A1- A6 mcqs missed to restudy Flashcards
(214 cards)
1
Q
Does an auditor opinion, to be economically useful, would be formed within and based on evidence obtained at reasonable cost
A
no. reasonable cost is based on the economic useful is formed withing reasonable time and based on evidence obtained at a reasonable cost. not with obtaining audit evidence
2
Q
what is presumption about the reliability of audit evidence
A
Reliable audit evidence is enhanced by a satisfactory and effective i/c structure. audit evidence is rely on in a persuasive rather than conclusive manner. corroborative evidence is refer to as the obtaining of sufficient evide
3
Q
if a previous audit opinion was adverse due to lack of adequate disclosure. The statement are properly stated and current year in unmodified. what is the auditor opinion and eom
A
unmodified with eom after the opinion paragraph.
4
Q
what procedure would an audit perform when auditing scf
A
reconcile the scf to other f/s amounts
5
Q
what would an auditor least likely considered in the assessment of ia competence, objectivety and applicatiion of systematic discipline approach
A
results of analytical procedure. this is a criteria of IA assesement.
6
Q
what is not included in required documentation for GAAS
A
the basis for auditors decision not to perform tests of controls concurently with the obtaining an understanding of i/c. used under PCAOB.
7
Q
MCQ test A1-m2; what is true and not true about test data
A
true; only one transaction each need to be process ; test on clients computer under the auditors control; test data consist of valid and invalid data the interest auditor. not true; test data consist of all valid and invalid conditions
8
Q
when would an auditor include om paragraph
A
when there is material inconsistency in other information in a document containing audited f/s that mangement refused to reviised i.e. annual report.
a change in estimates would not be included in om or eom paragraphs.
9
Q
Can a auditor issue a unmodified opinion when there is a departure from gaap
A
yes. when it is justified
10
Q
for a single audit is the auditor least likely to considered the whole audit opinion
A
yes.
11
Q
What should a successor auditor ask a predecessor audit after engagement sign
A
matters of facilitating financial reporting consistency between prior year and current year. not; disagreement btwn auditor and mngmt over accounting principles that is prior to engagement.
12
Q
when is dual dating used
A
when there is additional or subsequent event after the audit report. Dual dating is not used in a situation where previous auditor report is included in current auditors report
13
Q
when would an auditor refer to a specialist in an opinion
A
when there is a departure from an unmodified opinion an audit want to discuss in the OM section
14
Q
What are the QC for Auditors; hELPME
A
- HR 2. Engagement/client acceptance and continuance 3. Leadership Responsibility 4. Performance of the engagement 5. Monitoring 6 Ethical Requirement
15
Q
is human judgement in decision making an inherent sitiuation
A
yes. because human can make mistake not an inherent situition is when there is a complex information system; this could be resolved in the design
16
Q
If a government agency declines to include supplemental information required by GASB. the auditor should
A
give an unmodified opinion with a om paragraph
17
Q
if a cpa completed an audit and client wanted to change opinion to a review due to scope limitation and it was justified the cpa would
A
the review would be a new engagement. Cpa would just give a statement that review is less than scope.
18
Q
A cpa firm wants to make sure work provided meets qualtiy standard what standard is the firm doing of QC
A
P = performance in engagement in HELPME. Would review the engagement and audit report . documentation. E would be evaluating the client continuance
19
Q
What is an auditor responsibilty when supplement infor is outside of basic f/s
A
perform limited procedures on supplement information
20
Q
when using a specialist should the auditor have an understanding of the objective and scope of work
A
yes
21
Q
a material departure from gaap would be a
A
qualified a pervasive from gaap= adverse a scope limitation= disclaimer or qualified due to gaas
22
Q
if an auditor is unable to gather information on appplication of accounting principals and no infor on asset and liab at the begin of the year what opinion would he give
A
would not be able to express an opinion but can express and opinion on statement of financial position using end year numbers
23
Q
what is true about test data and integrated test facility
A
test data: are process with clients computer and compared to auditors pretermined amounts. itegrated test facility uses dummy accounts ( not invalid data) like test data go through system but extract by codiing and result show under actual situations
24
Q
how does and not considered significant risk
A
does consider inherent risk alone as start - is first stopped by control risk - then detected by auditor = audit risk audit use professional judgement significant risk exist when inherent risk is high does not considered; when determining risk, whether isignificant impact or not, should ignore internal controls when considering risk factors.
25
if there has been an accounting change but does not change the f/s and is material should the auditor report it
no. and no mention in notes to the f/s. only if there were material modifications and would be mention in EOM or departure from GAAP an material.
26
What statement is a basic element of the auditors report under GAAS
auditor includes evaluating signifcant estimates made by management
Remeber: the statement on assurance is GAAS standard require that we plan and perform the audit to obtain reasonable assurance that f/s are free from material misstatement.
27
why could same invoice number appearing on different invoices be and indicator of fraud instead of same po on difference invoices
each invoice should have its own uniquie number.
but po can be issued for two item and one of the two were back ordered.
28
how do i answer sample size to tolerable risk to incorrect acceptance
there is a direct or expect relationship between sample size and tolerable.
And a inverse between tolerable and incorrect acceptance.
remeber sample and varibility of population does not matter.
So if there is a small sample size there would be a small or equal torerable risk and a higher risk of incorrect acceptance.
