Final Review Flashcards
A _____ ticket documents the steps in making a product.
MOVE
Which of the following factors is most relevant when an auditor considers the client’s organizational structure in the context of control risk?
A. Management’s attitude toward information and processing and accounting departments
B. The organization’s recruiting and hiring practices
C. Physical proximity of the accounting function to upper management
D. The suitability of the client’s lines of reporting
D. The suitability of the client’s lines of reporting
% change in quantity demanded > % change in price, and revenue declines if price increases
ELASTIC
% change in quantity demanded = % change in price, and revenue not sensitive to price change
UNIT ELASTIC
% change in quantity demanded < % change in price, and revenue will increase if price increases
INELASTIC
Open market purchases of government securities by a central bank is __________________.
EXPANSIONARY
As time elapses, consumers become more sensItive to changes in prices, and their demand becomes more _______________.
ELASTIC
Safety ___________ reorder point focuses on a set of procedures to determine inventory levels for demand-dependent inventory types such as work-in-process and raw materials.
STOCK
Professional employees of the audit firm who are not covered members may nonetheless not own more than ____ of a client’s ownership interests without impairing independence.
5%
An example of nonsampling risk is the auditor selecting _______________ audit procedures.
INAPPROPRIATE
A CPA compiled the financial statements of a nonissuer for the fiscal period ending March 31, Year 1. The financial statements omitted substantially all disclosures required by GAAP. The CPA should issue a _____________ report on the financial statements with a _____________ paragraph indicating management has elected to omit substantially all disclosures.
MODIFIED; SEPARATE
In the audit of a nonissuer’s financial statements performed in accordance with GAAS, an auditor is required to document the auditor’s ________________ of the entity’s ______________ control structure.
AUDITOR’S; INTERNAL
In a nonissuer’s financial statement audit, an auditor is required to perform procedures to determine the _______________________ of internal controls over financial reporting.
IMPLEMENTATION
An accountant is asked to issue a review report on the balance sheet, but not on the other related statements. The scope of the inquiry and analytical procedures has not been restricted, but the client failed to provide a representation letter. The auditor should issue a _______________________ report with the client’s consent.
COMPILATION
When considering the use of management’s representations as audit evidence about the completeness assertion, an auditor should understand that such representations _______________, but do ____ replace, substantive procedures designed to support the assertion.
COMPLEMENT; NOT
An advantage of using probability-proportional-to-size sampling rather than classical variables sampling is the sampling process can begin ___________ the complete population is available.
BEFORE
An accountant’s standard report on a compilation of a projection should NOT include a statement that the ______________________ assumptions used in the projection are reasonable in the circumstances.
HYPOTHETICAL
When ___________ policies and procedures are unlikely to relate to the assertions, an auditor would most likely assess control risk at the maximum level for certain assertions.
CONTROL
An auditor’s test of controls for completeness for the revenue cycle usually include determining whether an __________ is prepared for each shipping document.
INVOICE
The business cycle in the U. S. is measured in terms of changes in _____ GDP.
REAL
When evaluating results of testing a sample using attribute sampling, the auditor considers the sample’s final error rate to be equal to (Errors in the ___________ + missing elements in the sample) / total elements in the same + ______________ for sampling risk
SAMPLE; ALLOWANCE
The primary concerns of macroeconomics is un______________, economic ___________, and government budget deficits.
EMPLOYMENT; GROWTH
The primary concerns of microeconomics is the study of _________ of goods and services as they affect _________________ units.
PRICE; INDIVIDUAL
There are many kinds of statistical estimates that an auditor may find useful, but basically every accounting estimate is either a quantity or of an error rate. The statistical terms that roughly correspond to “quantities” and “error rate,” respectively, are _______________ and ___________________.
VARIABLE; ATTRIBUTES
________________ fees and commissions are prohibited for attest clients.
REFERRAL
An increasing federal deficit implies a ____________ in tax revenue and an _______________ in entitlement payments.
DECREASE; INCREASE
Deviations from specific ___________ control procedures at a given rate ordinarily result in misstatements at a ___________ rate.
INTERNAL; LOWER
The statements on Standards for Attestation Engagements are issues by the AICPA’s _________________ Standards Board.
