I can do all things

Question 1

Examples of material weaknesses

Answer 1

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.

Question 2

Top down approach

Answer 2

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

Question 3

Entity level controls

Answer 3

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

Question 4

Deficiency in design

Answer 4

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.

Question 5

testing operating effectiveness of controls

Answer 5

reperformance of the control procedure

Question 6

testing design effectiveness

Answer 6

inquiry, observation, and inspection of relevant documentation

Question 7

When one or more material weaknesses exist, what type of opinion should the auditor express on IC over financial reporting

Answer 7

adverse

Question 8

2 types of issues that might affect the auditors report regarding consistency

Answer 8

A change in accounting principle

A restatement to correct previously issued FS

Question 9

What opinion is a GAAP departure

Answer 9

Q or A

Question 10

What two matters affect the auditors evaluation of consistency of FS and the auditor would add an explanatory paragraph

Answer 10

a change in acct principle

an adj to correct a misstatement in prev issued FS

Question 11

When would an auditor add an explanatory paragraph

Answer 11

a change in acct principle

an adj to correct a misstatement in prev. issued FS

Question 12

When can an audit partner not serve as an engagement quality reviewer?

Answer 12

when he was partner during either of the 2 audits preceding the audit subject to the quality review

Question 13

what is the objective of an engagement quality reviewer

Answer 13

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

Question 14

what are examples of significant engagement deficiencies applicable to an engagement quality review

Answer 14

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

Question 15

If the client does not furnish adequate evidence for IC over inventory, but provides all other evidence

Answer 15

Disclaimer

Question 16

Ineffect controls over AP but FS are not MM

Answer 16

adverse

Question 17

Mgmt has not provided assurance that there are no MM but no MM were found

Answer 17

unqualified

Question 18

When there is a reasonable possibility that a MM will not be prevented or detected on a timely basis

Answer 18

material weakness

Question 19

SSARS suggest

Answer 19

a comparison of FS with budgets or forecasts

Question 20

If an auditor can audit everything except the opening inventory balance, what kind of opinion?

Answer 20

unmodified on the BS but a disclaimer on the IS

Question 21

What does increasing the risk of incorrect rejection do?

Answer 21

increases the likelihood of improperly concluding that a balance is MM when it is not.

Question 22

If an A confirms AR balances at an interim date, what should they perform at YE?

Answer 22

review supporting doc for new large balances occurring after the interim date, and evaluate any sig changes in balances at YE.

Question 23

What is materiality for an item that the audit is expressing an opinion on the specific item in the FS

Answer 23

should be related to the specified item rather than to the FS taken as a whole

Question 24

Deviation rate applies to which kind of sampling

Answer 24

attribute sampling which is approp for tests of controls (not substantive tests)

Question 25

What type of sampling does an A use for substantive tests of details

Answer 25

Variables

Question 26

What type of sampling is used for tests of controls

Answer 26

attributes

Question 27

What do As need for attributes sampling

Answer 27

Need the allowable risk of assessing control risk too low, the expected pop deviation rate, and the tolerable rate

Question 28

Financial projection

Answer 28

report is restricted as to use and distribution

Question 29

What do code provisions govern the provision of? (instead of SOC)

Answer 29

the provision of nonaudit services to private companies and to a public company that is not an audit client

Question 30

Who may an auditor offer actuarial services to?

Answer 30

a private company (even if it is an audit client) and to a public company that is not an audit client