Testbank review Flashcards
1
Q
When AICPA professional standards relating to a review of a nonissuer’s (nonpublic entity’s) financial statements uses the term “should” to indicate the accountant’s responsibility to perform a procedure, performance of that procedure is considered:
A
Presumptively mandatory—The accountant is required to comply with it except in rare circumstances.
2
Q
Compilations, reviews and audits require accountant (auditor) reports, while ____________ does not require such a report.
A
financial statement preparation
3
Q
SSARS do not apply when only _______ financial statement notes.
A
drafting
4
Q
When, after discussions with management, the accountant prepares financial statements that contain a known departure or departures from the applicable financial reporting framework (including inadequate disclosure), the accountant should ________
A
disclose the material misstatement or misstatements in the financial statements—either on the Face of the statements or in the Notes.
5
Q
To perform a review, an accountant should
A
a. Possess an understanding of the accounting principles and practices in the client’s industry and an understanding of the entity’s business that will provide him/her, through the performance of inquiry and analytical procedures, a reasonable basis for expressing limited assurance that no material modifications need to be made to the financial statements.
b. Possess a general understanding of the client’s
(1) Organization
(2) Operating characteristics
(3) Assets, liabilities, revenues and expenses
6
Q
a review involves a three-party relationship among:
A
(1) responsible party (management), (2) intended users, and (3) an accountant.
7
Q
a __________ form of association allows companies to omit disclosures when such omission is not meant to make the financial statement misleading and such omission is properly disclosed.
A
compilation
8
Q
Changing from Audit to Review – the CPA should consider the _________ of the request before allowing the change, particularly when a scope limitation is involved. If the CPA does not believe it is reasonable, the change should not occur. If the CPA considers it reasonable, a______ report may be issued.
A
reasonableness, standard review
9
Q
Nature of Preparation of Financial Statements
A
- The accountant prepares financial state using the records, documents, explanations, and other information provided by management.
- The accountant should ensure that a statement is included on each page of the financial statements indicating “no assurance is provided.” If the accountant is unable to include such a statement on each page the accountant should issue either a
a. Disclaimer that makes clear that no assurance is provided on the financial statements or
b. Compilation report in accordance with AR-C section 80. - The accountant need not even consider whether s/he is independent when preparing financial statements.
10
Q
Compiled financial statements may omit note disclosures; the following is added to the compilation report:
A
Management has elected to omit substantially all of the disclosures (and the statement of cash flows) required by generally accepted accounting principles. If the omitted disclosures were included in the financial statements, they might influence the user’s conclusions about the company’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.
11
Q
A CPA should_________on compiled comparative financial statements in which one year, but not all years, omit note disclosures.
A
not report
12
Q
Comparative report, last year Audit, this year Review
A
the report should indicate (1) that the financial statements of the prior period were audited, (2) the date of the previous report, (3) the type of opinion expressed, (4) if the opinion was other than unmodified , the substantive reasons therefor and (5) that no auditing procedures were performed after the date of the previous report.
13
Q
As is the case for compilation reports, review reports are __________ in situations involving a lack of consistent application of generally accepted accounting principles or the existence of major uncertainties (including going-concern uncertainties) that have been properly reported in the financial statements. However, when that information is not properly presented or disclosed in the financial statements, the financial statements contain a departure from generally accepted accounting principles, and the review report should be appropriately __________.
A
not required to be altered, modified
14
Q
In what situation does preparation requirements apply?
A
- Prepare financial statements for use by another CPA who will review or audit those financial statements.
- Prepare financial statements to be presented with the entity’s tax return for purposes other than
submission with the tax return to a tax authority. - Prepare personal financial statements for presentation alongside a financial plan.
- Prepare financial statements using the client’s general ledger outside of an accounting software
system. - Prepare single financial statements or financial statements with substantially all disclosures (e.g., notes) omitted.
15
Q
professional standards consider review to be both ______and ______engagements.
A
assurance and attest
16
Q
Close
When current year financial statements have been reviewed and prior year financial statements were audited, an accountant may either reissue the audit report and issue a review report, or may refer to the audit in the review report. In referring to the audit in the review report, an accountant should indicate that _________, _________, _________, and ________. (When the current year financial statements have been compiled, the same procedures are followed.)
