Missed CPA Questions Flashcards by Adam Herron

For SSARS, A section is relevant to the engagement when

the section is in effect and the circumstances addressed by it exist

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For SSARS, an accountant should comply with each requirement of the relevant section unless

the requirement is not relevant because it is conditional, and the condition does not exist

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Rare Circumstance: relevant presumptively mandatory requirement is for a specific procedure and that procedure would be ineffective in achieving the intent of the requirement. In these circumstances, the accountant should ___

perform alt procedures to achieve intent of requirement.

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For audit procedures related to the inspection of significant contracts or agreements the auditor should ___

include abstracts (summaries) or copies of those contracts or agreements in the audit documentation.

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The auditor should include ___or copies of those ____ in the audit documentation whether or not they would be needed by an experienced auditor.

Abstracts

Copies of contracts/agreements

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PCAOB adopted ____ as its interim standards

GAAS

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Interim Standards are authoritative

False - they are not

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Interim standards were issued by

AICPA

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The office issuing the auditor’s report on a public company is required to obtain records of all internal controls over financial reporting found to be ineffective by other auditors

False – they are not

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Documentation regarding all ______and ______in internal control over financial reporting including______ is required

Sig Deficiencies
Material Weaknesses
Distinction between the two categories

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documentation related to the work performed by ____ ____ must be obtained, and reviewed and retained, prior to the report release date by the office issuing the auditor’s report

Other auditors

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Direct or indirect Financial Interest?

An investment held in a retirement plan
An investment held in a blind trust
investment held through a regulated mutual fund
An investment held through participation in an investment club

Direct
Direct
Indirect
Direct

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In explaining the potential effects of the significant deficiencies and material weaknesses, how does the auditor explain the effects

Only potential effects – don’t quantify (go in depth)

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Due professional care is ordinarily interpreted to require

Critical review of judgment at every level of supervison

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a member who serves as a client’s stock transfer or escrow agent, registrar, general counsel or its equivalent is independent

NO THEY AINT

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General rule of thumb question: Capital leases mean you are independent

no – its operating leases

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To evaluate such judgments and conclusions, the engagement quality reviewer should

hold discussions with the engagement partner and other members of the engagement team and review documentation.

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Complying w/ laws & regulations is an element of CPA firm’s quality control system

T/F

False

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Relevant ethical requirements is an element of what

quality control system

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An engagement quality review and concurring approval of issuance are required for ___

Engagements & Reviews

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An engagement quality review and concurring approval of issuance are required for engagements are conducted pursuant to the standards of the _____

PCAOB

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For PCAOB, A complete and final set of audit documentation should be assembled for retention not more than ____

45 days

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Independence is not impaired if a member obtains a loan from an entity that, at the time of obtaining the loan, is a client requiring independence,

False - it would be impaired

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If a cpa obtains a loan during a period where he doesn’t have to be independent during the time obtaining the loan and he is then asked next yr to audit those F/S - is he independent

Yes, because the CPA was not required to be independent at the time the loan was granted

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Nonaudit services with revenues in aggregate of ___ do NOT need approval from audit committee and without impairing independence

less than 5%

When do you need to understand the company's industry

after accepting engagement

A close relative who is not an immediate family member may have an ____ in an auditor's client without imparing the auditor's independence.

immaterial direct financial interest

A first cousin is considered a close relative by the interpretations for purposes of independence issues.

FALSE - no they aint

A sibling's ____ to an employee of a client generally is not considered a financial interest in the client.

loan

An auditor would evaluate the reasonableness of a client’s accounting estimates and inquire of a client’s attorney regarding unrecorded claims when ____

collecting evidence

US GAAS are codified into ___ sections

US GAAS addresses the responsibilities of the auditor that may exist in legislation or regulations

FALSE - no they dont

If a partner leaves to work at a different place and the firm audits that place 2 years later, the partner must disclose ___

nothing. they dont have to disclose shit

An auditor doesn't have to obtain knowledge of the intended users

FALSE

The auditor is _____ to have an understanding of the certification required by the appropriate auditing or accountancy board of the other country.

not required

The auditor’s opinion on whether a previously reported material weakness continues to exist may be expressed as the

material weakness no longer exists

The PCAOB’s guidance does not use the terms ____ opinion or ____ opinion it just uses ______

It just uses opinion or the auditors opinion

To discover understated (unrecorded) sales, the auditor would most likely trace transactions from ___ to ____

from shipping documents to sales invoices

Vouching from sales invoices to shipping documents (the opposite direction) is a test to substantiate that sales are not _____

Overstated

A compilation does include performing inquiries, analytical procedures

false

When determining whether related-party transactions have been properly accounted for in the financial statements, the auditor should be most concerned that

he financial statements recognize the substance of the transactions

The payroll clerk distributes signed payroll checks. Undistributed checks are returned to the payroll department. is what

weakness in I/C

In an audit of financial statements, an auditor’s primary consideration regarding an internal control policy or procedure is whether the policy or procedure

Affects management’s financial statement assertions

The word ____ is used to impose a requirement in the IESBA Code of Ethics for Professional Accountants.

shall

Opportunities for on-the-job training as well as continuity and periodic rotation of personnel are all valid factors of

Engagement personnel requirements

The AICPA’s Code of Professional Conduct states that a distinguishing mark of a profession is its

acceptance of responsibility to the general public.

The AICPA’s Code of Professional Conduct states that a distinguishing mark of a profession is its

acceptance of responsibility to the general public.

express opinion in agreed upon procedure?

A CPA's report on agreed-upon procedures should contain An acknowledgment of responsibility for the sufficiency of the procedures

False

A CPA's report on agreed-upon procedures related to management's assertion about an entity's compliance with specified requirements should contain a restricted or unrestricted report

restricted

An engagement to prepare financial statements in accordance with SSARS is what type of service

non-attest

Obtaining an understanding of the entity sufficient to identify areas in the financial statements where there is a greater likelihood that material misstatements may arise is part of the knowledge requirement for a compilation engagement.

false - review

All SSARS engagements require the agreed-upon terms of the engagement to be documented in an

engagement letter

as a condition for accepting any engagement to be performed in accordance with SSARS, an accountant is required to do all of the following except

determining independence -- compilation you dont have to be independent

If independence is impaired during a compilation you should ____

modify the report

What three things are included in explanatory material codified in SSARS?

Understanding of requiremnet/defintion What its intended to cover examples of procedures

Explanatory material in SSARS codifications will impose additional requirements

false

The authoritative body designated to promulgate standards for Review/compilation is the FASB

False -- its AICPA

The authoritative body designated to promulgate standards for audits for issuer are ____ --- non issuers?

Issuer - PCAOB | Nonissuer - GAAS

When can you not opine on supplemental f/s?

when they're not readily available.

Is available upon request supplemental f/s ok to opine on?

No -- they're not readily available

If the auditor issued an audit report on the financial statements that contained an adverse opinion nor a disclaimer of opinion, you CANNOT do what regarding supplemental f/s

opine on the supplemental f/s

The correction of a material misstatement in the previously issued financial statements of an issuer should be recognized where

explanatory paragraph following the opinion paragraph

The correction of a material misstatement in the previously issued financial statements of a non-issuer should be recognized where

explanatory paragraph after the opinion paragraph if the correction involved an error in accounting principle

If a CPA concludes that unaudited financial statements on which the CPA is disclaiming an opinion also lack adequate disclosure, the CPA should suggest appropriate revision. If the client does not accept the CPA's suggestion, the CPA should

Describe the appropriate revision to the financial statements in the accountant's disclaimer of opinion

Where should the cpa describe appropriate reivisons to the F/S in the audit report

accountants disclaimer of opinion

Where should the cpa describe appropriate reivisons to the F/S in the audit report

accountants disclaimer of opinion

uditor most likely would be required to report findings directly to outside parties when

management fails to satisfy legal or regulatory requirements to report such information to external parties specified

ield work requirements for performance audits include

planning the audit; supervising staff; obtaining sufficient, appropriate evidence; and preparing audit documentation. Reasonable assurance, significance, and audit risk

When developing the group audit plan, the group engagement team is required

to determine whether to reference each component auditor

An auditor reads the cover letter accompanying the document containing the audit report and audited financial statements and identifies a material inconsistency with the financial statements. The auditor determines that the financial statements do not require revision. Which of the following actions should the auditor take?

nothing

The factors affecting sample size when using classical variables sampling are

(1) desired precision, (2) desired sample reliability, (3) variability among item values in the population (the estimate of the population's standard deviation) and (4) population size.

___plans require special design to deal with negative balances and zero balances because sample selection is based on the cumulative sum of dollars of the population

PPS

____ techniques are unaffected by either zero balances or negative balances.

Classical Variable

The number of items in the population has virtually___ on the sample size unless the population is ____

No effect | Very small

An increase in the tolerable rate of deviation would allow a ___ in sample size

Smaller

Sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate., you do what

Modify control risk - increase sample size

Increase in tolerable misstatement does what to sample size

decrease

The clock card or time ticket would provide evidence for the __assertion

completeness

Payroll registry would provide evidence for the ___ assertion

existence

Published dividend records provide the strongest evidence supporting dividends earned on publicly-held investments. from ____ companies

investment services

___involves the theft of one customer's payment and subsequently crediting the customer with payment made by another customer.

