basic 1-50

Question 1

in the U.S. Who issue auditing standards to private companies

Answer 1

AICPA’s Audit Standards board

Question 2

in the the U.S. who issues auditing standard to audit public companies

Answer 2

Public company accounting oversight board(PCAOB)

Question 3

Aduit the goverment in the U.S. who issues the audit standards

Answer 3

U.S. Government Accountability Office (GAO)

Question 4

What is meant by generally accepted audit standards (GAAS) under the clarified auditing standards?

Answer 4

The statements of auditing standards issued by the AICPA auditing standards board.

Question 5

identify the four primary theme associated with the AICPA seven principles for audit standards setting.

Answer 5

1 purpose / premise2. Responsibilities3. Performance4. Reporting

Question 6

Identify the topics associated with each of the AICPA’ seven principles for audit standard setting.

Answer 6

1. purpose 2. premise3. responsibilities4. reasonable assurance5. performance requirements to achieve reasonable assurance6. inherent limitations7. reporting

Question 7

Identify the topics associated with the three general standards formerly known as generally accepted auditing standards (GAAS), which are still applicable to the PCAOB’s auditing standards.

Answer 7

1. Train 2. Independence3. Due professional care

Question 8

Identify the topics associated with the four reporting standards for generally accepted auditing standards for generally accepted auditing standards (GAAS) which are still applicable to the PCAOB auditing standards.

Answer 8

1. GAAP2. Consitency3. Disclosure4. Opinion

Question 9

List the six elements of quality control system.

Answer 9

1. leadership responsibilities for quality within the firm 2. Relevant ethical requirements 3.Acceptance and continuance of client relationships4. human resources5. engagement performance6 Monitoring

Question 10

What are some considerations that must be given by the auditor during the planning phase of the audit?

Answer 10

1. Determine whether to accept or continue the audit engagement;2. Assess the risk of material misstatement;3 Evaluate requirements for staffing and supervision 4. Prepare the required written audit program (also called the “audit plan”).

Question 11

What matter should be covered in the (successor) auditors inquiry of the predecessor auditor?

Answer 11

1. Facts related to managements integrity2 significant accounting or auditing disagreements3. Any communications with the audit committee about fraud, illegal acts, and significant deficiencies in internal controls maters4. predecessor’s understanding of the reasons for client change in auditors.

Question 12

What matter are typically addressed in an engagement letter?

Answer 12

1. the objective and scope of the audit2. the auditors responsibilities 3. Managements responsibilities4. statement about inherent limitations of an audit5. A statement identifying the applicable financial reporting framework6. Reference to expected content of any reports to be issued 7 other matters, as warranted

Question 13

What is the auditors basic audit planning responsibility?

Answer 13

The auditor should plan the audit ( and design the required written audit program or plan) to be responsive to the auditors assessment of the risk of material misstatement.

Question 14

what is the difference between an overall audit strategy and an audit plan?

Answer 14

An audit strategy deals with higher level issues, such as allocating audit resources, whereas an audit plan is more detailed and deals more specifically with the nature, timing and extent of audit procedures to be performed.

Question 15

The clarified auditing standards introduced the term, “performance materiality.” What does that term mean?

Answer 15

Th amounts set by the auditors at less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatement exceeds materiality for the financial statements as a whole.

Question 16

What is the audit risk model that is applicable to classes of trasactions or to account balances?

Answer 16

Audit risk = inherent risk * control risk * detection risk

Question 17

Define “audit risk”

Answer 17

The probability that the auditor fails to modify the opinion on financial statements that contain a material misstatement.

Question 18

Define “ Inherent risk”

Answer 18

The probability that a material misstatement would occur in the particular audit area in the absence of any internal control policies and procedures

Question 19

Define “Control risk”

Answer 19

The probability that a material misstatement that occurred in the first place, would not be detected by applicable internal controls.

Question 20

Define “ detection risk.”

Answer 20

The probability that a material misstatement, that was not prevented or detected by internal controls, was not detected by the auditors substantive and audit procedures.

Question 21

Define “risk of material misstatement.”

Answer 21

The risk that the financial statement contain one or more material misstatement prior to the audit.

Question 22

Define “analytical procedures.”

Answer 22

evaluations of financial information through analysis of plausible relationships among both financial and non financial data.

Question 23

what three purposes might analytical procedure serve?

Answer 23

1. required during planning 2. may be used as substantive evidence 3. required during final review

Question 24

What matters must be documented in connection with analytical procedures?

Answer 24

1. The auditors exception and the factors considered in developing it;2. The results of the comparison of the recorded amounts (or ratios) with the exceptions and 3. Any additional auditing procedures performed to investigate significant differences identified by that comparison

Question 25

What are the three categories of fraud-related risk factors that should be considered by the auditor?

Answer 25

1. Incentives/ pressures (the motivation for committing fraud)2. Opportunities (the ability to commit fraud)3. Attitudes/ rationalizations ( justification or excuse for committing fraud).

Question 26

List the two types of financial-statement-related frauds?

Answer 26

1. Fraudulent financial reporting (sometimes called cooking the books)2. Misappropriation of assets (covering up theft by false journal entries).

Question 27

When might an auditor have a duty to inform other outside of the audited entity of fraud -related matters?

Answer 27

1. In response to a valid subpoena2. To comply with applicable legal and regulatory requirements3. To respond appropriately to successor auditor’s inquiries when the former client has given permission to predecessor4. To report fraud to the applicable funding agency under the requirements of government auditing standards.

Question 28

what are the auditors responsibilities to communicate fraud identified by the auditor?

Answer 28

1. If the fraud is not material, the auditor should inform the appropriate level of management2. If the fraud is material (or if senior management is involved, even if not material,) the auditor should inform those charged with governance.

Question 29

What is meant by the term “ legal and regulatory framework”?

Answer 29

Those laws and regulations to which an entity is subject; noncompliance may result in fines, litigation, or other consequences that may have a material effect on the financial statements.

Question 30

What is the auditor’s responsibility to detect illegal acts?

Answer 30

The auditor should design the audit to provide reasonable assurance of detecting illegal acts having a direct and material effect on the financial statements.

Question 31

What are the two ways the external auditor might use the work of an internal audit function?

Answer 31

1. to obtain audit evidence 2. To provide direct assistance.

Question 32

When using the work of the internal audit function to obtain audit evidence, what three matters should the external auditor evaluate?

Answer 32

1. Objectivity- the internal audit function’s organizational status and the objectivity of the internal auditors;2. Competence of the internal auditors;3. Whether the internal audit function applies a “systematic and disciplined approach, including quality control”

Question 33

When using the internal audit function to provide direct assistance, what two matters should the external auditor evaluate?