A
the statements were audited,
the date of the previous opinion,
reasons for any departures from an unqualified form,
and that no auditing procedures were performed after the date of the previous report
17
Q
A compilation report should include statements that the financial statements have been _______ (in accordance with SSARS) and that the accountant ____________ the financial statements.
A
compiled, did not audit or review
18
Q
Independence is not required when ___________. The accountant need not consider whether s/he is independent and need not disclose independence.
A
preparing a client’s financial statements
19
Q
__________ is a variation of parallel simulation, processes actual client data through a copy of the client’s application program.
A
Controlled reprocessing
20
Q
________ processes actual client data through an auditor’s generalized audit software program and frequently, although not necessarily, the auditor’s computer.
A
Parallel simulation
21
Q
_________ introduces dummy transactions into a system in the midst of live transactions and is usually built into the system during the original design.
A
Integrated test facility (ITF)
22
Q
__________ is a set of dummy transactions that is developed by the auditor and processed by the client’s computer programs to determine whether the controls which the auditor intends to test (not necessarily all controls) to restrict control risk are operating effectively.
A
Test data
23
Q
_________ are programmed routines incorporated into an application program that are designed to perform an audit function such as a calculation, or a logging activity.
A
Embedded audit modules
24
Q
if controls appear adequate, the auditor should not skip testing them unless:
A
(1) the costs of testing are expected to exceed the savings in substantive tests or (2) the controls are redundant to other internal control activities. Therefore, this is not a valid reason for omitting tests of controls.
25
_______ involves the actual analysis of the logic of a computer program's processing routines.
code review
26
A ________ , while normally at the end of an account number, may be placed consistently in any position in the account when adequate computer programming exists
check digit
27
________ is the individual responsible for maintaining the database and restricting access to the database to authorized personnel.
Database administrator
28
________ is responsible for custody of the removable media (i.e., magnetic tapes or disks) and for the maintenance of program and system documentation.
Data librarian
29
The ________ is in constant contact with user departments and programming staff to ensure the users’ actual and ongoing needs are being met.
systems analyst
30
A ________ is a log, usually created by an embedded audit module, used to collect information for subsequent review and analysis.
Systems control audit review files (SCARF)
31
_________—This technique attaches additional audit data which would not otherwise be saved to regular historic records and thereby helps to provide a more complete audit trail.
Extended records
32
__________ is a technique in which an identifier providing a transaction with a special designation is added to the transaction record. The tag is often used to allow logging of transactions or snapshot activities.
Transaction tagging
33
the auditor is concerned with the existence of an error or the nonexistence of an error; therefore, ______ sampling is appropriate.
attribute
34
A ________ is a departure from the prescribed internal control policy or procedure.
deviation
35
________ sampling may be applied when testing controls which leave an audit trail in the form of documentary evidence. Documentary evidence in the form of audit stamps, initials, calculations, etc., lends itself to tests of controls where the auditor’s objective is to determine the rate of _________with the prescribed control.
statistical, compliance
36
_______ sampling (used in tests of controls) reaches a conclusion in terms of a rate of occurrence
Attributes
37
_______ sampling (used in substantive testing) reaches a conclusion in dollar amounts (or possibly in units).
Variables
38
When a dual-purpose test is used, auditors select the sample size as _______________.
the higher of that required for the two purposes. For example, if the test of control test required 35 items, and the substantive test required 40, both tests would be performed using the 40 items.
39
__________stratifies the population and then applies random sampling techniques to each strata.
Stratified random sampling
40
_________ is the risk that the auditor reaches an erroneous conclusion for any reason not related to sampling risk. Examples of _________ include use of inappropriate audit procedures or misinterpretation of audit evidence and failure to recognize misstatement or deviation.
