I can do all things Flashcards
Examples of material weaknesses
MM in the FS of the CY FS.
Ineffective oversight of the company’s financial reporting function by the audit committee.
Identification of fraud involving Sr MGMT although the amount is not viewed as material to the FS.
Top down approach
PCAOBs standard that directs auditors to begin their study of IC at the FS level and the overall risks to IC over FS, then consider Entity level controls, followed by focusing on the relevant assertions for significant accts and disclosures
Entity level controls
refers to those policies and procedures that have very broad implications to the achievement of an entitys control-related objectives related to operating activities, financial reporting, and compliance. Ex. control environment, risk assessment process, addressing policies over sig. risk mgmt practices
Deficiency in design
when a control necessary to meet the control objectives is missing or when an existing control is not properly designed so that even if the control operates as designed, the control objective is not always met.
testing operating effectiveness of controls
reperformance of the control procedure
testing design effectiveness
inquiry, observation, and inspection of relevant documentation
When one or more material weaknesses exist, what type of opinion should the auditor express on IC over financial reporting
adverse
2 types of issues that might affect the auditors report regarding consistency
A change in accounting principle
A restatement to correct previously issued FS
What opinion is a GAAP departure
Q or A
What two matters affect the auditors evaluation of consistency of FS and the auditor would add an explanatory paragraph
a change in acct principle
an adj to correct a misstatement in prev issued FS
When would an auditor add an explanatory paragraph
a change in acct principle
an adj to correct a misstatement in prev. issued FS
When can an audit partner not serve as an engagement quality reviewer?
when he was partner during either of the 2 audits preceding the audit subject to the quality review
what is the objective of an engagement quality reviewer
to evaluate the significant judgments made by the engagement team and the conclusions they reached in connection with an engagement report applicable to an audit or review of the interim FS
what are examples of significant engagement deficiencies applicable to an engagement quality review
The engagement team failed to obtain sufficient approp. evidence.
the team reached an inapprop. overall conclusion.
The report is not approp.
The firm is not independent of its client
If the client does not furnish adequate evidence for IC over inventory, but provides all other evidence
Disclaimer
Ineffect controls over AP but FS are not MM
adverse
Mgmt has not provided assurance that there are no MM but no MM were found
unqualified
When there is a reasonable possibility that a MM will not be prevented or detected on a timely basis
material weakness
SSARS suggest
a comparison of FS with budgets or forecasts
If an auditor can audit everything except the opening inventory balance, what kind of opinion?
unmodified on the BS but a disclaimer on the IS
What does increasing the risk of incorrect rejection do?
increases the likelihood of improperly concluding that a balance is MM when it is not.
If an A confirms AR balances at an interim date, what should they perform at YE?
review supporting doc for new large balances occurring after the interim date, and evaluate any sig changes in balances at YE.
What is materiality for an item that the audit is expressing an opinion on the specific item in the FS
should be related to the specified item rather than to the FS taken as a whole
Deviation rate applies to which kind of sampling
attribute sampling which is approp for tests of controls (not substantive tests)
What type of sampling does an A use for substantive tests of details
Variables
What type of sampling is used for tests of controls
attributes
What do As need for attributes sampling
Need the allowable risk of assessing control risk too low, the expected pop deviation rate, and the tolerable rate
Financial projection
report is restricted as to use and distribution
What do code provisions govern the provision of? (instead of SOC)
the provision of nonaudit services to private companies and to a public company that is not an audit client
Who may an auditor offer actuarial services to?
a private company (even if it is an audit client) and to a public company that is not an audit client