Answer 33

1. Objectivity- the internal audit function’s organizational status and the objectivity of the internal auditors; and 2. Competence of the internal auditors.

Question 34

Define what is meant by the term “ those charged with governance.”

Answer 34

The person or organization with responsibility for overseeing the strategic direction of the entity and the obligations related to accountability of the entity

Question 35

Define what is meant by the term “management.”

Answer 35

The persons with executive responsibility for the conduct of the entity’s operations.

Question 36

What matters are the auditor required to communicate to those charged with governance?

Answer 36

~ the auditors responsibilities under GAAS; ~ The planned scope and timing of the audit;~ Significant finding from the audit.

Question 37

What are the three objectives of internal control as identified in the definition of internal control?

Answer 37

1. Reliability of financial reporting:2. Effectiveness and efficiency of operations3. Compliance with applicable laws and regulations.

Question 38

Identify three procedures and auditor might perform to obtain an understanding of internal controls?

Answer 38

1. Inquiry of appropriate personnel;2. observation of clients activities;3. Review entity’s documentation of internal controls.

Question 39

Identify three ways auditors might document their understanding of internal controls?

Answer 39

1. flowchart of transaction cycles;2. Internal control questionnaires;3. Narrative write-ups (memos).

Question 40

Identify two reasons for assessing control risk at the maximum level.

Answer 40

1. The auditor believes that the design of internal control is ineffective2. the auditor believes that reliance on internal control (and performing applicable test of control) is not an efficient audit strategy compared to a wholly substantive audit approach.

Question 41

Identify the five interrelated components of internal controls.

Answer 41

1. Control environment 2. Risk assessment3. control activities4. Information and communication systems5. Monitoring.

Question 42

What is meant by the term “control environment”?

Answer 42

The policies and procedures that determine the overall control consciousness of the entity, sometimes called “the tone at the top.”

Question 43

What is meant by the term “ risk assessment”?

Answer 43

The policies and procedures involving the identification prioritization, and analysis of relevant risk as a basis for managing those risks.

Question 44

What is meant by the term “information and communication systems”?

Answer 44

The policies and procedures related to the identification, capture, and exchange of information in a form and time frame that enable people to carry out their responsibilities.

Question 45

What is meant by the term “control activities”?

Answer 45

The policies and procedures that help ensure that management directives are carried out especially those related to (1) segregation of duties, (2) physical controls,(3) authorization of transactions, (4) performance review, and (5) information processing.

Question 46

List the three categories of incompatible functions associated with segregation of duties.

Answer 46

1. Authorization of transactions (execution function);2. Accounting (record keeping function);3. Access to assets (custody function).

Question 47

What is the auditor’s responsibility for assessing risk of material misstatement?

Answer 47

The auditor should identify and assess the risks of material misstatement (1) at the financial statement level and (2) at the relevant assertion level related to classes of transactions, account balances, and disclosures.

Question 48

Define the term “significant risk.”

Answer 48

Risks that the auditor believes require special audit consideration.

Question 49

Define “material weakness.”

Answer 49

A deficiency (or combination of deficiencies) in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis.

Question 50

Define “ significant deficiency”.

Answer 50

A deficiency (or combination of deficiencies) in internal control that is less severe that a materiel weakness, yet important enough to merit attention by those charged with governance.

Question 51

What is meant by the term “deficiency in design”

Answer 51

When a control necessary to meet the control objective is missing, or when the control objective is not always met, even if the control operates as designed

Question 52

What is meant by the term “ deficiency in operation”?

Answer 52

When a properly designed control does not operate as designed, or when the person performing the control does not have the authority or competence to effectively person the control.

Question 53

describe the auditor requirement for communicating deficiencies in an entity’s internal controls

Answer 53

1. The auditor must communicate in writing the significant deficiencies ( including material weakness) identified in the audit2. the auditor may choose to communicate lesser matters too.

Question 54

Describe the timing of the required communication of significant deficiencies in internal control.

Answer 54

Under AICPA professional standards, written communication is required no later than 60 days after the audit report release date (including matters communicated orally during the audit.)

Question 55

What is meant by the term “transaction cycle”?

Answer 55

A group of essential homogeneous transactions; that is transaction of the same type.

Question 56

Why do auditor emphasize transaction cycles?

Answer 56

Control risk is generally constant with in a particular category of transactions as all transaction are processed the same way. So the transaction cycle is the highest level of aggregation for which control risk may be viewed as a constant.

Question 57

What is the difference between an accounts payable system and a vouchers payable system?

Answer 57

An account payable system aggregates payable to identify the total owed to any individual vendor. A voucher payable system keeps track of individual transactions for which payment is owed without summarizing the totals by vendor.

Question 58

List the two broad categories of substantive procedures.

Answer 58

1. test of details2. Substantive analytical procedures

Question 59

Identify the two categories of substantive test of details

Answer 59

1. test of ending balances2. test of transactions.

Question 60

Identify the four considerations that determine the effectiveness and efficiency of analytically procedures used for substantive purposes.

Answer 60

1. Nature of the assertion;2. Plausibility and predictability of the relationship;3. Availability and reliability of data; and 4. Precision of the exception.

Question 61

What is meant by “sufficient” and “appropriate” when “ sufficient appropriate audit evidence “ is mentioned?

Answer 61

~ “sufficient” refers to the quantity of evidence that is required; and ~ “Appropriate” refers to the quality of the evidence involved, in terms of “relevance” and “reliability”.

Question 62

Define “Assertion.”

Answer 62

Impact or explicit statements of fact by management that are associated with the entity’s financial statements.

Question 63

List the three broad categories of assertions under AICPA professional standards.

Answer 63

1. Account balances at the end of the period (there are four assertions related to the balance sheet);2. Classes of transactions and events during the period (there are five assertions related to the income statement);3. Presentation and disclosure (There are four assertions related to the footnotes applicable to any of the financial statements).

Question 64

List the four assertions about presentation and disclosure ( footnotes).

Answer 64

~ Occurence and rights and obligations; ~ completeness;~ Classification and understandably and accuracy and valuation. ~ Accuracy and valuation.

Question 65

List the five assertions about classes of transaction and events during the period (income statement).

Answer 65

1. Accuracy2. Occurrence 3. completeness4. Cutoff5. Classification

Question 66

List the four assertions about account balances at the end of the period (balance sheet).

Answer 66

1. Existance;2. Completeness3. Rights and obligations4. Valuation and allocation

Question 67

What are the AICPA guideline to rank reliability of audit evidence?

