Day 21 Flashcards
When are Compiled FS that omit GAAP disclosures acceptable?
- FS are otherwise in conformity with GAAP
- FS would not be misleading to the user
- Compilation report warns the user of the missing disclosures
MCQ-07130
When does an auditor assess control risk high?
- there are no effective controls relating to the assertion
- Implemented controls are not operating effectively
- it would not be efficient to test the operating effectiveness of controls
MCQ-07130
What should the auditor do when control risk is assessed at the maximum level?
Document the assessment
MCQ-07130
What is a characteristic of nonstatistical sampling?
It requires judgement to select a sample
MCQ-12560
What is a characteristic of statistical sampling?
It requires each item to have an equal probability of being selected
MCQ-12560
What is the primary objective of a review of interim financial information is to provide the accountant with a basis for?
Reporting whether material modification should be made for such information to conform with GAAP
MCQ-03749
“U LIAR CPA”
Understand
Learn
Inquiry
Analytical
Review
Client Rep. Letter
Professional judgement
Auditor communicates results
MCQ-03749
True or False: Each page of the Review of Interim Financials should be marked “Unaudited”?
True
MCQ-03749
In an Attribute Sampling application, what affects the sample size?
- Allowable Risk of assessing control risk too low (Indirect)
- Tolerable Deviation Rate (Indirect)
- Expected Deviation Rate (Direct)
MCQ-02586
Nonissuer: What deficiency’s should be communicated to Mgmt in writing?
- Control Deficiency
- Significant Deficiency
- Material Weakness
MCQ-03798
Nonissuer: What is the only deficiency that can be communicated within 60 days of the report release date?
Control Deficiency
MCQ-03798
What should the auditor do when engaged to compile FS of a Nonissuer in the CY when PY was reviewed and the Nonissuer is presenting the FS in comparative form?
All of these answers are correct:
1. Issue a compilation report with an extra paragraph describing the responsibility assumed for PY and include a stmt that “No review procedures were performed after the date of the review report”
2. Issue two separate reports, Compilation Report for CY and Review Report for PY
3. Issue a combined report including both full reports and a stmt that “No review procedures were performed after the date of the review report”
MCQ-04445
Name the procedures used to identify Subsequent Events: “PRIME”
Post Balance Sheet Transactions
Representation Letter
Inquiry
Minutes
Examine
MCQ-11110
When an accountant examines projected FS, the accountant’s report should include a separate paragraph that:
Describes the limitations on the usefulness of the presentation.
- Projected FS SHOULD include a stmt that “projected results may not be achieved”
- Projected FS SHOULD include a stmt that “there will usually be differences between the forecasted and actual result”
MCQ-02502
When auditing an entity’s FS in accordance with Government Auditing Standards, an auditor should prepare a written report on the auditor’s:
Understanding of internal control and assessment of control risk
MCQ-03610
What is the relationship between Expected Deviation Rate and Sample Size?
DIRECT
MCQ-02611
An entity’s internal control requires all check requests have an approved voucher, supported by a prenumbered PO, and a prenumbered Receiving Report.
What population of documents would the auditor select from to determine if any checks were issued for unauthorized expenses?
Canceled Checks
MCQ-02934
What paragraphs would the auditor modify in a Qualified Opinion due to a scope limitation and a Qualified Opinion due to a departure from GAAP?
Opinion Section and the Basis for Opinion sections would be modified
MCQ-14986
On receiving the client’s bank cutoff stmt, an auditor would most likely trace PY _____ listed in the Bank Cutoff Stmt to the YE _____.
PY checks listed in the Bank Cutoff Stmt to the YE Outstanding Checklist
NOTE: Bank cutoff stmts include transactions 10 to 15 days after YE. The outstanding checks and deposits on the Bank Rec. should agree to the Bank Cutoff Stmt
MCQ-02574
True or False: PCAOB Standards require a CPA to perform an Integrated Audit, which includes audits of both the FS and an audit on the effectiveness of Internal Control
TRUE
MCQ-05612
What standards/guidance applies: Compiling an individual’s personal FS to be used to obtain a mortgage.
SSARS
MCQ-06325
What is a characteristic that distinguishes computer processing from manual processing?
