MCQ Topics Flashcards
if an auditor of an issuer examines records or documents obtained from the issuer to verify proper authorization of transactions, then the auditor is conducting:
an inspection/examination
when would the use of a blank form of confirmations of AR most likely be preferable to positive confirmations?
when the recipients are likely to sign the confirmations without devoting proper attention to them
-this means its possible that a misstatement in the related receivable will not be discovered by the auditor
what type of audit evidence provides the least assurance of reliability?
prenumbered reports completed by the client’s employees
-considered internal evidence
when would an unmodified opinion be appropriate
-justified departure from GAAP (include an emphasis of matter paragraph)
-unjustified departure from GAAP, but it doesn’t have a material effect on the financial statements
-change in accounting principle that has a material effect on the current year financial statements (include an emphasis of matter paragraph)
in an attest engagement, the use of the accountant’s report should be restricted to specified parties when:
-reporting on an examination of a financial projection
-performing an assertion based examination, the engaging party is not the responsible party, and a written assertion has not been provided
-the criteria used to evaluate the subject matter are appropriate for only a limited number of parties
what is the complete and accurate list of the walkthrough procedures usually performed in an issuer’s integrated audit?
inquiry, observation, inspection of relevant documentation, and reperformance of controls
the calculate the required sample size for an inventory observation, what does the auditor usually determine?
-variability in the dollar amounts of inventory items
-risk of incorrect acceptance
what is a cognizant agency
federal awarding agency that provides the most amount of direct funding to a nonfederal entity
to gain assurance that all inventory items in a client’s inventory listing schedule are valid, what would an auditor likely trace/vouch?
items listed in the inventory listing schedule to inventory tags and the auditor’s recorded count sheets
why would an analytical procedure be used as a substantive test?
to achieve audit objectives in the most effective and efficient manner possible
what holds the highest risk of misappropriation of assets
bearer bonds because they are unregistered with no records kept of the owners or transactions involving ownership
-historically used for money laundering, tax evasion, and to conceal business transactions
the sample size of a test of controls varies inversely with
the tolerable rate
the sample size of a test of controls varies directly with
the expected deviation rate
if an accountant compiles financial statements for an entity and a member of the engagement team has a direct financial interest in the entity, then the accountant should
indicate the accountant’s lack of independence in a final paragraph of the compilation report
auditors try to identify predictable relationships when using analytical procedures. relationships involving transactions from what account most likely yields the highest level of evidence?
payroll expense
-based on objective information and can be computed directly by the auditor
regarding a nonissuer’s compliance with laws and regulations, an auditor performing an audit of the entity’s financial statements is responsible for
-obtaining a general understanding of the legal and regulatory framework applicable to the entity and how the entity is complying with that framework
an auditor has been hired to report on a nonissuer’s internal control over financial reporting. what would best describes a reporting option in this scenario?
when a material weakness exists, the auditor should issue an adverse opinion
what response would be in a legal letter regarding an auditor qualifying the audit opinion due to a scope limitation
the response specifically excludes information on a pending legal matter because of publicity concerns
for a compilation of financial statements engagement in accordance with SSARS, an accountant is not required to:
make inquiries nor perform procedures to corroborate the information provided by the client
-those are required in an audit engagement
when does a deficiency in operation exist
when a properly designed control is either not executed as designed or the person performing the control does not have either the authority or the skill to perform the control
when the prior period has been audited, the accountant should issue the current period compilation or review report, and any additional paragraph should indicate:
-the prior period statements were audited
-the date of the previous report
-the opinions expressed and if other than unmodified, the reasons for the modification
-that no auditing procedures have been performed since the previous report date
the senior auditor responsible for coordinating the fieldwork usually schedules a pre audit conference with the audit team primarily to
give guidance to the staff regarding both technical and personnel aspects of the audit