Answer 67

1. Direct personal knowledge by the auditor is the most reliable audit evidence.2. Evidence obtained from an independent outside source is the next most reliable.3. Evidence obtained from the entity under effective internal control is next.4. Documentary evidence is more reliable than verbal responses to inquires (and original documents are more reliable that faxes and photocopies).

Question 68

List the three categories of audit procedures.

Answer 68

1. Risk assessment procedures2. test of controls3. substantive procedures.

Question 69

What are substantive procedures?

Answer 69

Procedure performed to detect material misstatements at the relevant assertion level; these consist of tests of details and substantive analytical procedures

Question 70

Define “report release date”

Answer 70

The date the auditor grants the entity permission to use the auditor report (that date must be documented)

Question 71

What is meant by the term “documentation copletion date” under the AICPA and PCAOB standards, respectively?

Answer 71

Under AICPA standards ( applicable to audits of “non issuers”) The auditor should complete the assembly of the final audit file no later that 60 days after the “report release date.”Under PCAOB standards ( applicable to audits of “issuers”) - the auditor should complete the assembly of the final audit file no later that 45 days after the “report release date.”

Question 72

What is meant by the term “projected misstatements”?

Answer 72

The auditors best estimate of misstatements in populations suggested by audit sampling. ( The AICPA formerly used the term “likely error” for this concept)

Question 73

What matters must be documented by the auditor in connection with the evaluation of misstatements?

Answer 73

1. The threshold for determining what is viewed as clearly trivial.2. All misstatements accumulated during the audit (and whether they have been corrected).3. The auditors conclusion as to whether any uncorrected misstatements are material ( individually or in the aggregate), and the basis for that conclusion.

Question 74

What changes can the auditor make to the audit documentation after the documentation completion date?

Answer 74

~ the auditor must not delete audit documentation before the end of the retention period;~ The auditor may add to the documentation but must document any material added by whom when the reasons for the change and effect on the auditors conclusions.

Question 75

What are the audit documentation retention requirements under AICPA and PCAOB standards, respectively.

Answer 75

Under AICPA standard ( applicable to audits of “nonissuers” )___ The audit documentation should be retained for at least five years from the report release date.Under PCAOB Standards (applicable to audits or issuers”)__ the audit documentation should be retained for at least seven years from the report release date.

Question 76

List two alternative procedures for a non-response to a positive confirmation ( usually performed after a second request was sent, but no response was received).

Answer 76

First verify subsequent cash receipts; or second examine underlying documents for apparent validity.

Question 77

When might negative confirmations be justified?

Answer 77

1. The financial statement item involves a large number of small (immaterial) accounts;2. Control risk is low ( that is, internal control is viewed as effective);3. Recipients are expected to pay attention to the request.

Question 78

What is meant by the term “negative confirmation” ?

Answer 78

A response is only requested in the event the confirming party disagrees with the identified balance. A non-response is view as indicating that party agreement.

Question 79

What is meant by the term “ positive confirmation”?

Answer 79

A response is requested whether or not the confirming party agree with the entity’s recorded amount. A non-response indicates a “loose end” that must be resolved.

Question 80

What is the auditors basic responsibility when auditing accounting estimates?

Answer 80

evaluate the reasonableness (and the adequacy of related disclosures) of any significant accounting estimates relative to GAAP or other applicable financial reporting framework.

Question 81

What is meant by the term “estimation uncertainty”

Answer 81

The susceptibility of an accounting estimate and related disclosures to an inherent lack of precision in its measurement. (The risks of material misstatement increase when there is high estimation uncertainty.)

Question 82

What is the best evidence of fair value?

Answer 82

published price quotations in an active market

Question 83

define fair value

Answer 83

The amount at which the asset could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

Question 84

What is meant by the term “observable inputs”?

Answer 84

Assumptions that market participants would use in pricing an asset or liability based on market data from sources independent of the reporting entity.

Question 85

What is meant by the term (unobservable inputs)

Answer 85

An entity’s own judgement about what assumptions market participants would use. (estimation uncertainty increases when the fair value estimates are based on unobservable inputs instead of observable inputs)

Question 86

List the two types of letter involved in the communication with the entity’s lawyers.

Answer 86

~letter of inquiry- management’s letter to the entity’s lawyers ( as requested by the auditor) asking the lawyer to provide litigation-related information directly to the auditor~ lawyer’s letter— the lawyer’s response directly to the auditor.

Question 87

What is meant by the term “assert claim”?

Answer 87

Also referred to as “pending or threatened litigation” a claim that has already been filed (pending) or when the other part has announced an intention to sue (threatened).

Question 88

What is meant by the term “unasserted claims”?

Answer 88

Audited entity has exposure to litigation but no one has yet filed a law suit or announced an intention to sue

Question 89

List the four matters the lawyer’s letter should address regarding “asserted” claims.

Answer 89

1. The nature of the litigation 2. the progress of the case to date 3. how management is responding or intends to respond to the litigation 4.An evalutation of the likelihood of an unfavorable outcome and estimate if one can be made, of the amount or range of potential loss

Question 90

List the three matter the lawyers letter should address regarding “unasserted” claims.

Answer 90

1. The nature of the litigation 2. How management intends to respond if the claim is asserted and3. An evaluation of the likelihood of an unfavorable outcome and estimate, if one can be made, of the amount or range of potential loss.

Question 91

What is the effect of a limitation in the lawyers response to the letter of inquiry on the audit report?

Answer 91

This would be considered a scope limitation sufficient to prevent an unqualified opinion and likely resulting in a disclaimer of opinion.

Question 92

Under what circumstance might an auditor NOT be required to obtain a letter from the entity’s legal counsel?

Answer 92

If the entity had no litigation, claims or assessments having financial reporting relevance and accordingly, did not engage legal counsel. ( in such a case, the management representations letter would include a statement to effect.)

Question 93

What are the two basic categories of issues usually addressed by the management representation letter under the AICPA clarified auditing standards?

Answer 93

1. financial statements2. Information provided.

Question 94

What is the purpose of obtaining the required management representation letter?

Answer 94

to document in writing the essence of managements verbal response to the auditors important verbal inquiries

Question 95

List the members of the management who are responsible for signing the management representations letter.

Answer 95

The chief executive officer and chief financial officer

Question 96

What is meant by the term “related party”

Answer 96

One party that controls or can significantly influence the management or operating policies of another party.

Question 97

Identify three responsibilities of the auditor when related-party transactions have been identified.