29
Credit approval were 10,000
auditor design a statistical sample that would provide 1% risk of assessing control risk too low (99% confidence)
previous experience 2.5% of sales lacked approval.
this year sample was 200 examined and 7 lacked approval
auditor determine an upper deviation of 8%
what is the sample size risk
the 2.5% previous sales lack is not relevant for this calc nor are the 10000 credit approvals or 1% risk and 99% confidence
Sample size risk = 200/7 lack = 3.5%
8% deviation - 3.5% = 4.5% sample size deviation.
30
when auditor presents unaudit f/s to audit f/s in comparative form, the unaudite should be clearly marked
Either;
the unaudited f/s should be reissused
or
the audited f/s should include a separate paragraph describing the responsibility assumed for the unaudited.
remember the unaudited is contricting the audited f/s
31
the purpose of establish p& p for deciding to accept or continue client relationship is to
key words are ; accept or continue relationship
so auditors will wanted to review and evaluate cleints or management's integrity.
32
when would an auditor gain a sufficient understanding of client's i/c related to a process
when audited has a noted narrative that documents the process and can show if process is working the way management assertion says it is.
33
When are non issuer and issuers complete the assembly of the final audit file following the release date
non issuers = 60 day
issuers= 45
34
when the auditor is selecting test or sample size to obtain assurance of a process auditor should considered the tolerable rate and also the likely rate of deviation
when an auditor select test control with a sample size , he will need a tolerable rate and deviation rate.
neve should allowable risk of assessing control risk to high should come into the picture doing this period.
35
when auditor is interviewing managment and verify document or process he is what audit procedures of management assertion of fs
inqiuring and inspecting
and not observing
36
if an auditor gets a copy of an invoice that is not the invoice asked for and staff said original invoice was misplace he sould do waht
Auditor must maintain professional skeptism so he would look at fraud and reevaluate the risk of fraud and design alternative tests for the related transactions.
37
what characteristic most likely would heighten an auditors concern about RMM on the f/s
the entity industry is experiencing declining customer. this may give management the incentive to frauduently misstate f/s
fraud characteristic
rationale, incentive, pressure, opportunity
38
what reporting option is likely and least likely of supplementat information for GAAP
Likely; auditor report supplemental information on om paragraph stating auditor has applied required procedures
a disclaimer of opinion is issued on supplementary information
audit report on f/s includes an opinion regarding whether the supplementary information is fairly stated in all material respect to the f.s as a whole.
not likely
audit report includes an opinion of supplemental and a statement restricting ( is for single f/s)the use of the report.
no such requirement from GAAp
39
Regardless if an auditor does assess level of control risk, will he to substantive testing.
Yes. even with low control risk auditor will still test substantive $$$.
40
What is an analytical procedure perform at the final review stage
determine whether adequate evidence has been gathered in response to unusual or unexpected balances identified during the audit.
Analytical procedure involve comparing and not summarizing.
41
if a change in accounting principle does not material effect current year but may effect furture years, would auditor add an om or eom paragraph to unmodified opinioin
no. if change is not materal and does not effect current audit no om or eom.
42
A predecessor is reissuing the audited f/s. what would he not get from the sucessor auditor
a review of sucessor audit documentation of current year.
would get
-a current copy of comparative f/s
obtain a successor audit rep letter
compare the current period f/s with prior
need f/s do to his job.
43
if an auditor assess control risk too high and was incorrect. his assessment was based on
control risk of auditor sample is greater than the true operating effectiveness of the client control (control risk and sample risk have a direct or expected realationship)
or incorrect in the rejection.
44
what is diffence in IA and independent auditors audits
IA are more indepth into the i/c of the company such as analyzing and reporting on actual ops. independent auditors limited to matreriality effecting the f/s
45
in planning the audit, the auditor knowledge about the design of relevent controls should be used to
indentify types of potential misstatements that could occur
remember AR = ih \* cr\*dr
then he would document after detection.
46
as a result of test controls, an audit assessed control risk as to low and decrease substance testing. this assessment occured because the true deviation rate was
this is a incorrect acceptance.
If the acutal deviation rate 5% (actual )exceeding the popoulation rate (assumption) 4% controls risk is understated. because the control will be less effective than the sample results would indicate.
47
why would an auditor use classical variable sampling over probability proportional to size pps sampling
for negative balances require special special desings for pps while classical does not.
48
What would an auditor least likely to consider when reporting on a single f/s
The materiality of the f/s as a whole . he consider materialty just for the single audit f/s/
49
when reporting comparative f/s, an auditor should change the prevously issued opinion on the prior year f/x if.
the prior yr are restated to conform with GAAP when it didnt prevousle.
Should not reissue and issued f/s requested by client without justification.
50
Analytical procedures used in planning should focus on
understanding of clients business to assist in the planning of NET of audit procedures that will obtain audit evidence for specific account bal. or classes of transactions,
51
Auditor assess control risk because it
It effects the level of detection risk that audit may accept.
Remember inherent risk is independent of any relevant controls.
52
What is non sampling and sampling examples
non sampling: selecting inappropriate aduit procedures, using inappropriate audit evidnece, and failure by auditor to recognize misstatement . pr non sampling is anythin that is not sampling.
Sampling concluding account balance
i/c being effect or not being effective.
