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Audit CPA > Practice Quizzes > Flashcards

Practice Quizzes Flashcards

1
Q

When is the earliest an audit report may be dated?

A

auditor has sufficient & appropriate evidence to support an opinion

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2
Q

change in Act principle that materially affects comparability of nonissue comparative FS and auditor concurs? what to do

A

refer to change in EMPHASIS OF MATTER paragraph following unmodified opinion paragraph

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3
Q

first step in applying analytical procedures?

A

develop an expectation

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4
Q

what is sampling risk?

A

probability that the sample chosen is not representative of the population as a whole

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5
Q

how can an auditor assess control risk at a level higher than appropriate? how would deviation rate and tolerable rate compare?

A

the deviation rate in the auditor’s sample EXCEEDS the tolerable rate, but the deviation rate in the population is LESS than tolerable rate

if deviation rate>tolerable rate – higher risk

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6
Q

how does sample size of test of controls vary compared to expected population deviation rate and the tolerable rate?

A

sample size and expected deviation rate rise or lower by the same amount. sample size is inversely correlated to tolerable rate

ex: auditor expects more errors (higher expected population deviation rate), they will increase sample and tolerate less (lower tolerable rate)

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7
Q

how to ensure inventory purchases are properly authorized

A

matching of requisitions, receiving reports, and purchase orders

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8
Q

how to ensure inventory records are accurate?

A

periodic inventory counts used to adjust perpetual records

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9
Q

how does auditor report on responsibility in an AUP report?

A

there should be a disclaimer of responsibility for sufficiency of AUP procedures

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10
Q

how does auditor reference consistency of accounting principles in an audit report?

A

Implicitly! no need to mention unless there is an issue, then can be mentioned in the emphasis of matter paragraph

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11
Q

type of opinion if auditor is unable to obtain audited financial statements of a consolidated investee

A

qualified or disclaimer, as this is a scope limitation

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12
Q

Regardless of the assessed level of control risk, an auditor would perform what type of tests?

A

substantive tests to restrict detection risk for significant transaction classes. cannot entirely eliminate substantive testing for significant transactions/balances

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13
Q

date of management rep letter should coincide with what date?

A

auditor’s report

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14
Q

in searching for unrecorded payables, what would an auditor do?

A

compare cash payments made AFTER balance sheet date with accounts payable trial balance. The auditor is looking for items that should have been recorded as of the balance sheet date, but were not.

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15
Q

comfort letter?

A

letter containing negative assurance from the CPA to the underwriter or certain other requesting parties just before registering client’s securities. typically signed by the client’s independent auditor

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16
Q

maximum number of days auditor of nonissuer should complete assembly of audit file?

A

60 days following report release date

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17
Q

A group engagement team of a nonissuer should ask a component auditor to communicate:

A

whether it complied with ethical requirements relevant to the group audit and the independence requirements.

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18
Q

type 1 report?

A

provides auditor an UNDERSTANDING of controls at the service organization

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19
Q

type 2 report?

A

provides EVIDENCE of the OPERATING EFFECTIVENESS of a service organizations controls
if risk assessment includes an expectation that the controls are OPERATING EFFECTIVELY, you need a type 2

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20
Q

independence for review v compilation

A 
review = MUST BE INDEPENDENT
compilation = not required, but must disclose lack of independence
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21
Q

assurance on a compilation report?

A

no assurance

Report should state the accountant does not express an opinion on the financial statements

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22
Q

“statement of activities” is an adequate name for what type of report, and by what type of company?

A

Income statement for a not-for-profit. this is NOT a title for OCBOA

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23
Q

before accepting an engagement, a successor auditor should inquire about what of the predecessor. after accepting?

A

inquire about the disagreements the predecessor had with client regarding audit procedures and accounting principles.
AFTER accepting, successor can inquire of the predecessor about matters of continuing accounting significance

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24
Q

benefit of using computer assisted audit techniques ?

A

greater item of items can be tested at little additional cost

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25
Q

how to assess COMPETENCY of internal auditor

A

education, certification, quality of workpapers

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26
Q

sample error formula?

A

recorded amount - actual amount

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27
Q

tainting factor?

A

sample error / recorded amount

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28
Q

projected misstatement in a PPS sample, how to calculate

A

tainting factor x sample interval (see note on iPad)

29
Q

attribute sampling?

A

statistical approach to test controls. you CAN quantify this!

30
Q

what to do if you don’t hear back on positive requests for AR confirms

A

ask the client to contact customers!

31
Q

required to inquire during compilation?

A

No!! performance requirements are typically limited to having an understanding of the industry and business, and reading the FS to make sure there are no obvious mistakes in applying accounting principles

32
Q

when is pre audit approval required by the audit committee

A

for all audit, tax, and review engagements. not required for non-audit services that do not exceed 5% of total revenue of the fiscal year of the audit

33
Q

when is independence impaired related to paying audit fees

A

if more than one year overdue in payment of professional fees

34
Q

analytical procedures in the planning phase example

A

comparing financial information with nonfinancial information
anything that helps the nature, extent, timing of audit procedures

35
Q

Under DOL rules, independence is impaired when an auditor serves as what for employee benefit plans

A

an investment advisor

36
Q

how are an auditor’s responsibilities extended under a 2 CFR 200 single audit?