Answer 97

1. obtain an understanding of the business purpose of the related-party transactin2. Determine if the related-party transaction was authorized by board of directors 3. Evaluate the adequacy of the disclosures of the related party transactions

Question 98

What is meant by the term subsequent events

Answer 98

Events or transactions that occur after the balance sheet date up to the date of the auditor’s report which have a material effect on the financial statements and, therefore, require either financial statement adjustment or disclosure.

Question 99

What period of time defines a subsequent event?

Answer 99

The period after the balance sheet date up to the date of the auditors report.

Question 100

When would a subsequent event require adjustment of the financial statements?

Answer 100

When material events or circumstances clarify (that is provide better information about) circumstances already in effect as of the balance sheet date

Question 101

When would a subsquent event require disclosure in ( but not adjustment of) the financial statements?

Answer 101

When material events or circumstances arise after the balance sheet date.

Question 102

What should the auditors do when subsequently discovered facts become known to the auditor ( either before or after the report release date)?

Answer 102

Discuss the matter with management (and possibly those charge with governance) and determine whether the financial statement require revision. If so, inquire how management will deal with the matter.

Question 103

What procedures should the predecessor auditor perform when reissuing an audit report?

Answer 103

1. read the subsequent financial statements and compare to those previously audited2. Make inquiries of management and obtain written representations from management about issues affecting the previous representation obtained from management3, Obtain a representation letter from the successor audit about known relevant matters

Question 104

What is meant by the term “dual dating the auditor’s report”?

Answer 104

The auditor uses one date for the overall audit report, but specifies a later date to address a particular subsequent event, and does not imply responsibility for other matters beyond the basic date of the report.

Question 105

When the auditor has substantial doubt about and entity’s ability to continue as a going concern, what further evidence-gather responsibilities does the auditor have?

Answer 105

~ Inquire about managements strategy to overcome the entity’s financial difficulties and ~ evaluate the feasibility of the key elements of management’s plan with emphasis on “mitigating factors”

Question 106

What is meant by the term “mitigating factors” when the auditor is evaluating an enity’s going concern issues?

Answer 106

Those aspect of management’s strategy that might be expected to improve the entity’s cash flows (that is, generate cash inflows or reduce cash outflows).

Question 107

Describe the auditors reporting responsibilities when the auditor

Answer 107

Consider the adequacy of disclosure about these issues relative to GAAP or other applicable financial reporting framework (is there a misstatement?) and If the financial statements (including disclosure) are consistent with the requirement of the applicable framework, the auditor should add an emphasis-of-matter paragraph after the unmodified opinion.

Question 108

What meant by the term “reasonable period of time” when the auditor is assessing an entity’s going concern issues?

Answer 108

A period of time not to exceed one year beyond the date of the financial statements being audited

Question 109

What is the purpose of a bank confirmatin?

Answer 109

1. verifies the existance and ownership of bank accounts2. It also provides evidence about the completeness and terms of note payable with bank.

Question 110

What is meant by the term “cutoff bank statement”?

Answer 110

Short period bank statement obtained directly from the bank (normally for a 10-day period ) useful in verifying the deposits in transit and providing some ( usually partial) evidence about outstanding checks on a bank reconciliation.

Question 111

What is the schedule of inter bank transfer used for?

Answer 111

It is used to verify that transfer between the entity’s bank accounts are recorded properly ( and to detect kiting, which overstates the cash balance)

Question 112

what is meant by the term “kiting”

Answer 112

An overstatement of the true cash balance at year-end caused by recording the receipt, while failing to record the disbursement, associated with a transfer between the entity’s cash accounts.

Question 113

Describe how the auditor performs the “cutoff test” for sales.

Answer 113

Examine the last few transactions before year-end and the first few after year-end. Agree the entries on the sales journal to the shipping documents (existence)l and agree the shipping documents to the sales journal (completeness),

Question 114

What is meant by the “Lapping” related to accounts receivable?

Answer 114

An attempt to cover up a theft of receipts, where a clerk might apply a different customer account (whose payment was stolen) to conceal the theft.

Question 115

What is meant by the term “derivative” ?

Answer 115

A derivative is a financial instrument or other contract whose value is derived (hence, the name derivative) from its relationship to something else known as the underlying. The underlying can be another financial instrument, a physical commodity, currency, etc.

Question 116

What is meant by the term “hedge”?

Answer 116

A hedge is a defensive strategy designed to protect against the risk of adverse price or adverse price or interest rate movements to achieve a state of balance.

Question 117

What is usually considered to be the best evidence of fair value for a financial instrument that is measured at fair value?

Answer 117

Quoted market prices obtained from financial publications, national exchanges, or NASDAQ.

Question 118

Describe the basic steps that comprise the auditor’s search for unrecorded liabilities.

Answer 118

1. Review cash disbursements after year-end and examine underlying documents to identify liabilities of the period under audit.2. examine unpaid invoices (and receiving documents at the time of the test.3. Inquire of management as to the completeness of liabilities (document that in the management representations letter).

Question 119

When is the detailed testing of payroll ( or other expense accounts) typically performed?

Answer 119

Usually performed only when the auditor’s analytical procedures suggest that there is a risk of material misstatement relating to payroll (or other expense accounts)

Question 120

Define sampling risk

Answer 120

The risk that the sample may not be truly representative of the population.

Question 121

Define “type I error”

Answer 121

The risk of under-reliance on controls ( that is, the risk of assessing control risk too high); or incorrect rejection of fairness of an account balance. (The AICPA considers this an error related to efficiency.)

Question 122

Define “type II error”

Answer 122

The risk of over reliance on controls (that is, the risk of assessing control risk too low); or incorrect acceptance of the fairness of an account balance. ( the AICPA considers this an error related to effectiveness.)

Question 123

Define “nonsampling risk”

Answer 123

Any mistake by the auditor other than sampling risk that is not a direct consequence of using a sampling approach.

Question 124

List the two general approaches to audit sampling

Answer 124

1. Statistical 2. Nonstatistcal

Question 125

Define “random sampling”

Answer 125

Sampling methodology where each item in the population has the same probability of being selected.

Question 126

List the three factors, as indicated by AICPA table, that determine sample size for an attributes sampling application

Answer 126

1. Expected error rate (related to the variation in population)2. Tolerable error rate (related to precision)3. Risk of over-reliance ( type II error rate.)

Question 127

What is the formula to obtain the sample size for probability- proportionate-to-size (PPS) sampling

Answer 127

n = reliability factor (from PPS tables ) X book value / tolerable error

Question 128

List the various types of classical variable sampling techniques

Answer 128

1. difference estimation2. Ratio estimation3 mean-per unit estimation

Question 129

what is the purpose of stratification?