53
Before applying principle sustantive test to an entiy a/r at an interime dates, the auditor should
when audit procedures are performed before y-e, auditor must assessed the incremental risk involved and determined whether sufficient alternative procedures exist to extend the interim conclustion at y-e.
54
what type of evidnece is gathered by the auditor when a/r confirmation are sent out
Corrabative evidence that provides additiaonal support and validates clients accounting records.
55
what are example of mistatement by the client
## Footnote
Fraudulent
Judgement
Factual
Projected
Fraudulent: no such type
Judgement: unreasonable estimates by clients
Factual: no doubt in facts:
Projected: uses sampling and application to clients population.
56
Can an auditor that disclaim an opinion due to scope limitation give an opinion on one section of the b/s.
No. Not approrpriate would be consider piece mealing and would overshadow the discalimer.
However, an auditor can report one separate separate with agreed upon procedures.
57
Under GAAS when can an auditor issue unmodified w/out eom paragraph
when an auditor makes reference to the audit of a component auditor as a basis in pat of the opinion.
EOM used with Going concern
Significant related parties
Qualified use with omitting omitting scf.
58
Is the entire entity business, operation and business functions part of i/c
yes.
59
In a computer rized payroll system, what is the auditor least likely to use test data
For the proper approval of overtime by supervisor. beause it is generally not recorded in computer.
60
If a client refused to record impairment loss the is significant to f/s what opinion will auditor give
Qualified
It would be an Adverse opinion if it was material and pervasive where f/s can not relied on at all.
61
what is the auditorts primary emphasis in related party transactions
Evaluating disclosure of related party transactons via framework of existing pronouncements.
62
auditor is engaged to report on b/s but not on basic f/s.what is not required by audit
does not have to report on whole v=f/s materiality just materiality in b/s
63
what is the criteria for audit evidence
OREI
Observe
REcalculate
Examine
Inspect
64
When an auditor is required to establish an understanding with client in regards to services performed this generally understanding would inclue
Auditor responsibility to ensure those charge with governace (audit committee) are aware of significant deficiency in i/c.
65
what can predecessor and sucessor commicate about audit of client
before and after the engagement .
66
what is and is not an anlytical procedure
Estimate
Compare and prepare
understand client business (planning)
Convert
Develop
Not an analytical procedeure
project and summarized
67
What audit test would be attriibuted to sampling:
Test control= i/c. not substantive$
i.e. inspectinge employee time card for approval
Test control criteria:
Authoriation (approval), vaiidity (validate),completeness, accuracy, appropriate classification, accounting in confoming withGAAP (or frameword), proper period.
68
What are substantive $ test
Account balances, amount, valuation, presentation, verification, disclosure., estimates, examining , selecting a/r confirm balance.
69
What are example of situations that are and are not relevant to f/s
anything number related and could impact f/s directly such as: income tax comliance
computer passwoard to limit access to data files
production statistical evaaluation variance
not or indirect to f/s
excess use of materials in productions.this mre operation ineffieciency
70
71
Are consistent application of accounting principles and examination of eviedence on a test basis both implicitly
consistent application of accounting principle is implicit on auditor report and will be explicit mentioned in EOM only if issues with consistency.
There is no explicit on test basis
72
In statistical sampling methods used in substantive testing, auditor would stratify a population into meaningful groups if
the population has highly variable recorded amount and auditor reduce the required sample size by separating items into homegeneous groups related to specific audit evidence
73
If auditor is unable to get sufficient infomation on application of accouting principles and beg bal of asset and laib. The auditor should
No make an opinion on the current years ops and cash flow
74
if an auditor test sample of bank recs. notice several immaterial deposit in transit that did not clear the bank and suspected fruad his respond should be to
consider the implications for the integrity of management and employees and the possible impact of other aspects of the audit.
Auditor would report to managment in a timely basis an not an immediate basis.
75
what would be a consideration in planning a sample of a test of subsequent cash reciepts
In the planning stage of subsequent test there should be a preliminary judgement about material levels
76
Can an auditor express an opinion on entity a/r balance even if disclaim opinion on f/s as a whole.
Yes. as long as the report is separate ( called a element an need not report on current asset portion) form disclaimer opinion.
77
78
should a auditor considered confimring terms of large complex sales when using RMM assement
when he has done audt procedures for Audit risk for RMM= ir high\* cr = minimize detection risk due to extensive control testing.
79
when assessing internal auditor objectivity an auditor should
objectiveity on ia is based on organization level to which ia reports and policies prohibiting internal audit areas where ai lack indepency.
80
what does it mean when i/c has substance over form
management has establish appropriate prpocedures but not enforce compliance with them
81
what is the ultimate puropse of assessing control risks
to see if material misstatement may exist in the f/s.
82
If a company uses framework that is not GAAAP and using comprehensive basis of accounting (CBOA) but statements are not suitable titled auditor would
issure a qualified opinion with a basis of opinion paragraph
83
inherant risk is evaluated to help auditor assess
the susceptibility of f/s assetions to a material misstatement,assuming there are no related controls.
detection risk that procedure implement in place were not detected
control risk: RMM will not be detected or prevented on a timely basis.
84
if client in not in compliance with reg agency. audito should withdraw from engagement if
cleint refuses to accpet aditors reports as modified for noncompliance.
