Aud notes study question Flashcards

Question

10320; under government standard , when auditors has assessed control risk at the maximum level for assertions related to computerizes information systems that materially impact the f/s. The auditor should document

Answer 1

1. . basis for assessing control risk at the maximum 2. what is the planned audit procedure designed to reduce audit risk.= risk the auditor will make an mistake in the audited f/s. not included is managment acknowledgement of the assessed level of risk. this is a management response.

Answer 2

5000 recorded amount - audited amount 4000= 1000 tainted 1000 tainted/5000 recorded = 20% 10000 populatiion \* 20% = 2000 projected misstatement of this sample.

Answer 3

Accepted= Express an opinion on the information if review procedures have been apprpriately performed Report on whether the information is fairly stated in relation to the f/s taken as a whole, if appropriated procedures have been applied Disclaim an opinion on the information Can't accept; express negative assurance on the information, if review procedures have been appropriately performed.

Answer 4

id. of the application approriate sofewarre to perform the audit task not part of effectiveness and effeciency; client data.

Answer 5

yes. population variability has a direct **effect** to sample size however, in a test of control, population size has no effect on sample size unless population is small.

Answer 6

Deviation: The term deviation includes: any business event that occurred that was not expected to occur. any business event that didn't occur that was expected to occur. a control exists but did not operated effectively i.e. it has not prevented or detected and corrected a misstatement on timely basis. a control is absent.

Answer 7

Deviation from control activities do not necessarily result in misstatement. Therefore**, deviations from pertinent (important) or specific control activities** at a given rate would ordinarily be expected to result in misstatement at a lower rate.

Answer 8

errors in managment assertions.

Answer 9

1. professional behavior; honest effort in the performance of professional serivces 2. integrity; conduct fieldwork that is objective, fact-based, nonpartisan, and non-idealogical wiht regard to audit entities and users of audit reports 3 Service to the public; public interest is defined as the collective well-being of the community of people and entities serve by the auditor. auditor should meet this needs 4. objectivity; indepence mind and appereance, maintaining an attitude of impartial having intellectual honesty and being free of conflict of interest.

Answer 10

in the evaluation of sample size, the tolerable risk 7% was less than the deviation risk 8%.

Answer 11

no. due to it is not material

Answer 12

nature of substantive test from less effective to more effective procedure. AR = ir \*cr\*dr If control risk is low then detect risk is high and subtantive is low when contol risk is high then detect risk is low and substantive is high Seesaw effect

Answer 13

yes. attribute is a statistical approach to used to test controls in which auditors quantify sampling risk.

Answer 14

when the combined assessed level of ir and cr relative to a/r is low

Answer 15

nature of assetion tested plasusibilty predictability of the data relationship availability and reliability of data used to develop the expectatiion and precision of the expectation.

Answer 16

report on other comprehensive basis of accounting f/s report on specified account in financial statement report on a financial presentation to comply with a contractual agreement or regulatory requirement negative assurance a report on compliance with contractual requirements related to audited f/s

Answer 17

critical audit matter is defined as any matter arising from the audit of the financial statements that has been communicated or is required to be communicated to the audit committee, and that relates to accounts or disclosures that are material to the financial statements, and that involves especially challenging, subjective, or complex auditor judgments. The communication of critical audit matters is the responsibility of the auditor, not management or the audit committee, and they describe aspects of the audit process. They are not the same as critical accounting policies, which are determined by management and reported in quarterly and annual reports in management’s discussion and analysis. Critical audit matters will be different for each company, even within the same industry. They may change from year to year, based on the complexity of each individual audit, changing risk environments, and new accounting standards. In the standard, the PCAOB indicated that it expects that in most audits at least one critical audit matter will be identified. The board also has advised that critical audit matters should not be boilerplate because they are intended to provide information about each audit and the auditor’s perspective. The inclusion of critical audit matters in the auditor’s report is effective for large accelerated filers for fiscal years ending on or after June 30, 2019. It is effective for audits of all other companies required to have critical audit matters included in their auditor’s reports for fiscal years ending on or after Dec. 15, 2020.

Answer 18

when the sample rate deviation plus the allowance for sampling risk exceeds tolerable rate sample rate 3.5 + allowance 4.5 = 8 \> tolerable 7 = redyce

Answer 19

NO to all must accept

Answer 20

NO to all, he would be out of compliance with SSAR SSARS requirement= prepare, review compile. can not reproduce f/s or do je's.

Answer 21

- Compile, reivew, and prepare unaudited f/s which includes doing preparing person f/s used in mortages, attached to tax returns, Does not included - personal f/s for personal financial planing,,

Answer 22

m1 SSARS Engagement A. Preparation, SSARS, non attest, no assurance, can be non independent without disclosure Preparation; lowest level of SSARS Documentation for prep; 1. engagement letter; to establish understanding with the client included in it; objective on engagement; "manamgement responsibility: preparation of f/s in accordance to GAAP or framework and each page of f/s will include a statement that "no assurance is provided on f/s or accountant will be required to issue a disclaimer. - accountant responsibility - Limitation of the engagement - identification of framework - whether the f/s are contain a known departure or departure has inadequate disclosure 2. a copy of the f/s prepared by the accoutant 3. Any significant finding or issues 4. Oral or written communication with management regarding fraud or noncomplance with laws and regs. that came to accountant attention 5. accountant judgement is it is necessar to depart from GAAP. Justification is reqired and how B. Compilation, SSARS, attest, no assurance, non independent but have to disclose not independent, Document understanding with 1. Engagement letter - objective of engagement - management responsibilities - accountant responsibilities - limitation of the engagement Accountant performing compilation of entity must have general understanding of clients business via STAFF; - Staff qualifications - Transactions types and frequency Accounting basis used to prepare the f/s - Form of accounting records - Financial statements form and content before issuing report, accountant must read compiled f/s and considered whether they are appropriate in form and free from obvious material erros. Notice for all SSARS; Never assoicate with False, fraud or missleading f/s by entity. if client refuse to correct errors , accountant should withdraw form enagement. Documetnation in compilation engagement - engagement letter - copy of f/s - a copy of accountants report - any significant findings or issuers of the results of compilation procedures that could be material misstated and the actions taken to address these findings or the resolution of questions or concerns raised during the compilation procedures - oral or written communication with managment regarding fraud of noncompliance of laws or regs. that came to accountant attention. Accountant does not issue an opinion Standard compilation report has no title, non separate paragraph, no assurance, signature of accountant , city and state of accountant, date of the report. Reports that are in accordance with special purpose framework cash, taxe or contract basis; should have another paragraph that reference management responsibility of determining applicable framework and prepared within special framework and is other than gaap Accountant may omit substantial disclosures by client request. but the accountant must clearly indicate the omission by including and additiional paragraph diclosing such omission. which would state if disclosure were included it might influence users conclusions. If not independent, last paragraph should state the disclose that information. Accountant should not modify the compilation report to include a statement that the financial statements are not in conformity with applicable financial reporting framework. Such modification would give an adverse opition which is not applicable. C. Review; SSARm attest limited assurance, independent required, analytical procedures and inquiry.

Answer 23

would- there is a lack of segration of duties in acccounting and payroll ; wuld not affect accountants decision to accept engagment - entity's intention to omit from f/s substantially all of the disclosures required by GAAP; as along as the omission does not mislead user. - management acknowledge that the f/s will be lncluded in a written personal financial plan. can accept the engagment just not a application of SSARS would not- asset that are missappropriated are not investigated.

Answer 24

attest; - compilation - review - audit non attest -preparation = lowest level of services.

Answer 25

to either= - isssue a disclaimer that make clear on assurance provided on f/s or -perform a compilation enagement

Answer 26

No. compilation reports does not have any assurance be it positive or negative assurance.

Answer 27

No. This is an analytical procedures which are not required in compilations

Answer 28

withdraw from the compilation engagement and provide no futher services on f/s. this was an insufficienct diclosrue of GAAP.

Answer 29

desribe the limitation on the projections usefulness.

Answer 30

accountant is not required to perform any procedures to verify the accuracy or completness of the information provided by management.

Answer 31

a compilation report that notes or disclosed accountant's lack of independence.

Answer 32

implicit compilation statement; if the accountant is not independent, he sould specifically disclose the lack of independence, i.e implicit.

Answer 33

the effects of independence impairments, if present, will have on the expected form of the accountant's report.

Answer 34

substantially all disclosure required by GAAP are included in the f/s

Answer 35

Request that managment consider the effects of the related matter on the f/s. would not issued a disclaimer due to scope limitation., due to review is not an audit With a review, accountant unable to perform procedures deemed necessary to the review. the review is incomplete and review report is not issued.

Answer 36

review = analytical procedures and inquiries; is= inquiries concerning the entitys procedures for recording and summarizing transactions is not= analytical procedures designed to test managements assetions regarding existence.

Answer 37

are = comparing current year to prior year balances obtaining managment rep letter on year-end balances making inquires of the payroll accountant regarding the completeness of the account balances are not = testing the process used by management to determine the balance.

