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ZZZ - AUD > Day 23 > Flashcards

Day 23 Flashcards

1
Q

How might an auditor test Fair Value Measurements and Disclosures?

A
  1. Verify quoted market prices
  2. Do MGMT’s significant assumptions provide a reasonable basis?
  3. Do modifications to observable info reflect assumptions made in the market?
  4. Evaluate the Valuation model
  5. Test underlying data
  6. Develop independent fair value estimates
  7. Review subsequent events
  8. Consider use of specialist

MCQ-02500

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2
Q

What attributes should the auditor consider when assessing client risks that may result in material misstatement sure to fraud?

A
  • Type of Risk
  • Significance of the Risk
  • Likelihood of the Risk
  • Pervasivness of the Risk

MCQ-07597

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3
Q

The auditor’s responsibility paragraph of the unmodified opinion audit report EXPLICITLY states that an audit includes:

A

“We identified and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks”

MCQ-14965

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4
Q

Define: Bill of Lading

A

Generated by the carrier

MCQ-03197

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5
Q

After identification of misstatements in the sample, the next step is to:

A

Project the detected error to the entire population

MCQ-06224

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6
Q

Finish the stmt that is EXPLICITLY written: “The audit is conducted in accordance with _______…“

A

“Auditing standards generally accepted in the United States of America”

MCQ-14965

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7
Q

Steps in applying Audit Data Analytics:

A
  1. Risk Assessment
  2. Test of Controls
  3. Substantive Procedures
  4. Concluding the Audit

MCQ-14561

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8
Q

Define: Regression Analysis

A

Evaluates relationships between variables, show the direction and strength of the relationship.

Typically utilizes SCATTER PLOTS

MCQ-14561

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9
Q

Define: Variance Analysis

A

Compares a Company’s forecasted or budgeted values against actual values.

Bullet Chart

MCQ-14561

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10
Q

Define: Financial Projection

What type of engagement is to examine an entity’s financial projection?

A

Financial Projections- are hypothetical, “WHAT-IF” prospective financial statements.

Agreed-Upon-Procedures and restrict the use of the report

MCQ-02514

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11
Q

Name the Auditor’s Responsibilities in an Attest Function (Opinion)

A
  1. Maintaining Professional Skepticism
  2. Complying with relevant ethical requirements
  3. Exercising Professional Judgement
  4. Obtaining SUFFICIENT APPROPRIATE audit evidence
  5. Complying with generally accepted auditing standards (GAAS)

MCQ-03333

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12
Q

Opinion Type: The FS fail to contain adequate disclosure of related party transactions

A

Qualified or Adverse

MCQ-02914

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13
Q

Opinion Type: The auditor is unable to determine the amounts associated with illegal acts committed by Mgmt

A

Disclaimer of Opinion

MCQ-02914

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14
Q

Opinion Type: The client refuses to permit its attorney to furnish information requested in a letter of audit inquiry

A

Disclaimer of Opinion

MCQ-02914

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15
Q

Opinion Type: The auditor is engaged after fiscal YE and is unable to observe physical inventories or apply alternative procedures to verify their balances

A

COULD RESULT IN A Disclaimer of Opinion DEPENDING ON THE MATERIALITY OF INVENTORY

MCQ-02914

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16
Q

In assessing the tolerable rate of deviation of a test of controls that was performed using statical sampling, an auditor should consider that:

A

Deviations from pertinent controls at a given rate ordinally result in misstatements at a lower rate.

“Sometimes a control is not working but that does NOT mean there is a dollar misstatement”

EX: Testing approval for sales orders and 50% were not approved, that does not mean sales income is off by 50%

MCQ-11048

17
Q

Advantages of Statistical Sampling:

A
  • Measure the sufficiency of the audit evidence
  • Provide an objective basis for quantitatively evaluating sample results
  • Design efficient sample
  • Quantify sampling risk to limit risk to an acceptable level

MCQ-02600

18
Q

Name the two requirements crucial to achieving audit efficiency and effectiveness with a computer are selecting what?

