75% Flashcards
(26 cards)
who authorizes distributions of dividends?
board of directors
how relevant are subsequent events related to fair value measurements at balance sheet date?
not very
which is a communication requirement from registered firms?
A. to management - a schedule of unadjusted audit differences
B. to the AC - critical accounting policies and practices used
C. to the internal audit manager - alternative accounting treatments discussed with management
B
what type of assurance is provided for the following SSAE engagements?
examination
review
agreed upon procedures
examination - reasonable assurance
review - limited/negative assurance
agreed upon procedures - no assurance
what type of assurance is provided for the following SSARS engagements?
review
compilation
preparation
review - negative/limited assurance
compilation - no assurance
preparation - no assurance
the risk of incorrect rejection and the risk of assessing control risk too high relates to
the efficiency of an audit
what does the search for unrecorded liabilities focus on?
payments made after balance sheet date for payables accrued on 12/31
if an audit firm provides non-attest services related to internal control to an audit client, what steps should be taken to avoid an independence violation?
must be communicated in writing to the audit committee
which of the following outside parties can the auditor disclose irregularities to?
- subpoena
- SEC when client reports an auditor change
- successor auditor
- governmental funding agency
all
what are the segregated functions of timesheets and distribution of paychecks?
approval of timesheets - authorization function
paychecks - custody of assets
examining vendor invoices, consignment agreements, and confirming inventory out on consignment provides evidence for which assertion?
rights and obligation
observing physical inventories provides evidence for which assertion?
existence and completeness
an auditor selects sales invoices and traces them to shipping documents. which assertion is tested?
existence
how are major programs determined by an auditor?
risk based approach
are compiled financial statements with omitted disclosures eligible for comparative financial statements?
no
if an auditor issues an adverse opinion on FS, when is issuing a compliance report appropriate?
instances of noncompliance
what type of assurance is provided for compliance of contractual agreements related to audited FS?
negative
what must be communicated to those charged with governance?
disagreements with management
significant audit adjustments
consistent application of GAAP is mentioned [explicitly v. implicitly] in the auditor’s report?
implicitly
determine sample size:
tolerable misstatement: $200,000
reliability factor: 4
recorded amount of AR: $500,000
200,000 / 4 = 50,000
500,000 / 50,000 = 10 items to sample
which sections are modified when an auditor qualifies an opinion for a non-issuer due to a scope limitation?
opinion
basis for opinion
why would convertible bonds converted to common stock and then repurchased decrease the debt to equity ratio?
converting bonds decreases debt
additional common stock/treasury shares increases equity
in a combined audit report, what must be added when:
FS = qualified opinion
ICFR = adverse
explanatory paragraph describing departure from GAAP
explanatory paragraph that defines and describes the material weakness
if a customer’s response to an AR confirm is that they need additional information, what should the auditor do in response?
perform alternative procedures - verify shipping documents and subsequent cash collections
