Flashcards 4

Question 1

When auditor becomes aware of possible noncompliance with laws and regulations by a client, the auditor should obtain an understanding of the nature of the noncompliance to:

Answer 1

Evaluate the effect on the financial statements

Question 2

What procedure would an auditor most likely use to identify unusual year-end transactions…

Answer 2

Performing analytical procedures

Question 3

According to Sarbanes-Oxley, the maximum number of years an audit partner can perform audit services for an issuer before the partner is required to rotate?

Answer 3

5 years

Question 4

The standard accountant’s report issued after reviewing the financial statements of a nonissuer in accordance with SSARS should state that the…

Answer 4

Accountant is not aware of any material modifications that should be made to the financial statements for them to be in accordance with GAAP.

Question 5

Is a CPA required to comply with the provisions of Statements on Standards for Accounting and Review Services when making any kind of journal entries?

Answer 5

Not required

Question 6

The standard issued by an accountant after reviewing the financial statements of a non-issuer states that:

Answer 6

The accountant is not aware of any material modifications that should be made to the financial statements.

This is know as negative assurance.

Question 7

Nonsampling risk

Answer 7

Is the risk that the auditor makes an error in judgement which leads to reaching the wrong conclusion.

Question 8

A qualified opinion phrase…

Answer 8

In our opinion, except for (explanation of problem) as discussed in the preceding (non-issuer)/ following (issuer) paragraph

Question 9

Qualified opinion in prior year due to lack of disclosures. Current year its fixed.

Answer 9

Auditor will express unmodified opinion on the prior year financials statements.

Question 10

When disclaimer of opinion is issued due to a lack of sufficient audit evidence, the lack of evidence should be disclosed in….

Answer 10

Auditor’s responsibility paragraph and discussed in an additional paragraph before the opinion paragraph.

Question 11

Auditor is unable to determine is management estimates on the future events are reasonable, and the effect of those events are believed to be material..

Answer 11

Auditor should express qualified opinion or a disclaimer of opinion. Due to it being a scope limitation

Question 12

Disadvantage of keeping micro-computer prepared files.

Answer 12

Its easier for unauthorized persons to access and alter files. These files are open to admin personnel which translates to easier access to others.

Question 13

Quality control standards relate…

Answer 13

To a company as a whole

Question 14

Auditor review client policy and procedures for what planning purpose?

Answer 14

Understanding client’s operation and business

Question 15

Auditor uses the internal control and final assessed risk of material misstatement primarily to determine the nature, timing, and extent of …

Answer 15

Substantive testing

Question 16

Stratified sampling would be best used when…

Answer 16

There is a lot of variation among item in population. Grouping them into homogenous groups.

Question 17

25% change in which of the following factors will have a small effect on the population size:

Answer 17

Number of items in population.

Big Effect

• Degree of Assurance
• Planned assessed level of control risk
• Tolerable rate of deviation

Question 18

Which type of procedure would yield the most reliable evidence?

Answer 18

A recalculation of bad debt expense

Question 19

In auditing account receivables the negative form of confirmation request most likely would be used when:

Answer 19

The combined assessed level of inherent and control risk relative to accounts receivable is low.

Question 20

When is the auditor required to communicate with those in charged with governance…

Answer 20

This communication should include disagreements with management about significant audit adjustments, whether or not satisfactory resolved.

Question 21

Under single audit act, materiality is:

Answer 21

Determined separately for each major federal financial assistance program

Question 22

What procedure would you apply should an auditor include in the audit plan to create the most efficient audit when the client uses a service organization for several processes…

Answer 22

Review the service auditor’s report on controls placed in operation