Lapping

comparison of remittance dates would detect the scheme __

lapping

he retention period should not be shorter than five years from the ____

report release date;

___ provide a psychological deterrent to employees considering defalcations (stealing)

fidelity bonds

bank safe-deposit box prefer what type of control

dual-control (two people have access)

the auditor should or should not communicate their effect on the auditor’s overall risk assessment.

should not

how do auditors communicate overall risk assesssment to gov

they dont

Management and governance are are mutually exclusive.

no they are not

Why does GAAS establish two categories of laws and regulations?

GAAS requires a different auditing approach for each category because the auditor has different responsibilities for each.

or the provisions of those laws and regulations generally recognized to have a direct effect on the determination of material amounts and disclosures in the financial statements, the auditor's responsibility

is the same as that for misstatements caused by fraud or error—to obtain sufficient appropriate audit evidence

risk factor that relates to misstatements arising from misappropriation of assets?

A lack of independent checks

Performance materiality is only 1 amount

False, can be more than 1

During the planning phase of an audit the auditor should not consider whether specialize skills are needed in certain arease

false - yeah they should

Written rep letter is in the performance part of the audit, not planning

true

Make inquiries of the client’s in-house legal counsel us during what phase of the audit

planning

Confirm that the financial statements can be reconciled to the accounting records is during the planning phase

false

US generally accepted auditing standards measures

Measures of the audit quality and the objectives to be achieved

US GAAS must be followed by CPAs per the

AICPA’s Code of Professional Conduct

auditor strives to achieve independence in appearance in order to

serve public interest

Sucsessor Auditor should review wp relating to ___ and ___

Contingencies & I/c

an accountant not have a duty to disclose that fraud or noncompliance with laws and regulations may have occurred to parties outside of the entity to a predecessor t/f

false

an accountant not have a duty to disclose that fraud or noncompliance with laws and regulations may have occurred to parties outside of the entity when receiving a subpoena t/f

true

PCAOB can issue / adopt ___ relating to the ____

standards relating to prep of audit reports

Issuer's audit committee is responsible for the public accounting firms Compensation T/F

True

Members of issuer's audit committee can engage independent ___ to carry out their ___

counsel - duties

A member of an issuer's audit committee may NOT accept ____

fee outside being a member of the board from the CPA firm - even consulting/advisory

A member of a group engagement team will not be subject to discipline if a foreign component auditor departed from the ethics requirement as long as:

the foreign component auditor accordance w/ requirements set forth in the IESBA's Code of Ethics for Professional Accountants.

can a firm disclose confidential info to an insurance carrier if its regarding a claim

yes

Significant deficiencies related to the internal control design exist, but none is deemed to be a material weakness. - should this be in an audit report?

yes

An auditor's report on significant deficiencies should include a ____ on the distribution of the report.

restriction

What type of opinion can you express during a review?

no opinions

where in the audit report contain a statement that the engagement is substantially less in scope than an audit.

No where - you cant do that

Low level management fraud you report this to ____

appropriate level of management

Factors to consider regarding the integrity of a client include

the nature of the client's business/practice | info towards attitudes of management/gov/owners

The AICPA states that you cannot follow another country's rules if practicing outside USA

FALSE - yeah you can

Officer commits fraud - who do you talk to

gov

who takes responsibility for Agree upon procedure

management/client

any disclosure of a client company name by a CPA specializing in _____procedures is a violation of client confidentiality under the AICPA Code of Professional Conduct

bankruptcy

The auditor's engagement letter should address such matters as the ____

objective

A compilation areport to the audit committee that is not sent to the stockholders.is OK

True

Accepting an engagement to compile an entity's financial projection most likely would be inappropriate if the projection is to be included in:

on offering statement of the entity's initial public offering of common stock

For compilations, you need a written management rep letter

false

a firm does not need to consider this when adopting policies for retention of engagement documentation?

ability to retrieve and access the engagement documentation in perpetuity

ach issuer disclose whether or not the audit committee is comprised of at least one member who is a ___

financial expert

Segregation of duties between receiving cash and posting the accounts receivable ledger would stop what

lapping

Part of gaining an understanding of an entity's accounting practices is obtaining an adequate understanding of the qualifications of

accounting personnel

Preventative controls are

more cost beneficial than detective controls

Preventive controls place ___ on and require ____ of employee activities to reduce the occurrence of errors or deviations

restrictions | documentation

extent and nature of the risks to internal controls associated with IT, an auditor should consider Whether IT controls are automated or manual in nature

FALSE

who should approve AR write offs

treasurer

An auditor tests an entity's policy of obtaining credit approval before shipping goods to customers in support of management's financial statement assertion of:

valuation

An auditor who uses a transaction cycle approach to assessing control risk most likely would test control activities related to transactions involving the sale of goods to customers with the:

collection of AR

A service auditor's report expressing an opinion on a description of controls placed in operation at a service organization should contain a description of the

scope & nature of service auditor's procedures

Observing an entity's employee prepare the schedule of past due accounts receivable is a test of controls that would help an auditor in assessing the level of control risk.

true

Which of the following could be difficult to determine because electronic evidence may not be retrievable after a specific period?

timeing of procedures

During the audit of a new client, the auditor determined that management had given illegal bribes to municipal officials during the year under audit and for several prior years. The auditor notified the client's board of directors, but the board decided to take no action because the amounts involved were immaterial to the financial statements. Under these circumstances, the auditor should:

consider withdrawing

an inherent limitation of internal controls is

collusion

A compilation accountant is required to gain an understanding of related to the entity and its environment to plan the engagement in conformance with the Statements on Standards for Accounting and Review Services (SSARSs), including:

sig. accounting policies

inherent limitation in i/c includes

management override collusion mistakes

Two assertions for which confirmation of accounts receivable balances provides primary evidence are

right and obligation , existence

After determining that a related party transaction has, in fact, occurred, an auditor should:

obtain understanding

For relate party transactions, the auditor should substantiate that the transaction was consummated on terms equivalent to an arm's-length transaction

false - its impossible

If a practitioner does not possess an understanding of the client's business and the industry, he/she can review information obtained from external sources such as:

trade and economic journals; reports by analysts, banks, or rating agencies; or regulatory or financial publications.

. If a practitioner does not possess an understanding of the client's business and the industry, the auditor should issue a disclaimer, because the scope of work was not sufficient to express an opinion.

false

In order to assess control risk at a low level would mean there is an effective functioning of _____ and thus the auditor would initially focus on the _____

application controls | general controls

knowledge of the client's “industry, regulatory, and other factors” includes an understanding of all of the following, except entities accounting polices

true

acceptable level of detection risk increases means what

you can emphasize more reliance on it. This is a good thing.

As the acceptable level of detection risk increases, an auditor may change the:

timing of substantive procedures from YE to interim

Sound internal control procedures dictate that immediately upon receiving checks from customers by mail, a responsible employee should:

prepare a duplicate listing of checks received

A type 2 report

is a service auditor’s report on whether controls were suitably designed to achieve specified control objectives,

n understanding the control environment, the auditor should concentrate on the implementation of controls because

controls may be established, but not acted upon

In an audit of financial statements, an auditor’s primary consideration regarding an internal control policy or procedure is whether the policy or procedure:

affects management f/s assertations

When performing risk assessment procedures to obtain an understanding of internal controls, you perform analytical procedures

false

Which of the following is most likely to be a response to a pervasive risk at the financial statement

ssigning more experienced staff or those with specialized skills such as specialists, providing more supervision, or incorporating additional elements of unpredictability

Which of the following is the primary reason that many auditors hesitate to use embedded audit modules?

auditor has to be involved w/ the system design of the application

An embedded audit module is a section of program code that is included in the client's application program in order to collect audit data for the auditor.

true

The nature of an entity refers to the entity’s

operations

The entity's industry is experiencing declining customer demand would cause the auditor a heignted risk of

RMM

Inherent risk (IR) is the____to a misstatement that could be material, before I/C

susceptibility of a relevant assertion

The use of ____requires the auditor to use a computer simulation that mimics the client's production programs.

parallel simulation

an event that could introduce or change financial reporting risks?

New or revamped information systems

Materiality levels are generally considered in terms of the smallest aggregate level of misstatement that could be considered material to any one of the financial statements.

true

What is the overall primary objective of developing a detailed audit plan on a financial statement audit?

Design procedures to reduce risk to an acceptably low level.

Comparing daily sales summaries with control totals of invoices is the best procedure for ensuring that invoices for goods shipped are recorded in the ____

Sales Journal

Planning memo & I/C questionnaire are required ocumentation for auditors to keep

nope

. Restrictions on retained earnings resulting from loans, agreements, or state law are items that should be described or disclosed in the financial statements. This deals with what assertion

disclosure & presentation

What is the name of the common procedure applied to test the reasonableness of significant accounting estimates in a financial statement audit?

