Auditing Progress Tests

Question 1

When dealing with predecessor and successor auditors and they DO NOT REISSUE what happens and what do you include?

Answer 1

OTHER MATTERS PARAGRAPH (COME ONN)

1. Not name the pred. auditor by name
2. Indicate the type of report used
3. Indicate substantive reasons for the qualification (IF MODIFIED)

Question 2

In determining the sample size for a test of controls, what three things should you examine?

Answer 2

1. Tolerable deviation rate
2. Likely rate of deviations
3. Allowable risk of assessing control risk too low
   NOT POPULATION SIZE

Question 3

For Government Auditing Standards what are some standards that the auditor should report on in the report?

Answer 3

Auditor should report on the scope of their testing of compliance with laws and regulations and of internal controls.

Question 4

What are the compatible duties of a Cashier?

Answer 4

Receive remittance from the mail room and prepare the daily deposit slip

Question 5

What should you do as the auditor when you are supposed to audit an entity’s Net Income, Stockholder’s Equity, or Profit sharing plan?

Answer 5

You should also audit the interrelated items associated with net income including the Income statement and Balance Sheet accounts.

Question 6

When you issue a compilation report do you need to include that the entity omits all substantial disclosures required by GAAP?

Answer 6

YES. don’t get this confused from the fact that you can ACCEPT a compilation that omits all serious disclosures required by GAAP.

Question 7

What will a report on compliance over a management assertion most likely include?

Answer 7

A DISCLAIMER of opinion. No opinion is given. Don’t get this confused with the internal controls surrounding compliance like you did in the progress exam.

Question 8

What type of test is done when you are comparing the average of OT hours worked in the prior year to the amount worked this year? (What other tests are there and what could you do for those tests?)

Answer 8

REASONABLENESS TEST- data in two or more fields are checked for consistency (similar to A.P.)
A range test identifies amounts that are outside of a predetermined range
A test of details for OT hours would be to look at time sheets for that particular week.

Question 9

Should you inquire of a client’s legal council when you are evaluating the entity’s ability for going concern or when you are reviewing for subsequent events?

Answer 9

BOTH- you should inquire of the legal council for going concern and you should inquire of the legal council and management for subsequent events.

Question 10

What kind of post balance sheet cutoff transaction is very tricky and will probably be included on the exam?

Answer 10

BANK CUTOFF- tests for cash balances

Question 11

What are the mitigating factors to address and entity’s ability for going concern.

Answer 11

Marketability of assets, plans to dispose of assets, plans to borrow money or restructure debt, plans to delay or reduce expenditures (Debt), plans to increase stockholders equity

Question 12

What is the first thing you need to do if you discover a mistake after you have submitted the auditor’s report?

Answer 12

FIRST THING is you should see if procedures ALREADY PERFORMED work for the ones that had been omitted. If they do then you’re good. If they don’t and you’re worried it would impair the opinion and their are other people relying on it you should PROMPTLY UNDERTAKE and apply the omitted procedures AND THEN ONLY WHEN THE REPORT CANNOT BE UNMODIFIED to you issue a new report to inform PEOPLE THAT RELY ON IT.

Question 13

In the audit of the financial statements what is the auditor REQUIRED to do with respect to an entity’s internal controls?

Answer 13

DOCUMENT THE UNDERSTANDING of the controls. The only reason you would need to look at their operating effectiveness is if you wanted to rely on those controls when you are assessing risk/performing sub. procedures.

Question 14

If they ask for the difference between known (factual) and likely (judgmental) misstatements what is the big key you need to remember to classify certain situations into each one.

Answer 14

DIFFERENCES IN JUDGEMENT/ESTIMATES is what is going to be likely/judgmental misstatement where as GAAP, omissions, misapplication of principles is all known/factual

Question 15

A performance audit DOES NOT REQUIRE what?

Answer 15

A concurrent (financial) opinion that the financial statements taken as a whole.

Question 16

Which standard includes independence of mind and ethics for government/AICPA stuff?