85
what are some risk factors
lack of independent checks would represent fraud risk of missapropriation of assets
inability to generate cf from ops represents incentive for fraudulent financial reporting
strain relationship with cleint and auditors represents an attitude is considerd fraudulent financial reporting
hihg turn of senior managment = unstable organization structure theat provides fraudulent finanical reporting.
86
87
In assess control and substance risk an auditor uses what techniques
Test of controls: Reperformance
Test of Substance:
Analytical procedures
Verification
Confirmation
88
During an auditors information gathering procedure session, auditors will discuss the best characteristic of a mind set of
Questioning : using an attitude of professional skepticism.
89
An auditor would express an adverse opinion is a
situation where something highly material and pervasive that f/s are not in conformity with GAAP. rules regarding capitalizing leases.
90
A sucessor auditor would most likely make specific inquiries of the predecessor auditor regarding
disagreement with management as to auditing procedures, integrity of management, disagreement as to accounting principles and communicating with governance regarding fruad, acts of noncompliance with laws and regulations, matters on i/c, predecessor understanding as to reason for change.
91
92
CPA issuing a disclaimer on audit (GAAs issue) due to non conform of GAAP on capitalize leases. CPA suggest appropriate revision but management refuses to accept. What is the CPA to do
Do the discliamer and describe the nature of the disclaime in audit report if pacticable.
93
would a flowchart be affective in i/c for auditors
no. just in understandig i/c via staff direct reports.
94
what is an inaccurate statement of sufficiency of audit evidence
amount audit evidence gathering has indirect impact on level of detection. which is not true. it is the opposite.
95
96
What type of evidence is gathered when a/r confirmation is **sent**
Corroborating evidence is confirmed when **sent**
Substantive evidence is when confirmed is recieved and part of audit evidence
97
what is statistical sampling in tests of controls
Deviatations rate (or **best estimate of population** ) from control activities (p &p) does not result in misstatement. therefore pertinent (relevant) control activities (p&p) at a give rate would result in misstatement at a lower rate
98
analytical procedures done in the final stages that suggest several accounts with unexpected relationship would result in
Additioanal test of details are required on accounts involved. the results could be irregularities exist among relevant account balances.
99
before applying substantive tests $ to the detail of accounts at an interim date prior to balance sheet dates an auditor should
should consider if year-end balances selected for interim testing are reasonable predictable amounts, relative significants and composition.
100
For math problem, read dates for calculation and answers
yes.
101
Are substantive testing required for analytical procedures
not required but can be used.
102
what are the differences between receiving reports and shipping reports
receiving porting are a/p would not be something shipped to some one address via fraud.
We pay a vendor
Shipping is an a/r would verify address someone that needs to pay entity because they recieved merchandise
103
from a4 mcqs what expression would be included in the management letter by the auditor
a statement about subsequent events such as no events have occured subsequent to b/s date the requires subsequent event to or disclosure in the f/s
other expression pertain to
Representation letter : management provides information on the f/s, completeness, recognition , measurement and disclosure and subsequent events
104
when looking at bank transfer misstatement question from a cash is cash out
how do you review
if cash was disbursed to you on 1/4/y2 you could not have received cash on 12/31/y1.
105
if auditor is testing valuation , allocation and accuracy he would and would not test
he would test overhead rate
he would not test ; voucher sample of corresponding prenumber of invoices
106
what is an auditor primary method to corroborate information on litigation claims and assement
primary is first thing which is review the correspondence from clients lawyers to a letter of audit inquire
could be second: Examining invoices to lawyers letter is a substance test to a particular matter
107
if employees are ordering merchandise over the internet and approving invoices for payment, paying them an them destroying invoices how would auditor test
through the cash disbursement report to the invoice via existence
108
what are the a/r confirmation for useful in negative request;
Assess level of control risk is low (if high, it would be a positive confirmation)
number of small balances are many
consideration by the recipient is likely
109
If an event that did not exist at year of audit but aros after year end. the events maybe important to the auditor. how would the auditor handle
If he think th event is important, he would disclose in the f/s so not to be misleading
110
When is there a reduction in the plan reliance on a prescribed control for statistical sampling
the happens when the upper deviation = sample deviatIon ( auditor guess based on his bell curve) + allowances for sampling. If upper deviation sampling risks exceeds tolerable rate, then test for control will be reduced.
if sample deviation risks + allowwance for sampling is less than tolerable rate, then test of control will be increased
111
What is the best way to test for existence in inventory
Best way is to observe the inventory
and vouch back from source doc to je
112
what is the difference between completness testing and existence testing in source doc. and list
Complete= tracing forward from source document to journal entrties ior listing.
So. tracing listing to general ledger inventory account (this is not a source doc or invoice) is completeness
Existence = vouch backwards= journanl entries or listing back to the source document.
113
Is making suggestions by auditor to improve clients i/c or designing effective substantive testing a primarry objective in knowledge of i/c
no; on making improvement to client. make be used in engagement letter
yes. on design of substantive test. since it must br done along with i/c.
114
is there a difference in missapropriation of assets and fraudulent financial reporting
yes. missapropriation of assets is stealing. could be done through employees knowing there ar large amount of assets that can be converted to liquid assets quickly
Fraudulent financial reporting could happen when there is pressure to get good financial number on the books, or compensation for good sales. or overly large complex organization structure with unsual lines of authority. for example the purchase order manager can also sign checks.