Retrospective look-back

Application controls can be performed by IT (automated) or by individuals

True

Who is responsible for the prevention and detection of fraud?

management/gov

The acceptable level of detection risk is inversely related to the:

assurance provided by substantive tests.

Thus, the acceptable level of detection risk relates to the auditing procedures applied through

substantive tests

As the assurance provided by substantive tests becomes or is expected to become ____, the acceptable level of detection risk decreases, or vice versa

higher

What is the primary purpose of reviewing conflict-of-interest statements signed by members of management?

identify related parties

An auditor who initially detects fraud ultimately makes the legal determination of whether fraud has actually occurred.

false

The classes of transactions in the issuer's operations that are significant to the issuer's financial statements this is an example of what component of I/C

Information and Communication

The specialist does not need to be independent of the client

True

The auditor should be concerned with the professional credentials, reputation, and experience of the specialist.

true

. In other words, the auditor should assess the risk that the actuary's ____might be impaired.

objectivity

Personnel with responsibilities that impact financial reporting systems, management, those charged with governance, and regulatory authorities should be understood when understanding the information and communication component of internal control for the purpose of having a basis for assessing risk of material misstatement on a financial statement audit of a nonissuer

true

Processes and data may be altered or manipulated to generate fraudulent results. is what primary risk

primary risk of IT

To compile financial statements, the accountant should possess a general understanding of the nature of the entity's operations. This most likely not include understanding the Stated qualifications of the entity's accounting personnel

false - yes it will

An auditor may choose to rely or not rely on the work of another auditor, In either case, the auditor should inquire as to the reputation of the other auditor.

True

An inherent limitation to internal control is the fact that controls can be circumvented by management override.

true

Inquiring of the client's legal counsel concerning pending litigation is performed during the field work phase

true

Comparing the financial statements to anticipated results is done at the planning phase

true

Stratified and variable sampling are used in the substantive testing of account balances and details of transactions.

true

he sample size of a test of controls varies inversely with:

Tolerable rate

The auditor should obtain representations from management stating its compliance with all contractual agreements that may affect the financial statements

TRUE

Applying substantive tests at an interim date, rather than at the balance sheet date, increases ___that a misstatement may occur between the interim and year-end dates and exist at the balance sheet date. This increase in risk is the

audit risk | incremental audit risk.

A portion of a client's inventory is in public warehouses. Evidence of the existence of this merchandise can most efficiently be acquired through which of the following methods?

confirmation

Analytical procedures used in planning an audit generally use data aggregated at a low level.

false -- high level

The primary source of information to be disclosed regarding litigation, claims, and assessments is:

client's management.

The procedure, “The accountant should perform specific procedures to evaluate whether there is substantial doubt about the entity's ability to continue as a going concern,” is:required for what type of engagement(s)

audit only

Population size is not an important factor in determining sample size for attribute sampling.

true

Tolerable error rate and the expected error rate are important factors in determining sample size.

true

e procedures an auditor performs to obtain evidence about the existence, ownership, and completeness of investments will vary depending on both the type of investments involved and the auditor's assessment of audit risk.

True

A faxed reply directly to the auditor may qualify as a positive confirmation, assuming it is received directly by the auditor. is sufficient enough for a confirmation.

No -- have to determine the validity of the fax. . After validation, auditor can use the confirmation (fax, e-mail, oral, or other electronic means applies)

the choice of analytical procedures as a substantive test, when compared to the use of the tests of details of transactions and amount balances, depends “on the auditor's professional judgment about the expected effectiveness and efficiency of the available audit procedures.”

true

For analytical procedures, Relationships involving only balance sheet accounts tend to be more predictable than relationships involving income statement accounts.

False - Income statements are more predictable

The absence of the original insurance policy on plant equipment most likely indicates the existence of a

lien on the plant equipment.

Audit tests must be performed on a____ basis throughout the year in an audit of an entity that processes most of its financial data in____ without any paper documentation.

continual | electronic form

Analytical procedures used in planning an audit should focus on: enhancing the auditor's understanding of the .

client's business

Analytical procedures performed in the overall review stage of an audit suggest that several accounts have unexpected relationships. The results of these procedures most likely would indicate that: additional ___

tests of details are required. / more testing is needed

Read the file of correspondence from taxing authorities would help identify __

litigation, claims, and assessments

There are three common types of classical variables sampling estimators: mean-per-unit, ratio, and difference.

True

mean-per-unit, ratio, and difference. is what

classical variable samples

n auditor has responsibility for identifying and responding to risks that there is substantial doubt about the entity’s ability to continue as a going concern for: one year after the date the financial statements are issued or available to be issued. or the amount of time required by the AFRF

true

The analysis of repairs and maintenance primarily tests which assertion of property and equipment in a financial statement audit?

Completeness

A management representation letter is required for the issuance of a review report. Without this letter from management, the review report will be disclaimed

Flase -- you cannot do a review report

After issuing an auditor's report, an auditor becomes aware of facts that existed at the report date that would have affected the report had the auditor known of the facts at the time. What is the first thing the auditor should do?

Determine whether there are persons currently relying on, or likely to rely on, the financial statements and whether those persons would attach importance to the information

probability-proportional-to-size (PPS) sampling, also known as dollar-unit sampling controls what

risk of incorrect acceptance/rejection

all such mat weaknesses / sig def must be communicated in writing to all stockholders.

NOPE

An entity may request an accountant to compile financial statements that omit substantially all the required disclosures

true

Management rep letter required for compilation?

Nope

Attorney letters are for review and audits only

flase -- only audits

A CPA has been requested by a former audit client to reissue the auditor’s report for the prior period. Before reissuing the report, the CPA should obtain a

management rep letter

A CPA has been requested by a former audit client to reissue the auditor’s report for the prior period. Before reissuing the report, the CPA should: make inquiries of the former client’s attorney regarding pending litigation., consider whether there is substantial doubt about the former client’s ability to continue as a going concern.

false

A management representation letter is written representation from management which affirms the fair presentation of the financial statements and management's responsibility for them,

True

A management representation letter is written representation from management which affirms' the completeness of all information provided to the auditor and in the financial statements,

True

A management representation letter is written representation from management which affirms representations relating to recognition, measurement, and disclosure (including the absence of knowledge of fraud or suspected fraud),

True

A management representation letter is written representation from management which affirms information concerning subsequent events.

True

Before issuing an unmodified report on a compliance audit, an auditor becomes aware of an instance of material noncompliance occurring after the period covered by the audit. The least appropriate response by the auditor would be to: issue a qualified compliance report describing the subsequent noncompliance.

true

If management refuses to furnish a written representation as part of an examination engagement, the auditor may either withdraw or

disclaim opinion *couldnt issue review report w/o a management rep letter*

n testing long-term investments, an auditor ordinarily would use analytical procedures to ascertain the reasonableness of the: completeness of ____

investment income

An auditor may achieve audit objectives related to particular assertions by performing ___ proceures

analytical

An auditor may achieve audit objectives related to particular assertions by: prepping workpapers

false

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?

Personnel

he personnel department is charged with planning, controlling, and coordinating employees

true

cogs/avg inventory is what

inventory turnover

What is the most likely course of action that an auditor would take after determining that performing substantive tests on inventory will take less time than performing tests of controls?

only do substantive tests

he procedure of an accountant making inquiries concerning actions taken at the board of directors' meeting is:required for a compilation

false -- only review

The purpose of the management representation letter is to serve as corroborating evidence with other evidence gathered during the audit. is more than likely from a management representation letter.

true

In determining the number of documents to select for a test to obtain assurance that all sales returns have been properly authorized, an auditor should consider the tolerable rate of deviation from the control activity. The auditor should also consider the: likely rate of deviations and allowable risk of assessing control risk too high.

Only Rate of deviations

“In connection with an audit of our financial statements, management has prepared, and furnished to our auditors, a description and evaluation of certain contingencies.” The foregoing passage most likely is from:

an audit inquiry letter to legal counsel.

Key Co. plans to present comparative financial statements for the years ended December 31, 20X1 and 20X2, respectively. Smith, CPA, audited Key's financial statements for both years and plans to report on the comparative financial statements on May 1, 20X3. Key's current management team was not present until January 1, 20X2. What period of time should be covered by Key's management representation letter?

January 1, 20X1, through May 1, 20X3

Which of the following management roles would typically be acknowledged in a management representation letter?

Management has the responsibility for the design of controls to detect fraud.

n testing controls for operating effectiveness, the risk of assessing control risk too low is called _______, which impacts __________.

beta - effectiveness

Management makes representations to the auditor through the audit process. Such representations:can be verbal

yes they can

After obtaining an understanding of the internal control and assessing control risk at maximum, an auditor did not want to perform additional tests of controls. The auditor most likely concluded that the:additional evidence to support a reduction in control risk was

not cost beneficial

In auditing payroll, the crucial audit concern is: “Are recorded payroll costs accurate and as expected?”

true

In auditing payroll, the crucial audit concern is: “Are recorded payroll costs accurate and as expected?” A comparison of actual to expected is the basis of analytical procedures.

