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Flashcards in A3 Optional practice review Deck (16):

The accountant may have a duty to disclose irregularities to all of the following outside parties

1. The SEC when the client reports an auditor change
2. A successor auditor when the successor makes appropriate inquires
3. A government funding agency from which the client receives financial assistance.


The auditor should be designed to identify material misstatement due to acts of noncompliance with law and regulation,

but acts of noncompliance with laws and regulations that relate to OPERATING ASPECTS rather than ACCOUNTING ASPECTS may NOT directly affect the F.S, therefore they may be LESS likely to be discovered by the auditor.


Monitoring is the process of assessing the quality of internal control performance over time and taking necessary corrective actiions

however, eliminating a control that is not operating effectively would NOT be an appropriate corrective action.


The use of budgets and forecasts to identify variances IMPROVES manager's ability to supervise company activities.

Variance from budget serve as signals to manager that a potential problem exists.


Analytical procedures is not used to obtain an understanding an entity or part of the entity

Analytical procedure is used in planning stage and final review stage.
Observation is an substantive test, not a procedure to gain an understanding of internal control.


An entity's objective consist of
1. financial reporting
2. operation
3. compliance

Internal control over safeguarding of assets may include controls related to
1. financial reporting objective
(e.g. use of a lockbox system to collecting cash or password for limiting access to AR data files)
2. operation objective

No compliance objective


The auditor is required to document key elements of the understanding of the entity and its environment, including each of the components of internal control.

Auditor is NOT required to perform test of control unless they plan to place reliance on a particular control.


When expressing an UNMODIFIED opinion, the auditor will NOT refer to the work or findings of a specialist.

The auditor may make reference to a specialist in a MODIFIED opinion (in a departure from an unmodified opinion), The auditor may need to permission of the specialist before referencing the specialist in the report.


While a specialist who is related to the client may be acceptable in certain circumstances

in such situation, the auditor would likely perform additional procedures to verity objectivity.


The permanent(continuous) file includes audit doc that has a continuing interest from year to year. which include

contract, pension plans, leases, stock option, bylaws, article of incorporation, minutes of meeting, bond indenture, and internal info.


Doc completion day
PCAOB 45 days following the report release date

Doc completion day
SAS 60 days following the report release date


The auditor is able to detect liabilities not recorded at year-end by comparing cash payments made after the balance sheet date to the related receiving reports and vendor invoices

any payments made on transactions dated before year-end reflect a liability that should have been recorded


Sound internal control dictates that, immediately upon receiving checks from customers by mail, a responsible employee should:

Prepare a duplicate listing of checks received.(a remittance listing 汇款清单should be prepared)


Examine shipping documents for matching sales invoice is tests of controls most likely would help assure an auditor that goods shipped are properly billed

Tracing from a sample of shipping documents to matching sales invoices would provide support for the completeness assertion for billing.


A voucher is often a prenumbered form used in the accounts payable department to standardize and enhance a company's internal control over payments to its vendors and service providers.

A voucher is usually prepared after a vendor's invoice has been matched with the company's purchase order and receiving report.


An auditor most likely would compare cash payments made AFTER the balance sheet date with the accounts payable trial balance in searching for unrecorded payables.

The auditor is looking for items that should have been recorded as of the balance sheet date, but were not.