Deck 1

Question 1

What is the accounting and review services committee? (MCQ-06329)

Answer 1

The authoritative body who job is to issue pronouncements in connection to unaudited financial statements of nonissuers. Pronouncements= Statements on Standards for Accounting and Review Services (SSARS).

Question 2

A report on agreed-upon procedures should contain? (MCQ-02450)

Answer 2

a list of the procedures performed(or reference to) and the related findings.

Question 3

When is objectivity, integrity, or independence considered impaired with respect to an audit client? (MCQ-08159)

Answer 3

Objectivity, integrity, or independence is impaired if the auditor offers or accepts a gift or entertainment to or from a client in reasonable circumstances. Some relevant facts to consider is the nature of the gift/entertainment, the occasion giving rise to the gift/entertainment, or cost or value of gift/entertainment.

Question 4

What are some audit procedures to test completeness and, valuation and allocation, and existence of ending cash balance?

Answer 4

1. . Bank Confirmation- should be sent to all banks even if there is no year-end balance. This can also provide evidence of actual loans, contingent liabilities, discounted notes, pledged collateral and guarantee or security agreements
2. Bank Reconciliations- Every year-end bank reconciliation should be tested by sum up the bank reconciliation and list outstanding checks, checking if the balance per books on reconciliation matches general ledger and balance per bank confirmation.

Question 5

How does materiality relate to the Single Audit Act?

Answer 5

A single audit includes a separate evaluation of materiality for each major program.

Question 6

What are analytical procedures?

Answer 6

Involve comparison of both financial and relevant nonfinancial information

Question 7

What are some subsequent events?

Answer 7

Subsequent period is the period between the date of the financial statements and the date of the auditor’s report. The auditor should obtain an understanding of the procedures management establishes to identify subsequent events.

The auditor should inquiry about changes in long-term debt after year-end, sales/acquisitions of sales, new commitments, borrowings, or guarantees and new significant unusual transactions to name few.

Question 8

When does an accountant comply with Statements on Standards for Accounting and Review Services (SSARS)? (MCQ-06286)

Answer 8

When engaged to prepare, compile or review the financial statements

Question 9

What report states “the accountant is not aware of any material modifications that should be made to the financial statements to be in accordance with GAAP?”

Answer 9

An Accountant’s standard REVIEW REPORT

NOTE- term “presented fairly” used in Audit Report

Question 10

How are accounting records used as a form of audit evidence?

Answer 10

It important to note that accounting records are not sufficient support for an audit opinion. Supporting records (sub ledgers) are important not just the initial journal entries recorded in the general ledger. Accounting records are tested through analytical procedures and substantive procedures.

Question 11

What are analytical procedures?

Answer 11

Evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data

Question 12

What are substantive procedures?

Answer 12

Test of details of transactions and balances and analytical review procedures designed to substantiate the account balances shown in the financial statements

Question 13

What does the engagement letter include?

Answer 13

Contains the terms of the engagement: the responsibilities of both the auditor and management of the organization, an explanation of the inherent limitations of the audit, the applicable reporting framework, and an explanation of the form and content of the audit report.

Question 14

What is control risk?

Answer 14

The risk that a material misstatement that could occur in a relevant assertion will not be prevented or detected (and corrected) on a timely basis by the entity’s internal control.

Question 15

List the types of non-audited services a auditor may provide an issuer client without impairing independence and without obtaining the preapproval of the audit committee

Answer 15

All 3 conditions must be meet:

1. Non- audited services were suddenly brought to the attention and approved by the audit committee right before completion of the audit.
2. Non- audited services to perform financial information systems design and implementation.
3. Services that were not recognized as non-audited services at the time of engagement

Question 16

What is the engagement team’s responsibilities when assessing materiality?

Answer 16

A preliminary assessment of materiality should be done by the group engagement team. The group engagement team should assess the materiality of the group F/S as a whole as well as performance materiality.

Question 17

Does the auditor include a separate section in the audit report if there is substantial doubt about an entity’s ability to continue as a going concern?

Answer 17

Yes, if the auditor concludes that there is substantial doubt, the auditor should include a separation section of the auditor’s report with the heading “Substantial Doubt About the Entity’s Ability to Continue as a Going Concern” that includes the terms “substantial doubt” and “going concern”. Time period is not mentioned in audit report.

Question 18

What is lapping?

Answer 18

Occurs when an employee withholds funds received by a customer for personal use and fails to apply these receipts of cash or checks to the customer’s receivable balance.

Question 19

What is kitting?

Answer 19

Concealing of cash shortage by depositing in one bank an unrecorded check of another disbursement bank, effectively recording the same funds in both bank accounts.

Question 20

What factors affect the nature and extent of audit documentation?

Answer 20

1. risk of material misstatement
2. The extent to which judgement was required in performing the work and evaluating the results
3. nature of the specific auditing procedure
4. significance of evidence obtained
5. nature and extent of any problems identified
6. need to document conclusions that may not be obvious