Non-sampling risk, nonsampling risk
41
auditor concluding that the account balance is not materially misstated when it is materially misstated is an example of _______ associated with ________.
sampling risk, variables sampling
42
internal control not being as effective as the auditor believes is an example of _______associated with _______.
sampling risk, attributes sampling
43
In statistical sampling the ______ variation in a population, the _____ the required sample to provide an estimate of the population.
less, smaller
44
difference and ratio estimation methods measure the _________between audit and book values or the _____ of audit to book values.
difference, ratio
45
the objective of the allowance for sampling risk is to estimate the __________ (range of procedural deviations) of the _________.
confidence interval, population
46
_______ sampling risk allows a larger margin of error and suggests a smaller sample size.
increased,
47
The existence of a deviation from a control activity may or may not indicate that ______ exists in the accounting records.
an error
For example, an invoice which has not been footed to test mathematical accuracy may still be correctly totaled and properly recorded in the accounting records.
48
________ might test controls for voucher processing, billing systems, payroll systems, inventory pricing, fixed-asset additions, and depreciation computations.
attributes sampling
49
Desired sampling risk increases= Acceptable sampling Risk______ = _______Sample Size
Increase, smaller
50
discovery sampling is a special case of sampling for ______. In discovery sampling there should be no opportunity to __________, because it is designed to sample for serious or critical errors. Once a critical or serious error is discovered, the sampling plan will probably be ________and a more comprehensive examination _________.
attributes, observe more than one occurrence, abandoned, undertaken
51
When a __________ is used,
Systematic sampling method provides every sampling unit in the population an equal chance of being selected. If the population is arranged ________, systematic selection is essentially the same as random number selection.
random starting point, randomly
52
One problem with _________ sampling is that the population may be systematically ordered; for example, the identification number of all large items ends with a 9. A _______sample may result since 9s may be selected either too frequently or never. This limitation may be overcome by using ________ or by using an interval that __________ with the pattern in the population.
systematic, biased, multiple random starts, does not coincide
53
the __________ is an input into determination of sample size (the others include expected deviation rate, the risk of assessing control risk too low, and population size [which has only a very limited effect on sample size]).
tolerable rate of deviation
54
_______ breaks down the population into subpopulations and applies different selection methods to each subpopulation. This selection method is used when the population consists of different types of items (e.g., large balances and small balances).
Stratified sampling,
55
preliminary judgments of materiality levels are used in ________sampling, not ________sampling.
variables, attributes
56
auditors use attributes sampling for tests of controls, and to use attributes sampling, auditors need the ___________, the __________, and the __________.
allowable risk of assessing control risk too low, expected population deviation rate, tolerable rate
57
auditors obtain a written representation letter when ________of an audit
near the conclusion
58
the term "________" means that the auditor must comply with the requirements unless he or she can demonstrate that alternative actions were sufficient to achieve the objectives of the standards.
should
59
When establishing an understanding with an audit client, that understanding should be documented through
an engagement letter (or other suitable form of written agreement) with the client.
60
While fraud risk factors have been present in the past when fraud has occurred, they___________indicate fraud in any particular situation.
may or may not
61
the specialist is only referred to when that audit report directly relates to a matter resulting in ________ of the report—here an important subsequent event. It might also involve a case in which a specialist’s valuation _______ from management’s valuation.
modification, differs
62
When an outside specialist has assumed full responsibility for taking the client’s physical inventory, reliance on the specialist’s report is acceptable if the auditor
conducted the same audit tests and procedures as would have been applicable if the client employees took the physical inventory.
63
the three conditions generally present when fraud occurs are that individuals have an
(1) incentive or pressure, (2) opportunity, and (3) ability to rationalize.
64
_________ and _________ procedures are further audit procedures
tests of controls, substantive
65
Audit Risk =
Audit Risk = Inherent Risk×Control Risk×Detection Risk
66
_______risk is the likelihood that an auditor’s procedures lead to an improper conclusion that no material misstatement exists in an assertion when in fact such a misstatement does exits.
Detection
67
________, not _______, departures require disclosure in the audit report.
material, immaterial
68
Communicate with the audit committee concerning the prior year’s audit adjustments will have occurred around the __________.
prior year’s end
69
making inquiries of the client’s attorney will occur _____ the planning stage.
after
70
The ______ uses a calculation based on the investor’s proportionate share of the results of operations and financing by the _______, not market value.
equity method, investee
71
________ maintain records of dividend income and auditors use such records to compare with a client’s recorded dividend income.
