Flashcards 1

Question 1

What opinion should practitioner issue if the assumptions did not provide a reasonable basis for the prospective financial statements?

Answer 1

Adverse Opinion

Question 2

Reporting a non-issuers internal control over financial reporting, an auditor should include a paragraph that describes…

Answer 2

Inherent limitations of any internal control

Question 3

Likely candidates for “Test Data” test of controls…

Answer 3

• Missing employee numbers
• Time tickets with invalid job numbers
• Agreement of hours per clock card with hours on time
  tickets

Question 4

Entity prepares its financial on tax basis. Description on how that differs from GAAP should be included in:

Answer 4

Notes to the financials statements

Question 5

AICPA members who perform compilations/ reviews are governed by who?

Answer 5

• AICPA Code of Conduct
• SQCS Statements of Quality Control Standards
• SSARS - Statements on standards for accounting and review services

Question 6

Authoritative Literature Hierarchy

Answer 6

1. Statements of Auditing Standards (SAS)
2. Auditing Interpretations, AICPA Guides (SOPS)
3. Industry Articles (No Authority)

Question 7

Detection Risk and evidence have a(n)…

Answer 7

Inverse Relationship

Question 8

With respect to Audit Standards and Ethics and Independence Rules, the PCAOB has…

Answer 8

Has adopted its own rules.

Some from the AICPA and ASB (Auditing Standards Board) but also its own rules

Question 9

Practitioner may perform an agreed- upon procedures attest engagement on prospective financials if the following are met:

Answer 9

• Agree upon procedures to be performed
• Take responsibility for procedures
• Financials include summary of significant assumptions
• Criteria used in the determination of findings

Question 10

Situations that impair independence

Answer 10

• Threatened (and likely) lawsuit
• Credit Balance in excess of $10,000
• Overdue audit fees that are over a year overdue.

Question 11

Words like “may”, “might”, or “could” describe…

Answer 11

judgement calls by the auditor

Question 12

“Should” =

Answer 12

Following term used to indicate in a presumptively mandatory requirement

Question 13

Auditor’s responsibilities for audited financials are confined to…

Answer 13

the expressions of auditor’s opinion

Question 14

Term identifies a requirement for audit evidence…

Answer 14

Appropriate

Question 15

Reasonable Assurance definition:

Answer 15

A high, not absolute level of assurance to allow an auditor to detect material misstatement

Question 16

Which paragraphs in non-issuers audit report reference GAAS and GAAP

Answer 16

GAAS - Auditor’s Responsibilities

GAAP - Opinion (Financial Statements)

Question 17

Lower Control Risk reduces

Answer 17

(reduces) Total risk of material misstatement

Question 18

Materiality is defined

Answer 18

as the amount of error or omission that would affect the judgement of a reasonable person.

Question 19

Which is least likely to affect an auditor’s judgement about materiality?

Answer 19

The client’s evaluation of materiality.

Question 20

Auditor assigned to both cash and fixed assets. Cash had many transactions during the year but fixed assets had only a few. What strategy would be best for the audit?

Answer 20

Focus on the ending balance for cash, and focus on the transactions that happened during the year for fixed assets.