pass AUD Flashcards
negative assurance may be expressed when an accountant is requested to report on the:
1. results of performing a review of management’s assertion
2. compilation of prospective financial statements
<1>
In essence, negative assurance tells you that nothing wrong stood out, while positive assurance actively confirms that things are right.
2–> There is no assurance (positive or negative) provided in a compilation, as the accountant does not verify or test the information.
the auditor will not preform in review of interim financial information:
1. applying financial rarios to the interim financial information
2. obtainig corroboraring external evidence.
<2>
2–>In a review, the auditor primarily relies on inquiry and analytical procedures rather than obtaining extensive corroborative external evidence, which is more common in a full audit. While some external evidence might be gathered in a review, it’s not to the same extent as in an audit.
when an accountant is not independent with respect to an entity, the compilation report should be:
1. a compliation report with special wording that notes the accountant’s lack of independence may be issued.
2. the standard compilation report may be issued, regardless of independence
<1>
In simple words: If an accountant has a special connection with a company, their report should say so at the end. They can tell why they have this connection, but it’s their choice.
tracing shipping documents to prenumbered sales invoices provides evidence that:
1. shipments to customers were properly invoiced
2. all goods ordered by customers were shipped
<1>
When tracing shipping documents to prenumbered sales invoices, the auditor is moving from the source documents (shipping documents) to the financial records (sales invoices).
what characteries of prospective financial statement would require the practitioner to include in a report on the prospective financial statements a paragraph that restricts the use and distribution of the report?
1. they are considered a financial projection
2. they are prepared by a practitioner who lacks independence
<1>
What things in future financial predictions mean the report should have a “use with caution” warning?
包括財務預測的前瞻性財務報表是前瞻性的，並且基於對未來事件的假設，而不僅僅是責任方的預期。 由於假設的假設性質以及此類資訊可能被誤解或誤用，這些陳述尤其敏感。
an auditor that is auditing accounts receivable with least likely perform what tests?
1. Select cash disbursements made shortly after year-end and examine the supporting documentation, such as receiving reports and vendor invoices
2. Confirm a sample of accounting receivables with the customer is that all the balance
<1>
1–> [cash disbursement–> payable)
would be a test performed during an auditor of accounts payable, not accounts receivable
when an auditor doesnot receive replies to positive request for year-end accounts receivable confirmations the auditors most likely would:
1. Ask the client to contact the customers to request that for confirmation be return
2. increase the assessed level of detection risk for the valuation and completness assertions
<1>
2–>
If an auditor increases the level of detection risk, they might reduce substantive testing.
However, when there’s a lack of response to confirmations, the auditor generally would be more skeptical and may increase, not decrease, their substantive procedures.
Which is true about the auditors responsibility with respect to accounting estimates?
1. The auditor is responsible for preparing accounting estimates in accordance with generally accepted auditing standard
2. The auditor is responsible for evaluating the reasonableness of accounting estimates
<2>
The auditor’s job isn’t to prepare or make the accounting estimates. Instead, the company’s management does that. The auditor’s role is to check if those estimates seem reasonable and are made correctly based on the information available.
What procedures is usually performed by an accountant in review engagement of her non-inssuer performed in accordance with statements on standards for accounting and review services?
1. Communicating significant deficient discomfort during the study of the internal control structur
2. Comparing the financial statements with the statements for comparable prior periods
<2>
2–>is part of the Analytical Procedures. When you look at trends, data, and ratios to see if the numbers make sense, you often do this by comparing them with past periods to spot any significant differences or anomalies.
procedures for a review engagement:
1.Inquiries - Asking questions.
2.Analytical Procedures - Looking at trends and data.
3. Review of Documentation - Checking some documents.
4. Obtain a Letter from Management
Testing the existence of the accounts receivable balance:
1. Testing, stripping cut off procedures
2. Obtaining confirmation of receivables directly from customers
<2>
2–> existence–> vouch back –> F/S to source –> more realiable to confirm with the customers directly
which party should request inquiry of a client’s lawyer?
1. client management
2. auditor
<1>
當審計師需要客戶律師提供資訊（通常涉及訴訟、索賠或評估）時，標準做法是由客戶管理層提出正式請求。 這是因為律師-委託人特權存在於律師和委託人（客戶管理）之間，而不是存在於律師和審計師之間。 審計師通常會起草或提供詢問函，但應由客戶管理層發送，以確保律師能夠在不違反保密協議的情況下做出適當回應。
by examing the assets listed as new additions on an analysis of plant and equipment, an auditor obtains eveidence concerning management’s assertion of:
1. valuation and allocation
2. existence
<2>
The main reason for this is that the auditor is checking to see if the newly added assets actually exist in physical form and have been accurately recorded in the books. The focus is on determining whether the asset is real and not just a fictitious entry.
with respect to litigation involcing a nonissuer that could give rise to a risk of material misstatement, an auditor should obtain audir ecidence relevant to each of the following matter, except:
1. the amount or range of potential loss resulting from the litigation
2. the objectivity and experience of the entity’s legal consel
<2>
in determining the effectiveness of an enity’s internal controls relating to the occurrence assertion for payroll transactions, and auditor most likely would inquire about and:
1. observe the segregation of duties concerning personnel responsibilities and payroll disburesement
2. verify the preparation of the monthly payroll account bank reconciliation
<1>
2–>ensuring completeness and accuracy of recorded transactions.
confirmarion from outside agent indicating that securities are being held in the client’s name provides evidence with respect to both the existence assertion and
1. understandability of presentation and classification
2. rights and obligations
<2>
client’s name –> ownership–> right
