AUD Memorization

Question 1

Steps to report illegal acts for a nonissuer (4)

Answer 1

1) Illegal act discovered
2) Report to governance
3) Client’s response appropriate?
4) If yes, then determine if FS are materially misstated. If no, then consider withdrawing

Question 2

Engagements under Statements of Standards for Accounting and Review Services (SSARS) (3 of them)

Answer 2

Preparations, Compilations, Reviews of historical financial information, including FS

Question 3

Engagements under Statements on Standards for Attestation Engagements (SSAE) (3 of them)

Answer 3

Agreed-upon procedures, Examinations, Reviews of anything other than historical financial information

Question 4

For each engagement below, list what procedures the CPA peforms, the type of assurance, if independence is required, and if a report is issued or not.

Review
Compilation
Preparation

Answer 4

Review - inquiries and analytical procedures, Limited assurance, independent, yes

Compilation - assemble and read FS, no assurance, independence not required but must be disclosed, yes

Preparation - prepares FS or specified FS elements (BS only), no assurance, no independence, no

Question 5

What are the nine elements in an engagement letter (FACSIMILE)

Answer 5

Fees
Auditor’s responsibilities
Confirmation of engagement
Scope and objective
Internal controls
Management’s responsibilities
Irregularities (fraud)
Illegal acts
Errors

Question 6

What are the five reasons a successor auditor wants to discuss with the predecessor auditor?

Answer 6

Reasons for change
Integrity of management
disagreements during audit
communication with management or those charged with governance
Understand related party transactions and significant unusual transactions

Question 7

List the number of days the final audit file must be assembled within and the amount of years it should be retained for in regards to the following:

Issuers
Nonissuers

Answer 7

Issuers - 14 days after report release date, 7 years
Nonissuers - 60 days after report release date, 5 years

Question 8

What is the audit process outline? (8 steps)

Answer 8

Client acceptance/continuance
Plan the audit (initial strategy and plan)
Obtain understanding of client, its environment, and IC
Assess risk of material misstatement and design further procedures
Perform tests of controls
Perform substantive procedurs
form an opinion
Issue a report

Question 9

When is something considered inelastic and elastic?

Answer 9

If elasticity of demand (Ed) is greater than 1 it is elastic and revenue will decrease with a price increase; if it is less than 1, it is inelastic and revenue will increase if price is increased, if it equals 1, then it is Unit elastic and isn’t effected by price changes.

Question 10

What are the 5 components of internal controls (CRIME)

Answer 10

Control Activities
Risk Assessment
Information and communication
Monitoring of controls
Control Environment