Flashcards 2
What situation would constitute an improper segregation of duties related to payroll?
The department supervisor, who approves employee timesheets (authorization function), distributes paychecks to the employees in their department (custody of asset)
Less Acceptable DR = ?
More Acceptable DR = ?
More substantive tests = ?
-Run more substantive tests
-Run less substantive tests
-Less audit risk (ex. DR decreases)
(Lower AR = IRCRLower DR)
Audit procedures can be carried out at interim dates if:
- Control risk for the accounts/ transactions are low
- Controls are good
Similar between GAAS and Attestation Standards?
Requirement that CPA be Independent
Audit committee should pre-approve everything except:
Non-audit services that do not exceed five percent of total revenues.
What is most likely used in determining the auditor’s preliminary judgement about materiality?
The entity’s financial statements from the prior year
The relationship between the PCAOB and the SEC…
- PCAOB is subject to oversight by the SEC.
- Only accounting firms registered with the PCAOB may prepare audit reports for SEC issuers.
CPA is required to establish an understanding of each engagement and outline details. What areas need to be addressed?
- Objective/ Scope of the engagement
- Responsibilities of management
- Limitations of the engagement
When entity presents the supplementary information with financial statements:
- Auditor should report on the supplementary info. in either:
(A) An other-matter (emphasis of matter) paragraph
(B) Separate report on the supplementary information
In a review an auditor isn’t required to …
Test the operating effectiveness of the entities internal control
At the minimum, a compilation documentation should include:
- Engagement letter
- Copy of financial statements
- Copy of the accountant’s report
Audit Scope
The amount of the time and documents which involve in an audit.
What prospective financial statement is appropriate for general use?
Financial forecast
Not financial projections Assumptions
In the auditor’s report, which section refer to the lack of consistency, when there’s a change in accounting principal (material)
Auditor would report an emphasis - of - matter paragraph after the opinion paragraph
How to get reasonable basis for a Review….
- Make inquiries of management and other personnel
- Perform analytical procedures
- Obtain representations from management
- Other procedures address significant accounting & disclosures matters
