Progress Tests Flashcards
The auditor provides an opinion on
the entity’s financials and on the effectiveness of internal controls.
Generally accepted auditing standards (GAAS) are
measures of the auditor’s performance, and guide the auditor in the performance of a properly planned and executed audit.
The Auditing Standards Board (ASB) issues many types of pronouncements, including but not limited to
Statements on Auditing Standards (SASs). While SASs are considered to be interpretations of GAAS, not all ASB pronouncements relate to audits.
The accountant is not required to obtain an understanding of these in a review engagement under SSARS
Internal Controls. An understanding would be required in an audit or in a review of the interim financials for an issuer (and nonissuer when the annual financials are audited).
Analytical procedures used in the planning stage of an audit engagement are
usually use financial and nonfinancial data aggregated at a high level.
The “Service” provider auditor should include in their report a description of the
scope and nature of procedures performed. When providing an opinion on controls placed in operation does not include an opinion on their operating effectiveness.
If one or more significant assumptions do not provide a reasonable basis for the financial statements forecast then a(n)
adverse opinion would be issued. Not an unmodified opinion with an emphasis-of-matter paragraph.
In order to obtain an initial understanding of internal controls sufficient to assess the risk of material misstatement of the financials, an auditor would most like perform
risk-assessment procedures to evaluate the design of relevant controls. Not analytical procedures to determine the need for specific controls. Analytical procedures typically do not help determine the need for specific controls anyway.
In a well designed internal control, employees in the same department would
approve purchase orders and also negotiate terms with vendors. The department being the purchasing department for these 2 activities.
An auditor engaged to conduct a performance audit of a governmental entity in accordance to GAS, is not required to report
a concurrent opinion on the financials taken as a whole. However, the pertinent views of the entity’s responsible officials concerning the auditor’s findings are part of the auditors report.
Management acknowledges its responsibility for the design of controls to detect and prevent fraud in its
management representation letter. Management does not communicate its views on ethical behavior to its employees in the management representation letter.
A predecessor auditor who audited the prior period financials generally should obtain a letter of representation from the
successor auditor. The predecessor auditor is seeking independent confirmation regarding issues that might materially affect the previous financials.
The auditor’s report on financials prepared in conformity with a comprehensive basis of accounting other than GAAP would include a statement that the basis is
a comprehensive basis of accounting other than GAAP. It would not state that the cash receipts and disbursements basis is not a comprehensive basis of accounting.
To obtain an understanding of a continuing client’s business in planning an audit, the auditor would most likely
review prior years audit documentation and the permanent file for the client. Audit documentation from prior years may contain useful information about the nature of the business, its organizational structure, its operating characteristics, and transactions that may require special consideration. Reading specialized industry journals would not give an as good of an understanding than prior years audit documentation.
The most effective control assuring that recorded purchases are free from material errors is
the independent matching of the purchase order, receiving report, and the vendor’s invoice in preparing vouchers on which the disbursement check is based on. Just matching the purchase order and the vendor’s invoice is not enough, as that will still allow payment of goods that were not received.
