NINJA AUD - Evaluating Audit Findings, Communications, and Reporting

Question 1

An auditor most likely would apply analytical procedures in the overall review stage of an audit to:

Answer 1

determine whether additional audit evidence may be needed.

Question 2

In testing the existence assertion for an asset, an auditor ordinarily works from the:

Answer 2

accounting records to the supporting evidence.

Question 3

When should the auditor’s report be dated?

Answer 3

No earlier than the date on which the auditor has obtained sufficient appropriate audit evidence

Question 4

Concerning the content of audit documentation…

Answer 4

It is appropriate to use calculator tapes with names or explanations on the tapes rather than writing separate lists onto workpapers.

Question 5

In using the work of a specialist, an auditor may refer to the specialist in the auditor’s report if, as a result of the specialist’s findings, the auditor:

Answer 5

adds an emphasis-of-matter or other-matter paragraph to the auditor’s report to emphasize an unusually important subsequent event.

Question 6

An auditor who uses the work of a specialist may refer to the specialist in the auditor’s report if the:

Answer 6

auditor modifies the report because of the difference between the client’s and the specialist’s valuations of an asset.

Question 7

A difference in management’s and the auditor’s position would be:

Answer 7

a judgmental misstatement, NOT a factual misstatement.

Question 8

The auditor should include in the audit documentation:

Answer 8

a. the amount below which misstatements would be regarded as clearly trivial;
b. all misstatements accumulated during the audit and whether they have been corrected; and
c. the auditor’s conclusion about whether uncorrected misstatements are material, individually or in aggregate….

Question 9

An unreturned negative confirmation request typically does not provide significant explicit evidence because:

Answer 9

nothing assures the auditor a missing response means the respondent agrees with the data.

Question 10

The focus of a second or wrap-up workpaper review performed is:

Answer 10

the fair presentation of the F/S in conformity with GAAP.

Question 11

In auditing accounts receivable, the negative form of confirmation request most likely would be used when:

Answer 11

the combined assessed level of inherent and control risk relative to accounts receivable is low.

Question 12

If management declines to present supplementary information required by the Governmental Accounting Standards Board (GASB),

Answer 12

the auditor should issue an unqualified report with an additional explanatory paragraph.

Question 13

If the client refuses to correct the other information included in the documents containing audited financial statements,

Answer 13

the auditor will have to revise the audit report, withdraw from the audit report, or withdraw from the engagement.

Question 14

Under PCAOB Auditing Standard 3, audit documentation should be retained no fewer than how many years following the report release date?

Answer 14

7 years

Question 15

If there are inadequately disclosed conditions that cause the auditor to have substantial doubt about the entity’s ability to continue as a going concern,

Answer 15

the auditor must determine whether to issue a qualified or adverse opinion.

Question 16

When an auditor is unable to obtain sufficient appropriate audit evidence about a significant item in the F/S:

Answer 16

he should consider the need to express a qualified opinion or to disclaim an opinion because of a scope limitation.

Question 17

Comfort letters are ordinarily addressed to the client’s ______ and signed by the client’s ______.

Answer 17

underwriter of securities; independent accountant.

Question 18

To express an unmodified opinion using an unmodified report covering single-year financial statements:

Answer 18

• comparative financial statements are not presented—i.e., the prior year’s financial statements audited by another CPA are not presented.
• the prior report expresses an unmodified opinion.

Question 19

When an entity changes its method of accounting for income taxes, which has a material effect on comparability,

Answer 19

the auditor should refer to the change in an emphasis-of-matter paragraph added to the auditor’s report.
This paragraph should describe the change and refer to the financial statement note that discusses the change in detail.

Question 20

Sufficient and appropriate documentation should include:

Answer 20

evidence that the audit working papers have been reviewed.

Question 21

Because the supplementary information is NOT a required part of the basic F/S,

Answer 21

the auditor should apply only certain limited procedures.

Question 22

Under Government Auditing Standards, an auditor is required to state that:

Answer 22

compliance with laws and regulations is the responsibility of the entity’s management.

Question 23

AT 601.07 states that:

Answer 23

“a practitioner should not accept an engagement to perform a review of an entity’s compliance with specified requirements or about the effectiveness of an entity’s internal control over compliance or an assertion thereon.”

Question 24

The practitioner’s report on agreed-upon procedures on an entity’s compliance with specified requirements should include:

Answer 24

identification of the responsible party.

Question 25

The practitioner’s examination report on compliance should include:

Answer 25

A statement that the practitioner believes the examination provides a reasonable basis for his or her opinion

Question 26

Section 404 of the Sarbanes-Oxley Act of 2002 requires:

Answer 26

that the audit report attest to, and report on, the internal control assessment made by management.

Question 27

A written assertion about the effectiveness of internal control should be presented:

Answer 27

in a separate report that will accompany the auditor’s report.

Question 28

When third-party use of prospective financial statements is expected, an accountant may not accept an engagement to:

Answer 28

perform a review.

Only a compilation, examination and agreed-upon procedures.

Question 29

Comfort letters are ordinarily signed by the client’s:

Answer 29

independent auditor.

Note: It is a letter issued to underwriters concerning the financial information contained in registration statements filed with the SEC in connection with the issuance of securities.

Question 30

If the auditor does not audit the complete set of statements,

Answer 30

(s)he should determine whether it is feasible to (1) audit the profit participation and (2) perform procedures on interrelated items.

Question 31

In order to identify matters that may affect interim financial information,

Answer 31

the auditor should read the available minutes of meetings of stockholders, directors, and appropriate committees.

Question 32

Reports are considered special reports when issued in conjunction with:

Answer 32

compliance with aspects of regulatory requirements related to audited financial statements.

Question 33

Letters for underwriters (comfort letters) typically give

Answer 33

negative assurance on unaudited interim financial information.

Question 34

The auditor needs to communicate any disagreements any matters,

Answer 34

hether resolved or not, that individual or in the aggregate could be significant to the financial statements or the auditor’s report. Disagreements based on preliminary or incomplete information that were later resolved do not need to be disclosed.

Question 35

The retention period for audit documentation:

Answer 35

“should not be shorter than five years from the report release date”

Question 36

To ensure that the audit report for an issuer is prepared in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the report must:

Answer 36

attest to and report on the internal control assessment made by the management of the issuer.