Pass Key 4 Flashcards
When the auditor’s risk assessment is based on the effective operation of control s, the audit will most likely involve
Identifying specific internal control s relevant to specific assertions
Auditor determing that performing substantive test on inventory will take less time that test of controls
Perform only substantive test on inventory
Which of the following presumptions is correct about the reliability of audit evidence?
An effective internal control structure provides more assurance about the reliability of audit evidence
When performing substantive test of a random sample of cash disbursement auditor sees that original invoice have been misplaced. What should he do?
Reevaluate the risk of fraud and design alternate tests for the related transactions
To be effective analytical procedures in the overall review stage of an audit engagement should be performed by
A manager or partner who has a comprehensive knowledge of the client’s business and industry
When auditor increases the assessed level of control risk because some activities are ineffective, auditor would most likely
increase the extent of tests of details
As the asseptable level of detection risk decrease an auditor may
Postpone the planned timing of substantive tests from interim dates to year end
The auditor’s purpose in establishing materiality levels in compliance audit includes all EXCEPT
Establishing the basis for the opinion on effectiveness of internal control over compliance
A principal advantage of statistical method of attribute sampling over nonstatistical methods is that they provide a scientific basis for planning the
Sample size
And auditor who wishes to capture an entity’s data as transactions are processed and continuously test the entity’s computerized information system would use what technique
Embeded audit module
If management declines to present supplementary information required by GASB auditor should issue
Unmodified opinion with other matter paragraph
If management declines to present supplementary information required by GASB auditor should issue
Unmodified opinion with other matter paragraph
On receiving a client’s bank cutoff statement an auditor most likely would trace
Prior year checks listed in the cutoff statement to the year end outstanding checks
What of the following factors auditor consider most important upon subsequent discovery of facts existed at the date if the audit report
The client’s willingness to issue revised FS or other disclosures to person’s known to be relying on the FS
When accountant compiles a financial forecast, the account ants report should include
The statement that the practitioner assumes no responsibility to update the report for events and circumstances occurring after the date of the report
When CPA can not obtain a written representatuon letter from management acknowledging management s responsibility for internal control. CPA should
Withdraw from ingagement or issue disclamwr
Advise the General Manager which of the following control achieves the objective ofaccountability and comparison.
The responsibility for small tools is assigned to individual foremen
Advice the Purchase Manager which of the following control does not achieve the objective of Validity of transactions.
Purchases are supported by purchase requisition, purchase order, receiving report, and vendor invoice
For inventory itemMO-6403 the Auditor’s test count was 150 whereas the client’s records showed a quantity of 127. On inquiry about the difference, the supervisor commented that the variance of 23 units was due to the additional items identified as damaged and will be returned to the vendor.
How should Smith’s audit response be to the above variance situation?
Review return shipment documentation to verify exclusion from inventory count
Customer response to at request .Yes, we ordered $22,000 worth of merchandise from A2Z in early December, however, we have mailed A2Z a check for $22,000 on 12th December Year 1
Post rectifying entry in the books of A2Z to correct the error
Inherent risk is evaluated to help an auditor assertion which of the following
The susceptibility of a FS assertion to material misstatement assuming there are no related controls
This is the 5th year that Bane, CPA, is auditing Maya. Based on the information provided, which of the following factor most likely increases the risk of fraudulent financial reporting?
That Maya had an unusually successful 4th quarter.
Subsequent to issuing a report on audited financial statements, a CPA discovers that the accounts receivable confirmation process omitted a number of accounts that are material, in the aggregate. Which of the following actions should the CPA take immediately?
Perform alternative procedures to verify account balances.
Components of internal control?
The 5 components of internal control according to COSO are:
Control environment
Risk assessment
Control activities
Information and communication system
Monitoring
Components of internal control
The 5 components of internal control according to COSO are:
Control environment
Risk assessment
Control activities
Information and communication system
Monitoring
Which of the following procedures would a CPA most likely perform in the planning phase of a financial statement audit?
Compare financial information with nonfinancial operating data.
When the operating effectiveness of a control is not evidenced by written documentation, an auditor should obtain evidence about the control’s effectiveness by
Inquiry and other procedures such as observation.
Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?
Compare cash payments made after the balance sheet date with the accounts payable trial balance
CPA firm should adopt a system of quality control
That encompass es HR policies and practices.
Agreed upon procedures
Disclaim opinion on subject matter
When planning a review what auditor should perform to understand customers business and internal control
Consider the results of audit perform with respect to current year’s FS
Best procedures for identifying unrecorded trade accounts payable?
Review cash disbursements recorded subsequent to BS date to identify unrecorded trade accounts payable
Compiled FS report
The accountant is not required to perform any procedures to verify info provided by management
