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Yaeger AUD > Exam 1 Wrong Answers > Flashcards

Exam 1 Wrong Answers Flashcards

0
Q

Documented the expected results of nonaudit services for the audit committee is…

A

Not required

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1
Q

Prior to seeking approval of nonaudit services related to internal control from the audit committee, a registered public accounting firm must do all 3 of the following

A

1 Describe in writing the scope of the nonaudit services

2 discuss potential effects on independence

3 document substance of discussion with audit committee

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2
Q

Significant deficiencies are deficiencies in the design or operation of internal control. The level of deficiency can be affected by…2

A

1 diversity of entity’s business and

2 size of entity’s operations

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3
Q

Severity of deficiency depends on the…2

A

1 Magnitude of potential misstatement resulting from the deficiency

2 whether there is a reasonable possibility that the entity’s controls
Will fail to prevent, or detect and correct misstatement

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4
Q

Environment of the entity, including its diversity and size, can affect…

A

The risk of material misstatement

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5
Q

Environment of the entity, including its diversity and size, can affect the risk of material misstatement and therefore…

A

The possibility that a deficiency could be a significant deficiency

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6
Q

Which of the following types of audit evidence generally is most appropriate, analytical procedures or confirmation of account info?
Why?

A

Confirmation of account info, evidence obtained from outside the
Entity

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7
Q

2 types of misstatements that are relevant to the auditor’s consideration of fraud

A

1 misstatements arising from fraudulent financial reporting

2 misstatements arising from missappropriation of assets

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8
Q

Misstatements arising from cash account misstatements are…

A

Not a type of misstatement that is relevant to the auditor’s consideration of fraud

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9
Q

The auditor should prepare audit documentation that enables an experienced auditor to understand that…

A

Accounting records agree or reconcile with audited values

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10
Q

Audit documentation should enable an experienced auditor, having no previous connection to the audit to understand all of the following except…

A

Changes in the audit plan from the prior year

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11
Q

How would increases in tolerable misstatement and assessed level of control risk affect the sample size in substantive test of details?

A

Increase in tolerable misstatement would decrease sample size

Increase in assessed level of control risk would increase sample
Size

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12
Q

Tolerable error is a planning concept and is related to…

A

Auditor’s preliminary estimates of materiality

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13
Q

The higher the auditor sets the tolerable error…

A

The smaller the sample size the auditor will require

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14
Q

Tolerable error or tolerable misstatement is the…

A 
Maximum error in related account balance or class of transactions
That may exist without causing FS to be materially misstated
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15
Q

Assessing control risk is the process of evaluating the…

A

The effectiveness of entity’s internal controls in preventing or
Detecting material misstatements in financial statements

16
Q

The less an auditor can depend on internal control in preventing or detecting material misstatements in the financial statements, what is its affect on sample size?

A

The larger the sample size the auditor will require

17
Q

An accountant is required to obtain a management representation letter…

A

When performing a review of FS of a nonissuer

18
Q

If an accounts receivable confirmation response is not received after the second request,mother best procedure for the auditor would be to…

A

Inspect shipping records documenting merchandise sold to debtors

19
Q

Inspect shipping records documenting merchandise sold to debtors. What does this audit procedure accomplish?2

A

1 Provides evidence that merchandise from a recorded sale was
Sent to customer

2 substantiating amount owed

20
Q

Reviewing the cash receipts journal for the month prior to year end, would not be a procedure an auditor would most likely perform for year end accounts receivable confirmations when auditor hasn’t received a second reply because…

A

Review of cash receipts journal would need to be done for month
Following year end

21
Q

Which of the following statements ordinarily is included among written management representations obtained by the auditor?

A

Management has made available to you all financial records and
Related data

22
Q

Auditor reports on…(compared to management)

A

Material weaknesses in internal control (not management)

23
Q

When reporting on financial statements of a regulatory entity that are prepared in accordance with the requirements of financial reporting provisions of a government regulatory agency to whose jurisdiction the entity is subject, the auditor may report on the financial statements as being prepared in accordance with a comprehensive basis other than GAAP. However reports of this nature should only be issued if…

A

The financial statements are intended solely for filing with one
Or more regulatory agencies

24
Q

A CPA may respond to potential clients regarding…

A

Application of accounting principles

25
Q

CPAs should recommend how a transaction be handled, but they should also state that…

A

While they recommend a certain type of treatment, the responsibility
For the proper accounting treatment rests with preparers of FS

26
Q

Compilation documentation documentation at a minimum should include what 3 items?

A

1 engagement letter

2 any significant findings or issues and

3 communications regarding illegal acts and fraud that come to accountant’s attention

27
Q

Under the Statements on Auditing Standards (SASs), the auditor should complete the assembly of the final audit file on a timely basis, but within how many days following the report release date?

A

Within 60 days

28
Q

If the auditor identifies significant risk related to fraud involving improper revenue recognition the auditor may perform…

2) May not perform

A

Confirm contract terms with customers

2) may not observe inventory at year end as agreed upon in
Planning stages of audit

29
Q

A member of a group engagement team will not be subject to discipline if a foreign component auditor departed from the ethics requirements as long as the foreign component auditor is…

A

in accord with ethics and independence requirements set

forth in IESBA’s ethics for professional accountants

30
Q

The written communication regarding significant deficiencies and material weaknesses identified during the audit should not include…

A

Paragraph describing management’s assertion concerning effectiveness of internal control

Yaeger AUD (38 decks)

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