Investment services
72
the successor will normally review working papers of ___________. Prior income statement accounts are less likely to have _________ than are balance sheet accounts and contingencies.
continuing accounting significance, continuing significance
73
Define "Subsequent Events - Type II" (requiring disclosure, but not adjustment).
Material events or circumstances arising after the balance sheet date.
74
An auditor’s decision concerning whether or not to “dual date” the audit report is based upon the auditor’s willingness to __________.
Extend auditing procedures
75
Relationships involving balance sheet accounts are _____ predictable than income statement accounts.
less (because balance sheet accounts represent balances at one arbitrary point in time).
76
A lawyer’s response to an auditor’s request for information concerning litigation, claims, and assessments: The lawyer will appropriately limit the response to matters which __________, and to matters __________ to the financial statements.
he has given substantive attention to, that are considered material
77
subsequent events are those events or transactions which occur subsequent __________, but prior _______ and _______, that have a material effect on the financial statements and, therefore, require ______or ________ in the statements.
to the balance-sheet date, to the issuance of the financial statements, the auditor’s report, adjustment, disclosure
78
The representation letter should be dated as of the date of ________.
the auditor’s report
79
_________ attempt to improve operations and reduce waste through the introduction of controls.
Operational audits
80
auditors must obtain a representation that those signing the letter have no knowledge of fraud or suspected fraud committed by (1) ______ (2) ________ or (3) ________.
1. management,
2. employees who have significant roles in internal control,
3. others where the fraud could have a material effect on the financial statements
81
the primary responsibility of the stock registrar is to prevent any ________, and thereby verify that the stock ________.
overissuance of stock, is issued properly
82
The ________ will maintain records of total shares outstanding as well as detailed stockholder records, and carry out transfers of stock ownership.
transfer agent
83
Concerning current audit use of audit evidence about the operating effectiveness of controls obtained in prior year audits, the auditor generally may_______
use of such evidence if the related controls are tested at least every third year.
84
the department responsible for bad debt write-offs should be independent of the ________ and ________ functions. eg. ________
sales authorization, recordkeeping, treasurer
85
a _______system will show when and where materials are being used.
perpetual inventory
86
The auditor issues an _______opinion if the client’s internal control has one or more material weaknesses.
adverse
87
the professional standards indicate that a material weakness has more than a __________ of resulting in a material misstatement.
reasonable possibility
88
the independent auditors ______ detection risk (they perform substantive tests to restrict it).
do not assess
89
auditors ______control risk, they do not ______control risk--control risk is a ______of the client’s internal control structure.
assess, reduce, function
90
Foreign Corrupt Practices Act’s provisions prohibit _________ payments and require publicly held companies to ______ and ______ adequate internal control.
illegal foreign, devise, maintain
91
control activities include _____, ______, _____, and_____.
performance reviews, information processing, physical controls, and segregation of duties.
92
________Standards apply to letters for underwriters
Statements on Auditing
93
the attestation standards on MD&A (management’s discussion and analysis) do not include an assertion for _________. Those standards indicate that the four standards are______ , _______with the financial statements, _______, and ______and _______.
rights and obligations,
completeness, consistency, occurrence, presentation and disclosure
94
GAAP require inclusion of a statement of cash flows, and omission of such results in a ______.
qualified opinion
95
the preferable titles when reporting on cash basis financial statements are _________ arising from cash transactions, and ________.
assets and liabilities, revenue collected and expenses paid
96
Changes in reporting entities, changes in accounting principles, correction of errors, and changes in principles inseparable from changes in estimates all affect _______ and should be referred to in the auditor’s opinion.
consistency
97
Ordinarily in an attest examination report a CPA may generally report upon either the _______ or on the _______ to which the written assertion relates.
written assertion, subject matter
98
the professional standards require that the report on compliance with laws and regulations include all ________ of noncompliance, and all __________ which could result in criminal prosecution.
material instances, instances or indications of illegal acts
99
Whenever reports filed on a printed form designed by authorities, call upon the independent auditor to make an assertion that the auditor believes is not justified, the auditor should ______ or ________.
reworded or attached to a separate report
100
financial forecasts are prospective financial statements based on the responsible party’s assumptions reflecting conditions it expects to _____ and the course of action it expects to _____.