AUDITING
A company has a policy of frequently cutting prices to increase sales. Product demand is significantly elastic. This means that quantity _______________ proportionately more than the _____________ declines.
ICNREASES; PRICE
Whenever reports filed on a printed form designed by authorities call upon the independent auditor to make an assertion that the auditor believes is not justified, the auditor should ____________ the form or attach a separate report.
REWORD
Retired, unemployed and those “otherwise not working in the professions” are all _____________ members.
OTHER
An auditor should not include a KAM section in a report expressing an adverse opinion or disclaimer of opinion because it may ___________ from the opinion.
DISTRACT
As the acceptable level of detection risk decreases, the assurance directly provided from substantive tests should _____________.
INCREASE
During a period with an increasing federal budget surplus, fiscal policy is most likely ________________.
CONTRACTIONARY
Assessing control risk below the maximum level most likely would involve identifying specific ______________ control policies and procedures relevant to _____________ assertions.
INTERNAL; SPECIFIC
CRIME
Control environment
Risk assessment
Information and communication
Monitoring
(Existing) control activities
EBOCA (Control Environment)
THICS
Independent BOD
ORGANIZATIONAL structure
Commitment to COMPETENCE
ACCOUNTABILITY
SAFR (Risk Assessment)
SPECIFY objectives
ASSESS change
Consider potential for FRAUD
Anaylze RISKS
OIE (Information and Communication)
OBTAIN and USE information
INTERNALLY communicate information
EXTERNALLY communicate with external parties
SoD (Monitoring)
SEPARATE and ONGOING evaluations
Communicate DEFECIENCIES
CATP (Existing control activities)
CONTROL activities
TECHNOLOGY controls
POLICIES and PROCEDURES deployment
_____________________ risk relates to the nature, timing, and extent of the auditor’s procedures.
DETECTION
__________________ financial statements cannot be reviewed.
PROSPECTIVE
In order to address unemployment, Congress should ______________ taxes, _______________ government expenditures, and run _______________.
REDUCE; INCREASE; DEFICITS
In an attest relationship, the periods which the independence rules are applicable are the period covered by the __________________ statements and by the professional _____________________.
FINANCIAL; RELATIONSHIP
_____________________ is an audit procedure that is performed during substantive testing.
CONFIRMATION
Inadequate disclosure of the substantial doubt about an entity’s ability to continue as a going concern is a departure from GAAP, resulting in either a ____________ or ____________ opinion.
QUALIFIED; ADVERSE
Obtaining a representation letter from the CEO is more likely to be performed in a ___________ engagement of a nonissuer (where obtaining the letter is required) than in a compilation engagement.
REVIEW
SOX does not require an assertion that any identified internal control weaknesses will be rectified within __ days after the report is issued.
60
A scope limitation requires the auditor to ____________ an opinion or ___________ from the engagement.
DISCLAIM; WITHDRAW
A material weakness in internal control requires the auditor to issue an ___________ opinion.
ADVERSE
Basic elements of a report on compliance include a statement that the audit should be planned to obtain ___________________ assurance about whether noncompliance could have a ______________ effect on the programs audited.
REASONABLE; MATERIAL
Tracing (old) equipment recorded in the books to the actual equipment during a plant tour is a control which tests for __________________ retirements.
UNRECORDED
When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor most likely would increase the extent of test of ______________.
DETAILS
Negative assurance may be expressed when an accountant is requested to report on the results of performing a review of _____________________ assertion.
MANAGEMENT’S
The primary evidence regarding year-end cash balances in the financial statements is documented in _________ reconciliations.
BANK
When an accountant compiles a financial forecast, the accountant’s report should include a statement that the practitioner assumes ______ responsibility to update the report for events and circumstances occurring after the date of the report.
NO
An auditor usually tests the reasonableness of dividend income from investments in publicly-held companies by computing the amounts that should have been received by referring to _______________ record books produced by investment ______________ services
DIVIDEND; ADVISORY
An auditor’s purpose in reviewing the renewal of a note payable shortly after the balance sheet date most likely is to obtain evidence concerning management’s assertions about understandability of _____________________ and _________________________.
PRESENTATION; CLASSIFICATION
A critical component of the determination of whether providing a nonaudit service would create a threat to independence is consideration of management’s ability to effectively ______________ the nonaudit service to be performed.
OVERSEE