Answer 38

compilation in yr 4 from review yr3 is a down grade 3 options - issue yr 4 compilation with extra paragraph on responsiblity assume in yr 3 review and no review done in yr 4. - issue two separate reports for yr 4 and yr 3 - issue combined yrs 4 and 3 full reports and a statement that no review done in year 4.

Answer 39

Either. the report on the prior period reissued to accompany the current period report or the report on the current period should include a separate paragraph a description of the responsibility assumed for the prior periods f/s.

Answer 40

the type of opinion if it is not unmodified. date of previous audit report that no auditing procedure done in current year review report prior year statements were audited.

Answer 41

A scope limitation that was overcome through acceptable alternative procedures.

Answer 42

is. - comaparing disaggregated revenue data for the current interim period with that of comparable prior periods - inquire of management about knowledge of fraud or suspect of fraud. - obtain evidence that interim f/s reconcile with the accounting records is no- - obtaining corroborating evidence on entity going concern

Answer 43

to provide an accountant basis for reporting whether material modifications should be made to conform with GAAP framework

Answer 44

accountant review report is not a part of the registration statement within the meaning of the SEc Act of 1933 . this is to indicate that in no way he is responsible for financials on prospectus.

Answer 45

consider audit procedures performed on previous f/s and how they correspond to current year's interim f/s. Analytical procedures ar performed after knoweldge of company.

Answer 46

an opinion (positive) as to whether audited f/s comply in form with the accounting requirements of the SEC.

Answer 47

Unusual circumstances such as ; 1. new legislation 2. evolution of a new form of business transactions

Answer 48

a position in policy making in the clients's finance division.

Answer 49

A spouse employment with a client. Independent rules extend to member' spouse, dependent children, and dependent relatives

Answer 50

is - an investment held by the trustee of a trust - an investment held through a nonclient investment club (influence) - an investment held in a blind trust is not - an investment held through a nonclient regulated mutual fund. member does not control the stock.

Answer 51

no account that are Security Investor Protected Corp protect or FDIC are not impaired

Answer 52

Yes for Consulting with experts because something may exceeds member competency No. for obtaining accreditaion

Answer 53

To distinguish a mark of profession as it is accpetance of responsibility to the public

Answer 54

An CPA selling CPA quesions without written authorization. Signe immaterial false document is a Integrity and objectivity rules violation not following certain rules is a Compliance and standard rule violation. However, Cpa may give justication as to why.

Answer 55

auditors sisters= works at client firm as an internal auditor, Independence rule

Answer 56

yes. This would be an impairment.

Answer 57

Applies to any services that a memeber perform such as compilation, reivews, atttestation, auditing

Answer 58

AICPA Rules for member 1. Independence rules; members in practice 1.xxx, public practices. membersperforming attestation, audit., close relative are impairments, financial (all) are impairments. not for compilations (must disclose) and non attestation. 2. Integrity and objective rules, members in practice , a members in business 2.xxx. in the perfomra of any professional services, a member shall maintain objectivity and integrity, shall be free of conflicts of interest and shall not knowingly misrepresent facts of subordinate his or her judgemet of others 3. General standard rules 1.xxx, 2.xxx. other members = retired or unemployed 3.xxx. Professional competency; knowledge of technical subject matter or ability to obtain that knowledge by research or by consulting with others. Due professional care; degree of skills commonly possessed by other in the field; must critically reivew work done by those assisting in engagement, plan and supervise of professional services; sufficient relevant data (not all ) to afford a reasonable basis for conclusion or recommendations in relation to any professional service performed 4. Compliance with standards 1.xxx 2.xxx a measure of quality and performance. members must comply with their governing body SAS, PCAOB, SSARS etc. 5. Accounting principal rules 1.xxx 2.xxx GR; GAAP must be followed. Exception; unusual circumstances may justify a departure from if f/s may cause a f/s to be misleading. There are some interprepation of code specifically new legislation and new forms of business transactions. all justification must be described and explained. not a justification; unusual degree of materiality of the existence of conflicting industry practices . 6. Confidential rules 1.xxx. a member in public practie shall not disclosed any confidential client information without the specific consent of client. Exception; subpoena or summons, CPA peer reivew, ethics or trial board of AICPA or investigated body of state CPA society or under authority of state statues; your legal defence team if your are being sued by your client. 7. contingent fee rules. 1.xxx GR; not allowed Contigent fees are permitted in the following casesl fixed by courts authority or tax matter based on court or government findings, represent a client in tax examination compilations of f/s expected to be used by third parties only if member inclused a statement that member is not independent. 8. Acts Discretible Rules. 1.xxx 2.xxx 3.xxx member shall not; failure to return clients records discimation or harrassment follow standards or procedures in govt audits unless member disclose why standards are not usd Shall not be negligent in preparing f/s shall not solicit cpa exam questions and answers without aicpa consent. promote and marketing and advertsing of cpa members experience and qualification are deceiving terminitatig from client shall not retain clents record shall file tax returns on time 9. Advertising and other forms of solicitation rules 1.xxx advertising and soliciation are misleading or deceptive ; can not intentially understate fees would mislead or deceive a resonable person influent court 10. Commissions and referral fees rule 1.xxx a member shall not for a commission recommend or refer to a client any product or service when the member or the member's firm also perform for that client. - audot pr review f/s - compilation of f/s expect to be used by 3rd parties, when the member does not dislosed a lack independence - examination of propospective financial compilation (when disclose independent) and tax ok commission and referral fees 11. Form of organization rule 1.xxx A firm may not designated itslefs as a member of the AICPA unless all of its CPA owners are members of AICPA and can continue to one or more past owner past away Owner of CPA firm must be more than 50% ownership owned. those doing SAS and SSARS non owner ; non cpa can use the title principals , owner, officer, member, shareholder, or other title permitted by state law. Use of CPA title in private industry; a cpa employee in private industry may use the designation cpa in signing a report a report only if the use of that designation does not imply to readers of the report that the cpa is independent. Seven Type of threats to conceptual fundament 1. Adverse interest threat; not act with objectivity 2. Advocacy threats; compromise or promote client interest or position 3. Familiarity threat; long family relationship member and sympathetic 4. Managment participant threat; assuming mangagement responsibilty with client. 5. Self interest; financial benefiting or 6. will not appropriately evaluate the results of a previous judgement made or performed or supervised by the member. 7. Undue influence threat; subordinate his or her judgement. client indicates that will not award additional engagments to the firm if the firm contiunes to disagree with the client on an accounting or tax matter. -

Answer 59

relates to ethics policy . research questions on itegrity in absense of guidence; find terms until you get something. nothing on ethics but something on integrity ET is for code of conduct ET 0. 300.040.04 CPA has inheritance that was a financial interest in one of cpa clients. key words are close relative, financial interest, impaired, ET 1 270 100 03

Answer 60

At least 2

Answer 61

Reviewing proposed transactions and informing client of the tax consequense maybe performed without impairment not planning and issuing an opinion on a tax treatment on an aggresssive tax position

Answer 62

no. lead and concurring partner rotate off after 5yrs. Other audit partners are subject to a two year rotation

Answer 63

if a cfo that was an audit manager of former client began a now cfo of client but ws last on the audit on 12-31-y1. one year cooling off periond is over

Answer 64

7yr pcaob issuer public company 5 yr SAS non issurer private company

Answer 65

attributes - priincipal financial officer, principa; accounting officer, controller, public accountant, or auditor - actively supervising principa cfo or cao - assessing the performance of public accountant with respect to preparation of aucit or evaluation of f/s not attribute -serving on at least one other issure audit committe or disclosure committee of the bod. = this is not required on the bod training

Answer 66

(1) yes. the audit rotation for key audit personel is 5 years (2) yes. just becasue retired does not limit he could advocate for audit firm (3) 7 year = 5 +2 (4) 10 (5) 50% (6) issuer 45 day and non issuers 60 day

Answer 67

- objectivity; independence in mind and appearance; an attitude of impartiality, having intellectual honesty and being free from conflicts of interest - integrity; audit conducted with fact base, non partiscan, non-ideological, with regard to the audited entities and users of the audit report - professional behavior; honest effort in the performance of professional services in accrodance with relevant technical and professional standard Serving the public interest; the collective well-being of the community of people and entities served by the auditor. should meet the needs of those that need

Answer 68

8666- what services would constitute a management function under Govt Auditing Serivces and an impairment for independent cpa's; The development of program policies. 7171- what circumstances would a covered aicpa member independents be impairmentj with respect to nonissuer client; member owning securities or bonds in a clients company. 6874 - are the understanding of a review of inquiry and analytical procedures used in a management rep letter; No, they are discussed in an engagement letter. Things in an engagement letter; management responsibility

Answer 69

a statement that the accountant was not required to perfomr any procedures to verify the accuracy or completeness of the information provided by management. An accountant when compiling the report does not give assurance on them not being aware of any material modification that should accompany the f/s.

