Communication with Management and those charged with governance

Question 1

True or False: Audit committee are employees of the company

Answer 1

False: Audit committee are made up of independent professionals in charge of audits. They are not employees are have any role other than being on the committee.

Question 2

What are the SOX requirements for issuers with regard to the audit committee? Name 3.

Answer 2

SOX requires the audit committee to approve engagement with the auditor, preapprove the types of services performed by the auditor and communicate with the auditor. Basically the audit committee oversees the auditors and auditors report to the audit committee not management.

Question 3

The auditor can or cannot report the absence of significant deficiencies?

Answer 3

Cannot. Because it can be mistakenly interpreted. Auditors should say, that there “were no material weaknesses identified during the audit.”

Question 4

Failure to furnish the auditor with adequate evidence is a __________ limitation.

Answer 4

Scope

Question 5

What happens when there is a scope limitation in an audit of internal controls?

Answer 5

When there is a scope limitation in an audit of internal controls, the auditor can issue a disclaimer of opinion or withdraw from the engagement.

Question 6

An audit would issue an adverse opinion if they find a material weakness and significant deficiencies. True or false

Answer 6

False. Adverse opinions are issued only for material weaknesses.

Question 7

An auditor would have to report to the audit committee when there is a material weakness and significant deficiencies. True or False.

Answer 7

True.

Question 8

If a material weakness exists in an audit of internal controls, an auditor may issue a _______ opinion.

Answer 8

Adverse

Question 9

Is an auditor required to report ALL control deficiencies detected during the course of the audit?

Answer 9

NO. Not all. They are to report any control deficiencies and material weaknesses.