exist, take
101
_________ are designed to demonstrate the effect of a future or hypothetical transaction by showing how it might have affected the historical financial statements if it had been consummated during the period covered by those statements.
pro forma financial presentations
102
Given one or more hypothetical assumptions, a responsible party may prepare, to the best of its knowledge and belief, an entity’s expected financial position, results of operations, and changes in financial position. Such prospective financial statements are known as______
Financial projections
103
a service auditor’s report on a service organization may include a conclusion on whether controls have been ______ or on whether they have been _______ and ______.
suitably designed,
| suitably designed and operate effectively
104
the audit report should not be dated earlier than the date on which the auditors __________ to support their opinion on the financial statements—ordinarily the _____day of fieldwork.
have obtained sufficient appropriate audit evidence,
last
105
Principles included in Trust Services engagements:
Security-- The system (infrastructure, software, people, procedures, and data) is protected against unauthorized access (both physical and logical).
Availability--The system is available for operation and use as committed or agreed.
Processing Integrity--System processing is complete, accurate, timely and authorized.
Online Privacy--Private information obtained as a result of electronic commerce is collected, used, disclosed, and retained as committed or agreed.
Confidentiality--Information designated as confidential is protected as committed or agreed.
106
the broad objectives of ________ are to render reasonable assurance that assets are safeguarded from unauthorized use or disposition and that financial records are sufficiently reliable to permit the preparation of financial statements
internal control
107
Section 404a: Requires management to include its _______ in the annual report filed with the SEC.
Section 404b: Requires the CPA firm to ________ and __________.
assessment of internal control over financial reporting,
audit internal control and express an opinion on the effectiveness of internal control
108
Statements on Standards for Attestation Engagements on MD&A as well as for other attestation engagements define control risk as relating to the risk that material misstatements will not be _______ or ________ in a _______.
prevented or detected, timely manner
109
Which of the following is restricted to use and which can be distribute in general?
financial forecast report & financial projection report
financial forecast report may be a general distribution report.
financial projection report --> restricted as to use and distribution.
110
A material change in an accounting estimate may ______ disclosure in a note to the financial statements but ________ a consistency modification in the auditor's report.
require, does not require
111
continuing auditor should update his report on the financial statements of the one or more prior periods presented regardless of __________.
the opinion previously issued
112
“______________” includes the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time
Generally accepted accounting principles
113
The audit report is only modified when the group auditor does not wish to take responsibility for the component (other) auditor's work; in that situation the __________ are modified to indicate the existence of the component auditor. If the group auditor wishes to name the component auditor, s/he should obtain the _________ and also present ___________.
introductory, scope, and opinion paragraphs
component auditor's permission
that auditor's audit report
114
If after evaluating management’s plans substantial doubt still exists, the auditor should either _______ or ________. In either case the report should explicitly include the phrases "_________" and "________."
add an emphasis-of-matter paragraph to an unmodified report (following the opinion paragraph) or disclaim an opinion.
substantial doubt and going concern
115
Confirmation of accounts receivable, difference between International Standards on Audit and US Standards?
ISA -> Confirmation of accounts receivable is an optional procedure based on the auditor’s judgment.
US Standards (both AICPA and PCAOB)-> Confirmation is presumptively required unless accounts receivable are immaterial.
116
Governmental auditing is often accomplished under the Single Audit Act. Which of the following may be engaged to do this work?
Audits may be accomplished by government auditors at local, state, or federal level or by CPA firms
117
International Auditing and Assurance Standards Board (IAASB) is a Board within the broader organization, ________
International Federation of Accountants (IFAC)
118
_________ require that the auditor provided the location in which he or she practices.
International Standards of Auditing
119
the PCAOB did not adopt the AICPA’s ________ because they only apply to nonpublic companies ("non-issuers").