Answer 129

to reduce the overall variability within a population

Question 130

What is relevant “sampling unit” in PPS sampling ?

Answer 130

An individual dollar associated with the financial statement element involved.

Question 131

What is the primary advantage of PPS sampling?

Answer 131

Efficiency– If there are few differences between audit and book values, PPS sampling may result in smaller sample sizes than other sampling methods.

Question 132

what is the primary disadvantage of PPS sampling?

Answer 132

PPS sampling does not work very well in dealing with understatements or zero (unrecorded) balances.

Question 133

Define “general Controls”

Answer 133

Controls that have pervasive effects on all the specific computer processing applications

Question 134

List the five categories of general controls

Answer 134

1. Organization and operation2. systems development and documentation 3. hardware and system software 4. Access5. Data procedures

Question 135

Define “application controls”

Answer 135

Information processing controls that apply to the processing of specific computer applications (controls around input processing and output)

Question 136

What two topics of responsibility are addressed in the “Managements responsibility” section of the auditor’s report?

Answer 136

1. Management’s responsibility for the fair presentation of the financial statements2. Managements responsibility for the design implementation and maintenance of internal control related to financial reporting

Question 137

if the prior periods financial statements have been audited by a predecessor auditor whose report is not issued, the auditor should add an other other matter paragraph. what specific matter should that other matter paragraph address?

Answer 137

1. that the prior period financial statements were audited by predecessor auditor2. the type opinion expressed ( and the reason for any modification)3. the nature of any emphasis-of matter or other matter paragraph and 4. the date of the predecessor’s report

Question 138

If the auditors report includes a section after the opinion paragraph labeled “report on other legal and regulatory requirements,” how should the introductory paragraph be labeled?

Answer 138

“report on financial statements” - ordinarily, the introductory paragraph does not have a label, but in this case, it would.

Question 139

Identify the three requirements that determine whether a reference to component auditors is permitted

Answer 139

1. the component’s financial statements must use the same framework as group 2. the component audiot has complied with GAAS (or PCAOB standards, as applicable). 3. the component auditor has issued an audit report on the component’s financial statements (and that report is not restricted as to use).

Question 140

What is meant by the term “component auditor”

Answer 140

An auditor who performs work on financial information of component that will be used as audited evidence for the group audit. A component auditor may be (1) part of the group engagement partner’s firm (2) a network-affiliated firm, or (3) another unrelated firm.

Question 141

When the group engagement partner decides to reference the component auditor work, what is the effect on the auditor’s report?

Answer 141

Introductory paragraph management responsibility section– no effectAuditor’s responsibility section– first sentence modified to identify the component audited by other auditors and the magnitude of financial statement involved.Opinion paragraph– Modified to say “In our opinion, based on our audit and report of the other auditors…”

Question 142

What is meant by the term “significant component”?

Answer 142

A component identified by the group engagement team that (1) is of individual financial significance to the group; or (2) due to its specific nature, is likely to include significant risks of material misstatement of the group financial statements.

Question 143

What is meant by the term “emphasis-of-matter paragraph” in an auditor’s report?

Answer 143

A paragraph that refers to a matter appropriately presented or disclosed in the financial statements that it is fundamental to users understanding of the financial statements.

Question 144

What is meant by the term “other matter paragraph” in an auditors report?

Answer 144

A paragraph that refers to a matter other that those presented or disclosed on the financial statements that, in the auditor judgment, is relevant to users understanding of the audit, the auditor’s responsibilities, pr the auditor’s report.

Question 145

Identify the three issues for which an emphasis -of - matter paragraph is required.

Answer 145

1. When there is substantial doubt about the entity’s ability to continue as a going concern.2. when there is an inconsistency in accounting principles used. 3. When the financial statements re prepared in accordance with special purpose frameworks (such as cash basis, tax basis, regulatory basis, or contractual basis).

Question 146

List the item comprising (that is, the structure) of an unmodified audit report under the AICPA’s clarified audit standards.

Answer 146

1. Title2. Addressee 3. Introductory paragraph 4. Management responsibility section5. auditor responsibility section6 opinion paragraph 7. Signature ( with the city and state of the office responsible for the engagement)8. Date.

Question 147

What type of report should the auditor express when a misstatement is viewed as material, but not pervasive?

Answer 147

Qualified opinion.

Question 148

What is the auditor’s responsibility with respect to consistency on audited financial statements presented on a comparative basis?

Answer 148

The auditor should evaluate the consistency between all such period presented, as well as the consistency of the earliest period cover by the auditor opinion with the previous period.

Question 149

When a material change in accounting principle has been properly accounted for by the entity’s financial statements (with adequate disclosure and justification that the adopted principle is preferable), what is the effect on the auditor’s report?

Answer 149

The auditor should include an emphasis of matter paragraph to describe the change and references the footnote that discusses the change. the auditor should also state that the auditor’s opinion is not modified with respect to the matter.

Question 150

Where should an emphasis- of-matter or other-matter paragraph be presented in the auditor’s report?

Answer 150

1. The emphasis- of matter paragraph should be presented after the opinion paragraph.2. the other-matter paragraph should be presented after the opinion paragraph (and after any emphasis-of-matter paragraphs).

Question 151

What is meant by the term “initial audit engagement”?

Answer 151

An engagement in which (1) the financial statements for the prior period were not audited; or (2) the financial statements for the prior period were audited by a predecessor auditor.

Question 152

What is meant by the term “other information” ?

Answer 152

Information other than the financial statements and the auditor report that is included in a document containing audited financial statements and the auditors report (can be financial and non financial information, but excludes “required supplementary information”).

Question 153

What does the term “readily available” mean?

Answer 153

It means that no further action by the entity is required being available through the entity website would be considered readily available, but being upon request would not be considered readily available.

Question 154

What is meant by the term “required supplementary information”

Answer 154

Information that a designated accounting standard setter requires to accompany an entity’s basic financial statements (although the information is not part of the basic financial statements, authoritative guidelines for measurements and presentation have been established.)

Question 155

How does required supplementary information affect the auditor’s report on entity’s financial statements?

Answer 155

The auditor should include other-matter paragrah in the audit report to comment on required supplementray information (whether or not it is presented at all and whether or not it is presented in accordance with the prescribed guidelines)

Question 156

Identify two general circumstances that would require an alert to restrict the use of the auditor’s report.

Answer 156

1. when the subject matter is based on criteria that are only suitable for ( or available to) a limited number of users or 2. the matters are presented in a by product report that is not the primary objective of the engagement.

