Chapter 5 Set 2 Flashcards
An auditor’s letter issued on significant deficiencies relating to a nonissuer’s internal control observed during a financial statement audit should:
Conditions noted by the auditor that are significant deficiencies or material weaknesses should be reported in writing. Any report issued on such conditions should (1) indicate that the purpose of the audit was to report on the financial statements and not to provide an opinion on internal control; (2) include the definition of a material weakness and, if applicable, significant deficiency; (3) include a restriction on use (i.e., the report is intended solely for the information and use of management, those charged with governance, etc.).
In reporting on a nonissuer’s internal control over financial reporting in an attest engagement, a practitioner should include a paragraph that describes the:
In reporting on a nonissuer’s internal control over financial reporting in an attest engagement (not an audit), the practitioner’s report should include a paragraph stating that, because of inherent limitations of any internal control, errors or fraud may occur and not be detected.
Which of the following conditions is necessary for a practitioner to accept an attest engagement to examine and report on a nonissuer’s internal control over financial reporting?
In order for a practitioner to examine and report on management’s assertion about the effectiveness of an entity’s internal control, management must present its written assertion about the effectiveness of internal control.
Which of the following statements is correct concerning an auditor’s required communication of significant deficiencies in internal control noted during a financial statement audit of a nonissuer?
The report should state that the communication is intended solely for the use of management, those charged with governance, and others within the organization.
An engagement to report on an entity’s internal control is best described as?
an attestation engagement to examine and report on management’s written assertion about the effectiveness of its internal control.
Any report issued on significant deficiencies noted during an audit should indicate what?
(1) indicate that the purpose of the audit was to report on the financial statements and not to provide assurance on internal control, (2) include the definition of significant deficiencies, and (3) include a restriction on the use of the report.
A material weakness is a deficiency, or combination of deficiencies, such that there is a ?
REASONABLE possibility that a MATERIAL misstatement of the entity’s financial statements will not be prevented or detected/corrected.
In an audit of an issuer:
It is management’s responsibility to assess and report on internal control, but the auditor is also required to assess and report on internal control.
In an audit of an issuer, the auditor must provide an opinion on which of the following?
The auditor provides an opinion on the entity’s financial statements and on the effectiveness of internal control. The auditor is not required to provide an opinion on the audit committee’s oversight (but is required to report to the board when such oversight is ineffective).
In an audit of a NONissuer, the auditor is required to communicate?
both significant deficiencies and material weaknesses to management and those charged with governance.
In an audit of an issuer, the auditor is required to communicate?
both significant deficiencies and material weaknesses to management and the audit committee, but only material weaknesses result in an adverse opinion on the effectiveness of internal control.
In an attest engagement to examine the effectiveness of an entity’s internal control, the auditor must communicate?
both significant deficiencies and material weaknesses to management and those charged with governance.
In a financial statement audit of a nonissuer, a previously communicated significant deficiency that has not been corrected, ordinarily should be communicated again:
A previously communicated significant deficiency that has not been corrected ordinarily should be communicated again in writing, during the current audit.
Which of the following statements describes an auditor’s obligation to identify deficiencies in the design or operation of internal control in a financial statement audit of a nonissuer?
The auditor need not search for significant deficiencies in internal control, but should document and communicate any such deficiencies that are discovered.
Jackson is auditing the financial statements of Saffer Company, an issuer. Which of the following is true?
PCAOB Auditing Standard No. 5 requires Jackson to perform an integrated audit, auditing both the financial statements and management’s assessment of the effectiveness of internal control.