Accounting and Review Services Standards
120
In relation to the AICPA Code of Professional Conduct, the rules of the International Code of Ethics for Professional Accountants have _____ definitive prohibitions.
fewer
121
International standards do________ to another audit firm involved in a portion of the audit while PCAOB standards ______ the principal auditor to so report (i.e., percentages or dollars audited by the other auditor are reported and the opinion is based in part upon the report of the other auditor).
not allow reference, allow
122
the international code allows contingent fees when ______ are established.
appropriate safeguards
123
Unlike audits performed following PCAOB requirements, audits performed following the ISAs _______ an opinion on internal control.
do not require
124
Impairments of independence are ____, ____ and _____for GAO.
personal, external, and organizational
125
partners or managers must provide _____ or more hours of nonattest services before they are considered to be covered members.
ten
126
Under the ethical standards of the profession, a home mortgage loan is not acceptable (unless _________ in when the current standard was established).
"grandfathered"
127
________ and substantive procedures are further audit procedures.
tests of controls
128
a ______ system will result in collection of receivables by a bank, thereby eliminating employee contact with the cash.
bank lockbox
129
the ______ function, and not the controllership function, will normally be responsible for distributing payroll checks.
treasury
130
hiring personnel represents an _______ function while distributing checks represents a ________function
authorization, custody
131
For the financial statements follow the special-purpose financial reporting framework, the audit was conducted in accordance with _________, not the special-purpose financial reporting framework
generally accepted auditing standards
132
all audit reports include the word "________" in their title.
independent
133
A ______ is a departure from the prescribed internal control policy or procedure.
deviation
134
while _____ and ______standards presumptively require confirmation, _____do not.
PCAOB and ASB , IAS
135
Section 404 of the Sarbanes-Oxley Act requires that the audit report ____to, and ____on, the assessment made by management.
attest , report
136
________ (the ____________) is used to construct an interval around the sample results in which the true population characteristic is expected to lie. Accordingly, possible error in either direction from the sample results is considered.
precision, allowance for sampling risk
137
________ in variables sampling is the risk of incorrect rejection.
reliability
138
the _________ (__________) is the difference between the client’s book value and the auditor’s estimate of the audited value.
projected error, (projected misstatement)
139
The Department of Labor (DOL) most frequently conducts financial and performance audits following
Government Auditing Standards
140
The fundamental difference between the balance sheet and the other statements is timing. _________ provide a "snapshot" of a company's finances at a single point in time. ___________ provides details about how the total amount of stockholders' equity changed between the time the last balance sheet was prepared and the current balance sheet date.
Balance sheets, the equity statement
141
“Because of the significance” terminology is used in _______opinions and ______ of opinion.
adverse, disclaimers
142
Procedures performed to evaluate control risk inculde _______; _________; __________ and __________.
Re-performance of the control procedures.
Inquires of personnel;
Inspection of documents and records;
Observation of activities and operations;
143
_______, ________ and _______ which are used for substantive testing.
analysis, confirmation and comparison
144
An auditor must always perform substantive tests for ________and______. Although a lowered control risk assessment allows the auditor to reduce substantive testing, it cannot be used to eliminate substantive testing.
significant account balances and transaction classes
145
If financial statements prepared on a comprehensive basis of accounting other than GAAP (i.e., in accordance with a special purpose framework) are not appropriately titled, the auditor must _________and ________ for the inappropriate title of the statements, which constitutes a departure from the applicable accounting framework (analogous to a GAAP departure).
disclose any reservations in an explanatory paragraph and qualify the opinion
146
A review of the cut-off bank statements for the period after the year end would be performed primarily to verify the items in the ________, not as part of the review of subsequent events.
bank reconciliation
147
In reviewing subsequent events, the auditor would read the latest _______ and__________, inquire with _________concerning litigation, claims, and assessments, and make specific inquiries of _______.
interim financial statements, board of directors' minutes,
| legal counsel, management
148
Analytical procedures involve the _______ of recorded amounts, or _______ developed from recorded amounts, to _______developed by the auditor.
comparison, ratios, expectations
149
The auditor should inquire with management as to whether there was any significant change in ________, _________, or _________ after year end
capital stock, long-term debt, working capital
150
Which firms must have a majority of their financial interests owned by CPAs?
I. Attest firms.
II. Firms that identify themselves as "Members of the AICPA."
Attest Firms ONLY
151
When the auditor scans the activity in an account looking for unusual items, he/she is performing an ____________.
