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ZZZ - AUD > Day 21 > Flashcards

Day 21 Flashcards

1
Q

When are Compiled FS that omit GAAP disclosures acceptable?

A
  • 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

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2
Q

When does an auditor assess control risk high?

A
  • 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

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3
Q

What should the auditor do when control risk is assessed at the maximum level?

A

Document the assessment

MCQ-07130

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4
Q

What is a characteristic of nonstatistical sampling?

A

It requires judgement to select a sample

MCQ-12560

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5
Q

What is a characteristic of statistical sampling?

A

It requires each item to have an equal probability of being selected

MCQ-12560

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6
Q

What is the primary objective of a review of interim financial information is to provide the accountant with a basis for?

A

Reporting whether material modification should be made for such information to conform with GAAP

MCQ-03749

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7
Q

“U LIAR CPA”

A

Understand

Learn
Inquiry
Analytical
Review

Client Rep. Letter
Professional judgement
Auditor communicates results

MCQ-03749

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8
Q

True or False: Each page of the Review of Interim Financials should be marked “Unaudited”?

A

True

MCQ-03749

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9
Q

In an Attribute Sampling application, what affects the sample size?

A
  • Allowable Risk of assessing control risk too low (Indirect)
  • Tolerable Deviation Rate (Indirect)
  • Expected Deviation Rate (Direct)

MCQ-02586

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10
Q

Nonissuer: What deficiency’s should be communicated to Mgmt in writing?

A
  • Control Deficiency
  • Significant Deficiency
  • Material Weakness

MCQ-03798

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11
Q

Nonissuer: What is the only deficiency that can be communicated within 60 days of the report release date?

A

Control Deficiency

MCQ-03798

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12
Q

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?

A

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

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13
Q

Name the procedures used to identify Subsequent Events: “PRIME”

A

Post Balance Sheet Transactions
Representation Letter
Inquiry
Minutes
Examine

MCQ-11110

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14
Q

When an accountant examines projected FS, the accountant’s report should include a separate paragraph that:

A

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

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15
Q

When auditing an entity’s FS in accordance with Government Auditing Standards, an auditor should prepare a written report on the auditor’s:

A

Understanding of internal control and assessment of control risk

MCQ-03610

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16
Q

What is the relationship between Expected Deviation Rate and Sample Size?

A

DIRECT

MCQ-02611

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17
Q

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?

A

Canceled Checks

MCQ-02934

18
Q

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?

A

Opinion Section and the Basis for Opinion sections would be modified

MCQ-14986

19
Q

On receiving the client’s bank cutoff stmt, an auditor would most likely trace PY _____ listed in the Bank Cutoff Stmt to the YE _____.

A

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

20
Q

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

A

TRUE

MCQ-05612

21
Q

What standards/guidance applies: Compiling an individual’s personal FS to be used to obtain a mortgage.

A

SSARS

MCQ-06325

22
Q

What is a characteristic that distinguishes computer processing from manual processing?

A

Computer processing virtually eliminates the occurrence of computational error normally associated with manual processing.

MCQ-03062

23
Q

In a FS Audit, GAGAS require a report on internal controls over ______, NOT a report on internal controls over ______

A
  1. Financial Reporting
  2. Compliance (No opinion/no operating effectiveness)

MCQ-03582

24
Q

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)

A

GAS does not require an Opinion on the FS taken as a whole

MCQ-03582

25
Q

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”

A

IMPLICITLY

MCQ-14971

26
Q

List the circumstances that would require an Emphasis-of-Matter paragraph?

A
  • 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

27
Q

List the circumstances that would require an Other-Matter paragraph?

A
  • 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

28
Q

True or False: An auditor must assess the competency of both the Internal Auditor and the Specialist.

A

TRUE

MCQ-04962

29
Q

What are the differences between a Compilation and a Preparation Engagement?

A

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

30
Q

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.

A

Qualified or Adverse

NOTE: This is a departure from GAAP and would only result in a Qualified or Adverse opinion

MCQ-02379

31
Q

What procedures are performed when auditing the Long-Term Bonds Payable?

A
  • 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

32
Q

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?

A

In the Notes to the FS

(And is then the Emphasis-of-Matter paragraph references the FS Notes)

MCQ-15026

33
Q

Where should the auditor’s report include a reference to the United States as the country of origin?

A

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

34
Q

What condition would necessitate a larger sample size?

A

A low level of tolerable misstatement
- Tolerable Misstatement and Sample Size = INDIRECT RELATIONSHIP

MCQ-14891

35
Q

Equation: The allowance for sampling risk

A

Upper Deviation Rate - Sample Deviation Rate = Allowance for Sampling Risk

MCQ-02877

36
Q

What Mgmt assertion is the auditor testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?

A

Inventory is complete - Completeness

MCQ-7161

37
Q

Define: Deposit in Transit

A

A disbursement recorded in one accounting period with the receipt date occuring in the subsequent period.

MCQ-03140

38
Q

The Acceptable Level of Detection Risk is inversely related to what?

A

Assurance provided by Substantive Tests

EX: if the acceptable level of detection risk DECREASES = more assurance is required from the substantive tests

MCQ-02867

39
Q

Less Work = ______

A

Accept More Risk

MCQ-02867

40
Q

More Work = _________

A

Accept Less Risk

MCQ-02867

41
Q

When would an auditor reporting on comparative FS change the previously issued opinion on PY FS?

A

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

ZZZ - AUD (24 decks)

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