Question 157

What is the auditor’s responsibility to enforce the distribution of the auditors written communication having an alert to restrict the use of it?

Answer 157

The auditor is not responsible for enforcing such distribution. the purpose of the alert is to appropriately communicate the restricted distributions.

Question 158

What is meant by the term “summary financial statements”?

Answer 158

Historical financial information that is derived from financial statements but that contains less detail that the financial statements, while still providing a structured representation consistent with the provided by the financial statements.

Question 159

To what extent must the auditor comply with GAAS when auditing financial statements intended for use solely outside of the U.S.A.?

Answer 159

The auditor should comply with GAAS, Except for requirements related to the form and content of the auditor’s report. (in this case, the auditor may report either using a U.S. form of report or using the report form and content associated with the other country.)

Question 160

Identify the procedures an auditor should perform when engaged to report on the application of accounting principles to specific transaction.

Answer 160

1. Obtain an understanding of the form and substance of the transaction involved; 2. Consult with the “continuing accountant”(which requires the client’s permission); and 3. Review applicable accounting requirements and consult with other, as necessary.

Question 161

When is the AICPA pronouncement, “reports on application of requirements of applicable financial Reporting framework” applicable?

Answer 161

When providing a written report or verbal advice on; 1. The application of accounting principle to specific transactions2. the type of opinion that might be issued on specific financial statements.

Question 162

What is meant by the term “special purpose framework”?

Answer 162

A financial reporting framework other than GAAP that is one of the following bases of accounting;1. cash basis 2. tax basis 3 . Regulatory basis4. contractual basis5. other basis that uses “definite set of logical, reasonable criteria”

Question 163

When deciding whether to accept an engagement to report on financial statements prepared in accordance with special purpose framework, what three matters should the auditor consider?

Answer 163

1. the purpose for which the financial statemnt are prepared 2. the intended users of financial statements and 3. the steps taken by management to determine that the framework is acceptable in circumstances

Question 164

Which special purpose frameworks require a paragraph in the auditor’s report to restrict the distribution of the report to specified users?

Answer 164

The contractual basis and regulatory basis (not intended for general distribution) require such a restriction. the cash basis, tax basis, and regulatory basis intended for general use do not require such restricted distribution.

Question 165

What is meant by the term “service organization”?

Answer 165

An organization or segment of an organization that provides service to user entities that are relevant to those user entities internal control over financial reporting.

Question 166

What two type of reports of internal controls at the service organization may the service auditor be engaged to issue?

Answer 166

1. report on management’s description of a service organization system and the suitability of design of controls (type 1 report)2. Report on management’s description of service organization suystem and the suitability of design and operating effectiveness of controls (type 2 report)

Question 167

When might the user auditor’s report appropriately refer to the service auditor report?

Answer 167

The user auditor may refer to the service auditor in the user auditor’s report containing a modified opinion, if that reference would be helpful to understanding the user auditors modification. ( There should be no reference to the service auditor in the user auditor’s report containing an unmodified opinion.)

Question 168

The auditor expresses positive assurance (an opinion) on what specific matters in a “letter for underwriters and certain other requesting parties”?

Answer 168

An opinion is only expressed on whether the audited financial statements and schedules, included in registration statement, comply as to form with SEC requirements.

Question 169

What are the objective of the “compliance audit” ?

Answer 169

~ To express an opinion on whether the entity complied with applicable compliance requirements , at the level specified in the governmental audit requirements in the governmental audit requirement that are supplementary to GAAS and GAGAS and to evaluate those requirements.

Question 170

List the three main differences in government audit standards relative to AICPA’s Statements on auditing Standards.

Answer 170

~ Government auditing standards require a written report on internal control; ~~ government auditing standards require a written report in compliance with applicable laws and regulations and ~~ government auditing standards require the auditor to report any known instance of illegal acts that could result in criminal prosecution.

Question 171

When must a state or local governmental enity be audited according to the single audit act of 1984, as amended?

Answer 171

When a state or local governmental eniity spends federal assisstance aggregating at least 750,00 in fiscal year.

Question 172

What AICPA standards are applicable to reviews and complication for nonissuers

Answer 172

Statements on standards for accounting and review services (SSARS) are issued by the AICPA’s accounting and review services Committee (ARSC).

Question 173

what is the purpose of a “review” as prescribed under in statements on standards for accounting and review services?

Answer 173

The purpose of a “review” is to obtain limited assurance, sometimes called negative assurance, that there are no material modifications that should be made to the financial statements

Question 174

What is the accountants’s responsibility to establish an understanding for an engagement to compile a non-issuer’s financial statements?

Answer 174

The accountant should establish an understanding about the engagements objective, management’s responsibilities,the accountant’s responsibilities, and the limitations of the engagement, among other matters with management and document that in writing with an engagement letter.

Question 175

What is the effect on a compilation report if the accountant is not independent ?

Answer 175

A compilation does not require independence, since no assurance is provided— but the compilation report must point out that fact when idependence is lacking. The auditor may choose to add a single sentence to the end of the compilation report without any further explanation as to the reasons for the impairment of indpendence; or may instead choose to disclose the reason for the impairment of independence

Question 176

What is the accountant’s responsibility to establish an understanding for an engagement to review a non-issuer’s financial statements?

Answer 176

The account should establish an understanding about the engagement’s objective, management’s responsibilities, the accountant’s responsibilities, and the limitations of the engagement, among other matters with management and document that in writing with an engagement letter.

Question 177

What is the effect on succerssor accountants compilation or review report when the predecessor accountant’s compilation or review report is not presented on the prior year’s financial statements?

Answer 177

The successor accountant’s report should include an explanatory paragraph that identifies the nature and date of the predecessor’s report and states that the current accountant takes no responsibility for the prior year’s financial statements.

Question 178

What is the accountant’s responsibility to establish an understanding for an engagement to compile specified elements of an entity’s financial statements?

Answer 178

The accountant should establish an understanding about the services to be performed, the nature and limitations of those services, the parties’ respective responsibilities , and the nature of the report to be issued. it is preferable, but not technically required, to get that understanding in writing.

Question 179

What is the accountant’s responsibility to establish an understanding for an engagement to compile an entity’s pro forma financial information?

Answer 179

The accountant should establish an understanding about the services to be performed, the nature and limitations of those services, the parties’respective responsibilities , and the nature of the report to be issued. It is preferable, but not technically required, to get that understanding in writing

Question 180

What are the accountants performance requirements regarding an engagement to compile proforma financial information?

