Day 16 Flashcards

1
Q

When the auditor increases the assessed level of control risk bc control activities were determined to be ineffective, the auditor would increase what?

A

Extend of tests of details

CR increases = DR decreases

To get a decrease in DR, greater assurance is needed from substantive tests. Thus increasing the extend of tests.

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2
Q

True or False: Analytical procedures performed in the overall review stage require specific documentation.

A

False

MCQ-02311

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3
Q

True or False: When an auditor uses Analytical procedures as the principal substantive test of a significant FS assertion, the auditor is required to document both the auditor’s expectation and the factors considered in developing that expectation.

A

True

MCQ-02311

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4
Q

What is the PRIMARY purpose of sending standard confirmations to financial institutions

A

To provide corroborating information on deposits and loan balances

MCQ-02937

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5
Q

An Auditor has been engaged to report on supplementary information that accompanies audited FS. What stmt should be included in the report?

A

A stmt that the supplementary information has been subjected to audit procedures

MCQ-00048

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6
Q

The auditor discovered that AR turnover is substantially lower in the CY compared to PY. Why?

A

Fictitious credit sales have been recorded during the CY

MCQ-02383

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7
Q

What type of service is a Preparation Engagement?

A

Non-attest and not required to be independent

MCQ-12573

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8
Q

What will result in Mgmt refusal to furnish a Rep. Letter?

A

Disclaimer of Opinion or Withdraw

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9
Q

Name the procedures used to test the DESIGN effectiveness of Internal Control?

A
  1. Inquiry
  2. Observation
  3. Inspection
  4. Walk-Throughs
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10
Q

Name the procedures used to test the OPERATING effectiveness of Internal Control?

A
  1. Inquiry of appropriate personnel
  2. Observations of the company’s operations
  3. Inspection of relevant documents
  4. Reperformance of the control
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11
Q

True or False: Materiality limits apply to violations of State Labor Regulations?

A

True

MCQ-05359

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12
Q

What happens to Sample Size?

Increase in Tolerable Misstatement

A

Decrease in Sample Size

MCQ-02599

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13
Q

What happens to Sample Size?

Increase in Assessed Level of Control Risk

A

Increase Sample Size

MCQ-02599

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14
Q

A CPA is required to comply with what provisions when engaged to:

Issue a letter for an underwriter, also known as a comfort letter, to a broker or dealer of securities.

A

Statements on Auditing Standards

MCQ-08410

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15
Q

A CPA is required to comply with what provisions when engaged to:

Provide assurance on investment performance statistics prepared by an investment company on established criteria.

A

Statements on Standards for Attestation Engagements

MCQ-08410

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16
Q

Define: Attest Engagements

A

When a CPA is engaged to issue an Examination, a Review, or an Agreed-Upon Procedures report on a SUBJECT MATTER

17
Q

Define: Financial Forecast

A

Expected financial results of future periods based on EXPECTED Conditions and EXPECTED course of action.

18
Q

Define: Financial Projection

A

Based on HYPOTHETICAL assumptions

“WHAT-IF” type of scenarios

LIMITED USE

19
Q

Developing an Audit Plan

“NET”

A

The Nature, Extent, and Timing of the procedures to be performed

20
Q

What is the ultimate purpose of assessing Control Risk?

A

To contribute to the auditor’s evaluation of the risk that Material Misstatements may exist in the FS

MCQ-02485

20
Q

What is the ultimate purpose of assessing Control Risk?

A

To contribute to the auditor’s evaluation of the risk that Material Misstatements may exist in the FS

MCQ-02485

21
Q

What should an independent auditor do when issuing an audit report for a governmental entity and plans to issue a separate report on Internal Controls over financial reporting and Compliance with laws and regulations?

A

State in the audit report that separate reports will be issued

22
Q

Agreed-Upon Procedures:

“I AM SURE”

A

Independence of practitioner
Agreement of the parties
Measurability and Consistency
Sufficiency of the procedures
Use of the report can be General or Restricted
Responsibility for the subject matter = client
Engagement to perform agreed-upon procedures on Prospective FS