True

The auditor's consideration relating to management's plans may include the following: Plans to dispose of assets Plans to borrow money or restructure debt Plans to reduce or delay expenditures Plans to increase ownership equity

yep

A weakness in internal control over recording retirements of equipment may cause an auditor to: select certain items of equipment from the accounting records

and locate them in the plant.

Walstone CPA is engaged to audit financial statements of a nonissuer prepared in accordance with a national variant of International Financial Reporting Standards (IFRS). These financial statements are intended to be used in the United States. Which of the following is true related to the form of the audit report?

US Report only

If financial statements prepared in accordance with a financial reporting framework generally accepted in another country, the auditor should include in the auditor's report an emphasis-of-matter paragraph that identifies the financial reporting framework

true

For agreed-upon procedures engagements on prospective financial information, the prospective financial statements include a summary of

significant assumptions.

violations of provisions of contracts or grant agreements and abuse that could have a material effect on the financial statements. should included in what

the auditor's report

Reporting standards for financial audits under Government Auditing Standards (the “Yellow Book”) differ from reporting under generally accepted auditing standards in that Government Auditing Standards require the auditor to present the results of the auditor's

test of controls

The objective of a review of interim financial information of an issuer is to provide the CPA with a basis for reporting whether _____ should be made to the interim information to comply with the applicable financial reporting framework.

material modifications

An auditor notes significant deficiencies in a financial statement audit conducted in accordance with Government Auditing Standards. In reporting on internal control, the auditor should state that the auditor considered the entity's internal control over financial reporting (internal control) to determine the____

audit procedures that are appropriate.

Which of the following statements should be included in a practitioner's report on the application of agreed-upon procedures? A statement referring to standards established by the ___

AICPA

The company issues financial statements that purport to present financial position and results of operations, but refuses to include the related statement of cash flows -- should disclaim opinion

false - The auditor should issue a qualified opinion. This situation is a type of departure from an applicable financial reporting framework because the financial statements do not include all of the disclosures

_____ the date of distribution, circulation, or submission of the exempt offering document is when the auditor should review subsequent events procedures that should be performed when an auditor is complying with AU-C 945

At or shortly before

In a review, a departure from AFRF happens. What do you do disclose the departure from the applicable financial reporting framework in _____ of the accountant's review report.

a separate paragraph

In a reivew, a departure from AFRF happens. The effects of the departure on the financial statements should be disclosed in the separate paragraph What if management hasn't determined the effects?

1. true 2. if management didn't analyze effects, the CPA doesn't have to determine effects given the CPA disclose that hte effects haven't been determined

If information accompanying the basic financial statements has been subjected to auditing procedures, the auditor may include in the auditor's report on the financial statements an opinion that the accompanying information is fairly stated in:_____ in relation to the basic financial statements taken as a whole.

all material respects

SAS is created by who

AICPA

For financial statement audits, Government Auditing Standards (GAS) incorporate the AICPA Statements on Auditing Standards (SAS) and prescribe additional standards on: Reporting on I/C Noncompliance w/ laws & reg

True

A compilation is performed in accordance with the

Statements on Standards for Accounting and Review Services established by the AICPA. (SSARS)

who established ssars

aicpa

Nonissuer When the auditor expresses a qualified opinion, the auditor should disclose _____ one or more separate paragraph(s) in the report in a paragraph entitled ____ ____ the opinion section.

all of the substantive reasons in “basis for qualified opinion” Precedeing(after)

A qualified opinion should include the word except or exception in a phrase such as ____

“except for” or “with the exception of.”

an unjustified accounting change. -- unqualified opinion

false - qualifeid

the statement :because of inherent limitations of any internal control, internal control may not prevent, or detect and correct, misstatements. is included in integrated audits

true

"____and ____ of Internal Control Over Financial Reporting" is the ____ section of the audit report should include 2 elements: 1. 2.

Defintions & Limitations third 1. Definiton of I/C 2. because of inherent limitations, internal control may not prevent, or detect and correct, misstatements

An auditor is engaged to report on selected financial data that are included in a client-prepared document containing audited financial statements. If the auditor is engaged to report on the selected financial data, the auditor's report should be ______

Limited to data derived from F/S | Cant include data outside of the audited F/S b/c that data wasn't audited

An auditor is engaged to report on selected financial data that are included in a client-prepared document containing audited financial statements. -- you should restrict teh report

false - dont restrict

West, CPA, is engaged to compile the financial statements of Lake Co., a nonissuer. Lake's financial statements are prepared in conformity with the cash basis of accounting. If Lake's financial statements do not disclose the basis of accounting used, West should disclose the basis of accounting used in the notes to Lake's financial statements. T/F

False - west should disclose the basis of accounting used in West's compilation report.

If a company wants a compilation w/o disclosures, the auditor must not compile unless he knows that the omission isnt for

misleading

The objective of pro forma financial information is to show what the significant effects on ____ financial information

Historical

When supplementary information accompanies the reviewed financial statements, the accountant should clearly indicate the ______ the review accountant is taking with respect to the supplementary information in an ____ paragraph in the review report or in a ____ on the supplementary information.

degree of responsibility other-matter separate report

A practitioner has examined a client's compliance with debt covenants associated with a bank loan and is ready to issue a report. Which of the following standards apply to the report? ____ standards

Compliance attestation

Compliance engagements are either used to determine (1) an entity’s compliance with requirements of specified laws, regulations, rules, contracts, or grants or (2) the effectiveness of an entity’s internal control over compliance with specified requirements.

true

Compliance engagements should be conducted in accordance with attestation standards established by ___the AICPA.

the AICPA.

An auditor may not issue a qualified opinion when the auditor is independent. t/f

You disclaim

a scope limitation prevents the auditor from completing an important audit procedure. - only disclaim