Answer 70

does not provide any opinion of GAAP or anything else true audit report provide postive assurance and review provides negative assurance.

Answer 71

Despite not being in public practice , must follow the code of conduct rule of integrity and objectivity if not in public practice does not have to follow rules of - independence - commission - contigency fees.

Answer 72

Integratative Audits are audited of the financial statements and audit of managements assessments of the effectiveness of i/c over financial reporting (icfr) Dodd frank act amended rule 404 of SOX icfr are required for SEC registered large accelerated filers $700m or more and Accelerated filers $75m or more but less than $700m. SAS 130 governs non issuers icfr the rules for issurs and non issuers are very simulare. the auditor objectives is to express an opinion on the effectiveness of icfr. two opinon; unmodifed/unqualified or adverse= material weakness = ineffectiveness of i/c. auditor requirement for both= should paln and perform integrative audit to achieve both objectives. perform control criteria on management use of its evaluation of the effectiveness of i/c. auditor will test those controls. Management requirement sox 404 issuer; state managements responsbility for establishing and maintaining an adequate ic structure. containing an assessment of icfr Management responsibility SAS 103 non issuer Accepts responsibilty of effectiveness of ic Evaluate the effectiveness using criteria of AICPA or reg. agencies Have support for assessement of ic Provide a written assessment of effectiveness of ic In some rare instances auditor may no be permittted to withdraw of audit of icfr, they would give a disclaimenr of opinion of icfr. Written Representatin for both Management ; aknowledges refor icfr; state assessment as of a specified date and criteria used; affirms that management did not rely on audit procedures as basis for assessment; state disclosed all deficiency in design and operation of ic. confirms that all significant defiencies and materail weaknesses have been disclosed and have previous ones been resolved; descibe fraud resulting in material misstatement of fraud involving senior management or empolyess who have significant roles in icfr; subsequent events; where there any changes as of the date the report or corrective action take by management of significant deficiency or material weakness. Planning the engagement ;both What is the auditor strategy to consider; look at matters affecting the industry, prior knowledge of entiy ic via the last audit or reviewing predecessor working, matters concering entity business, operation and capital structure, the complexity or the entity ops and recent chages in ops and ic, maanagement effective of evaluating ic, judgement about materiality and risk of effectivness of ic this is also used for audit of f/s. more attention focus on high risk areas; evaluating fraud rsik assessment perform in the f/s audit, scaling the audit, smaller or less complec might achieve control objecting differently thant more large and complex corp. Fraud Risk assessment both; Auditor looks at the triangle of fraud; opportunity-rationalization-pressure incentive controls to address fraud risk assessment= significant or unusual transactions, period-end journal entries and adjustments; related party transactions; significant management estimates. audit may use the work of IA. other company personell and specialist who are competent and objeuctive in evaluatng the effectiveness or ic. Top down approach Both 1. F/s level- entity level (high level)= control environment, management override, company risk asessemnt, central process., monitoring ops and controls, period end fr,policies that address significant business controls and risk mangement. 2. Account, transactions and disclosure this is quantitative and qualitative of risk factors; accoutn size and composition, susceptible to missstatment, volume of activite and complexity, account and transaction class, exposure to loss, existence of related parties, changes for prior periods. auditor assess material weakness that will lead to material misstatement ifn f/s. 3. Assertions= auditor should test those control that are important in addressing the risk of material misstatement. Audit uses CRIME components for icfr. Test of controls. - evaluate design effecttive of ic by doing walk-through , observe and inspect documentation - evaluation operating effectiveness; inquiry alone is not suffecient. must do the following; inspect documents, observe, reproformance and recalculation, use auditor judgement. Auditor must determing the effect of any ic deviation of risk, evidence and effectiveness. Auditor must test test for errors and fraud. errors can be inherent risk. Fraud don't let management know your test because they might try to divert information. Use of Service organization; auditor would want to - obtain an understanding of relevant control - obtain evidence that controls at the service organization are operating effectively by performing by ; obtaining service auditors reports, testing the entitys controls over activities, perfrom test of controls at the service organization. Benchmarking of automated controls. automated contols are not susceptable to human erros. benchmarking strategy is most appropriate in low rsik suitiations. low risk, non change, autuomated - benchmarking. Evaluating Control deficency both 1. compensating controls when other contols are offeset the material weakness that was found by auditors. Due to cost, managment will not fix it. auditor may considered it. Forming an opinion both' base opinion about the effectiveness of ic on all evidence including f/s and ic. Management report on ic include; -indicate managment responsibility describe subject atter icfr id. the criter used in effectiveness of ic statement of assessment of effectiveness of ic and including as of date and should be at end of most recent fical period. describe and disclosed any material weakness id by management if report is incomplete or improper presented, auditor should modify to discuss sitiuation, if management refuse to supply report, auditor should withdraw from engagement. if report contains additional info,, auditor should disclaim an opinion on additional info. such as cost benefit info, F/S audit v. audit icfr difference issure and non issuer Engagement non issuer; - purpure (issuer) of an audit of the effectiveness of entity ic is to express an opinion about entity maintain, in all material respect effective ic. Purpose (non issuer) of an auditor's consideraton of ic in an audit of fs conducted in accordance to GAAS is to enable auditor to plan and determine NET of tests to be performed. - relevant period audit of ic- issuer= ic results in an opinion of ic as of a point in time. ic audit of fs= non issuer= opinion of fs at a period in time. extent of testing; ic audit of fs = non issuer is more limited. while audit of ic= issuer is test of effective of design ic and operating effect more test. -communication of control defeciencies in fs audit= non issuer significant deficiency and material weakness must be made within 60 days of the release of the report and all include restricted use. where as audit of ic= issuer commication must be made by report release date and no restricted used.

Answer 73

entity level= control environment component and high level; an outside auditor assessment process of ia competency an objectivty

Answer 74

the evaluation of operating effectivness will occur after the planning Planning ic = [preliminary judgement, extent (net) of recent changes, the type of available evidential matters pertaining to effectivness on ic.

Answer 75

managment written assessment about the effectiveness of ic.

Answer 76

Audit of IC Audit of ICFR ## Footnote Scope Different Different more extensive audit of ic Purpose Different Different more directed toward Audit ic less in IFRC Procedure different different more extensive for audit of ic

Answer 77

management must assess and report on ic auditor must assess and report on ic

Answer 78

- evaluate overall risk of f/s level = - consider entity leve - evaluate accounts, disclosures and assertions for which there is reasonable possibility of material misstatement - test of controls

Answer 79

is = a description of key employee fraud, statement that management has performed an evaluation on the effective of ic, an affirmation that managment did not rely on auditors procedures as basis for assessment, a statement whether there were any significant changes in ic AFTER the as of report. and not BEFORE the as of report.

Answer 80

inadequate design of IT control would be a control deficency but not necessarily a material weakness.

Answer 81

Withdraw for engagement or disclaim of opinion=this is for both. failure to receive a rep letter = withdraw or disclaim ( because most of work has been done when rep letter happens)

Answer 82

yes . audited f/s and icfr

Answer 83

ic design test = Inquiry, observe, inspect ic opertating test = inquiry, observe, inspect documents, reproform, recalculate, audit use judgement.

Answer 84

is not responsible forsufficient evidence to support an opinion abot the effectveness of each indiv control responsible for overall effectiveness on ic. it also incorporates an element of unpredictability into testing along with obtain more evidence on greater riske subjects, determining effect of any id controls on assessment of risk associatte with contols.

