Chapter 6 - Professional Responsibilities

Question 1

Independence REQUIRED

Answer 1

Applies only to:

• Audits
• Special Reports
• Reviews

Question 2

Independence NOT REQUIRED

Answer 2

• Compilations

- Non-Attest Services: tax & consulting

Question 3

PCAOB

Answer 3

Sets rules for CPA firms that audit public issuers

Question 4

Tax Services

Answer 4

Ok when approved by Audit Committee

Question 5

Cool Off Period

Answer 5

CPA firm cannot audit client if CPA’s firms employee holds high position at client for ONE YEAR

Question 6

SOAP

Answer 6

Summary of Adjustments Past

Question 7

State Board of Accountancy

Answer 7

Licenses CPAs

Question 8

AICPA & State CPA Society

Answer 8

Clubs & not authoritative bodies

Question 9

Audit Documentation

Answer 9

Supports auditor’s opinion

Question 10

Report Release Date

Answer 10

Date on which auditor grants client to use report

Question 11

Keeping WP

Answer 11

• SAS: 5years

- PCAOB: 7 years

Question 12

Document Completion Date

Answer 12

Time to complete WP after Report Release Date:
SAS - 60 days
PCAOB - 45 days

Question 13

Objective of detailed substantive testing

Answer 13

Detect Material Misstatement

Question 14

IT Segregation of Duties

Answer 14

C - Control Team
O - Operators
P - Programmer 
A - Analyst (system)
L - Librarian

Question 15

Highly computerized systems

Answer 15

Substantive testing alone may not suffice - test of controls should be performed to assess control risk

Question 16

Integrated Test Facility

Answer 16

Can run fictitious and real data at the same time

Question 17

Parallel Simulation

Answer 17

Runs client’s data on auditor controlled software

Question 18

GAGAS (Yellow Book)

Answer 18

Government Auditing Standards

Question 19

GAAS

Answer 19

Generally Accepted Accounting Standards

Question 20

Types of Government Audits

Answer 20

• Financial

- Performance

Question 21

Quality Control and Assurance

Answer 21

Peer review every 3 years

Question 22

GAGAS

Answer 22

Report all fraud and illegal acts

Question 23

Content of Report on IC (governmental)

Answer 23

• Assertion that evaluating compliance is part of developing opinion
• Assertion that specific controls relating to F/R are considered
• Indication that EITHER no weaknesses found or significant def. found and whether material

Question 24

Single Audit Act

Answer 24

Fed assistance of $750k or more (separately to every single program, NOT in total on F/S)

Question 25

Retention of govnt. reports

Answer 25

3 years

Question 26

Quality Controls

Answer 26

• H Human Resources
• E Engagement/Client Acceptance
• L Leadership Responsibilities for Quality @Firm
• P Performance
• M Monitoring
• E Ethical Requirements (to maintain public confidence in profession)