115
what factors would an auditor assess when assessing an IA for objectivety, and competency
Objectivety- audit committee reviews employment decision of the director of IA
Competency= attending comprehensive CPE
Certified IA
Prior work experience
116
what is the accronym for test account balance for management assertion.
Test of account balance for management assertions: CVER
Completeness, Valuation, accurarcy, allocation, Existence and occurance, rights and obligations
117
What is the accronym for test of transactions and events for management assertion
Test of transactions and events = COVEU
## Footnote
Completeness
Cutoff
Valuation, allocation and accuracy
Existence and occurrence
Understandability and classification
Revenue transactions; existence and occurance / supports for overstatement and completeness/coverage for expense understatements
118
What is the accronym for presentation and disclosure for management assertion
Presentation of disclose
CVRU
Completeness
Valuation, allocation and accuracy
Understandability and classification
119
what is in CRIME five components of i/c
CRIME
Control Environment= overall tone of the organization
Risk Assessment; management id of risk
Information and Communication= recording transaction and communication of responsibilties
Monitoring= assessment of i/c overtime
Existance of control activities; control policies and procedures
120
Would control activities be part of information and communciation
no. information and communication is recording of transactions and assigning responsibilites.
Where as control activities are p&p
121
when auditing a clients fv of investments for presentation and discloure and auditor would do the following test of assertions
CVRU
Completeness , valuation and accuracyt, rights and obligation, and understanding,
IT would not determine how future value of fv for client
122
123
When an auditor primary concerned with i/c is
the impact on financial staements
124
when an auditor is using the analytical review the primary audit procedure he is looking for the reasonable of
Completion of recorded investment.
Completion is synomis with reasonable
Classificaton of g/l based on evaluating appropriate accounting principles
existance and ownership evaluated on inspection, reveiw or confirmation with outside broker on securities.
125
126
When looking at size sample and varibility on left side and specific tolerable rate and specific risk of incorrect acceptance on the right side how should you view columns for ccorrect answers
if size does not matter. YOu are only looking at specific tolerable rate and specific risk of incorrect acceptance on the rights side.for correct answers
focus on the right side.
for example if specific tolerable is smaller that means auditor wants lower risk. There fore the sample size would be larger. This mean if the specific incorrect higher this mean he wants higher risk and the sample should be smaller
Higher incorrect risk = smaller sample size
Smaller tolerable = larger sample
Lower incorrect risk = larger sample size
higer tolerable - smaller sample.
Lowe
127
An auditor would design test of details to ensure that sufficient audit evidence supports
the planned of level assurance at the relevant assertion levels by managment because auditors are looking for misstatements.
128
what is and is not a i/c questionnaire for PPE
Are i/c : are request for purchase of equipment reviewed for consideration of bids.
are request for major reparis approved
are prenumbered pos used for equipment and periodically account for
are not procedures in palce t monitor and perperly restricted access to equipment. this is more of a physical security questions.
Make sure to read are of questions.
129
when would an auditor most likely increase test of control
when IT systems is extensivley integrated through out the company accounting system ; less substantive and more test of controls
Manual systems = test of control would not be used and subtance testing would be used
130
How are the opinions for qualified, disclaimer Adverse
Qualified; material but not pervasive (adverse) or due to scope: In our opinion, **except for the effects of the matter describe** in the basis-for-qualified-opinion paragraph .**..are presented fairly the financial postion**
Disclaimer: GAAS due to scope : **Because of the significance of the matter described....Accordingly, we do not express an opinion on these f/s.**
Adverse GAAP issue very material and pervasive: **In our opinion,** b**ecasue of the significance of the matter** described in the basis-for-adverse-opinion paragrapj, **the consolidated f/s referred to above do not presented fairly the financial postion**
131
what is an inheranct limitation that i/c can't stop.
Mangagment override ; a ceo request a check without a po or not following p&p.
collusion by two or more empployees
employee error.
132
what is an is not an effective i/c to reduce billing errors
is: using computer programs on pricing and mathematical accuracy
matching shipping docs with sales orders before invoicing
comparing control totals for shipping documents with corresponding total of sales invoices
is not: reconciling g/l to sales total. errors could happen.
133
what is the best and reliable audit evidence structure
effective i/c provides more assurance about reliability of audit evidence
effected I/c enhances audit evidence.
134
What would and would not not have an impact in determining the Scope of an existing client audit
Scope are situation that would asssit an audiotr in during his job:
effect on IT
current regulation and staturory reporting requirements
aknowledge gained from prior experience with client
would not ; prelinary evaluataion of material and audit risk; these are focus on the audit.
135
if there is an insignificant portion of clients inventory in an off site. what type of evidence of existence should be used.
for insignificant it would be confirmation
for significant it would be inspection and observe.
136
what is a factor i whether group auditor list comonent auditor will or will not reference component auditor
the group may not list component audit in opinion wheter is unmod or qualified is ased on group audito satiified as to the idependnece and prefessional reputation of component .
137
what is matter that auditor is to communication with governance
any adjustment that were recommended to management that have a significant impact on the financial reporitng.
Auditor does not have to report to governance on his risk of fraud assessment.
