Study Quiz

Question 1

1.10 What are the purposes of establishing quality control procedures with respect to acceptance of new clients

Answer 1

1. Ensure that clients management acts with integrity
2. Provide reasonable assurance that the CPA firm
   
   1. Is competent to perform engagement
   2. Has needed capabilities
   3. Can comply with legal and ethical requirements

Note: overall the reason for QC requirements is to ensure that the CPA firm complies with professional standards and legal and regulatory requirements and issues an appropriate report.

Question 2

Independence requirements from SOX for audit issuers include?

Answer 2

Question 3

1.03 What circumstances would permit an independent auditor to accept an engagement after the close of the fiscal year?

Answer 3

Generally there are scope limitations with regards to accepting an audit client after YE (aka inventory at 12.31.22 could not be performed). As such an auditor may accept an audit engagement after the fiscal year end when alternative audit procedures can remedy any limitation resulting from performing the audit after the close of the year.

Question 4

What are the preconditions of an audit that must be considered before accepting an audit?

Answer 4

1. Determining if the applicable reporting framework is acceptable
2. obtaining managements agreement that it understands and accepts certain responsibilities.
   
   1. Prepare the financial statements
   2. Establish and monitor controls
   3. provide auditor access to information relevant to the audit

Question 5

What is the responsibility of each of the following parties?

1. Audit Committee
2. Management
3. Internal Audit

Answer 5

1. Audit committee is responsible for overseeing financial reporting and ensuring that proper IC are in place to prevent fraud.
2. Management is responsible for establishing and maintaining controls that prevent and detect fraud and for performing risk assessments related to fraud risk.
3. Internal Audit evaluates whether those internal controls are working and reports back to the audit committee.

Question 6

True or False

Independence is considered impaired if fees remain unpaid for any professional service provided more than one year prior to the current year’s report date.

Answer 6

True

No attest report can be issued before such fees are paid.

Question 7

True or False

CPA’s are generally may not release confidential client information without permission. A CPA may share information with a third party service provider after entering into a confidentiality agreement with the provider or receiving permission from the client.

Answer 7

True

Either a confidentiality agreement must be signed or permission from the client must be obtained.

Question 8

What is a “private letter”

Answer 8

A private letter ruling is a statement from the IRS that provides interpretation of tax law as it relates to situations specific to a particular taxpayer. CONTINGENCY FEE IS OKAY

Question 9

What is a compilation engagement?

Answer 9

A compilation is an engagement in which the CPA helps management assemble their financial statements. Independence is not required for a compilation because the CPA is not responsible for rendering an opinion, conclusion, or findings. However, if the CPA lacks independence, it must be disclosed in the compilation report.