mcq Flashcards
How often should registered public accounting firms that provide audit reports for 100 or fewer issuers be inspected by PCAOB?
at least once every three years.
Analytical procedure 在final review 阶段类似下列哪一个?
a substantive test as risk assesment,
b. sub test as test material misstatement
c 是什么帮助understanding
d analytical procedure as sub test
原话是similar to the analytical procedures performed as risk assessment procedures.
To evaluate the overall financial statement presentation, to assess the conclusions reached. and to assist in forming an opinion on whether the financial statements as a whole are free of material misstatement.
What’s a service organization type 1 report? type 2 report? Impact on IC?
These are reports provided by service auditor to report on the controls of service org that are relevant to the user entity’s IC over FS.
Type 1 is a report on the design and implementation of service org’s IC, does not provide assurance on operating effectiveness of the controls. Type 1 doesn’t provide basis for reducing user entity’s CR.
Type 2 may provide such basis.-include test of operating effectiveness of service org’s IC.
A practitioner may accept an engagement to examine MD&A of a public or nonpublic entity, provided the practitioner audits or reviews the financial statements?
AUDIT.
What are the component of Internal Control COSO Framework?
CRIME:represent means used by an entity to help it achieve its objectives of IC.
Control Environment; Risk assesment; Information and communication system; Monitor; Existing control activities.
Conditions when employment impairs independence? AICPA
close relative (siblings, parents, and nondependent children) -- employed in a key position. immediate family -- employed in a key position. Non-key position is OK and can have retirement plan etc. Self -- employee any position, promotor, former (any position as long as period overlaps or currently in a place to influence firm) or future employee (key position unless no influence, no material amounts due. If within one year, must be reviewed)
Conditions when financial interest impairs independence? AICPA
close relative (siblings, parents, and nondependent children)-- the financial interest in client 1) is material to the relative's net worth; 2) enables relative to exercise significant influence over the client. either 1 of the 2 if auditor, both if partner. immediate family (spouse and dependents) -- investment ownership same as self. No direct financial interest allowed. Direct or material indirect.
What would impair independence with respect to employee benefit plan audit-DOL requirements?
Direct and material indirect financial interest.
Business connection or employee of plan or plan sponsor.
Member of firm that maintains financial records (book keeping) for the plan.
Former employee is fine as long as not particepating in the audit of coverd period. Other than book keeping, all other non-attest engagements are OK(diff. from SEC or AICPA ).
Does tax services to auit client or client’s officer impair independence?
Normally no,
But, YES per SEC (SOX, and PCAOB) rules, if related to confidential or aggressive tax transactions, or to corporate officers.
But is OK per AICPA rules for non issuer assurance clients.
How to deal with inadequate communication from audit committee? a. 在fs notes 中披露，b. scope limitation, qualified opinion c. perform alternative procedures
Consider:
Modifying the auditor’s opinion on the basis of a scope limitation;
Obtaining legal advice;
Communicating with third parties (regulator or owners);
Withdraw.
应该是B
如果有illegal acts of sr. mgt 应该给谁报告，选项没有Audit Committee!! a. Legal counsel; b. Regulatory authority of the client….
Legal counsel.
Disclosure of an illegal act to parties other than the client’s senior management and those charged with governance is not ordinarily part of the auditor’s responsibility.
什么可以rule out the presumption of confirmation of A/R 纠结在1：It’s ineffective to confirm 2：It is easier to perform alternative procedures
- The use of confirmations would be ineffective.
- receivables are immaterial.
- inherent and control risks are very low and evidence provided by other procedures is sufficient to reduce audit risk to an acceptably low level.
Required documentation about RMM?
- discussion among audit team;
- key elements of understanding of entity and its environment;
- assesment of RMM and basis;
- identified risk and related control evaluated;
- more complex, more audit procedures, more documentation.
What’s the test data technique of Computer Assisted Audit Techniques?
The client’s system is used to process the auditor’s data, off-line, while still under the auditor’s control. The test data contains the types of invalid conditions in which the auditor is interested.
live computer files are not affected in any way.
How often should A CPA firm that is a member of the AICPA have a peer review in order to maintain membersthip in the AICPA?
Every 3 years.
In deciding whether to reissue their report, the predecessor auditors should?
Audit:
Read the current FS and compare with prior audited FS.
Obtain rep letter from the successor auditor AND mgt.
Review and compilation: No rep letter from mgt. Rest are the same.
What procedures are required in a review engagement?
ULIARCPA.
Understanding with client-engagement letter.
Learn about the business.
Inquiries to insiders-corroboration with other evidence not required.
Analytical procedures-ratios, patterns to detect unusual relationships.–NO test of controls, NO audit test work.
Review other procedures.
Client representation letter-to the accountant, acknowledge mgt’s responsibility, confirm full and truthful responses, knowledge of fraud, etc. dated at same date as review report)
Professional Judgment to Evaluate Results.
Accountant (CPA) Communicates Results-review report. state review is substantially less in scope than an audit. accountant is not aware of any material modifications(limited assurance).
What to do when there’s departure from GAAP in a review engagenment?
CAN NOT issue qualified or adverse “opinion”. Can modify the report and disclose the departure. “Based on our review, with the exception of the matter(s) described in the following paragraph, I am not aware of any material modifications that should be made…”
If modification not adequate, should withdraw.(similar to compilation)
What’s the difference between review of nonissuer F/S and review of issuer F/S(interim)?
Different standards–SSARS vs PCAOB.
Nonissuer-accountant not required to obtain understanding of internal control or the business’ environment, just the business itself and appropriate knowledge of the industry. Communication with predecessor is also not required.
What type of conclusion does a review report give?
Limited assurance–Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with GAAP(etc). Modification allowed (with the exception of…we are not aware of …), but NO adverse or disclaimer.
review的时候哪一个要modify report，有两个情况选yes or no。一个情况好像是scope limitation.
Departure from GAAP–yes.
Scope limitation–No. (withdraw)
review for nonissuer 最有可能做什么？
选有inquiry/analytical procedure的就对了. No test of internal control, NO audit test work.
第一年compilation 第二年audit 不reissue的话successor怎么办?
Make reference to the report of predecessor accounts, OR perform the level of service themselves.
Include an other-matter paragraph in the auditor’s report that includes description of the prior period’s service and a statement that the compilation was less in scope than an audit and did not provide the basis for an opinion.
两年不一致的时候，总是other matter paragraph 交代前一年。