138
Sim 3 test of control v test of substantive procedure
test of substantive procedures is $ balances
id procedure proper class
exam and approv= inspect and control test
compared this year exp with last year = analyltical proc and substantive
request from directly from customer= inquire and we are request $ amount substantive
questioned managment of subsequent event= we are inquiring on $ amount of a future event that may impact this year f/s = inquiry and substantive
observing cash reciept clerk deposit check. observaton and clerk is doing a procedure= test of control
examine additions to the fa accounts; this is an inspection and $ to account = substantive testing
agreed sales invoices to credit file to determine that customer had approved credit; agreed to credit file, this is auditor reperforming and not reculating no math steps invoived and authorizatio = test of control
ask accounting manager how often is deposit made and by whom = this is an inquiry and test of control no $ amount involved just a procedure test of control
139
a1-a5 mcqs study 2/16/20; during an audit, an auditor identifies a business risk associated with plans for a new products lines. what should the auditordo as a results
analyze the new id risk in conjunction with other know business risk and consider whether there is an immediate consequence for the risk of material misstatement at various level of the audit (f/s).
140
141
sample to test i/c are intended to provide a basis for an auditor to conclude whether
the control activities are operating effectively
sample test = control operating effective
142
when performing analytical procedures in the planning stage, the auditor most likely would independent develop expectations by reviewing
analytical procedures involve comparison ofrecorded amounts . in the planning stage, substantial amounts included; use of general financial data,
unaudited informataton from internal quarterly reports
143
an auditor would perform the following on contingency of litigations, claims, an assessments
contingency are things that have not happen yet.
on of the procedures that an auditor would perform is obtain assurance from management that it has disclosed all unasserted claims that its lawyer has advised are probable of assertions = accrue and disclosed on f/s.
144
in obtaining an understanding of an entitys i/c in f/s audit, an auditor is not obligated to
search for significant deficiency in ops of i/c
145
146
would a segregation of duties such as separating authorize to dispose of equipment and those authorize to approve removal work prevent improper disposal of equipment
yes
147
148
would action would an auditor take after determining taht performing substantive test on inventory will take less time thant perfroming test of contorls
if it is more effecient, assess control risk low, and no reason to test controls( there is not a high degree of eletronic payments) than only do substantive testing
149
in an audit of an issuer, an auditor is least likely to include in the critical audit matter paragrah
A critical audit matter, or CAM, is any matter communicated or required to be communicated to the audit committee and that both relates to material accounts or disclosures that are material to the financial statements and involves “especially challenging, subjective, or complex auditor judgment.
such things as audit disclaimer responsibity, qualifyng, restriction or minimizing auditors responsibity for CAM would not be appropriate.
150
in addition to making management inquiries on contingent information, what infor is needed and not need
contingent = things that have not happen yet'
needed; obtaining a client rep letter
reviewing status of l-t leases
discussing sales contract with sales managers
non needed; reviewing derivative transactions reflected in the quarterly b/s. this has already happen
151
would significant accounting est made by management and cpa's assessment of sampling factors be appropriate for gaas reporting
yes to significant accounting est.
no ; to cpa's assessment of sampling factors of risk. not included in the report.
152
how should a previous communicated significant defiency that has not been corrected be communicated again
in writing during the current audit
153
154
A1-A5 mcq study 2/18/20: In the previous year, an auditor expressed a qualified opinion on the f/s due to lack of adequate disclossure. since then, the they have been restated in current years comparatives. the auditors updated report on the prior year should include a;
Expressed unmodified opinion on th restated f/s of the priors. an state the substantive reasons for the change of opinion in the EOM i or OM following the opinion paragraph.
155
A misstatement discoved that was immaterial from previous year should covered in what in current year's audit
Considered part the evaluation of audit finding for te current. due to immaterial could be aggrated to material in the current year but no restatement or EOM or OM.
156
157
What is a statement is a standard applicable to the f/s audit in accordance to Government Auditing Standards
The auditor should report on the scope of auditors testing of i/c.
Remember that the auditor **WOULD (**and **not shoul**d) determine the extent to which the entitys programs achivee the desired levels of results
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Under the third standard of fieldwork, the auditor must obtain **sufficient and appropriate audit evidence** by performing audit **procedures** to afford a reasonable basis for opinion of **F/s**
what is the appropriate audit evidence required by this standard is
The standard on this is based on th level of assurance of **substantive testing of $ amount procedures** from **f/s** for **sufficient and appropriate audit evidence**
this can be done with analytical procedures
159
new mcqs 2/20/20: would an independent auditor share judgement with IA on material of misstatements and evaluating accounting est.
no. This is the independent auditors responsibility. he would use audit in support role only.
160
why would an auditor fine blank confirmation better than positive
because recipient would have to research information and not sign in the case of positive confirmation.
161
if an auditor is engaged to provide an opinion on complete f/s and an opinion on a/r. the complete has a qualified due to materiality in a/r. what would the a/r opinion be
Adverse the modified f/s is due to the a/r materiality. the a/r material is very material and pervasive.
162
What is adequately disclosed when there is a substantial doubt about companys
Auditor would disclosed in unmodified opinino (adequate) and state in the report;
EOM report that follows the opinion paragraph
going concern
substantial doubt.
163
in developing an audit plan which includes outlining audit procedurs to be performed. what procedure would be used to detect material $$ misstatments
substantive procedure $$
Test of details and not TEST of controls would be a procedure for RMM
TEST of CONTRols use to evaluate operating effective of existing control in preventing or detecting material misstatements.