A

auditor is reponsible for procedures testing compliance on matters impacting federal reward programs

37
Q

what control deficiencies is an auditor required to communicate to those charged w governance? all of them?

A

not all of them!! only control deficiencies determined to be SIGNIFICANT DEFICIENCIES and MATERIAL WEAKNESSES are required to be communicated

38
Q

how to report on change in accounting estimate (one keyword)

A

PROSPECTIVELY
change in estimate (ex: change in life of a depreciable asset) does not affect comparability of FS between periods – so no need to modify report

39
Q

how to report on change in accounting principle?

A

change in principle (ex: method of accounting for inventory) is reported in an EMPHASIS OF MATTER PARAGRAPH (after the opinion paragraph) if it is material

40
Q

in an auditor standard report – is there a need to mention consistency?

A

NO
consistency between periods is implied, no need to state it. only mention in an EOM if a change in principle impacts consistency between periods

41
Q

when PLANNING for an integrated audit of an entity’s internal control, what are things that the auditor might do? what is one thing they absolutely won’t do during PLANNING?

A

consider changes in operations, preliminary judgements, evidence available

DO NOT evaluate the operating effectiveness of the controls, this is obviously something that happens after planning

42
Q

embedded audit module, what is it?

A

a code designed to give auditor a notification in real time when transaction meets a criteria flagging it for review, good for paperless systems where an auditor needs to continuosuly monitor and analyze transaction processing

43
Q

when assessing the OBJECTIVITY of internal auditor, what should CPA do

A

auditor should figure out who the internal auditor reports to

44
Q

what are Free rents received as part of an award to carry out a federal program treated as

A

federal funds expended

45
Q

what is the registration statement referring to

A

securities act of 1933

46
Q

CPA thinks its justifiable, but they are changing from an audit to a review per client request. what do u have to do

A

u don’t need to mention the audit at all, just simply say a review is substantially less in scope than an audit

47
Q

no assurance provided in a preperation engagement, but where does the auditor reference (hint: how many times)

A

EACH PAGE

say that there is no assurance provided

48
Q

finding significant defeciencies in internal control, what type of opinion does this mean

A

qualified if not fixed. only MATERIAL weaknesses will result in an adverse opinion

49
Q

overall result of a review?

A

Conclusion with LIMITED ASSURANCE.

You are NOT expressing an opinion!!

50
Q

management rep letter required for a review?

A

you BETCHA!

think – you are INQUIRING in a review, so the management rep letter is like an inquiry u r making

51
Q

SSAE preperation audit, what does the CPA disclose in the report

A

that they have NO responsibility to update the report for events/circumstances occuring after report date

52
Q

financial information systems DESIGN & IMPLEMENTATION impair independence if auditor does this

A

yessir except those falling under the de minimis exception

53
Q

examination of AR & cash receipts provides auditor evidence for what assertions related to sales

A

completeness & occurence of sales transactions

54
Q

The auditor should consider the results of analytical procedures performed in the planning stage of the audit in identifying:

A

the risks of material misstatement due to fraud

55
Q

IS v BS accounts, which ones when looking at the relationships is more predictable

A

IS accounts! ex: interest expense is more reliable evidence than accounts receievable

56
Q

definition of a walkthrough

A

following a transaction from origination until it is in the financial statemets

57
Q

what two things (two words) can help an auditor determine the DESIGN of internal control?

A

observation & inspection to evaluate IC design

58
Q

to understand an entity’s internal control, what is important for auditor to do

A

obtain knowledge of the controls & whether they have been implemented

NOT required to understand the operating effectiveness to understand the internal contorl

59
Q

why is it important to understand the INFORMATION system relevant to financial reporting

A

to understand types of TRANSACTIONS processed, and how they are initiated, recorded, and summarized

additionally included is how they prepare significant accounting ESTIMATES

60
Q

what are common walkthrough procedures? (4 things)

A

inquiry, observation, inspection of relevant documentation, and reperformace of controls

61
Q

to understand an entities internal control related to inventory, what is a good thing to do

A

review description of inventory controls

obtaining and understanding is step one, so before doing test counts or anything, simply learn more by reading the descriptions

62
Q

when testing the completeness assertion for accounts payable, what is a good to use for the population?

A

list of vendors that the company has previously done business with

63
Q

what is the primary responsibility of the stock registrar?

A

to verify that stock is issued only with proper authorization

64
Q

what if related party transactions are not disclosed, but less than material?

A

even if it is not QUANTITIVELY MATERIAL, it is qualitatively material because it is important to disclose all related party transaction information

65
Q

what is an auditor required to communicate to those charged w governance regarding deficiencies found in internal control

A

both significant deficiencies and material weaknesses

66
Q

what needs to be found to issue an adverse opinion on IC?

A

MATERIAL WEAKNESS

significant defiencies will be a qualified opinion

67
Q

what defencies in internal control need to be communicated to management

A

ALL DEFIECIENCES the auditor finds

communicate defiencies that are significant or material to audit committee

68
Q

what is a cognizant agency?

A

agency that provides most amount of direct funding to a nonfederal agency

Audit CPA (10 decks)

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