Answer 16

Objective, Intergrity involves objectivity

Question 17

In government auditing who is considered to be a SUBRECIPIENT and who is considered to be a RECIPIENT?

Answer 17

SUBRECIPIENT- someone who is nonfederal that RECEIVES an award from federal funding. An example would be a NFP
RECIPIENT- An individual that receives awards through a pass through entity.

Question 18

For suspected noncompliance what should be the first thing that an auditor does? (think similar to us making a mistake after audit report)

Answer 18

The first thing an auditor should do would be to apply audit procedures specifically to those suspected noncompliance things (NOT GO TO MGMT FIRST)

Question 19

What are the four things that are NOT REQUIRED when performing a review of a non-issuer?

Answer 19

1. Testing Internal Control
2. Performing Audit Tests (TOC and Substantive)
3. Assessing Fraud Risk
4. Communicating with Predecessor Auditor (Use judgement)

Question 20

When is NOT APPROPRIATE when you are auditing a single financial statement or a single account/transaction to issue an unmodified opinion when the F/S AS A WHOLE are unmodified?

Answer 20

When it is a FINANCIAL STATEMENT. This is considered a piecemeal opinion and cannot be done because the Financial Statement is considered material to the F/S as a whole.

Question 21

In which type of report does the language refer to the fact that the auditor has no responsibility for stuff that happens after the report is issued?

Answer 21

This is for prospective financial statements (NOT COMPILATIONS)

Question 22

What is a way that they could trick you by saying that there is something included on a Compilation Report?

Answer 22

DISCLAIMER of opinion. Because the report specifically states that the accountant “does not express an opinion” which is the language used in a Disclaimer paragraph.

Question 23

What are documents you must issue with a compilation engagement?

Answer 23

1. Engagement letter (*when the unaudited F/S are NOT being read by a third party this would be acceptable even over a compilation report
2. Any significant findings/issues
3. Communications about fraud or illegal acts.

Question 24

What is test data and what can it help detect in relation to payroll?

Answer 24

Test data is introduced and allows the auditor to determine if the controls are working properly. Test data is fictitious data that is processed through the client’s computer for testing. In relation to payroll this would be good for testing improper inputs of Employee ID.

Question 25

What are some factors that an auditor should consider with respect to fair values?

Answer 25

1. The role of information technology
2. Whether the valuation methods are appropriate for industry.
3. Segregation of duties related to valuation.
   * Auditor is concerned about fair values BEFORE audit is over NOT SUBSEQUENT EVENTS.

Question 26

What are some of the procedures used in assessing control risk? (what does assessing control risk really mean?)

Answer 26

It really means that you are doing test of controls(pretty tricky probably won’t be something to worry about) and those procedures are:
Reperformance, Observation, Inspection, Inquiry

Question 27

When they are talking about standards that could be included with GAAS they are going to try and trick you? How?

Answer 27

BOTH GAAS and whatever other standards being applied (ISA, GAGAS, PCAOB) need to be included in the Auditor’s Report.

Question 28

What is a way that they could trick you regarding most reliable audit evidence?

Answer 28

ANALYTICAL PROCEDURES because you think they are going to be auditor’s knowledge but no fucking way are they that easy because it is really based on internal data. CONFIRMATION worked in that stupid fucking example.

Question 29

The most likely explanation that an auditor can not reasonably expect to detect all noncompliance is?

Answer 29

This is very tricky because they are wording it exactly the way that they want you to read into the reasonable assurance part of the question. The real reason (and something new!) is that acts of compliance relate to OPERATING aspects as compared to ACCOUNTING aspects.

Question 30

What is the main difference between attribute and variables sampling?

Answer 30

Attribute sampling is used to test the characteristics of each item in a sample and is used for tests of controls.
Variables sampling is used to determine whether an account balance is reasonable or not and is most likely used in a test of details.

Question 31

When you are talking about the code and independence is a brother in law’s father OK or NOT OK?

Answer 31

OK! it is not considered to be a covered member in the code. don’t get this confused because you were thinking they weren’t OK when you first saw this question.