Computer processing virtually eliminates the occurrence of computational error normally associated with manual processing.
MCQ-03062
In a FS Audit, GAGAS require a report on internal controls over ______, NOT a report on internal controls over ______
- Financial Reporting
- Compliance (No opinion/no operating effectiveness)
MCQ-03582
An Auditor has been engaged to conduct a performance audit of a governmental entity in accordance with GAS. GAS does not require the auditor’s report to include an ______? (Opposite of FS Audit)
GAS does not require an Opinion on the FS taken as a whole
MCQ-03582
How does the auditor make representations in the auditor’s report on comparative FS under U.S. Auditing Standards regarding the “Consistent application of accounting principles”
IMPLICITLY
MCQ-14971
List the circumstances that would require an Emphasis-of-Matter paragraph?
- Material justified change in accounting principal
- Special purpose framework (references the note explains how the basis differs from GAAP - DOES NOT include a description of how the basis is different from GAAP)
- Change in audit opinion (NOTE: Other-Matter can be used too)
- OPTIONAL: Going Concern when substantial doubt is alleviated
(NOTE: All circumstance that require an Emphasis or Other-Matter paragraph REQUIRE an Explanatory Paragraph)
MCQ-14999
List the circumstances that would require an Other-Matter paragraph?
- Change in audit opinion NOTE: Emphasis-of-Matter can be used as well
- Restrict use of report
- PY FS were audited and report is not present
- Comparative FS with CY audited financials and PY FS were not audited
- Report on compliance included in auditor’s report
NOTE: All circumstance that require an Emphasis or Other-Matter paragraph *REQUIRE an Explanatory Paragraph*
MCQ-14999
True or False: An auditor must assess the competency of both the Internal Auditor and the Specialist.
TRUE
MCQ-04962
What are the differences between a Compilation and a Preparation Engagement?
NOTE: Procedures performed are basically the same
- Compilations: Require a report to be issued and the consideration of independence
- Preparations: No independence and no report
MCQ-06364
Opinion Type: Conditions that cause the auditor to have substantial doubt about the entity’s ability to continue as a going concern are inadequately disclosed.
Qualified or Adverse
NOTE: This is a departure from GAAP and would only result in a Qualified or Adverse opinion
MCQ-02379
What procedures are performed when auditing the Long-Term Bonds Payable?
- Compare interest expense with the bond payable amount for reasonableness
- Recalculate bond premiums and discounts
- Examine documentation of the bond instruments
- Confirm the outstanding bonds payable balance NOT the individual bondholders
MCQ-02478
An entity prepares its FS on Income Tax Basis. Where should the description of how that basis differs from GAAP be included in the Auditor’s report?
In the Notes to the FS
(And is then the Emphasis-of-Matter paragraph references the FS Notes)
MCQ-15026
Where should the auditor’s report include a reference to the United States as the country of origin?
BOTH NEED TO BE REFERENCED
1. The accounting principals used to prepare the FS
and
2. The auditing standards the auditor followed in performing the audit
MCQ-02370
What condition would necessitate a larger sample size?
A low level of tolerable misstatement
- Tolerable Misstatement and Sample Size = INDIRECT RELATIONSHIP
MCQ-14891
Equation: The allowance for sampling risk
Upper Deviation Rate - Sample Deviation Rate = Allowance for Sampling Risk
MCQ-02877
What Mgmt assertion is the auditor testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?
Inventory is complete - Completeness
MCQ-7161
Define: Deposit in Transit
A disbursement recorded in one accounting period with the receipt date occuring in the subsequent period.
MCQ-03140
The Acceptable Level of Detection Risk is inversely related to what?
Assurance provided by Substantive Tests
EX: if the acceptable level of detection risk DECREASES = more assurance is required from the substantive tests
MCQ-02867
Less Work = ______
Accept More Risk
MCQ-02867
More Work = _________
Accept Less Risk
MCQ-02867
When would an auditor reporting on comparative FS change the previously issued opinion on PY FS?
PY FS are restated to conform with GAAP
EX: PY was qualified and the client corrected in the issue in the current year
MCQ-03040