false you can qualify too

When a prior year's financial statements being used for comparative purposes were audited by another auditor, who expressed a qualified opinion: __ of the successor's report is changed to include a statement that the prior year's statements were ____, the ____of the other auditor's report, the ___issued, and an explanation if the opinion was other than unmodified. The name of the predecessor auditor ___ be mentioned if his or her ____.

``` Auditor Responsibility Paragraph Audited by another auditor Date of other auditor's report Opinion issued Should not be report is not presented ```

In the “Basis for Opinion” section of an audit report of an issuer, the auditor must disclose: That the auditor is a public accounting firm registered with the ____ (United States), and the auditor is required to be independent with respect to the company in accordance with U.S. _____ and the applicable rules and regulations of the ___ and the ____

PCAOB federal securities laws SEC and the PCAOB

The financial statements fail to disclose information that is required by generally accepted accounting principles. you should issue an ____ or ___ opinion

adverse or qualifeid

Which of the following items should be included in an auditor's report for financial statements prepared in conformity with a special-purpose framework? A title that includes the word ___

independent

A report on an issuer's integrated audit must include a statement that: the auditor believes the ___ provides a reasonable basis for the issued opinion.

audit

The practitioner's report on agreed-upon procedures on an entity's compliance with specified requirements should include which of the following? A representation regarding the sufficiency of the procedures

FALSE

The practitioner's report on agreed-upon procedures on an entity's compliance with specified requirements should include which of the following? ____ of the responsible party

Identification

In performing an audit of internal controls over financial reporting integrated with an audit of financial statements, the auditor uses what standard

an audit standard specifically designed for an integrated audit of internal controls.

In drafting an audit report for an issuer, which of the following would be the first section of the report? Basis for Opinion T/F

False - Opinion on the F/S, THEN Basis for Opinion

required procedure that an auditor must perform when complying with AU-C 945, Auditor Involvement with Exempt Offering Documents? Perform a _____from the date of the ___ through the date of the ____

subsequent events review Auditor's report Exempt offering

Which of the following would be an appropriate addressee for an audit report of an issuer?

Shareholders & Board of directors

In an independent accountant's review report on interim financial information included in a registration statement, a prospectus should include a statement clarifying that the accountant's review report is _____ within the meaning of the____

not a part of the registration statement | Securities Act of 1933.

a prospectus should include a statement clarifying that the accountant's review report is not a part of the registration statement within the meaning of the Securities Act of 1933. This is in what report, included in what statement?

In an independent accountant's review report on interim financial information included in a registration statement,

AT-C 315 states that a practitioner should not perform a review of an entity's ___ with requirements of specified ___

compliance | laws, regulations, rules, contracts, or grants.

___agreements require entities to furnish compliance reports by independent auditors.

Contractual

Negative assurance means that the auditor is ____

unable to acquire specific documentation for an account in the financial statements.

An entity's compliance with aspects of contractual agreements or regulatory requirements related to audited financial statements is specifically listed as a special report. Green audited the financial statements in accordance with generally accepted auditing standards and concluded that the financial statements were fairly presented on the prescribed basis. Green should issue an audit report:

on special-purpose financial statements.

A Type 1 report addresses management’s description of a service organization’s system and a service auditor’s report on that description and on the suitability of the ___ of controls.

design

A Type 2 report addresses management’s description of a service organization’s system and a service auditor’s report on that description and on the suitability of the ___ of controls

design and operating effectiveness

An auditor most likely would be responsible for communicating significant deficiencies in the design of internal control: to shareholders with significant influence (more than 20% equity ownership) when the significant deficiencies are deemed to be material weaknesses

FALSE

An auditor most likely would be responsible for communicating significant deficiencies in the design of internal control: to specific legislative and regulatory bodies when reporting under Government Auditing Standards.

TRUE

when reporting under Government Auditing Standards., n auditor most likely would be responsible for communicating significant deficiencies in the design of internal control to ____

Legislative and regulatory bodies

When reporting on Big City's internal controls used in administering a federal program, the CPA should: communicate ____ that are ___in relation to the ____

weaknesses material federal program.

The auditor report is required to contain either an expression of opinion regarding the financial statements taken as a whole or an assertion to the effect that an opinion cannot be expressed. The objective is to prevent:

misinterpretations regarding the degree of responsibility the auditor is assuming.

considering disclosure about the client's possible inability to continue as a going concern.

After considering management's plans, an auditor concludes that there is substantial doubt about a client's ability to continue as a going concern for a reasonable period of time. The auditor's responsibility includes: The auditor also need not communicate with the client's audit committee regarding whether management's plans for dealing with the adverse effects can be effectively implemented.

FALSE

The practitioner's examination report on compliance should include which of the following? A list of the procedures performed and related findings

FALSE

A list of procedures performed and related findings would be included in a practitioner's report on ____ on compliance.

agreed upon proedures

The practitioner's examination report on compliance should include which of the following A statement that the practitioner believes the examination provides a reasonable basis for his or her opinion

True

When auditing financial statements of an entity that receives financial assistance from a governmental agency, the auditor should report on compliance with provisions of laws, regulations, contracts, or grant agreements that have a ____on the financial statements.

material effect

hat is an auditor's responsibility for supplementary information, such as the disclosure of pension information, which is outside the basic financial statements but required by the GASB?

Limited Procedures

The auditor has an obligation to apply limited procedures to and report deficiencies in the required supplementary information (RSI) T/F

True

The auditor should also consider whether or not the RSI should be covered in the representation letter from management.

True

It is required to apply substantive tests of transactions to the supplementary information.

False

Reporting on internal control under Government Auditing Standards differs from reporting under generally accepted auditing standards in that Government Auditing Standards require a: written report describing each ___ observed, including identification of those considered material weaknesses.

significant deficiency

Block CPA Firm is engaged to perform a financial statement audit of BIG Company (an issuer). BIG Company is required to report on the company’s internal control over financial reporting (ICFR), but that report is not required to be audited. Which of the following would be a required element of the audit report of BIG Company? ____ language in the “_____” section noting that no audit of internal controls over financial reporting is required, although management is required to report on the company’s internal control over financial reporting

Explanatory Lang | Basis of Opinion

if the auditor issues separate reports on ICFR and the financial statements, under PCAOB, the required paragraph referencing the separate report should appear in the “______” section, immediately following the______

Opinion on the Financial Statements | opinion paragraph

Block CPA Firm signs an initial engagement letter in 20X8 to audit the financial statements of ABC Company (an issuer) for fiscal years ending 20X6, 20X7, and 20X8. The work began in 20X9. In the audit report of the issuer, what year would Block CPA Firm disclose as the year that it began serving consecutively as the company’s auditor?

20X8

AICPA AS 3101.10 requires a statement in the auditor's report containing the year the auditor began serving consecutively as the company's auditor. T/F

FALSE - PCAOB

In determining the year the auditor began serving consecutively as the company's auditor, the auditor would look to the year when the firm signs an initial _____to audit a company's financial statements (which is 20X8 in this question) or ____ whichever is ___.

engagement letter when the firm begins performing audit procedures, earlier

independent for agreed upon procedures?

yes

The standard accountant's report issued after reviewing the financial statements of a nonissuer in accordance with SSARS should state that the:

accountant is not aware of any material modifications that should be made to the financial statements for them to be in conformity with GAAP.

The auditor's responsibilities in a governmental audit are modified under generally accepted auditing standards.

false

Which of the following is correct about reporting on compliance with laws and regulations in a financial audit under Government Auditing Standards (the “Yellow Book”)? In some circumstances, auditors are required to report fraud and noncompliance with laws and regulations directly to parties external to the audited entity.

true

In the following circumstances, the auditor should recognize the need to disclose the fraud to parties outside the entity:

To comply with legal and regulatory requirements To a successor auditor when the successor makes inquiries In response to a subpoena To a funding agency or other specified agency in accordance with requirements for the audits of entities that receive governmental financial assistance

An accountant has compiled the financial statements of a nonissuer in accordance with Statements on Standards for Accounting and Review Services (SSARS). Does SSARS require that the compilation report be printed on the accountant's letterhead and that the report be manually signed by the accountant?

Doesnt require either one, but they CAN (optional)

When an entity changes its method of accounting for income taxes, which has a material effect on comparability, the auditor should refer to the change in an emphasis-of-matter paragraph added to the audit’s report. In addition to indicating that the matter does not modify the opinion, this paragraph should describe the change and:

reference a disclosure & Describe change

When there has been a change in accounting principles, but the effect of the change on the comparability of the financial statements is not material, the auditor should:

dont refer to the change at all

If a control would not present a risk of material misstatement to the financial statements, even if the control were deficient, you still have to test it

false - no you dont

Assertions about account balances at the period-end include that the entity ____holds or controls the rights to assets, and liabilities are obligations of the entity.

holds or controls the rights to assets, and liabilities are obligations of the entity.

AR = IR × CR × DR, or AR = RMM × DR

Yep

If control risk is high, this means that the auditor must have a ____detection risk

low

Make inquiries prior to the date of the report about possible future transactions that may impact the forecast once the report is issued is a common compilation procedure

false - you dont inquire about future events in compilations

Material, corrected misstatements that were identified by the auditor’s procedures should be communicated to who

gov

If all members of governance are management, Material, corrected misstatements that were identified by the auditor’s procedures should be communicated to who

False - you communicate this to management & therefore do not need to repeat yourself

The CPA can review the B/S only. Reviewed financial statements are often intended for third-party use (for obtaining credit, for instance) and the use of the review report in this manner would not affect the accountant's decision to issue the report

true

Examples of general controls are program change controls, controls that restrict access to programs or data, controls over the implementation of new releases of packaged software applications, and controls over system software that restrict access to or monitor the use of system utilities that could change financial data or records without leaving an audit trail.

yep their are a lot

When an auditor submits a document that contains information in addition to audited financial statements to a client or to others, his responsibility:

includes reporting on all the information included in the document.

Send a letter of inquiry to the entity's attorney regarding pending litigation in a review

NOPE

he standard compilation report explicitly states that the accountant has not ____ or ___ the financial statements.

reviewed or audited

An accountant compiles the financial statements of a nonissuer and issues the standard compilation report. Although not specifically stated in this report, it is implied that:

substantially all disclosures required by GAAP are included in the financial statements.

Which of the following components of internal control would be considered the foundation for the other components?

control environment

Control environment provides discpline and structure

true

Variables sampling is the sampling procedure used to measure, or reach a conclusion about, the continuously variable dollar amounts of the sample, which provide the quantitative estimates required for substantive testing.

True

Which of the following sampling methods would be used to estimate a numerical measurement of a population, such as a dollar value?

variable

Stop-or-go and random number sampling are sampling methods can be used with either variables or attribute sampling.

Truw

In evaluating the overall effect of audit findings on the auditor's report, the auditor should document all of the following except:

a summary of all uncorrected misstatements related to known and likely misstatements. (this includes trivial -- trivial amounts are not required)

Lake, CPA, is auditing the financial statements of Gill Co. Gill uses the EDP Service Center, Inc., to process its payroll transactions. EDP's financial statements are audited by Cope, CPA, who recently issued a report on management's description of EDP's system and the suitability of the design and operating effectiveness of controls. Lake is considering Cope's report on EDP's system in assessing control risk on the Gill engagement. What is Lake's responsibility concerning making reference to Cope as a basis, in part, for Lake's own opinion? Lake may not refer to Cope under the circumstances above. --- why?

Gill uses EDP | EDP is audited by Cope

ensure the entity's operations are conducted in accordance with the provisions of laws and regulations. is an objective of the auditor

FALSE

The internal auditor's competence and objectivity are assessed by using information from ____, external ___, and previous experience with the internal auditor

discussions with management personnel | quality reviews

In assessing the competence and objectivity of an entity's internal auditor, an independent auditor least likely would consider information obtained from Analytical procedures

false | Obviously, the internal auditor's competence and objectivity cannot be assessed by using analytical procedures.

Which of the following should a practitioner perform as part of an engagement for agreed-upon procedures in accordance with the Statements on Standards for Attestation Engagements (SSAEs)? Issue a report on ____based on specified procedures performed

findings

Agreed upon procedures mainly focus on what

findings

A CPA may serve on a corporate board of directors if: the CPA____ the corporation. the CPA has no other business connections to the corporation.

doesn't audit (no attest engagements)

In order to verify that marketable securities are correctly valued as of the balance sheet date, the auditor must compare the ______ to the recorded value on the balance sheet.

published closing price

The more indirect the relationship, the less effective that control may be.

true

When an auditor is asked to report on the fair presentation of financial statements prepared in conformity with a regulatory basis of accounting, he or she is required to issue _______from GAAP

a standard report modified for the departures

The auditor is unable to determine the amounts associated with an employee fraud scheme. - disclaim opinon

yes

Payroll Data Co. (PDC) processes payroll transactions for a retailer. Cook, CPA, is engaged to express an opinion on management's description of PDC's system and suitability of the design of controls. PDC's system is relevant to the retailer's internal control, so Cook's report may be useful in providing the retailer's independent auditor with information necessary to plan a financial statement audit. Cook's report should:

Cook's report is only a description of PDC's system and the suitability of the design of controls and therefore he must disclaim an opinion on the operating effectiveness of PDC's controls. He did not test whether the controls were operating with sufficient effectiveness to provide reasonable assurance that the related control objectives were achieved during the period under audit

A practitioner may be engaged to perform an ____engagement or an___ engagement in the area of compliance attestation.

agreed-upon procedures | examination (Audit)

A practitioner is asked to attest on an entity’s compliance with terms of a contract with a third party, and the practitioner does not audit the financial statement of the entity. Which of the following types of attestation engagements may be performed related to compliance?

Agreed-upon procedures or examination

The Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern.” Where would you find this statement (what report)

audit report

On August 13, a CPA completed fieldwork on an engagement to audit financial statements for the year ended June 30. On August 27, an event came to the CPA's attention that should be disclosed in the notes to the financial statements. The event was properly disclosed by the entity, but the CPA decided not to dual date the auditor's report and dated the report August 27. Under these circumstances, the CPA was taking responsibility for:

all subsequent events that occurred through August 27.

hich of the following best describes the process of identifying, assessing, and responding to risk of material misstatement on a financial statement audit?

Cumulative and iterative

March, CPA, is engaged by Monday Corp., a client, to audit the financial statements of Wall Corp., a company that is not March's client. Both entities are nonissuers. Monday expects to present Wall's audited financial statement with March's auditor's report to First Federal Bank to obtain financing in Monday's attempt to purchase Wall. In these circumstances, March's auditor's report would usually be addressed to:

Monday Corp., the client that engaged March.

Because the auditor's responsibility is to the client company, the address of the report should be the stockholders and/or the board of directors of the company that engaged the auditor.

true

When unaudited financial statements of a nonissuer are presented in comparative form with audited financial statements in the subsequent year, the unaudited financial statements should be clearly marked to indicate their status and:

the report on the unaudited financial statements should be reissued ORRRRRRR the report on the audited financial statements should include a separate paragraph describing the responsibility assumed for the unaudited financial statements.

When an auditor qualifies his or her opinion because of a scope limitation, the wording in the opinion paragraph should indicate that the qualification pertains to the _____on the financial statements and not to the scope limitation itself.

possible effect

An auditor decides to issue a qualified opinion on an entity’s financial statements because a major inadequacy in its computerized accounting records prevents the auditor from applying necessary procedures. The opinion paragraph of the auditor’s report should state that the qualification pertains to:

the possible effects on the financial statements.

Due to a scope limitation, an auditor disclaimed an opinion on the financial statements taken as a whole, but the auditor's report included a statement that the current asset portion of the entity's balance sheet was fairly stated. The inclusion of this statement is: not appropriate because it may tend to the auditor's disclaimer of opinion.

overshadow

Dual dating the report for a subsequent event that has occurred after the original date of the auditor's report, the auditor has chosen not to extend his responsibility (and procedures) either to all subsequent events occurring through the date of the report or to all events occurring since the original date of the auditor's report. IT IS ONLY LIMITED TO THE

Subsequent event referenced

Zag Co. issues financial statements that present financial position and results of operations but Zag omits the related statement of cash flows. Zag would like to engage Brown, CPA, to audit its financial statements without the statement of cash flows although Brown's access to all of the information underlying the basic financial statements will not be limited. Under these circumstances, Brown most likely would: refuse to accept the engagement as proposed because of the client-imposed scope limitation.

False -- it is not a client imposed limitation

Explain that they have to qualify the audit opinion due to omitting the statement since management declines to present it

Disclose all the ___reasons for the adverse opinion is necessary when giving an adverse opinion

substantive

basic element of the auditor's standard report of a nonissuer An audit includes assessing significant ____made by management.

estimates

The use of inappropriate accounting principles | What type of opinion (2)

qualified or adverse

Unreasonable accounting estimates | What type of opinion (2)2

qualified or adverse

In which of the following paragraphs of an auditor's report of a nonissuer does an auditor communicate the specific financial statements covered by the audit?

Introduction