Answer 85

Comunication and reporting in an integrative Non-issuer; Significant deficiencies and material weaknesses; the auditor should communicate to management and those charged with governance in writing. Such communication generally should be made by the reprot release date. if previous communication have not been corrected, may refer communication in the current communication. Audit can communicate significant matters earlier. non issuer communication sample; - address to managment and other governance - open paragraph; in connection with audited fs as of date and for y-e and our audit of companys icfr, GAAS - context ; auditors responsibilty plan and perform integrated adut and obtain reasonable assurance whether fs free from material misstatement and whether ic was maintained in all material aspects (whether material weakness exist), integrated audit is not designed to detect deficiency that are less sever than a material weakness - definitiion and describe of material weakness and significant defiency --restricted user - auditor signs - auditors city and state - date of audit report Auditor should communicate to management is writing all deficencies whether significant or nonsignificant. no later than 60 days of following report release date . if auditor concludes that audit committee is ineffective must communicate in writing to BOD. Auditor is not required to search for control deficiency taht are less server than material weaknesses. Auditor should not issue a report with no material weaknesses. Commucation of deficiency in ic non issuer breakdown; Control deficiency= communicate in writing to management within 60 days of the release of the report Significant deficiency; communicate in writing to management and governance. communicate by the report release date Material weakness; comm in writing to mngmt and governance by the report release date. Communicate with managment and audit com issuer; - must communicate in writing any significant deficiency to audit committee - should comm.in writing to managment all deficienc in icfr. and infor audit comm. - if conclude audit comm is ineffective with icfr results, comm. in writing to governance. - auditor is not require to search for control deficincy or significant deficiency, but those id should be communicated in writing - auditor does not provide assurance that all control def. and all signifanct def have been id. - no sample communication have been provided by pcaob Comm. of Def. ic breakdown issuer - control deficiency= communcate in writing managment and inform audit comm - signifant def.= comm. in writing managment and audit comm - material weakness= comm. in writing mnmgt and audit comm. and comm. in writing should be issued prior to issuance of audit report Report on ic of fs non issurer separate or combined report on icfr and fs' if Separate must point of make reference in each report Separate report layout of icfr - title = independent auditor's report - appropriate address - intro - managment responsibility of ic; designing, implementing and maintaining icfr and its assessment about effectiveness of icfr, incldede in the accompanh management icfr report - auditor responsibility; express oponinf icfr and standards used GAAS. - definition, framework used and inherent limitation limitation - opinion - pointer= report on audtied f/s; we also have audited, in accordance with GAAS icfr and fs. our reprt date which should be same as the date of the report and we express an opinion. auditor signature city and state date of auditor report Combined report non issurer - title independent auditor's report - approproate addressee - intro MR responsibility AR responsibility -define and inherent limitation of icfr =-opinion -auditor signature, city and state, date of auditor report REport date should be done no earlier than the date on which sufficient appropriate evidence. the date of the report shold coincide with the date of the audit report Material weakness in ic; presense of material weakness in ic = adverse opinion. Breakout - Basis for adverse opinion Adverse opinion Other consideration ; if mnmgt report fails to include one or more material weakness id by auditors, auditor should state and describe the omitted material weakness, and comm in wrting to governance. if managment report includes material weakness but does not fairly state, audit should describe material weakness in his ic report. Audit should considered the adverse opinion on icfr on the fs opinion and should indicate whether the opinion on fs was effected by material weakness on icfr. Reporting on ic issuer; separate or combined reports Separate report title[ report of independence registered public accounting fimr - addressess; to the sharehoders and BOD of company - Opinion of icfr - basis of opinion = also included mr and ar pointer paragraph follow the opinion paragraph - definition and inherent if icrf - signature, we have serve as the company's auditor since (year), city and state, date Combine issuer title same address same -opinion on the fs and icfr ic and then fs - basis opinion icfr and fs and mr and ar - definition and inherent limitaton of icfr - Critical audit matters - signaturre and other stuff the same Report date same -Material weakness = adverse opinion defined,statematerial weakness describe in managment assessment other detail same - Report on a previously reported material ic weakness - Scope limitation= withdraw or disclaim opinion; state that opinion is not being given and in separate paragraoh give substantive reason for the disclaimer - Subsequent events; changes that occur after the as of date of the report 12.31.y3 but prior to the date of the audit report 3/31/y4. audite shoudl - inquire of management - obtain written rep from management - inquire about and examine documentait for subsequent event no follow if event happen after the audit report released.

Answer 86

in an integrative audit on non issuer there are no restriction on the use use of the report due to it has the audit of fs and ic. it would have restricted use onf signicant deficiency and material weaknesses when icfr is part of financial statment

Answer 87

the effectiveness on ic and not on management assessmen of ic.

Answer 88

Sim 1 Find the correct audit response 2.a client did not furnish adequate evidence for the auditor to evaluate the ic over inventory. all other evidence was provided. = Answer; issue a disclaimer of opinion. due to scope limitation of ic. 3. the auditor examined the clients ic over cash receipts and concluded that they are operating as designed. however, the designe of the controls does not include control procedures to prevent misstatement and the potential omission of cash receipts. Answer; Determine if the control deficiency is a material weakness by obtaining further audit evidence. ic operating was good, design was bad. now must determine if it is material 4. the auditor concluded that the ineffectiveness of the design of controls over ap and cr presents a material weakness in ic . subsequent tests revealed no material weakness. Answer; Express an adverse opinion on the ic. no additional paragrah needed. 5. mnmgt has not provided assurance that there ar no material weakness in controls. subsequent test revealed no material weakness. Answer; express an unqualified opinion on the ic. as long as no material weakness = clean opinion 6. auditor prior yr report on ic included an adverse opinion. the client has since modified ic. no material weakness were found in current yr. Answer; Express an unqualifed opinion on the ic no additional paragraph needed Sim 2; the section of audit of ic report' we believe that the audit evidence is sufficient and appropiate ( not reasonable and appropriate) in the all sections the internal control framework used is from COSO = committee of sponsoring organizations of the treadway commission. The auditing standards are GAAS n on issuere PCOAB issuer Accounting principe framework is GAAP. Sim 3; where do you fine combine report on integrative in PCAOB research. PCAOB - 2201 87 go specifically to combined and separate reports. try to be as detaited as possible to research question. advance search , use Combined reports

Answer 89

nonfinancial data have been accurately derived from related records.

Answer 90

NO; not when reporting on a subject matter.

Answer 91

Should is the procedure of ; procedure is presumptively required, where as carrying out is not required. Account must apply with the requirement in all cases, except in rare circumstances. practitioner must judge it is necessary to depart from requirement.

Answer 92

SSAE. when reporting on a subject matter or an assertions about the subject matter

Answer 93

Attestation engagement does not report on historical information i.e. historical fs. Attestation report on subject matters or assertion about subject matter. SSAE =Statement on standard for attestation enagament report on the following subject matters; - Agreed upon procedures = aup - financal forecast and projections - pro forma financial statements = tatke historical an dturn to fwd senarios - compliance - MDA - Reporting on controls at a service organiization., Types of Attestation reports and service peformed Attestion services examination ; positive assurance like a audit,REport: Prosective financial statements: forecast and projections; Proforma f/s; Compliance, MDA, Services organization. Review; negative limited assurance.; proforma f/s, MDA AUP; no issurance, AUP, prospecitve f/s, compliance. Audit enagement; SAS and PCAOB SSAR; Compilations, preparation and review SSAE; attestment enagagement; AUP, examination, review You want find in SSAE; historical f/s and no reference to GAAP. Attest standards; departure from mantatory requirements must be justified interpretation publications should be considered with departure expplained Other attest publications have no authority but may be helpful. The concepts and guidance ; CAPE CORP Compliance with all attestations Acceptance of new clients and attestation Precondition; must be independent, responsible party is subject matter, accountant responsible for obtain evidence for opinion, conclusion and finding in written report. Engagement; Acceptance of CHANGE in terms of engagament Using the work of OTHER practiioners is allowed. like a specialist, must be competent Responsibilty for quality control, like the audit Professional Skepticism and professional judgement. Attest risk are like audit risk; Attest risk = IR\*CR\*DR Inherent risk; exists independently and accountant can not change this risk Control risk; RMM could occur in the subject matter and not prevent or detected and correct via thorugh ic. accountant can not chage this risk Detection risk; relates to accountant procedures and can change this rsik by vary the NET procedures. Material misstatments ; modified risk of qualified or adverse in examinations or a modified conclusion in a review. Scope restrictions. Examination; QDW Review; W.

Answer 94

Adverse due to very material on not providing reasonable basis.

Answer 95

make inquires about accounting principals used in the prep of prospective f/s, and not make inquiries prior to the date of the report about future transations that may impact the forecast once the report is issued in not accountant responsibility

Answer 96

that all prospective reports results may not be achieve Prospecitve f/s are done with examination, review and compilation. examine and review independent, compile independent not require but must disclosed

Answer 97

Review of proforma financial information

Answer 98

There is no mentions in a standard report that compilation of projection are hypothetical assumptions used in projections reasonable assumptions; although true but not in report.

Answer 99

The date the AUP is completed.

Answer 100

there will usually be difference between the forecast and actual results. Also remember, compilation does not provided assurance.

Answer 101

engagement does not included an evaluation of the support for the assumption underlying the projections. limited in scope and no opinion or assurance.

Answer 102

no mention in the audit engagement but may reference procedures performed in the aup

Answer 103

partial presenation and only used internal audience or restricted when financial statement information is omitted.

Answer 104

There usually be a difference between the projected and actual results

Answer 105

A disclaimer on the subject matter = denying expressing an opinon. due to aup does not express an opinion.