164
if an auditor has an substantial doubt about a entity ability as going concern. If the entity does not disclose would the auditor issue a qualified opinion
yes. disclosure is required by GAAP. if failure to disclose results in qualified opinion.
165
Can an auditor issue an unmodified opinion when there is material departure form GAAP
yes. when it is justified. unmodified with EOM paragraph.
166
in assessing objectivity of IA, the independent auditor would considered
level where IA reports
policy prohibuting IA lack of indepency
external peer reviews
professional auditing standard used and developed via Institute of IA
167
what would be a procedures on test of completion of assertions
1. source doc to listing
2. perform cutoff procedures provides assurance that goods in transits (shipped or received) are appropriately included or excluded from inventory.
Completion = cash disburesment and a/p
Examine would include paid invoices but excludes not yet paid.
168
A good i/c would have employee who prepare remittance listing that is forwarded to cashier should also include
a listing sent to a/r bookkeeping to update the subsidiary ledge account receivable records.
169
when an auditor plans to rely on controls that have changed since the last tested what would be the course of action for the current year
change in i/c, an auditor would test the operating effectiveness of such control in the current audit.
170
what is a basic element of the independent audit report
performing procedures to obtain audit evidence about the amoutn and disclosures in the f/s
disclosed all information required by GAAP is implied but not mentioned.
171
mcq 2/25/20; what control is least likely to be used in a safegaurd for cash
receiving report
segregation of duites
lock box
bank statement
receiveing report would not be used for safe gaurd of cash
172
in an audit of an issuer, what would least like be put in the critial matter paragraph in the audit report
A critical audit matter, or CAM, is any matter communicated or required to be communicated to the audit committee and that both relates to material accounts or disclosures that are material to the financial statements and involves “especially challenging, subjective, or complex auditor judgment.
the paragraph would include information such as; reference to the relevant financial statement account that relates to CAM
description of how CAM was addressed
description of principan consideration that led the auditor to determine CAM
IT DOES NOT INCLUDE INFORMATION OF DISCLAIM AUDITORS RESPONSIBILITY FOR CAM
173
An auditor issued an audit report that was dual dated for a subsequent event occuring after the original date of the auditor report but before the issuance of related f/s. what is the auditors responsibility
to limited to the specified event referenced.
174
other information on critical audit matters or CAM
(1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment. Critical audit matters are not a substitute for the auditor's departure from an unqualified opinion (i.e., a qualified opinion, adverse opinion, or disclaimer of opinion on the financial statements as described in
175
An auditor that is engaged to do an audit of Service organizations i/c placed in ops as of a specific date. the report will be useful to the clients audit. what would the type 1 opiion be
type 1 opinion is Management's description of the services organization system
type 2; provided inform on operating effectiveness of i/c
176
more on type one and type 2
The short answer is that a Type 1 report just provides a report of procedures / controls an organization has put in place as of a point in time. A Type 2 report has an audit period and provides evidence of how an organization operated its controls over a period of time
177
what would provide the most reliable evidence of management assertions of rights and obligation
178
what procedure would an accountant perform during an engagment to compile prospective f/s`
179
what procedure would an auditor to in planning a f/s audit
180
what is the auditor tyring to accomplish when he reviews the reconciliaton of payroll tax form the client files
181
when reporting on condition of the observing of non issuer i/c auditor will
restrict use of the report due to not a requirement for issuer but an option on add to engagement via integrative reporting
182
If an auditor wants to test the account balance on a clients f/s. to test the valuation, allocation and accuracy of management assertion , he would not
vouching back a sample from g/l to documentation is test of existence and occurance assertion use in transaction accounts. so audit would not use this.
He would use
reconciling supporting schedule to g/l
footing and cross footing account and supporting schedule
perform recalc of est pertaining to account balance.
183
what is a services that accountant can charge contigency fees
nonattest client in an irs examination
184
two crucial requirements to achieving audit effeciency and effectiveness with computers are selecting
remember computers = process, applicatinon this give output of data.
they identification of the approriatness of audit task
appropriate software t perform task
can not
assess ,
determine
speak to specific industries
185
an auditor is unable to complete a procedure during an audit. what opinion is he least likely to give
an avderse opininion = this is a very material and pervasive departure from framework or GAAp
He would give either disclaimer or qualied based on the severity of the limited scope.
a unmodified would be give it was immaterial or if an alternative procedures could be performed.
186
what percedure would an auditor perform in the planning stage
high level analytical procedure: such comparing recorded financial information or f/s with anticipated results from budget and forecast.
187
CPA believes there is substantial doubt about a clients ability to continue as a going concern for a reasonable period of time. CPA evaluate entity plan. what would be a mitiagating factor in companies plan
the reduction in required dividends. this mean company is conserving cash.
accumulating treasury stocks. no cash outflow to buy back stocks.
188
2/22/20
189
what is correct about i/c
that i/c is relevant to the entire entity or to any of its ops unit or business functions.
and there is a direct relationship entitys objective and i/c
however not all objective and related i/c relevant to f/s.
