M2-Documentation

Question 1

Quality control standards relate to the conduct of a firm’s audit practice as a whole, and compliance with such standards would not be demonstrated by audit documentation for one specific audit engagement. (true or false)

Answer 1

true

Question 2

The permanent file includes items with continuing audit significance, such as debt agreements. (true or false)

Answer 2

true

Also:

• bond indenture agreements
• lease agreements
• internal control flowchart

Question 3

Audit documentation serves mainly to provide:

Answer 3

1) the principal support for the auditor’s report;
2) assistance in the planning, conduct, and supervision of the audit;
3) accountability
4) useful information

Question 4

The working trial balance generally contains a column for adjustments ad reclassification’s. (true or false)

Answer 4

true

Question 5

Factors affecting the nature and extent of audit documentation include:

Answer 5

1. The risk of material misstatement;
2. The extent to which judgment was required in performing the work and evaluating the results;
3. The nature of the specific auditing procedure;
4. The significance of the evidence obtained;
5. The nature and extent of any problems identified; and
6. The need to document conclusions that may not be obvious

Question 6

The quantity, type, and content of audit documentation vary with the circumstances, but it should be sufficient to show that the accounting records agree or reconcile with the financial statements. (true or false)

Answer 6

true

Question 7

Audit documentation should be prepared in enough detail so that an experienced auditor who has no previous connection with the audit can understand the procedures performed and the evidence obtained. (true or false)

Answer 7

true

Question 8

The documentation completion date (and not the report date) is defined as the date after which existing documentation must not be deleted, and additions to the documentation file must be documented as such. (true or false)

Answer 8

true

The report release date is:

• often the date on which the report is delivered to the client
• the date on which the auditor grants the client permission to use the report
• used to define the beginning of the retention period

Question 9

According to PCAOB standards, the documentation completion date is _____ days following the report release date.

Answer 9

45 days

According to AUDITING standards, the documentation completion date is 60 days following the report release date.

Question 10

Audit documentation, or working papers, comprises the principal record of audit procedures performed, evidence obtained, and conclusions reached. Reviewing the working papers allows a supervisor to understand the work performed and the evidence obtained, and to evaluate whether the audit was adequately performed. (true or false)

Answer 10

true

Question 11

Audit documentation should show that the accounting records agree or reconcile with the financial statements. (true or false)

Answer 11

true

Question 12

Registered public accounting firms are required to maintain audit work papers and supporting documentation for a period of _____ years.

Answer 12

7

Question 13

Sufficient and appropriate documentation should include evidence that the audit working papers have been reviewed. (true or false)

Answer 13

true

Question 14

A nonissuer auditor should complete the assembly of the audit file within 60 days following the report release date. (true or false)

Answer 14

true