Answer 106

the practitioner assume no responsibility to update the report for evetns and circumstances occuring after the date of the report. Remeber ; do not chose; a statement that the accountant did not audit or reivew the f/s, this would be a statement for compile pro forma and not prospect f/s

Answer 107

do ; nonissure f/s included in registration included in registation statement file to SEC. this is regulatory restricted financial projections do not ; proform f/s financial forecast

Answer 108

AUP; accountant is engaged by client to issue a report of findings based on specified aups. Aup conditions; I AM SURE Independent Agreement of the Parties on determionation of findings and parties are accountable Measurability and Consistency; Sufficiency of the procedures ; accountant is not responsible Use of the report is restricted to specified parties Engagement to Perform AUP on prospective f/s; must include a summary of significant assumptions Reporting requirements and elements A title : Independent Accountant's Report on applying AUP ID of specified parties, subject matter or related assertions, the nature of the engagement and responsible parties A Statement that subject matter is the responsibility of parties Statement procedures performed were those agreed to by parties and description of aups Statement engagement conducted with standardd estb. by AICPA List of procedures performed and related finds. No opinion provided or conclusion No assurance No opinion. Restricted use desription of assistance provided by specialist. AUP reporting structure for AUP Title Intro Procedures and findings Scope or Disclosure OM: Restricted Signature, City and State Date of the report Explanatory language would include; disclosure of facts, assumptions, or interpretation, desription of conditions of records, controls, and data, accountant has no responsibilty to update the report sampling risk Prospective f/s; may cover partial expired no a period, a completely expired period no pro forma statements Types of prospective f/s 1. financial forecast; expected financial results of future periods based on expected conditions and course of actions not restricted and limited use 2. financial projections; it is based on hypothetical assumptions. based on what if's scenarios. restricted use and limited Prospective engagement types; 1. Prep SSARs lowest level, historica f/s. dependent or independent. engagment letter but no rep letter, exclude summary of signifacnt finding, if financial projection used id of the hypothetical assumption or description of limitation. no assurance 2. Compilation; SSARS; no assuarnce, based on partys assumptions, should read prospective f/s with assumptions and accounting policies and considered if conform with AICPA presentation. not required to gather evidence or aware of inappropriate assumptions. is permitted , but not required to disclose the reason for lack of independence. Standard report is independent. 3. Examination; not restricted, positive assurance, opinion. AICPA guideline not followed = Qualified (except for) or adverse opinion. Signifiicant assumption are not disclosed= Adversed, Basis no reasonable; Adverse. Scope limitation; Disclaimer 4. AUP Exam Financial Forecast Report structure;' Title; Independent Accountant's Report Appropriate Addresses Intro Scope= MR and AR Opinion Warning: difference between forecast and actual results. because evetns and curcumstances frequently do not occur as expected and those differences may be material. We have not responsibility to update this report for events and circumstances occuring after the date of this report. Signature, city state, date of the report Examination of Financial Projections would change slight from financial forecast 2nd paragraph description of hypothetical assumptions 1st paragraph. a description of the purpose of the projections in the first paragraph 3rd and 4th paragraph ad reference to hypothetical assumptions A paragraph restricting the report. Compile Exam AUP Prospect fs(pfs) assemble Eval apply spec aup Respon party assmp Assemble Eval includ in pfs Are f/s and significant assumption conform w/ AICPA guidelines look for errors opinion disclam Obtain AUP n/a n/a Yes ID prospective f/s yes yes yes compliance with AICPA Yes yes yes Limited of scope yes no yes mention a number of things of procedures performed no no yes Caveate that prospective results may not be achieved yes yes yes CPA has no responsibility updating the report yes yes yes Opinion of pfs accordance with AICPA guidelines no yes no Limite use of the report proj proj yes or restricted.

Answer 109

Type 1; A decription of the scope and nature of service auditors procedures performed.

Answer 110

A disclaimer of opinion on the operating effectiveness of service org controls. This is type 1 report on controls place in operations. and type 2 report on controls place in ops and test of ops effectiveness . since this was not part of report, disclaim this.

Answer 111

management description of service org systems

Answer 112

Appropriate opinion to render the report on compliance because opinion is used. Only negative assurance. this is not an examination in SSAE,.

Answer 113

An examination = opinion on whether the entity complied , in all material respect with all apllicable compliance requirements

Answer 114

Risk of material noncompliance. RMM=AR= IR\*CR; As Dectional decrease = RMM increase due to dection detected all RMM up front.

Answer 115

Test of control of operating effectiveness on controls may be required if one of three situations exist 1. the risk assessment includes an explanation of the operating effectiveness of controls over compliance 2. Substantive procedures do not provide enough evidence to support a conclusion 3. test of controls are required by the governmental audit requirements.

Answer 116

a nonfederal entity that expends federal awards received from another entity to carryout a federal program. key word EXpend.

Answer 117

The f/s audit would include no findings or references of any relevant information regarding material illegal acts and fraud or irregularity found in the course of the audit about the non compliance. While there is a definition of material weakness and significant diffeciency for i/c, there is no material criteria discussion for compliance.

Answer 118

Government organizations and Federal financial assistance organizations

Answer 119

1. identification of management interpretation of compliance requirements that are subject to different interpretation. 2. Statement that management has disclosed all government program (not material programs) 3. disclose all known non compliance or state there was no such non compliance 4. Management agree that it has complied with compliance.

Answer 120

no. opinion of ic. but to express or to express an opinion of ic over compliance but an opinion on complance.

Answer 121

would include; - risk assessment procedures performed related to understanding ic over compliance - responses to the assessed risk of noncompliance including test of compliance and test of control= test of operating effectiveness. - Material levels of compliance wuold not have documentation of opinion of ic over compliance. no opinion on ic over compliance.

Answer 122

1. extend the audit procedures as necessary to determine whether fraud has occured.

Answer 123

This is a presumptively mandatory requirement; where procedure must be followed in all cased, except in rare circumstance. and must be describe and justified.

Answer 124

Question the cost of $5M for ops exp id.. Which will apprear on the schedule of findings and question costs.

Answer 125

not required. Reort would include; pertinent view of officials responsible for audit findings, statement of audit objective and scope, indication of illegal acts that could result in criminal prosecution discoverd during the audit.

Answer 126

Auditor should sufficient audit documentation that supplementary oral explanations are not required.

Answer 127

GAGAS = Report on ic and direct reporting on illegal acts. These reports are not required for SAS. Although report on ic can be part of an integrative. and reporting of illegal acts could be AUP

Answer 128

state that the audit should be planned to obtain resonable assurance (postive) about whether m=no compliance could have a material effect onthe entitys programs. the report should not describe the laws and regs that entity must comply.

Answer 129

Financial audits; Financial statements audits performed according to Government Auditing Standards (yellow book) incorporate GAAS and determine whether the fs present fairly the financial position, results of ops, and whether applicable cash flows in accordance with GAAP. FS in conformity with Special purpose framework (OCBOA) Government regulators generall specify the OCBOA to be used in relation to finaical assistance. Attestation Engagements; Examination, AUP, Compiles. must follow standards; 1, compliance with specified laws, regulations, rules contracts, grants. 2. effectiveness of ic over compliance of specified requirements 3. Presentation of MDA 4. Reliability of performance measures Performance Audits: follow standards they provides objetives analysis, findings, and conclusions to assist mangement and those charge wiht governance and oversight to among other things, improve program performancde and operations, reduce cost, oversee or initiate corrective action and contribute to publice accountantly. Key performance audit objective 1. effectiveness, economy, and efficiency= done cheap 2. IC; evaluate ic over effective and efficient ops, relaible reporting , or compliance with laws and regs. ie IT security. 3. Compliance ; establish by provisions of laws, regulations, contracts and grant agreements. 4. Prospective analysis; events that may occur in the future or to suggest actions and entity may take in response to future needs. Performing Financial audits; previous audit and attestation finds need to be fixed or correction action addressed. or else finds will continue to be in the audit or attestation. Management responses should address; fraud, noncompliance and abuses. GAGAS define specific requirements to plan and perform finding; what the ; Criterial, Condition, cause, and effect or potential effect Audit Documention is need to support the report and must be reviewed by supervisor to support findings , conclusions and recommendations. All departure from GAGAS and impact on the audit due to noncompliance caused by law, regulation and scope limitation must be documented. All communication must be relevant to the professonal judgement of auditor Standards for financial audits: reporting on financial audits Give and opinion of financial statements and report on ICFR and on compliance with provision of laws, regulation, contracts or grant agreements that have a material effect on the f/s. Reporting Confidential or Sensititive information Disclose; omission of information and state the reason or other circumstance that made the omission necessary. Audit may issue separate, classified or limited use report that are distributed to onlu the persons authorized by las or regulation to the confidential information. Distribution of reports Audit organization should distribut auditors reports to ; those charged with governance audited entities officials oversight bodies (audit committee) and responsible for the findings all other authorized to receive reports GAGAS has a reduce material level( worser for entity) to response to public accountability various legal requirments visibility and sensitivity of government programs Communication of deficiencies may be reported early ; uregency or signifcant finding need corrective actions ongoing noncompliance untected by management should be stopped. GAGAS (yellow book) Report on IC and compliance sturcture Title ; independent auditors report Appropriate addressee Intro; audit standards in accordance with GAGAS issued by Comptroller General of the US. ICFR; no opinor and disclaimer definition of CD and MW Next paragraph iC limited purpose; negative assurance, and describe DR and MW reported Compliance and OM Reasonable assurance on compliance (positive assurance) no opinion. test of compliance to disclosed instances of noncompliance and OM report required for GAGAS yellow book (pointer) Purpure of the Report; (pointer) to describe the scope of testing ic and compliance and result of testing. no opinion. the report is an integral part of audit fs (pointer) Management rep letter: included' mangement; there are no violation or possible violation of laws or regs. whose effect shoud be considered for disclosure in the fs or as a basis for recording a loss of contingency (same as GAAS/SSA) responsible for compliace of laws and reg. applicable to GAGAS. ID and disclosed in writing to the auditor all laws and regs that have a diect and material effect on fs. Report on ICFR all SD and MW to be reported Auditor will obtain understanding of the design of relevant controls and determine whether they have been implemented Communicate SD and MW in a written report and reported to specified parties IR is reported to evaluate management assertion on ICFR and compliance or noncompliance and the material effect on fs. Finding on SD and MW In the fs audit, GAGAS require report on ICFR and not a report on ic over compliance.