``` The introductory paragraph in the auditor's report should: 1 2 3 4 ```

Identify entity state f/s have been audited identify title of each statement Specify period covered

"____opinion—…because of the effects of the matters discussed in the preceding paragraph(s),…do not present fairly…ended.

Adverse

The company failed to make a count of its physical inventory during the year and the auditor was unable to apply alternative procedures to verify inventory quantities. what type of opinion

disclaim

A client has capitalizable leases but refuses to capitalize them in the financial statements. Which of the following reporting options does an auditor have if the amounts pervasively distort the financial statements? what opinion?

adverse opinion -- material gaap departure

In planning an integrated audit, which of the following matters does the auditor not evaluate as to whether they are important to the company's financial statements and internal control over financial reporting? Design of internal control over compliance with environmental regulatory reporting

AICPA/PCAOB doesn't address compliance

Knowledge obtained in the course of other engagements should be obtained when evaluating as to whether they are important to the company's financial statements and internal control over financial reporting

true

The auditor's preliminary judgments about materiality, risk, and other factors relating to the determination of material weaknesses should be considered when the company's financial statements and internal control over financial reporting

true

auditor is unable to obtain sufficient appropriate audit evidence to support management's assertions about the nature of a matter involving an uncertainty and its presentation or disclosure in the financial statements, the auditor should: consider the need to express a ____opinion or to ____an opinion because of a ____

qualified disclaim scope limitation.

For agreed upon procedures, Terms of uncertain meaning (such as read, general review, limited review, check, or test) should not be used in describing the procedures unless such terms are defined within the agreed-upon procedures.

Yep Agreed upon procedures are VERY specifc Recalculate the aging category for a randomly selected 25 accounts receivable invoices as of June 30, 20XX, based on the date of sale per the customer’s invoice IS AN EXAMPLE

hen an accountant compiles projected financial statements, the accountant's report should include a separate paragraph that:

describes the limitations on the usefulness of the projection.

When performing an attestation engagement related to a client's prospective financial statements, the accountant should ensure that the client discloses all ______ that are used for the prospective financial statements.

significant assumptions

The client is not required to disclose the significant ____used for the prospective financial statements, but must disclose the significant assumptions used

assertions

Who is responsible for determining the sufficiency of agreed-upon procedures to meet the needs of the specified party in an agreed-upon procedures engagement?

Specified parties

Financial forecast can be used for ___ & ___purpose

General and Limited

Financial forecast is an expected future position

true

Financial projections are prospective financial statements that present, to the best of the responsible party's knowledge and belief, given one or more _____assumptions,

hypothetical

Opinion on prospective F/S

Yes

Objectives of prospective financial information are obtaining reasonable assurance that (2)

Presented in accordance w/ AICPA Assumptions supported given hypotehtical assumption Expess opinion in written form

When a CPA examines a client's projected financial statements, the CPA's report should: state that the CPA performed procedures to evaluate management's ____

assumptions.

When a CPA examines a client's projected financial statements, the CPA's report should: explain the principal differences between historical and projected financial statements.

FALSE YOU DONT DO THAT

Agreed upon procedures adhere to what Standard?

Standards for Attestation Engagements (SSAE).

The prospective financial statements include a summary of significant assumptions. Must be included to accept an ____ engagement

agreed upon procedure

A nonissuer engaged a practitioner to perform agreed-upon procedures on specified matters. The date of the practitioner's report would ordinarily be determined by the occurrence of which of the following events?

Completion of agreed upon procedures

In a compilation of a projection, the CPA would assemble the financial statements based on management's ___

assumptions,

In a compilation of a projection, the CPA would assemble the financial statements are presented according to __guidelines

AICPA

In a compilation of a projection, The compilation report should :state that the compilation was performed in accordance with ____ standards established by the _____

attestation | AICPA

In a compilation of a projection, The compilation report should state that the compilation is ___in scope

state that the compilation is limited in scope

In a compilation of a projection, The compilation report should explain that the CPA assumes no responsibility to _____

update the report for future events

In a compilation of a projection, The compilation report should state that the hypothetical assumptions used in the projection are reasonable in the circumstances.

