NINJA AUD - Engagement Acceptance and Understanding the Assignment

Question 1

Audits of entities receiving federal financial assistance usually have the following common elements:

Answer 1

• Auditors must follow generally accepted auditing standards and government auditing standards.
• The auditor’s consideration of internal control is to include obtaining and documenting an understanding of internal control established to ensure compliance with the laws and regulations applicable to the federal financial assistance.
• The auditor issues a report on the consideration of internal control.
• The auditor is to determine and report on whether funds are administered in accordance with applicable laws and regulations.

Question 2

A CPA in public practice is required to comply with the provisions of the Statements on Standards for Attestation Engagements (SSAE) when:

Answer 2

compiling a client’s financial projection that presents a hypothetical course of action.

Question 3

During the initial planning phase of an audit, a CPA most likely would:

Answer 3

discuss the timing of the audit procedures with the client’s management.

Question 4

An understanding with the client most likely would:

Answer 4

discuss fees and billing.

Question 5

The Single Audit Act Amendment of 2013, as implemented by OMB Circular A-133,

Answer 5

is federal legislation that establishes uniform requirements for the audits of federal financial assistance provided to state and local governments. It requires state and local governments and not-for-profit organizations that expend total federal financial assistance equal to or in excess of $750,000 in a fiscal year to have an audit performed in accordance with the Act (as implemented by OMB Circular A-133).

Question 6

An auditor’s engagement letter most likely would include:

Answer 6

management’s acknowledgment of its responsibility for maintaining effective internal control.

Question 7

When an entity qualifies as low risk, the scope of audits under the “percentage of coverage” rule in the Single Audit Act Amendments of 2013 can be reduced to as low as

Answer 7

20% of the federal funding spent by the entity.

Question 8

Under the “percentage of coverage rule” that is included in the Single Audit Act Amendments of 2013, the auditor must select and test major programs that account for at least

Answer 8

40% of the federal funding spent by that entity.

Question 9

What a successor auditor would ask a predecessor auditor AFTER accepting an audit engagement:

Answer 9

Matters that may facilitate the evaluation of financial reporting consistency between the current and prior years

Question 10

After obtaining an understanding of the entity and its environment and assessing the risk of material mis­statement, an auditor decided to perform tests of controls. The auditor most likely decided that:

Answer 10

it would be efficient to perform tests of controls that would result in a reduction in planned substantive tests.

Question 11

An auditor is required to establish an understanding with a client regarding the services to be performed for each engagement. This understanding generally includes:

Answer 11

the auditor’s responsibility for ensuring that the audit committee is aware of any significant deficiencies that come to the auditor’s attention.