Answer 180

The accountant should read the compiled pro forma financial information, including the summary of significant assumptions, and consider whether that information appears to be free of obvious material errors. Note: to compile the pro forma financial information, the accountant must have compiled, reviewed, or audited the historical financial statements on which the pro forma information is based.

Question 181

list three usual type of attestation engagements. (This “menu” may change depending upon the specific subject matter involved.)

Answer 181

1. Examinations2. Reviews3. Agreed-upon procedures.

Question 182

Describe an “agreed-upon procedures attestation engagement.”

Answer 182

An engagement whereby the practitioner and the “specified parties” agree upon the specific procedures to be performed and the specified parties take responsibility for the sufficiency of the procedures for their purposes.

Question 183

Define attest engagement

Answer 183

An engagement where a CPA practitioner is engaged to issue (or does issue) an examination, a review, or an agreed upon procedures report on subject matter that is the responsibility of another party.

Question 184

List the two categories of requirements applicable to attestation engagements.

Answer 184

1. unconditional requirements– indicated by “must” or “is required” and 2. Preemptively mandatory requirements– indicated by “should”, which permits rare departures.

Question 185

List the three types of engagement that are permitted by AICPA attestation standards related to “prospective” financial information.

Answer 185

1. Examination- postive assurance is expressed2. Agreed- upon procedures– assurance is provided as “procedures, findings” 3. compilation- no assurance is expressed (note that a “review” is not permitted!!!)

Question 186

What is meant by the term “forecast”?

Answer 186

A forecast represents the predicted financial statement outcome – the “best guess.”

Question 187

What is meant by the term “projection”?

Answer 187

A projection represents the financial statement outcome based on certain specified hypothetical assumptions, which may or may not be likely to occur.

Question 188

What is the only type prospective financial statement for which an examination report can have general unrestricted distribution?

Answer 188

A forecast can have unrestricted distribution (but any report on a projection must have restricted distribution).

Question 189

What conditions are required to be present for practitioner to issue an examination or review report on proforma financial information?

Answer 189

1. The document containing the proforma information includes or references the complete historical financial statements and 2. the accountant has audited or reviewed the related historical financial statements.

Question 190

An examination report on pro forma financial information involves expressing an opinion on three matters. List the three matters.

Answer 190

1 Whether management’s assumptions provide a reasonable basis for presenting the significant effects attributable to the transaction / events;2. whether the adjustments appropriately reflect those assumptions3. Whether the pro forma column reflects the proper adjustments of the historical financial statements.

Question 191

List the three specific elements required by securities and Exchange Commission (SEC) in the Management discussion and Analysis (MD&A) presentation.

Answer 191

1. discussion of financial condition– regarding liquidity and capital resources;2. Discussion of changes in financial condition and3. Discussion of results of operations

Question 192

What precondition must exist for an auditor to accept an engagement to report on an entity’s Management Discussion and Analysis (MD&A) presentation?

Answer 192

~~ practitioner must have audited the annual financial statements for the latest period covered by the MD&A presentation and~~ Any other financial statements involved must have been audited or at least review if they are interim

Question 193

List the four assertions that are implicitly embodied in the Management Discussion and Analysis (MD&A) presentation

Answer 193

1 occurrence 2. consistency with the financial statement’s 3. completeness of the explanation 4. presentation and disclosure

Question 194

Define “assurance services.”

Answer 194

Independent professional services that improve the quality or context of information for decision makers.

Question 195

What is Systrust?

Answer 195

The AICPA’s assurance service regarding systems reliability.

Question 196

that is PrimePlus (formerly called ElderCare)?

Answer 196

The AICP’s assurance service directed at the needs of aging persons.

Question 197

What is Webtrust?

Answer 197

The AICPA’s assurance intended to facilitate e-commerce activities.

Question 198

List the five “principles” and categories of criteria associated with Trust Servies consisting of Systrust and WebTrust

Answer 198

1. Security2. Availability3. Processing Integrity4. Confidentiality5. Privacy.

Question 199

Differentiate between the AICPA and PCAOB requirements regarding “retention” of audit documentation

Answer 199

~~ AICPA require retention of audit documentation for five years for audits of “nonissuers”~~ PCAOB requires retention of audit documentation for seven years for audits of “issuers.”

Question 200

Differentiate between the AICPA and PCAOB requirements regarding the documentation completion date.

Answer 200

~~ AICPA; A complete and final set of audit documentation should be assembled no later that 60 days after the report release date for audits of “non issuers”~~ PCAOB: A complete and final set of audit documentation should be assembled no later that 45 days after report release date for audits of “issuers”

Question 201

Define “entity-level controls.”

Answer 201

Controls related to the control environment; controls over management override; the company’s risk assessment process; controls to monitor results of operation or other controls; controls over the period-end finacial reporting process; and policies that address significant business control

Question 202

List the diffrences in the AICPA statement on quaility control statards (SQCS) relative to PCAOB audit standard N0. 7.

Answer 202

SQCS do not ~~ require and “engagment quality review “ for any type of engagement;~~ impose a “cooling off” restriction or requirement that the reviewer must be an “associated person” of a registered public accounting firm~~ Require a “concurring approval of issuance” before issuing a report~~ Specifically require that engagement quality review documentation must be retained with other documentation

Question 203

List the five financial statement assertions outlined in the PCAOB auditing standard No. 15.

Answer 203

1. existence 2. Completeness3. Rights and obligation 4. Valuation or allocation5. presentation and disclosure

Question 204

What is the auditor’s basic objective when reporting on supplemental information under PCAOB auditing standards No. 17?

Answer 204

To obtain sufficient appropriate audit evidence to express an opinion on whether the supplemental information is fairly stated, in all material respects, in relation to the financial statement as a whole.

Question 205

What is the role of international federation of accountant’s (IFAC) international Auditing and assurance standards Board (IAASB)?

Answer 205

~~ in general to be the global standard-setting body related to auditing, review, other assurance services, and quality control, and to facilitate convergence of national and international standards~~ With respect to auditing specifically, to issue International standards on auditing (ISAs) applicable to the audit of historical financial information.

Question 206

Give two examples of “other members”

Answer 206

1. An unemployed member2. A Retired member

Question 207

What is the main thing that “öther members” are expected to do?

Answer 207

Not commit discreditable acts.

Question 208

Name three immediate family members

Answer 208

1. Spouses2. Spousal equivalents3. Dependents

Question 209

Name three close relatives.

Answer 209

Parents, siblings and non dependent children

Question 210

Immediate family members cumulatively may not own more that what percentage of an attest client?

Answer 210

5%

Question 211

What is a member in business?