FALSE

Government Auditing Standards require the auditor to: | describe the ___of the auditor's tests of ___with laws and regulations.

scope | compliance

hen an audit firm includes a report on compliance with aspects of contractual agreements in the auditor's report on the nonissuer's financial statements, in which paragraph of the audit report should the report on compliance be included?

Other matter -- bc it is not directly involved w/ the F/S

An auditor's report on financial statements of a regulated entity prepared in accordance with provisions of a government regulatory agency to whose jurisdiction the entity is subject should be issued by an auditor only if: the financial statements are intended solely for filing with one or more regulatory agencies to whose jurisdiction the entity is subject.

Yep wtf

Negative assurance should not be given unless the auditor has ___ the financial statements

audited

Negative assurance should not be given if the auditor has expressed an ___opinion or ____ an opinion on the financial statements to which these covenants relate.

adverse | Disclaimed

Reports are considered special reports when issued in conjunction with: ___ of ____ related to audited financial statements.

compliance | regulatory requirements

_____engagement does not include an evaluation of the support for the assumptions underlying the projection.

Compilation of a financial projection

if the practitioner believes that one or more significant assumptions do not provide a reasonable basis for the forecast, or a reasonable basis for the projection given the hypothetical assumptions, he or she should express an ____opinion

adverse

Under Government Auditing Standards, reports for financial and compliance audits should include a report on the auditor's consideration of ____. Therefore, under ___, an auditor should report on the ___of the auditor's testing of internal controls.

internal controls GAS scope

To express an unmodified opinion using an unmodified report covering single-year financial statements: ____financial statements are not presented—the prior year's financial statements audited by another CPA are ____. the prior report expresses an ____

comparative not presented unmodified opinion.

Comfort letters ordinarily are addressed to the client's ________ and signed by the client's ________.

Underwriter | CPA

Underwriters of securities often request the assistance of the independent accountant when issuing____ by requesting a ____

Initial stock offerings | comfort letter

Because a comfort letter is not an audit report, the independent accountant can only provide ____

negative assurance

An entity prepares its financial statements on its income tax basis. A description of how that basis differs from GAAP should be included in the:

Notes to F/S

Income Tax basis is what type of framework

special purpose

An auditor may express an opinion on an entity's accounts receivable balance even if the auditor has disclaimed an opinion on the financial statements taken as a whole, provided the: report on the accounts receivable is presented ___

separately (different report)

All materially respects

What is an auditor's responsibility when engaged to report on supplementary information accompanying the basic financial statements? 1. ___ paragraph 2 . ____ on supplementary info

Other matter | Separate report

Before reporting on the financial statements of a U.S. entity that have been prepared in conformity with another country's accounting principles, an auditor practicing in the United States should: Disclaim opinion

FALSE - not necessary. Any opinion can happen

Before reporting on the financial statements of a U.S. entity that have been prepared in conformity with another country's accounting principles, an auditor practicing in the United States should:

understand the accounting principles generally accepted in the other country.

"The subjects that may be covered in a comfort letter include:' ____ Independence An opinion as to whether the audited financial statements comply in form with the accounting requirements of the___ "____, and other financial information included in the securities offering. "___assurance about whether certain ____information included in the securities offering complies regarding form, in all material respects, with Regulation S-K."

``` CPA SEC tables, statistics Negative Nonfinancial ```

"The subjects that may be covered in a comfort letter include:' Negative assurance concerning whether the entity's internal control procedures operated as designed during the period being audited

No -- fuck internal control w/ comfort letters

comfort letter does not state or repeat an ____about the fairness of presentation of the statements.

opinion

auditor is required to determine the acceptability of the financial reporting framework applied to the special-purpose financial statements by obtaining an understanding of: the ___of the financial statements, the intended ___, and management's steps taken in determining the ____

purpose users applicable financial reporting framework.

an entity makes a material change in accounting principle, how is the audit report impacted? An____paragraph is required to be added to reference the ____discussing the change.

emphasis-of-matter | footnote (note to F/S)

Financial statements are considered special purpose financial statements when: prepared in accordance with either a ___or an other ___basis of accounting.

contractual | comprehensive

. If a separate report is issued for supp. info, the report should state that the other data accompanying the financial statements are presented only for _____ purposes and that the information has been compiled from information that is the ____without _____

supplementary analysis representation of management audit or review,

``` Cash Basis Tax Basis Regulatory Basis Contractual Basis All examples of what ```

special framework

When the auditor reissues a report of the financial statements, the date of the reissued report should be:

same date of original report | ONLY CHANGE IF SUBSEQUENT EVENT HAPPENED

Which of the following would be an appropriate title for a statement of revenue and expenses prepared using a special-purpose framework? Statement of income—_____

regulatory basis

A CPA is permitted to accept a separate engagement (not in conjunction with an audit of financial statements) to audit an entity's schedule of accounts receivable and schedule of royalties. ONLY IF the report is ____

restricted

The auditor's report on internal controls and compliance with laws and regulations in accordance with Government Auditing Standards (the “Yellow Book”), is required to include: uncorrected misstatements that were determined by management to be immaterial.

FALSE

In its annual report to shareholders, Lake Co. (a nonissuer) included a separate management report that contained an assertion about the effectiveness of its internal control over financial reporting. Lake's auditor is expressing an unmodified opinion on Lake's financial statements but has not been engaged to examine and report on this management assertion. What is the auditor's responsibility concerning such report? The auditor has no obligation to read the management report or to verify the accuracy or appropriateness of its contents.

FALSE - YES YOU DO

In its annual report to shareholders, Lake Co. (a nonissuer) included a separate management report that contained an assertion about the effectiveness of its internal control over financial reporting. Lake's auditor is expressing an unmodified opinion on Lake's financial statements but has not been engaged to examine and report on this management assertion. What is the auditor's responsibility concerning such report? auditor should read the management report and consider whether it contains a ____

material misstatement of fact.

When reporting under ___, the auditor is required to provide in all audits a written report on internal control for distribution to specific legislative and regulatory bodies,

Government Auditing Standards

A CPA is reporting on comparative financial statements of a nonissuer. The CPA audited the prior year's financial statements and reviewed those of the current year in accordance with Statements on Standards for Accounting and Review Services (SSARS). The CPA has added a separate paragraph to the review report to describe the responsibility assumed for the prior year's audited financial statements. This separate paragraph should indicate:

the reasons for the change from an audit to a review.

An auditor may report on selected financial data derived from audited financial statements that he or she has audited. Such a report should be ___to the data derived from the audited financial statements.

limited

In performing a financial statement audit in accordance with Government Auditing Standards, an auditor is required to report on the entity's compliance with laws and regulations. This report should: state that compliance with laws and regulations is the responsibility of the entity's ___.

management

In performing a financial statement audit in accordance with Government Auditing Standards, an auditor is required to report on the entity's compliance with laws and regulations. This report should: provide an opinion on overall compliance with laws and regulations.

FALSE

An opinion on the appropriateness of other comprehensive basis of accounting used is ___

not required.

In reading the annual report that contains the audited financial statements, the auditor discovers a material inconsistency that management refuses to correct. What action should the auditor take in response?

Withhold the auditor’s report until the correction is made OR Include other matter paragraph / withdrawal

When providing an audit report on governmental financial statements, the auditor should also report on internal control over financial reporting and on compliance with laws, regulations, and provisions of contracts or grant agreements. This information may be in _____

the same or in separate reports.

An independent auditor is issuing an audit report for a governmental entity and plans to issue separate reports on internal control over financial reporting and compliance with laws and regulations. The auditor should do which of the following? State in the audit report _____

that separate reports will be issued

In order to form an opinion on whether supplementary information is fairly stated Either an unmodified or ___audit opinion on the related financial statements is issued.

qualified

In order to form an opinion on whether supplementary information is fairly stated the auditor issued an audit report on the financial statements that contained neither an ___ opinion nor a ___of opinion

adverse | disclaimer

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 a statement that: any difference in the ____, ____, or ____presented may change the report.

facts, circumstances, or assumptions

An auditor is reporting on condensed financial statements for an annual period that are derived from the audited financial statements of an issuer. The auditor's opinion should indicate whether the information in the condensed financial statements is fairly stated in all material respects: in relation to the______

complete financial statements.

Information that a designated accounting standard requires to accompany an entity’s basic financial statements but is not considered to be a part of the basic financial statements, is commonly referred to as ___________________ with professional standards.

