Pass Keys Flashcards
What is the most relevant assertion for AR?
Existence- the risk AR will be overstated is higher than risk that AR will understated (completeness)
What is the most relevant assertion for AP?
Completeness and accuracy (risk of understatement is greater than risk of overstatement (rights and obligations)
6 FS Assertions
COVERU
Performing a count of negotiable securities auditor records on worksheet
Acknowledgement that securities returned infact
5 Component s of internal control
Control environment Risk assessment Information and communication Monitoring Existing Control activities
What are assertion s for account balance?
Testing inventory is an account balance, so the 4 assertions for account balances apply: 1) existence, 2) completeness, 3) rights and obligations, and 4) valuation and allocation.
Quality control system if CPA firm
The firm must establish and maintain a system of quality control. The system of quality control should include policies and procedures addressing each of the following elements:
Leadership responsibilities for quality within the firm (the tone at the top): There should be policies and procedures that promote an internal culture that emphasizes that quality is essential in performing engagements.
Relevant ethical requirements: This mainly deals with independence. A firm needs to have policies that make sure personnel understand independence requirements, have a system to evaluate possible independence issues for engagements, and policies for responding to possible breaches of independence. It should also obtain written confirmation annually from personnel required to be independent that they are in compliance with the policies and procedures on independence.
Acceptance and continuance of client relationships and specific engagements: There should be policies and procedures that evaluate any risks associated with a possible engagement and to help ensure that the firm only accepts engagements that can be completed with professional competence.
Human resources: There should be policies to ensure the firm has the appropriate and sufficient staff to perform engagements that 1) are in accordance with professional standards and 2) enable the firm to issue reports that are appropriate for the circumstances. The firm’s policies should also address personnel professional development as they advance in position and experience.
Engagement performance: There should be policies that provide reasonable assurance that engagements are performed in accordance with professional standards and that the firm issues reports that are appropriate for the circumstances. This also involves the engagement quality control review policies of the firm.
Monitoring: Policies and procedures that provide reasonable assurance that the firm’s quality control system is functioning properly and that the system is adequate and relevant.
In which case unmodified opinion would not be appropriate?
A material related party transaction not properly disclosure d
Which of the following info would raise a question concerning with incompliance with laws?
Entity prepared several large cash checks payable during the year
Which of the following auditor least likely to consider with respect to fair value?
Disclosure of the information available subsequent to the audit
Processing data through the use of the simulated files provedes auditor info of operating effectiveness of control. What technique is involved?
An integrated test facility
Factors CPA consider in the planning stage of audit engagement
FS account s likely to consider misstatement s
Condition s that require test extensions
Control related to occurrence assertion in payroll transaction
Segregation of duties
Before accepting engagement for new audit client auditor should
Get concern regarding making inquiry to predecessor auditor
Decrease of misstatement in a statement that auditor could tolerare
Perform planed audit procedure close to balanshhet date.
To determine there check being issued for anautorized expenditures
Select items from Canceled checks
Customer Zag omits statement of cash flow
Explane to Zag that omission requires qualification of opinion
Management representation should be obtained about all except
Management consultation with other accountants
Search for unrecorded payables
Compare cash payments after balance sheet date with the accounts payable trial balance
Negative assurance (Not aware, nothing came to our attention)-Review, but positive-Examination. If there is no word assertion, then it is subject matter (because of the effect)
Review Report vs Examination Report
Which of the following is not the risk assessment procedure
Risk assessment procedures to obtain an understanding of the entity include:
Inquiries of management
Analytics, such as using high level data to compare the prior year to the current year’s results
Observation and inspection, such as walkthroughs
FOB 2 types
FOB Shipping Point, indicates that the sale occurred at the shipping point—at the seller’s shipping dock. FOB Destination indicates that the sale will occur when it arrives at the destination—at the buyer’s receiving dock.
Prior to, or in conjunction with, the information-gathering procedures for an audit, audit team members should discuss the potential for material misstatement due to fraud. Which of the following best characterizes the mind-set that the audit team should maintain during this discussion?
Questioning
For an initial audit, which of the following is not a likely audit procedure for the opening balances?
High level analytical procedures comparing the previous period to the current year trial balance.
The independent auditor wants to assign tasks for the internal auditor to perform.He may allow
Allow the internal auditor to perform tests of internal controls.
Which is not considered entity level control
Comparison actual assets will h balances
Which is impairment of CPA independence under GAS?
Developing entity programme policies
Risk factor relates to misstatement arising from misapropriation of assets?
Lack of independent checks
A planning to use substantive anal Procedures. What is not a primary factor that affects the Efficiency and effectiveness of these Procedures in detecting possible Misstatements?
Analytical procedures should be applied to assertions that have potential misstatement s
Which is NOT a part of obtaining understanding of IC?
Determining there IC is operating effectively
In order to test existence and occurrence assertion of clients account payable auditor would most likely perform
Vouch selected amounts from AP listing to the clients voucher package
In planning Audit, auditor should consider materiality for the financial statements as a whole in terms of:
The smallest aggregate level of misstatements that could be considered material to any one of Fin Statements because FS are interrelated.