Answer 130

what is not a difference between a financial statement audit and an audit of ic for nonissuer; #3862; fs audit of icfr must be made within 60d days of release date of report where as icfr must be made at release date of audit and not vice versa when an accountant examines projected fs, the accountant reports should included a separate paragraph on; #2502; describing the limitation of the usefullness of the presentation; other words prospective fs may not be achieved. the report not include a difference between audit and examination. would include was not audited and does not give opinion.Just give reasonable assurance or positive assurance. Although scope of audit of federal financial assistance vaires, they do have what in common; #3514; unders Single Audit Act, auditpr must determine if the auditee aka client has complied with laws, regulations, and provisions of the contract or grant agreement. Materiality is set at program level and is not set by government entity that provided the assistance. Two things set materiality; 1. programs that expend more than $750K and 2. and high risk progams that are deemed major.do not have to meet $750k threshold. 3391- an accountant is conduct a review (SSARS and limited procedures) becomes aware of a significant change in control activities . what would the accountant consider perform ; two choices with review; analytical procedures and inquire. 4358-A n accountant compilation (SSARS no limited procedures) reported on financial projections does not contain a range should have a statement that says; there will usually be a difference between projected and acutal rsults because evetn and circumstances do not occur as expected 2449- an accountant in a public practice is required to comply with SSAE when: testifying as an expert witness in accounting and/or compiling clients financial projections that present a hypothetical course of action; nethier there are no such SSAE standards or testifying or advocanting for clients and compiling is a SSAR compliance. 4932-what is least likely included in an examination report (SSAE, opinion postitve assurance) related to a financial projections; an indication that had the accountant performed additional procedures. other matter might have come to their attation that would have been reported. this is an agreed upon procedure report. not an examination.

Answer 131

Revenue cycle= include sales revenue, receivables, and cash receipts Expenditures; purchases, payables and cash disbursements Cash; include cash receipts and cash disbrusemenrs Inventory; perpetual inventory, physical count and manufacturing cost Investments= debt and securities and income recieved from investments. Other transactions' PPE, payroll and personnel, and financing. Revenue is the highest fraud risk there are presumption that audit test and evaluate for RMM; - early revenue recognition - holding the books open past the close of the accounting period - ficticious sales - failure to record sales return - side agreemens to alter sales terms for customers - channeling stuff achive to convince distriburter to purchase more inventory than they need - overstating recievale or understating allowance for uncollected. Want to have strong internal controls on revenue cycles do risk mitigation with segregation of duites on sales transactions; - one dept or person; prepare sales orders via customers po. Sales orders need serial numbered - .....; credit apporvals to determine grant credit to customer and how much and not to grant credit to customers. copies sent to shipping and biling - ....; Shipments serial number or bill of laidnig need varify and send copies to customer and receivable set up. - ...billing; prepare serially number or sales invoice. shipping and invoice nubmer compared. - ... =accouniting; sales is entered into sales journal and receivable is recorded. AR segregation functions - Sales - Collection of CR - Uncollected AR - Sales Returns with credit memo - Sales Discount Cash Reciepts Segregation functions based on ARC; Authorization, Recording and Custody --Cashier; prepare reciept and make deposite; custody -Acccounts rec dept.- enter reciept in ar sub ledger; recording Accounting dept.[ enter reciepts in ar control accoutn ; recording Best safegaurds of cash and rev sales; lockbox or cash registers. Treausry - authorize depost. all reciepts should match. Specific procedures to obtain evdience of the revenue cycle and management assertions to fs Auditing sales transactions; COVER U Completeness of tranactions; trace up Shipping doc \> invoice\> Sales journal Cutoff= make sure that sales were recorded in proper period. make sure no one is trying to boost revenue Valuation, allocation and accuracy. check prices Existence and occurance. Existence; Vouch down; Sales journal to invoice to shipping documents Understanding and classification; examine a sample of sales invoices for proper classifications into appropriate rev account. Audit Accounts(Recievable) CVER Completeness; trace up detail age trial balance to GL Valuation, allocation and accuracy; results of confirmations, ,test accuracy of allw of bad debt and accounting est. Existence and occurance; confirm sample of positive and negative ar confirmation. Rights and obligations; review bank confirmation and debt agreement for liens on ar. inquire of management and review debt agreement and board minutes for evidence of ar have factored or sold. Auditing Presentation; CVRU Completeness; revenue Note to fs that all required disclosures related to ar have been included ;rev recognition rev reported by segments, related party ar Valuation, allocation and accuracy, read notes to make sure information is correct Rights, obligations and occurence; all pledge, lien and discounts have been disclosed Understanding and Classification; read in all ar info to make sure it is understandable.

Answer 132

3144- Tracing a bills of lading to sales invoice would show completeness assertion that shipment to customer was invoiced. 4425-what is the least likely thing an auditor will do if he does not receive a reply from ar confirmation. he would not increase the assess of detection for valuation assertion. he is doing existence assertion and not valuation assertion 2638-what is not procedure in ic that would reduce the risk of errors in the billing process. reconciling total sale invoice to ar subidisary ledger because this the entry dr ar cr sale thus this is in effective. 2647- auditors purpose of reviewing credit ratings with delinquent accounts is to obtain what assertion= valuation an allocation which shows valuation , allocation, adjustement and appropriate recording of assets, liab, revenue and expenses on the fnanical statements. where as the assertion of understanding and classification information to describe , present and disclosed information on the fs. 2686- flowchart= sales invoices are across from credit memos are across from remittance 5499-what would improve the responses rate of ar confirmation = give customers detail on outstanding balances would asssit them in confirming numbers. 4992-what does not demonstrate appropriate seg of duties= a billing clerk prepares invoice(recording) and records the resulting increaese in ar (recording) 3222- flowchart ; what is generated by application program; credit memos and sales invoices 2493- what would an auditor to believe there is a material misstatement in the fs; when there are fewwe responses in confirmations; maybe fraud. this in an existience assertion. 8385- an auditor notice that bad debt expense is hire than normal industry what would auditor ecommend; this is due to credit are or lack of credit checks 5329=tracing sales invoices to shipping document show evidence of ;shipments to customers were actually shipped. shipping documents to invoice = shipment to customers were properly billed. 2770= why are negative cofirmation of ar less effective than positive confirmation= since negative confirm are low risk, the audit would not care if customer do not respond. where as a high non respond positive confimation would suggest material misstatement. 2775= two assertion of ar confirmation are= rights and obligation and existence not completeness = this deals with if the ar was unrecorded. 2776= the negative request for of confirmation used are; assess leve of risk low, number of small balance are many (too many to send out compared ot large balance), and consideration by the reciepient is likely. 2777=what procedure would auditor perform he did not received 2nd confirmation request; perform alternative procedure on ar such as inspect the shipping records documentation the merchandise sold to debtor or customers. 5883- what is the brest control for ensuring that sales are properly authorized when assessing control risk; get proper authorization from credit appproval before filling the order. separating cash recipte depart form billi"ng is a segration of duties for theft. this question was on authorization. 11032(this is a pre test question) if the objective of the auditor is to test of details is to detect the overstatement of sales , he would trace transactions from= the sales journal to the shipping document. this is existence. tricky question because you would normally assimulate "tracing with completeness" can be used with existence as well. the key is overstating of sales this means it was recorded which would be a completeness assertion. however, this a existence assertion with the overstatement of sales. 2239-tracing shipping documents ot prenumber sales document is evidence of ; shipments were properly invoiced. 3127- comparable duties would be if the cashier recieves the remittance from the mailroom and deposits the checks. 2619-sound ic would have an employee that recieves the checks would ; make a duplicate listing of the checks 7613- if an audit is doing test of detail to determine if sale invoice are being record in correct accounts this would be an assertion of ; understanding and classification if were tracing shipping documents to corresponding invoice and then to sales journal and ar subledger this would be completeness. 7620-when would test of client ar via positive confirmation be inappropriate; if majority of the accounts are small balance i.e. negative confirmations.