RSI - Required Supplementary Info

When audited financial statements are presented in a client's document containing other information, the auditor should: ____the other information to determine that it is ____with the audited financial statements to identify __

read consistent material inconsistencies

If an accountant issues a document including both a separate restricted-use report and a general-use report, both reports should be restricted to the specified parties. T/F

False

When the prior-period financial statements were audited and the audit report is not reissued, the REVIEW report on the current financial statements should include ____ paragraph indicating that the financial statements of the prior period were ___; the date of the prior-period auditor’s report; the___ issued on the prior-period financial statements; if the opinion was modified, the substantive reasons for the modification; and that ___auditing procedures were performed after the date of the previous report.

an other-matter previously audited opinion no

If an external accountant is engaged to prepare financial statements in accordance with the Statements on Standards for Accounting and Review Services (SSARSs), and such financial statements contain a known departure from the applicable financial reporting framework that management refuses to correct, the accountant should:

disclose known departure

When an accountant determines the financial statements contain one or more departures from GAAP, the first action is to ask management to___ What if management refuses?

revise the financial statements. If management refuses, consider modifying one or more paragraphs to illustrate the departure and disclose the dollar effects

If prior-period compiled financial statements have been restated and the predecessor accounting firm decides not to reissue its report, the successor accounting firm may be engaged to

may be engaged to reissue the prior-period report.

If the predecessor accountant does not reissue his or her report and the successor accountant is not engaged to report on the prior-year financial statements, the successor accountant should indicate in the ___paragraph of his or her compilation or review report that a predecessor accountant reported on the financial statements of the prior period before restatement.

introductory

When an accountant is not independent with respect to an entity, which of the following types of compilation reports may be issued? A compilation report with___ that notes the accountant's lack of ___may be issued in the ___ paragraph

special wording independence FINAL

For compilations, The date on the report should be the date of ____

completion of the procedures

For compilations, A statement that a compilation is limited to presenting in the form of financial statements information that is the representation of ___

management

If management declines to present supplementary information required by the Governmental Accounting Standards Board (GASB), the auditor should issue: an ___with an additional ___paragraph.

unmodified opinion | explanatory

When a broker-dealer or other financial intermediary, besides an underwriter or other party with a due diligence defense under section 11 of the Securities Act of 1933, requests a comfort letter but does not provide a representation letter, the accountant should:

not provide a comfort letter but may provide another form of letter.

If adequately disclosed in the financial statements, an uncertainty about an entity's ability to continue as a going concern or other accounting matters (other than those involving a change in accounting principles) may be, at the accountant's discretion, emphasized in the accountant's report (but will not require a modification to the standard compilation or review report).

Not a question. This is a statement.

If properly disclosed in the financial statements, which of the following would ordinarily cause an accountant to modify his or her standard compilation or review report? Uncertainty about the entity's ability to continue as a going concern Inconsistency in the application of accounting principles

Neither

In a review of comparative financial statements, the reporting entity restated the prior year’s financial statements to correct a prior-year known departure from GAAP. How should the continuing review accountant address this change in the current period’s review report? Include an ____ paragraph indicating the date of the previous review report and the reasons behind the prior-period restatement, and the implications on the previous conclusion.

other-matter

To reissue the auditor's report on financial statements that have been neither restated nor revised, the auditor should use the _____date on the reissued report.

original report

Using the reissued report release date, or the current-period auditor's report date, would extend the auditor's responsibility for____

subsequent events to that date.

is engaged to prepare financial statements that substantially omit all disclosures. What are the requirements under the Statements on Standards for Accounting and Review Services (SSARS) for this type of engagement?

Disclose such omission in the financial statements

when the auditor is performing an audit of financial statements prepared in conformance with a regulatory basis of accounting, and the financial statements are intended for general use, the auditor’s report should be modified to: express an opinion about whether the special-purpose financial statements are presented fairly, in all material respects, in accordance with ____, as well as a separate ___about whether the financial statements are presented fairly, in all material respects, in conformance with the regulatory basis of accounting.

GAAP | opinion

When an independent U.S. auditor is engaged to report on financial statements prepared for use in another country, the auditor should perform audit procedures that are necessary to comply with: ___and the auditing standards of the other country or International Standards on Auditing (ISAs) when specifically _____to do so.

U.S. GAAS | requested

ISA stands for what

international standards on auditing

An auditor reporting in accordance with the Uniform Guidance rules on a schedule of findings and questioned costs would not include a ____opinion as to whether all questioned costs have been reported.

disclaimer of

A discretionary emphasis-of-matter paragraph is included in a review report. How is the standard review report modified? indicate that the accountant’s conclusion is ____with respect to this matter

not modified

For emphasis of matter paragraphs, the conclusion is modified with respect to this matter

FALSE - no its not

An auditor may report on condensed financial statements that are derived from a complete set of audited financial statements only if the auditor: All info is fairly stated in the ____ statements

complete

For which of the following events would an auditor issue a report that omits any reference to consistency? A change in the useful life used to calculate the provision for depreciation expense....why this? B/C a change in accounting estimate (such as a change in the useful life of a depreciable asset) is accounted for prospectively and does not affect the ___of financial statements between periods. So you would omit any reference to this change.

comparability

Uncertainties can be emphasized in the audit report T/F

true

An entity is a larger component of a business unit, what can you do in the the audit report in relation to this

include a emphasis of matter paragraph

In which of the following should an auditor's report refer to the lack of consistency when there is a change in accounting principle that is significant?

emphasis of matter paragraph

Emphasis of matter paragraphs are ___ the opinion paragraph

after

If a review accountant is unable to obtain sufficient appropriate evidence to support a limited assurance conclusion, the review accountant should:

withdrawal

If a review accountant is unable to obtain sufficient appropriate evidence to support a limited assurance conclusion, the review accountant should: change the scope of the engagement to a compilation, regardless of the nature of the evidence that was not able to be obtained.

FALSE -- you withdrawal

For special purpose frameworks, state that the financial statements are fairly presented (as appropriate) according to ____basis.

the special framework

Before reissuing a compilation report on the financial statements of a nonissuer for the prior year, the predecessor accountant is required to: compare the prior year's financial statements with those of the____

Current year

Before reissuing a compilation report on the financial statements of a nonissuer for the prior year, the predecessor accountant is required to: obtain a letter from the successor accountant pertaining to knowledge of any matters having an effect on the ____ financial statements.

When an accountant is engaged to compile a nonissuer's financial statements that omit substantially all disclosures required by GAAP, the accountant should indicate in the compilation report that the financial statements are: not designed for those who are_____

not informed about such matters.

An auditor determines that the entity is presenting certain supplementary financial disclosures of pension information that are required by the GASB. Under these circumstances, the auditor should: compare the required supplementary information for ___with the audited financial statements.

consistency

For RSI (Required Supplementary Info.), Compare the information for consistency with management's responses T/F

True

``` For RSI (Required Supplementary Info.), Make inquiries of management regarding the measurement and presentation of the information ```

True

When an accountant is engaged to compile a nonissuer's financial statements that omit substantially all disclosures with no reference to basis but are otherwise in conformity with a special-purpose framework, the accountant should disclose which of the following in his or her report? The financial statements were prepared in conformity with a _____ of accounting other than ____.

comprehensive basis | GAAP

accountant desires to issue a single combined report covering some subject matter that requires restriction of use to specified parties and other subject matter that is for general use: the combined report should be ____.

restricted in use

n auditor is engaged to report on selected financial data that is included in a client-prepared document containing audited financial statements. Under these circumstances: the selected data should be ____from the underlying accounting and other records used to prepare the audited financial statements.

derived

An entity engaged an accountant to review its financial statements in accordance with Statements on Standards for Accounting and Review Services (SSARS). The accountant determined that the entity maintained its accounts on an other-basis of accounting other than generally accepted accounting principles (GAAP). In this situation, the accountant most likely would have taken which of the following actions? ___the review report to reflect the fact that the financial statements were presented on an other-basis of accounting

Modified

An accountant is permitted to review financial statements that are prepared on a comprehensive basis of accounting other than GAAP.

False - yes they can

For Reviews, CPA Requests that management justify the use of the other comprehensive basis of accounting in the management representation letter

FALSE they dont need to justify

Financial statements are allowed to be prepared using a comprehensive basis of accounting other than generally accepted accounting principles, to be appropriate it must include: 1. a description of the ____, including a summary of significant accounting ____and description of the primary differences from ___,, 2. . disclosures similar to those required by ____if the financial statements contain items similar to those included in financial statements prepared in accordance with GAAP.

special purpose framework policies GAAP GAAP

If a predecessor accountant is asked to reissue a previous year’s compilation report, what is the date that should be used on that reissued report? ____ the report if the prior-year financial statements are restated or the previously released report is revised based on information that became known to the predecessor accountant.

Dual-date

If a predecessor accountant is asked to reissue a previous year’s compilation report, what is the date that should be used on that reissued report? The date of the original report, even if modifications to the report are made

False -if modifications are made - you dual date

financial statements of a prior period have been audited by a predecessor auditor whose report is not presented, the successor auditor should name of the predecessor auditor and the length of time he or she was associated with the client in the intro paragraph

FALSE - The successor auditor would have no reason to name the predecessor

he risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the:

effectiveness of the audit. ACCEPT EFFECT

assessing control risk too low relate to the:

effectiveness of the audit.

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