Misc. Flashcards
What is the primary responsibility of the bank acting as registrar for capital stock
To prevent any overissuance of stock, and thereby verify that the stock is properly issued.
T/F
Even if the client’s management has corrected significant misstatements found by the auditor, the auditor is still required to report those misstatements to management
TRUE
T/F
The “user” auditor can make reference to a “service” auditor’s report as long as the user is satisfied with the servicer’s professional reputation and independence
FALSE
The user auditor should not make reference to the report of the service auditor
An external peer review is required by GAGAS for auditors and audit firms every ____ years
Three
When a CPA reports certain, uncorrected, illegal acts to the audit committee that the CPA believes are material enough to warrant a qualified audit opinion and the client fails to take the appropriate remedial action and the audit committee refuses to inform the SEC, what should the CPA do?
Deliver a report concerning the illegal acts to the SEC within one business day.
T/F
The GAO doesn’t have standards of determining independence, rather they refer to the AICPA standards of independence of both mind and appearance
FALSE
The GAO determines that independence relates to both independence of mind and appearance
Financial Projections are meant for who?
Limited Use.
Should not be broadly distributed to groups such as all employees or potential or current stockholders
Best for someone like a bank that the client is trying to obtain a loan from
What are the factors an auditor should consider in making a judgment about whether an internal control deficiency is so significant that it is a significant deficiency?
I. Diversity of the entity’s business
II. Size of the entity’s operations
T/F
A letter issued on significant deficiencies relating to an entity’s internal control observed during an audit of financial statements should include a restriction on the distribution of the report.
TRUE
_________ involve identifying and preventing problems in an organization before they occur.
Feedforward controls
Feedforward controls are proactive and preventative. Feedforward controls are helpful to managers because they allow a manager to plan work effectively; they can regulate resources like employees, raw materials and capital ahead of time. This means that future problems can be avoided. Although feedforward controls can be costly and can slow down the planning process, they help to avoid problems later on.
___ is information provided about an action that has already occurred and may be used to help adjust future actions.
Feedback controls
________ systems are systems that prevent certain actions from occurring.
Preventive controls
T/F
When an auditor assesses control risk at the maximum level, they don’t have to document anything; this is basically their way of deciding not to test controls and rather to do more substantive test. Since it’s a preference of what to test, it doesn’t need to be documented/justified.
FALSE
Document both the auditor’s understanding of the entity’s accounting system and the auditor’s basis for concluding that control risk is at the maximum level.
What are detective controls?
Detective Controls are Feedback and Feedforward Controls
T/F
Preventative controls are more costly than detective controls
TRUE
T/F
Preventative controls are not as cost beneficial as detective controls
FALSE
They are more cost beneficial because they are more effective, easier to implement, and minimize time delays
T/F
Preventative controls are included in both general accounting controls and in accounting transaction (application) controls
TRUE
What are the five key components that Trust Services view a system consisting of? (DIPPS)
Infrastructure Software People Procedures Data
In a Trust Services engagement, a CPA reports on whether a system meets one or more of what 5 principles? (SAPOC)
Security Availability Processing Integrity Online Privacy Confidentiality
For each of the 5 principles that a CPA reports on in a Trust Services Engagement, the auditor considers what four criteria? (PCPM)
Policies
Communications
Procedures
Monitoring
If one or more of the four criteria relating to a principle in a Trust Services Engagement has not been achieved, what type of report does the CPA issue?
Qualified or Adverse
If management refuses to provide a written assertion for a Trust Services Engagement, what type of report does the CPA issue?
Disclaimer
When a CPA is reporting on more than one principle of a Trust Services Engagement, do they issue one report or multiple reports?
They can either issue a combined report on all principles or individual reports on each principle
T/F
A CPA can perform an examination, review, or AUP on a Trust Services Engagement
FALSE
Examination or AUP, not a Review
What is the difference between a WebTrust and a SysTrust?
WebTrust = provides assurance on electronic commerce (websites). CPA is engaged to examine both that a client complied with Trust Services Criteria (uses procedures in accordance with its defined policies) and that it maintained effective controls
SysTrust = provides assurance on any defined system. CPA is engaged only to examine that a client maintained effect controls over the system
What does SOC stand for?
Service Organization Reports
T/F
Letters for underwriters are required by the Securities Act of 1933
FALSE
T/F
Letters for underwriters are included in registration statements
FALSE
T/F
When unaudited financial statements are presented in comparative form with audited financial statements in a document filed with the SEC, such statements should be marked as unaudited
TRUE
T/F
When unaudited financial statements are presented in comparative form with audited financial statements in a document filed with the SEC, such statements should be withheld until audited
FALSE
T/F
When unaudited financial statements are presented in comparative form with audited financial statements in a document filed with the SEC, such statements should be referred to in the auditor’s report to discuss responsibility for the PY unaudited FSs
FALSE
In connection with a proposal to obtain a new client, an accountant in public practice is asked to prepare a written report on the application of accounting principles to a specific transaction. The accountant’s report should include what statement?
That any differences in the facts, circumstances, or assumptions presented may change the report
What does COSO stand for?
Committee of Sponsoring Organizations
The GAO standards of reporting for governmental financial audits incorporate the AICPA standards of reporting and prescribe supplemental standards to satisfy the unique needs of governmental audits. What is a supplemental reporting standard for governmental financial audits?
Auditors should report the scope of their testing of compliance with laws and regulations and of internal controls.