Answer 211

A member in business is an accountant who works for a company or government agency (such as an internal auditor) who is not working as a member in public practice

Question 212

Which area of professional responsibility worries members in public practice but not members in business?

Answer 212

independence

Question 213

Gifts or entertainment to members in business would create threats to integrity and objectivity if they either:

Answer 213

1. Violate the law or the policicies of their firm or other firms or2. are not reasonable in circumstances

Question 214

Who in an attest firm may not hold prohibited employment positions with an attest client

Answer 214

partners or professional employees

Question 215

Name three prohibited positions that partners or professional employee may not hold with an attest client.

Answer 215

Any of these: director, officer, employee, promoter, underwriter, voting trustee, trustee for any pension or profit-sharing trust of the clients, or any equivalent positions

Question 216

If an officer of an attest client leaves the client and joins the firm, which position might the person occupy that would inevitably impair independence?

Answer 216

Team member or someone in a position to influence,

Question 217

Give a an example of a common interest realty association.

Answer 217

Any of: condominium, cooperative, homeowners association, planned unit development, timeshare development.

Question 218

What is the test to determine whether gifts impair independence?

Answer 218

Clearly insignificant (to the recipient).

Question 219

What is the test to determine whether entertainment impairs independence?

Answer 219

Reasonable in circumstances

Question 220

Which types of covered members are limited in their ability to consider going to work for an attest client?

Answer 220

Team members and those in positions to influence.

Question 221

What two things should a person in a position to influence do after receiving an offer of employment from an attest client?

Answer 221

1. Promptly report to his or her firm2. Leave the engagement until a decision is made.

Question 222

What type of job with an attest client create an independence problem for a firm when taken by one of its partners or professional employees?

Answer 222

A “key position”

Question 223

When should a firm not have a depository account at an attest client bank?

Answer 223

When the chance the bank will experience financial difficulties is not remote.

Question 224

Which three conditions make it okay for an individual covered member to have an account at an attest client bank?

Answer 224

Any one of these conditions 1. the balance is fully insured2. Any uninsured amounts are immaterial 3. Any material amounts are reduced within 30 days

Question 225

From which entities should a covered member generally not borrow?

Answer 225

An attest client, its officers and directors, or any 10% shareholder.

Question 226

Name two types of loans a covered member may have without impairing independence.

Answer 226

Any two of these:1. Auto loans collateralized by the vehicle 2. Loans fully collateralized by the cash surrender value of insurance policy3. Passbook or similar collateralized loans 4. Credit card or overdraft amounts up to $10,000

Question 227

List the “covered members” Outlined in the principles of the code of professional conduct

Answer 227

~~ team members~~ those in a position to influence (PTI) team members~~ Other partners in the office (OPIO’s)~~ ten-hour people ~~ the firm ~~ Any entity controlled by the above

Question 228

During which two time periods must a firm be independent of an attest client?

Answer 228

1. The period covered by the financial statement2. The period of the professional engagement.

Question 229

A covered member who owns share in mutual fund has what kind of interest in the fund’s underlying securities?

Answer 229

Indirect

Question 230

What happens if an attest team receives significant help from employees of another, nonindependent firm?

Answer 230

independence is impaired

Question 231

What types of financial interest impair independence?

Answer 231

1. Direct and material2. direct and immaterial 3. indirect and material

Question 232

If a covered member learns that she has inherited the securities of an attest client, what should she do?

Answer 232

Sell the securities as soon as practicable but definitely within 30 days.

Question 233

A general partner’s interest in the investments of the general partnership is what?

Answer 233

direct

Question 234

A member may not sign a current-year audit report if the client has not paid fee due for how long ?

Answer 234

one year

Question 235

Auditors may not hold a client harmless for what?

Answer 235

liability arising from fraud by the client’s management.

Question 236

What are three key terms in the conceptual framework?

Answer 236

Threats, safeguards, and acceptable level.

Question 237

What are the three steps to applying the conceptual framework?

Answer 237

Identify threats, evaluate the significance of the threats, and identify and apply safeguards.

Question 238

List some examples of false, misleading, or deceptive acts.

Answer 238

~~ creating false or unjustified expectation of favorable results;~~ implying the ability to influence a court or agency ~~ Estimating a fee knowing that the amount charged will likely be much higher

Question 239

List at least two exceptions to the general rule that members may not disclose client confidences without specific contest of the client.

Answer 239

Any of: 1 to comply with valid summons or subpoena 2 as part of AICPA or state review of a member’s practice 3. to initiate or respond to a complaint from AICPA or state board; 4 necessary to initiate, pursue or defend a lawsuit

Question 240

Members who may advocate for their clients may not do which three things?

Answer 240

1. Stretch the bounds of performance standards2. Go beyond sound and reasonable professional practice3. compromise credibility

Question 241

If a client objects to outsourcing, what should a member do?

Answer 241

either not outsourcing, or reject the engagement altogether .

Question 242

What three things should a member describe when departing from generally accepted accounting principes?

Answer 242

1. the departure2. its approximate effects3. The reasons why normal compliance would mislead

Question 243

What are two steps that will eliminate most conflicts of interest problems ?

Answer 243

1 full disclosure to the client 2 client consent

Question 244

A violation of the rules is presumed if a member receives gifts or entertainment from a client if which two factors apply?

Answer 244

1. they violate policies of the member or the client or applicable laws and regulation and 2 the member knows of the violation or is reckless in not knowing

Question 245

Name a discreditable act that can happen after your’re fired

Answer 245

Removing client file or proprietary information

Question 246

Which type of record necessarily belongs to the member and almost always need not be produced upon request?

Answer 246

working papers

Question 247

Name the code’s exceptions to what would normally be treated as a contingent fee.

Answer 247

A fee fixed by courts or other public authorities. Or, in tax matters, if determined by the result of judicial proceeding or agency findings.

Question 248

A firm may not designate itself as “members of the AICPA” unless what condition applies?

Answer 248

All its CPA owners are members of the AICPA

Question 249

IF after discussing a disagreement with superiors, a member believes the matter is serious and is not going to be resolved as it should, what should she do?

Answer 249

1. determine whether the organization’s internal policies have any additional requirements for reporting differences of opinion2. determine whether she is responsible for reporting to third parties 3. consult legal counsel4. document the facts, principles, and conversations

Question 250

Briefly summarize the general requirements that must always be met before members may perform non-audit services for attest clients.

Answer 250

The client must agree to assume all management and evaluative responsibilities. the member must not do so. the member and client must establish these agreements in writing.

Question 251

CDOG

Answer 251

ConsitancysdisclosuresopinionGAAP