Analytical procedure
152
The bank will alert the company about direct deposits by sending ________.
credit memos
153
According to the Sarbanes-Oxley Act of 2002, what is the maximum number of years an audit partner can perform audit services for an issuer before the auditor rotation is required?
5 years.
**Other partners are on a 7-2-7 rotation.
154
Registered public accounting firms having more than 100 issuers as audit clients must be inspected _______; whereas those having fewer than 100 issuers as audit clients must be inspected ________.
annually, every 3 years
155
An engagement letter (or equivalent) is ______, while performing compilation service.
required
156
agreed-upon procedures reports should -______restricted.
be
157
The quality control standards require compliance with relevant ethical requirements, including _______ for all attestation engagements.
independence
158
The independent body that provides oversight of the audit and ethics standard-setting activities of the International Federation of Accountants (IFAC) is the:
Public Interest Oversight Board
159
the quality control element on accepting or continuing a client relationship has the purposes of (1) _______ (2) ________, and (3) _________.
(1) considering the integrity of the client,
(2) determining that the firm is competent to perform the engagement,
and (3) determining that the firm can comply with legal and ethical requirements.
160
AICPA independence requirements suggest that a CPA should evaluate whether a particular threat to independence would lead a reasonable person, aware of all the relevant facts, to conclude that:
An unacceptable risk of non-independence exists.
161
The individual_________should stamp, perforate, or otherwise cancel supporting documentation. The vouchers payable department should not be responsible for these tasks.
signing the checks
162
The _________ is involved with the approval of purchase requisitions, not the vouchers payable department.
purchasing department
163
When the financial statements of a nonpublic entity for a prior period have not been audited and are presented, for comparative purposes, with current period statements that have been audited, in such circumstances the auditor _________
may add a separate paragraph to the audit report and identify the financial statements.
164
The professional standards require that the predecessor auditor not be named when that auditor's report is not presented, but that the following information be indicated in the introductory paragraph of the successor auditor’s report: (1) _________, (2) _________, (3) __________, and (4) __________.
(1) the financial statements of the prior period were examined by other auditors, (2) the date of the other auditor’s report, (3) the type of opinion expressed, and (4) the substantive reasons therefore, if it was other than unmodified.
165
a forecast examination report presents an opinion concluding whether the forecast meets_______guidelines, not on whether the forecast is ________.
AICPA, fairly presented
166
the deviation rate applies to attribute sampling which is appropriate for ________, not ________.
tests of controls, substantive tests
167
________ provide a means of converting machine readable data into auditor readable data with added data manipulation routines including various sort and arithmetic functions.
generalized audit packages
168
Current liabilities that are refinanced before the _________ can be reclassified as noncurrent provided they meet the requirements of FAS BASC.
issuance of the financial statements
169
AICPA Professional Standards specifically identify that the accountant should consider the results of any audit procedures performed with respect to _________ as a procedure that would be applicable to planning a review of interim financial information with respect to _________the auditor's knowledge of the entity's business and its internal control.
the current year's financial statements, updating
170
If the auditor concludes that the financial statements do not require revision, but the client refuses to revise or eliminate the material inconsistency, the auditor may __________.
revise the auditor's report to include a separate other-matter paragraph describing the material inconsistency.
171
If financial statements prepared on a comprehensive basis of accounting other than GAAP (i.e., in accordance with a special purpose framework) are not appropriately titled, the auditor must ___________ and ____________.
disclose any reservations in an explanatory paragraph and qualify the opinion for the inappropriate title of the statements
172
In order for an auditor to accept an engagement to audit and report on a nonissuer's internal control over financial reporting, management must provide ____________ accompanies the auditor's report.
a written assessment about the effectiveness of internal control in a report that
173
A decision table presents in tabular form the conditions and alternative actions related to making a particular decision. It emphasizes _________ (decision rules) among the conditions and actions.
logical relationships
174
Program flowcharts emphasize the___________.
sequence in which operations are performed
175
The professional standards require an emphasis-of-matter paragraph should not ______ the opinion paragraph, it should _______the opinion paragraph.
precede, following
176
A lack of consistency in the application of accounting principles, with which ________, does not result in modification of the audit opinion or overall audit approach.
the auditor concurs
177
PCAOB may establish ______ standards, ______ standards, _______ standards, and _______ standards.
attestation, independence, auditing, quality control
178
The auditor should apply_________ to the supplementary information. Deficiencies in, or the omission of, such information should be reported in a separate ________.
certain limited procedures, emphasis-of-matter paragraph
179
A ______ sample is best at concluding on overstatements as contrasted to understatements; this is due to characteristics of the underlying statistical theory.
probability-proportional-to-size
180
Audit sampling is the application of an audit procedure to less than 100% of the items within an __________ for the purpose of ___________.