190
in an integrative audit of a non issuer, an auditor will issue and adverse opinion (material departure from gaap) on effectiveness of i/c when it is a
material weakness that is existing.
going concern not relevant
finanical statement misstatement = qualified or adverse. this question specifically state adverse opinion.
191
auditor has a materialty threshold of $100K. auditor has accumulated audit evidence that supports and allow for bad range of $1.5m to $1.8m. the client record only $800K what is the proper adjusment in summary of adjustment`
take the audit evidence number closet to the audit range = $1.5m less $800k
client recorded = summuary adjustment $700k
DR bad exp 700
Cr allw for bad debt exp 700
192
In auditing a/r, a negative confirmation form would be used when
conbined assess level of inherent and control risk are low to a/r.
not due to a/r totla is immaterial. if immaterial, don't send confirmation.
193
why is negative confirmation of a/r less effective than positive
A negative confirmation is a document issued by an auditor to the customers of a client company. ... A positive confirmation is one in which the customer is required to send back a document, either confirming or disputing the account information sent to it by the auditor
Discuss the advantages and disadvantages of using negative accounts receivable confirmations rather than positive confirmations. The primary advantage of negative confirmations is that they are less expensive than positive confirmations because there are no second requests and no follow-up of nonresponses.
since with a negative confirmation there is second request need, all may not verified accounts information.
194
which of the following management assertion is the auditor most likely testing if the auditor objective that all inventory on hand is reflected in the ending inventory balance.
the auditor will want to test the completeness of inventory.
value of inventory would not satisfy auditor
and properly presented on f/s would not be true could be errors.
195
What department would have proper authorization of write offs of uncollectible accounts
look at segregation of duties ARC
Authorization
Recording
and custody
Authorization should come from somewhat not recording or has custody
like the Treasurer office
196
what is the auditor responsibility if a previously reported i/c weakness is subsequently eliminated and managment engaged an independent auditor to attest to improvement
before auditor can attest he must perform procedures, once done that express an opinion on whether the weakness has been eliminated.
197
what professional standard is auditor meeting to conform with professional standard
quality control which is inclusive of independence of professional standards
where as GAAS relates to individual audit engagements
198
what information should a services corp auditor give when his i/ opinion is on a decription of controls placed in ops.
there are 2 type opinion he can give
type 1; report on control placed in operation; less intense
type 2; report on placed in ops and test of ops effective.
this auditor did type one which is description of the scope and nature of auditors procedures.
199
a company being audited has a IA that is both competent and objective. what type of assigned task can a independent auditor give to the IA
Can give him test of controls and of details (substantive$ test)
but not
auditing major subsidiary of programs
or using analytical procedures
200
what is auditor responsibility for a required supplementary information that is outside basic f/s but required for FASB
when audited f/s has supplement informatio that is outside of basic f/s, the auditir should apply limited procedures to the required supplement and add OM paragraph to f/s audit.
201
when there is a letter of transmittal that accompany's an annual report or CAFR for state goverement that is attached to audited f/s and the auditor reviewed the CAFR and id a material inconsistency with the f/s. the f/s was fine. what should auditor do
After reivewing report and determing that the audit is fine, Request that client revised the letter of transmittal
202
203
2/26/20
204
a group engagement partner decides not to refer to the audit of a component auditor. After making inquires about the components auditors professionalism, reputation and independence, the group auditor wold do what next
Group auditor is taking responsibility for the entire audit, should contact the component auditor and review his audit program and working papers pertaining to component audit
205
what management assertion is auditor doing when he is inquiring of warehouse personnel concerning obsolete inventory and slow moving inventory
this would be valuation: has inventory been claim at LCM or written of.
206
an audit is testing the reasonableness of dividend income form investments. what could auditor used to compute the amount of dividend income that has been received and recorded by client
electronic assess the details of divendends records on internet by using dividend rates of investments. or with invesment brokers statements.
207
when performing search for unrecorded fix asset auditor would perform
existence; vouch back asset on ledger to what it is in hand. via inspect ledger and insurance and tour facility.
208
what duties can an IA do for an external audit
1. test of controls and understanding controls
2. substanive test
3. assessing risk
4.
209
Whe an accountant compiles projected f/s. the report should state
Describe the limitation in the financial projections on the usefulness of the projections by including a caveat that the prospective results may not be achieved.
Other useful inform
compilation of projections does not disclaim historical info.
there is no assurance in the compilation of projection report
hypothethical assumption are examination of prepared projection and not compilations.
210
mcq test 2/28/29; a auditor will test the reasonableness of dividend income by getting information from
the dividends records produce by investment advisory services = investment statement
211
what does a compilation report contains
Remember compilation reports can included projections
Compilation does contain
there will usually be a difference between the projection andthe actual results because events and circumstances frequently do not occur as expected.
Compilation does not contain
1. evaluations and examination of the support of the underlying projections
2. projection is limited to presenting, in the form of a f/s, information that is accountants representation. this is management function.
accountant note in a compilation that their are no report on future events and circumstances.
212
the audior would report significant deficiency to
would report;to specific legislative and regulatory bodies when reporting under GAGAS.
would report to the audit committee or if no audit committee a formal oversight committee
not report ;Due to code of professional conduct, Would not repor to the SEC
would not report to sharehoders due tocode of professional conduct
213
is observing safeguard over access to an use of assets part of a review under SSARS
no; this is a i/c evaluation not conducted under a review.
214