A
  1. Identification of the Appropriate Audit Tasks
    and
  2. Appropriate Software to perform the tasks

MCQ-03065

19
Q

Define: Principal Owners in regards to Related Party Transactions

A

Principal Owners- Include owners of record or known Beneficial Owners owning 10% or more of voting interest

*NOTE: Form 4 is a required form for Principal Owners to be filed with SEC when they purchase or dispose of equity in an entity in which they own 10% or more.

TBS-002081

20
Q

What should the auditor do when a Contingency that is “reasonably possible” and can be estimated?

A

Disclosed in the footnotes of the financial statements, but no entry is required

TBS-008110

21
Q

What should the auditor do if a major customer filed for bankruptcy during the year under audit?

A

When a major customer files for bankruptcy, a loss is both probable and estimable = SHOULD BE RECORDED

DR Bad Debt (Operating Expenses) is recognized
CR Allowance for Doubtful Accts is increased

TBS-008110

22
Q

A practitioner has examined a client’s compliance with debt covenants associated with a bank loan and is ready to issue a report. What standards apply?

A

Compliance Attestation Standards - apply for an Examination of a client’s compliance

MCQ-06239

23
Q

What does the Completeness assertion relate to?

A

Completeness Assertion relates to the recording of all transactions

MCQ-03167

24
Q

What procedure would the auditor most likely perform to test controls relating to mgmt’s assertion about completeness of cash receipts for cash sales at a retail outlet?

A

Observe the consistency of the employees’ use of cash registers and tapes

MCQ-03167

25
Q

True or False: The auditor may report the absence of significant deficiencies to those charged with governance or management.

A

FALSE

The auditor may NOT report the absence

MCQ-08186

26
Q

What should the auditor do when there is a scope limitation when auditing internal control?

A

Disclaim an opinion or withdrawl from the engagement

MCQ-05614

27
Q

What should the auditor do when there is a material weakness in internal control?

A

Material Weakness = ADVERSE

MCQ-05614

28
Q

What type of report: “The report may not be suitable for any other purposes and that users are responsible for determining whether the procedures performed are appropriate”

A

Agreed-Upon Procedures

“I-AM-SURE”

MCQ-15108

29
Q

A justified departure from GAAP would result in what?

A

Emphasis-of-Matter Paragraph

MCQ-04437

30
Q

A change in accounting principle that has a material effect on the FS would result in what?

A

Emphasis-of-Matter Paragraph

MCQ-04437

31
Q

What procedure is most effective in reducing attestation risk?

A

Examination of evidence

MCQ-05468

32
Q

What nonissuer engagements require a Mgmt Rep. Letter and what engagements do not?

A

DO NOT: Preparation and Compilation

DO: Review and Audits

MCQ-11009

33
Q

“CAPE CORP”

A

Attestation Engagements: Common Concepts

Compliance with all attestation standards
Acceptance and continuance
Preconditions: (Independent, responsible party, subject mater is appropriate)
Engagement documentation standards

Change in terms of engagement
Others work = OK
Responsibility for quality control
Professional skepticism

MCQ-06503

34
Q

What is Mgmt’s assertion in an MD&A presentation when they say “Nonfinancial data have been accurately derived from related records”

A

Consistency

MCQ-06503

35
Q

Define: Predecessor Auditor

A

is an independent CPA from a different audit firm who was engaged to perform but did not complete an audit OR an independent CPA from a different audit firm who has reported on the most recent audited FS

MCQ-12554

36
Q

Two assertions for which confirmation of AR balances provides primary evidence are:

A
  • Rights and Obligations
  • Existence

MCQ-02775

37
Q

What are the auditor’s expanded responsibilities when performing an audit in accordance with 2 CFR 200 single audit?

A

Performance of additional procedures to test and report on compliance with laws, rules, regulations, and provisions of contracts or grant agreements that have a direct and material effect on major federal award programs

MCQ-03482

ZZZ - AUD (24 decks)

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