```
account balance or class of transactions,
evaluating some characteristic of the balance or class
```
181
An outside reviewer who is not already associated with a registered public accounting firm would become associated with the firm issuing the report if he or she ... (1) ___________ or (2) ____________."
receives compensation from the firm issuing the report for performing the review,
performs the review as agent for the firm issuing the report
182
Testing credit approval before shipping to customers tests the ________ assertion (not the rights and obligations assertion). This test addresses the ________ of accounts receivable.
valuation, collectibility
183
Retention of audit client records after client has demanded them is discreditable. Except the following two:
(1) A CPA may keep _______________and need not make them available to the client.
(2) A CPA may keep _____________ (adjusting, closing, consolidating entries, etc.) until payment of fees due is received.
(1) analyses and schedules prepared by the client for the CPA
(2) workpapers with information not reflected in the client’s books
184
Large amounts of cash on hand may lead to the ________.
misappropriation of assets
185
High turnover of legal counsel and Overly complex organizational structure involving numerous legal entities more likely be related to _______________, instead of misappropriation of assets.
fraudulent financial reporting
186
The ( International Auditing and Assurance Standards Board) IAASB’s pronouncements apply to _____, _____, other assurance, and ________ and________ that are conducted in accordance with international standards.
audit, review, quality control, related services engagements
187
The integrated audit of a public company resulted in the CPA’s issuance of an adverse opinion on internal control. When management believes that the material weakness is eliminated and the auditors, after performing appropriate procedures, agree? The Auditor may_________________.
issue another report, this one indicating that the material weakness no longer exists.
188
The professional standards require audit fee payment prior to ________.
issuance of the subsequent year audit report
189
The professional standards state that a predecessor auditor should obtain a _________ from the successor auditor. The predecessor auditor should also read the current financial statements and ___________.
letter of representation,
compare them to the prior period statements
190
In obtaining evidence about the occurrence of subsequent events, auditors should make inquiries of officers and other executives having responsibility for financial and accounting matters, including inquiries on (1) ___________, (2) ___________, (3) __________, and (4) any ___________.
(1) matters including contingent liabilities existing at the date of the balance sheet, (2) whether there was any significant change in capital stock, long-term debt, or working capital, (3) current status of items in the financial statements, and (4) any unusual adjustments.
191
If the auditor believes that financial statements prepared per a basis other than GAAP are not suitably titled, he should______________.
modify his report to disclose any reservations
192
Among situations that ordinarily do not result in an emphasis-of-matter paragraph on consistency are changes in _________ (e.g., changing the life of a fixed asset) and changes in principles with an ____________ (even if expected to be material in the future); absent other circumstances, a standard unmodified opinion may be issued.
accounting estimates,
| immaterial effect
193
_________ is an embezzlement scheme in which cash collections from customers are stolen and is detected by the use of confirmations and analytical procedures.
Lapping
194
______ is the overstatement of cash by recording a deposit without a corresponding withdrawal at year-end and is best detected through the use of a bank transfer schedule.
Kiting
195
Independence is ___________if an audit firm is indemnified from the effects of its own carelessness.
impaired
196
A cooling‐off period of how many years is required before a member of an issuer's audit engagement team may begin working for the registrant in a key position?
1 year
197
Which categories of covered members must be concerned with independence problems that might arise from gifts they receive from attest clients?
I. Team members.
II. Other partners in the office.
I Only. Other partners in the office and 10‐hour people, are not covered by the rule.
198
Members ___________ original or amended tax returns on a contingent fee basis, even for nonattest clients.
may not prepare