Answer 133

Sim 2 Substantive procedure used for an audit objective based on assertion 4. Investments are properly valued at BS date; understand and classification Determin that any impariments in the price of investments held by independent custodian. 7. Accounts rec. represents all amounts owned to the entity at the bs date perform sales cut-off tests to obtain assurance that sales transactions and corresponding entries for inventoriess and COGS sold are recorded in the same period. this will show that entity shipped sales inventory to customer for owning of ar to be paid. 9. Accounts rec. are stated at net realize value; review the aged trial balance for significant past due accounts to determine if accounts needs to be written off. 10. Accounts receivable are described and presented in the fs. Review the ar trial bal. for amounts due from officers and employees.; information of related parties should be disclosed in notes to fs. 14. Recorded property and equipment represents assets that actually exist at the bs date; Physically examine all major property and equipment additions Sim 3 Confirmation if a positive confirmation was sent out and customer say that the cancelled the order and ar is not theres, auditor would verify and proposed adjusted book entry. Sim 4 What would be the relevant assertion and procedures 2-4; After reviewing the bs. and corresponding docs, auditor found that the inventory bal. has incr. significantly over the prior years; Relevant Assertion; Mgmt; Existence and occurance Procedures; vouch=existence, observe, 5-7; auditor is concerned that the allw. uncollct as a % of ar has decr. even though sales has incr drastically over the prior pd. uncoll decr then sale decr Relevant Assertion; mgmnt; valuation, accuracy and allocation Procedures; auditor; review subsequent event, recalc, 8-10; when reviewing the ar subledgr, auditor found evidence that accts have been sold to a factoring co. but not removed from books Relevant Assertion; rights and obligations Procedures; inspect and exam, confirmation, review subsequent events, 11-13; in reviewing docs, auditor came across information that led hom to believe that a lawsuit filed against the co. may result in a settlement owed by co. Relevant Assertion; understanding Procedures; review of sub event, inquiry letter to lawyers 14-16' when auditor was reviewing the last qtr rev., he noticed a significant upswing in sales towards the end of the dec. the upswing did not appear to exist in the prior yr. Relevant Assertion; cutoff Procedures; cutoff procedures, inspect and examin doc. 17-19; when reviewing the working cap. , auditor notice and incr the co. current ratio due to a significant decr in CL. CA remained unchanged in the prior year. asset unchange liab decr Relevant Assertion; completeness Procedures; tracing = completeness, review sub event, Sim 5; Audit objective; receivables at y-e 2 are properly cutoff with respect to sales made at ye 2. Subtantive proceder; Complete ; trace shipp docs to invoice to subledger ledger ID last no. used in ye2 to firtst no used in year 3 for prenumbered shipping and sales invoices Audit objective; Depreciation is fairly statement; valuation, accuracy and allocation; recalc ye depr exp Review the process of assigning expected useful life to machinery and ask controller of assumptions changed. Sim 6 flow chart of control process or doumenting cash collection steps

Answer 134

Purchasing process; Requision (program) depart - send a request for an assets or goods and services to - Purchasing department that negotiate best price, issue prenumer po, approved po with; quantity, description and price then multiple copies are sent to requistion department-vendor-receiving. Once order are receive, receiving department counts order; due to receiving dept get blank information in quantity. If description match po,then to goods are forwarded to requision dept. AP department receive and match; receipt report, po, invoice for recording payment. For Segration duty purpose, AP clerk recorded invoice and AP Supervisor reviews AP for processing payment. All matched information is put together in a vouch packet for Treasurer to approve payment and issue and sign check and mailed. Vouch packet is cancel and marked paid and sent back to AP to posting and filing. Performing specifice audit procedures to obtain evidence of expenditure cycle; For accounts payable, the completeness and accuracy (valuation, allocation and accurancy) assertions are generally more relevant than the existence and rights and obligation because the riks of understatement is greater than the risk of overstatement (AR and rev). Account Payable ; Accounts assertions= CVER Completeness; assessing unrecord liab. to cash disbursement; Trace up ap listing agree to GL; reveiw w/cash dist jan and feb. Perform search of unrecorded liab. ID cash disb.related expensess incurred before y-e 12/31 to Jan cash distribut. Obtain a sample of vendor statements and agree to vendor accounts. confirm y-e liab. give proof to accrue liab. Valuation, Allocation, ACCURACY obtain AP listing, foot to listing and agree to GL Review the results of ap confirm Obtain a sample of vendor statements and agree to vendor accounts. confirm y-e liab. give proof to accrue liab. Existence and Occurance; Vouch inform from AP listing to Vouch package Only use conf vendor statements when no statements available or IC is weak. Confirmation are use for both completness and existence. Rights and Obligation; review a sample of voucher package for presence of purchase req., po, receiving report and vendor invoice to verify ap are owned by entity. Audit Purchase Transactions: COVER U; Completeness; trace sample voucher to purchase journal Cutoff; compare date on sample vouch to date the transaction were recorded in purch journal Val, Allc and ACCURACY; mathematical accuracy of vendor invoice Existence and Occurence; voucher authorization to receiving report Understanding and Classification; auditor should verify the account classification of a sample of purchase. Auditing Presentation and Disclosure; CVRU Completeness; require all disclosures related to account payables and purchases in NTFS such as payable by type; trade, officer, employee, affiliates and terms ST and LT Purchase contracts and purchase committment Related party Expense by segments Val, Allc, ACCURACY read and footnotee other info related ot AP and purchase and determine accuracy Rights and obligation and occurence; compare disclosure to other audit evidence to ensure that all disclosed inform related to ap and purch Understand and Classification; auditor should read all ap and purchase related disclosure/

Answer 135

2640-what ic activity is not performed in the voucher payable department; accounting for unused prenumber po and receiving report. 3172-what is an effective control activity to detect vouchers that were prepared for the payment of goods that were not received; match' po, receiving report and vendors invoice for each vouch in ap department 3180-determine whether ap are completed, an auditor performs a test to verify that all merchandise received is recorded. what document from match vouch should be used; look at the receiving to determine if merch have been received to pay. 3183-what ic procedure most likely addressess the completeness assertion for inventory; receiving reports and prenumber and reconcile to inventory recieved for ap payment. **2674-pr**operly designed ic would have same employee that match invoice to receiving report would; recompute of vendor invoice competiable with authorization 3196- when shipping dept returns noncoming goods to vendor, the purchasing dept of vendor should send a debit memo to the accounting accounting dept 2942- to determine whether ap are complete, an auditor performs a test to verify that all merch received would use which match doc. receiving report to verify what was recieved to what was paid. 2942-what procedure would an auditor perform in searching for unrecorded liab. completeness; compare cash payment/disbursement occuring after the b/s date with ap tb. 2949-what audit procedure id unrecorded trade ap; reviewing cash disbursement/payment recorded to the b/s date to determine whether the related payble apply to the prior period. 2468- when using confirmation to provided evidence of the completeness assertion of ap the appropriate population doc. would you the list of vendors with previous business. yes. 2742- what procedure would an auditor least likely perform before b/s; confirm ap due to payment could be made after y-e due to accre liab. 5878-what procedure would detect a liab omission by management; review the purchase contract or legal documents for probable, possible or remote lawsuits. why wouldn't checking the math accuracy of f/s be; there is a case that an liab omitted was not in the fs liab, 7160-would a weak segration of duties be a ap clerk that post vendor invoices it ap ledger and mails chech.; yes. mail checks should be done in the treasure office. 2606-for effective ic, the ap dept generally should; establish the agreement of vendor invoice, receiving report and po = match 2612-what procedure would an auditor perfomr in searching for unrecorded liab. vouch a sample of cash disbursement recorded just after the receiving report and vendor invoice. what was receive was recorded for payment. 2614-an auditor trace a sample po and related receiving report to the purchase journal and cash disbursment. what is the purpose of this substantial audit procedures; to determine if purchases were properly recorded. this the match process for ap to record invoice. 7623- what is a function that represent a weakness in ic related to cash disbursment'; Treasure dept does not files the voucher packet. that is for ap 7644- is comfirmation a test of completeness and existence; yes 7630-an auditor is performing a preliminary assessment of ic over purchases. what would be considered improper segration of duties of purchases of a large client. po department prepare prenumber requision and obtain all required approval. po should only issue prenumber which consumate order with vendor after getting best deal. should be in charge of getting approval, that is requistion dept responsibility.

