn’t auditing the ICFR, the auditor must include a explanatory language in the

A

basis for opinion section.

246
Q

where section would an auditor put information about the engagemnet partner/other accounting firms participating the audit

A

Information about certain audit participants

247
Q

When can an auditor accept to review an entity I/C

A

NEVER

248
Q

If a material weakness exists, can I/C be effective

A

no

249
Q

What is the title of an an ISSUER’s I/C audit report

A

Report of Independent Registered Public Accounting Firm

250
Q

On ICFR, if a sig. deficiency results in 1 or more material weaknesses, the auditor should give a ___ opinion

A

adverse

251
Q

In agreed upon procedures engagement, the objective

A

is to perform procedures on a subject matter or assertion and report the finding w/o providing an opinion or conclusion

252
Q

Should an auditor be named as an outside attest provider if they prepped F/S w/o appropriate independent safeguards

A

No

253
Q

What is a prospective F/S

A

financial forecast or projections

254
Q

What is a financial forecast

A

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
Q

What is a financial projection

A

based on one or more HYPOTHETICAL assumptions, an entity’s financial position

256
Q

What is a hypothetical assumption

A

not expected to happen, but consistent w/ prupose of hte projection

257
Q

There are two use for prospective F/S

A

general use & limited use

258
Q

What prospective F/S is ONLY for general use

A

financial forecast

259
Q

Can a financial projection be general use

A

NO

260
Q

Financial projections are limited use . Only ___ can use them

A

company’s directly negotiating w/ the entity

261
Q

Can an auditor provide attest services for prospective F/S if no disclosure is included for summary of sig. assumptions

A

NO

262
Q

What disclosure must be included for an auditor to audit prospective F/S

A

Summary of sig. assumptions

263
Q

what standards should auditors follow for auditing prospective FS on agreed-upon procedures

A

Standards for Attest Engagements

264
Q

Prospective F/S for agreed-upon procedures are what kind of use reports

A

restrictive

265
Q

Pro forma F/S show sig effects on ___ financial information that could’ve occurred at _____

A

Historical

an earlier date

266
Q

Changes of capitalization is a great example for a reason to generate ___

A

Pro Forma F/S

267
Q

Pro forma financial information should be labeled to distinguish it from historical costs
T/F

A

True

268
Q

Can you do compilations for Pro Forma F/S

A

Yes

269
Q

An auditor doesn’t have to be independent for agreed-upon procedures

A

false – have to be independent

270
Q

what type of use is for the report on agreed upon procedures

A

restricted

271
Q

Who takes responsibility for agreed upon procedures

A

Specified parties

272
Q

Does the audit report identify specified and responsible parties

A

yes

273
Q

A statement must be included in the audit report for agreed upon procedures that it was conduct in accordance with standards established by SEC

A

False - AICPA

274
Q

What is a service auditor

A

reports on controls over the service organization

275
Q

What is a type 1 report for service organizations

A

Report on managements description of a service org’s system and suitability of design of controls

276
Q

the info. necessary to report on management’s description of a service org’s system is obtained through ___

A

discussion with personnel and various documentation

277
Q

service auditor doesn’t have to be independent

A

false – yeah you do

278
Q

who accepts responsibility if CPA assists in prepping F/S and recommends a judgment

A

management

279
Q

If a CPA preps F/S for a company and it contains a known departure from the AFRF, the accountant must

A

disclose the material misstatement(s) in the F/S

280
Q

Can an accountant perform a compilation 1 F/S

A

yes

281
Q

If the auditor is not independent, in a compilation report, where should the disclosure of no independence be at?

A

Last paragraph of the report

282
Q

Can an auditor provide an emphasis paragraph in a compilation

A

yes

283
Q

Is a predecessor auditor required to reissue review/compilation reports

A

no

284
Q

If predecessor reissues review/compilation report, successor should either

A

reference predecessor report

perform compilation/review of F/S of prior period and report on them

285
Q

can a CPA review 1 f/s and not others

A

yes – if scopes are not restricted

286
Q

if a cpa cannot issue a review report due to restrictions, should consider

A

doing a compilation

287
Q

A review of special purpose framework is inappropraite unless it includes

A

description of special purpose framework/policies

informative disclosures similar to those required by GAAP

288
Q

do you have to quantify differences between GAAP & special purpose frameworks

A

no

289
Q

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

A

sig. interpretations of the contract

290
Q

When a review report on the F/S contain a changed reference to a departure from AFRF, the report should include

A

other matter paragraph indicating previous review report date

291
Q

For REVIEWS, where should emphasis of matter paragraphs be? Where should other matter paragraphs be

A

EOM - after conclusion paragraph

OM -After conclusion and after EOM if applicable

292
Q

For Reviews, what should known departure paragraphs be called

A

Known Departure from the “Framework”

293
Q

For a review, if modification to review report isn’t enough, auditor should

A

withdraw

294
Q

Does the auditor have to determine effects of departure for a review?

A

No

295
Q

In a review, if an auditor uses the work of other accountants and doesn’t assume responsibility for their work, the CPA should

A

make reference to the audit/review of other accountants in the review report

CPA Review AUD (8 decks)

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