Answer 136

Cash is the most high fraud risk lead by to fraud schemes; Lapping and Kitting Lapping occurs when an employee withholds funds received by a customer for his personal use and fails to apply these CR to customer balance and apply another CR to customers account Best safeguards; - independent comparsion of recorded cr with funds deposited - Separation of incoming CR from subsidiary ar remittance advice - Comparison of detail of bank deposits and the detail of remittance Provions of timely statement and bank recs. -Confirmation of customer balances Best safeguard is lockbox. Kitting occurs when a check drawn on bank is deposited in another bank and no one record is made of the disbursement in the balance of the first bank until after y-e. Kitting maybe used for cash shortage or a pad a companys cash position. Kitting results in the intentional overstatement of cash in the fs. Best detection for kitting is bank transfer schedule. bank to bank transfer at y-e this disbursement date on checkk and in GL for disbusing account should precede the receipt date noted by the bank and in the ledger for the receiving accout. Evidence should exist that all deposits in transits and outstanding checks listed on bank rec at y-e cleared the next period. Best to use a bank cutoff statement. Best ic is segregation of duties; ARC Procedures to obtain audit evidence cash cycle; Audit the Cash Balance+ :CVE Completeness, Valuation, allocation, existence bank confirmation and timely bank recs. Auditing CR and CD; CVEU; Completeness: trace; remittance advice to the CR journal and deposit slips. Cutoff CR and CD shortly before and after y-e for recording in proper period. Valuation. Allocation, Accuracy; from cr daily deposits, should foot the remittance advice and entries on the depsosit slip agree to CR journal and bank statement CD. voucher packet should agree to po, receiving report and invoice, cancelled check and CD journal. Existence and Occurance; vouch CR journal to remittance advice, deposit slip, and bank statement vouch DR journal to cancelled cks, voucher package and bank statement Understand and classification; examine a sample of remittance advices and cancell checks for recording in the proper account. Audit Presentation and Disclosure; CVUR Completeness; ensure that all related disclosure to cash have been included in note to fs. including; policy defining cash and cahs equiv, restricted cash and sinking funds, compensating bal. Valuation , alloc. and accuracy; evidence to ensure that all disclosed info. related to cash has occured. Understanding and class; the auditor should read all cash related disclosure to ensure that they are understandable.

Answer 137

Sim 2; if there are no cash received but invoiced. Audit would do the procedures of indentifying the invoice that matches those in the open accounts rec table as of the end of the year. this would most likely be an outstanding ar. Cash received greater than invoice amt. Determine if there are unrecorded sales. review sales number to ensure all booked to ar. Sim 1; Bank rec notes; old checks later than 2 month prior to y-e should be written off., the other reconcile line item can be blank if no activities, Other reconcile items in book should be detailted. this is unsubstantiate in current status. there should not be any yr3 financial info in yr 2 bank rec. If book infor is in correct due to aged DIT or stale checks , then was not in aggreement with bank balance at 12/31/y2

Answer 138

3140; illustrate a transfer that would be a DIT at 12/31/x1 DR date CR Date Per bk Per bnk per bk per bnk ck# 101 12/30 1/4 12/30 1/3 202 1/3 1/2 12/30 12/31 303 12/31 1/3 1/2 1/2 404 1/2 1/2 1/2 12/31 DIT is Cks 101 and 103. DIT is a disbursement posted in one accounting pd and receipt in another accounting period. 3161;what ic procedure would most likely deter lapping of collections from customer; segration of duties between CR and AR posting. Any verification and comparing could still show lapping. #5472; what cash transfer result in a misstatement of cash at 12/31/20x1 DR date DR date CR date CR date per bk per bnk per bk per bnk a. 12/31/x1 1/5/x2 12/31/x1 1/4/x2 b. 1/4/x2 1/11/x2 1/4/x2 1/4/x2 c. 12/31/x1 1/4/x2 12/31/x1 12/31/x d. 1/4/x2 1/5/x2 12/31/x2 1/4/x2 The cash disburse date per bk does 1/5/x2 does not tie to the Cash disb date per bk 12/31/x2. the bk transf je is dr bank trns per bk and cr bank trns to another as of 1/4/x2 or 12/31/x1. 2937; what is the reason the auditor sends a standard confirmation request to financial institution; to corroborate information regarding deposit and loans 2824-what is the purpose of the procedure to send standard bank confirmation- to seek information about contingent liab and security agreements and deposit account balances. 2826-the primary evidence on cash balances is documented in the ; bank reconciliation, which reconcile cash per bank to cash per book. 3135-which of the follow cks might be kitting DR date CR Date Per bk Per bnk per bk per bnk ck# 101 12/30 1/4 12/30 1/3 202 1/3 1/2 12/30 12/31 303 12/31 1/3 1/2 1/2 404 1/2 1/2 1/2 12/31 #202 and 404. Proper bank transfers would have DR postied in one period and CR posted in another period. those two check are not doing the procedure.

Answer 139

Inventory should be segregated into the following duties; Purchasing Recieving Warehouse Shipping Auditing Inventory balance to obtain evidence procedures used. in the inventory cycle auditor should observe both the beg. and end

Answer 140

4974- can observation be used for both the assertion of completion and existence; Yes; revidence of physical existence 4897-what procedure is most likely to understanding and classification ( disclosures) of the fs with respect to inventory; confirming pledge and loan assigments both have to be disclosed 2488-what ic would be most likely used to maintain accurate inventory records'; periodical count to adjust pepeptual inventory due to periodical done at end of year. 6865- the test of tags to listing would determine whether; test of completion to determine if tags were included in listing. i,e, recorded 7161-what management assertion states that all inventory on hand is reflected in inventory y-e balance, test of completion; done through observation, test inventory count and trace tags to report sheet 6713-what would be a good procedure to for completion assertion as it applies to inventory; performing procedure of cutoff in shipping and receiving to verify what inventory has been included or excluded, Also remember trace from tag to quantity is existence. 7657- what is and is not a test of valuation, alloc and accuracy; is; inquiry about obsolete and damage good, ; examine vendor invoices; and performing test on price for inventory sample is not; inquiry about consign; this is an assetion of completion.

Answer 141

Sim 1; See hard copy solution notes Inventory terms; Bill of laiding a/r; agreement between shipper and customer . Customer a/p receives bill of laiding FOB shipping; this mean shipper reduce inventory and there is a sales CR and COGS DR of inventory when shipped. FOB destination means shipper can not reduce inventory until customer receives inventory. Exclusion ; if auditor count is hire than client count then auditor would verify the exclusior be it sales , purchase, or returns inclusion ; if auditor count is lower than client count then auditor would verify the inclusion be it sales , purchase, or returns

Answer 142

4726-if an auditor scans investment records before and after the period to determine if transfers have been recorded in correct category this would be a assertion of ; Understanding and classification and valuation because want to know true fmv. 2391- if auditor is recording the count of negotiable securities on his worksheets. what other information is included in his worksheet. that the he returned the information back to the client. via client rep letter. 2796-what is the best controls that will give the greatest assurance that securities held as investments are safegaurded; access of securities requires two signatures of designated officials. 6209-what are the ways an auditor would validate securities held by clients in an active market 1. evaluate and approately applied base on GAAP 2. Appropriate for the environment in which the entity operates 3. Appropriate for the debt or equtiy security being valued. 7643- what would be a weak ic of investment; if the securities are held in the treasurers office ; they should be in a safeguarded place. 7645-if during the audit and auditor is in the review of investment and inquire of management about liens of securities this would be an assertions of ; Rights and obligations. 7625 - 4B12 --\> write in what the auditor would do to test each of these assertions. 7626 - 4B13 --\> " " (in general when testing existence and occurrence, you are looking at other agreement docs or invoices. There's no calculation involved) 7627 - all the other three didn't make sense 7639 - keyword is "sufficiently" which pertains to completeness, also can write in 4B13 about all four options 4435 - key thing in this question was that "preparing checks" doesn't mean they are signed. Signed checks are assets. Unsigned checks is recordkeeping. Also payment here meant cash because it's a cash receipts clerk. If it was a check, it would have been fine. 2396 - new additions would be existence 2692 - same question but completeness is an option. Review that answer! 2663 - put in notes that note can be current and noncurrent, thus checking renewal means classification 2410 - can explain 2413 - review depreciation concept to explain 2446 - notate all four options 2447 - \*Vouch for existence (voucher shows deal existed) and trace for completeness (trace a circle to complete) 2475 - write them in 4B12-13 2486 - direct labor hours are punch in and punch out cards 2762 - makes sense 8154 - makes sense 2823 - repeat

Answer 143

See Hard copy notes

Answer 144

2692-an audited is testing the PPE bal. in the GL and examining the a new additiions lists (report sheet) on an analysis of plant and equipment. He is getting evidence on the assertions of ; Existense; he is vouching back by way of looking at the PPE GL balance to new addition list (report sheet) analsys form and looking for ppe. 2762-when would an auditor extend substantive testing of payroll; when overpayment are discovered in performing test of details. 2663-an auditor is reviewing a note payable after the b/s sheet is getting evindence of assertions; understanding and classification. what are the terms of the debt and was it classified, l-t or s-t. would not be completion which would be transaction occuring in the peroid of audit 4435-what would be an inppropriate seg of duties; cash receipt clerk that credit custer account when payment is recieved. cash receipt clerk has custody of checks. should not record. 8154-what procedure woul an auditor complete to test existence of ppe; vouch back; obtain a listing of all current ye additions (report sheet) vouch back to significant invoices and determine place in service. 2486-what ic most likely would prevent dl form being charged to manufacuring oh; use of time ticketss to record actual labor worked on production orders. 2413-what would satiisfy an auditor about significant debits to accum dep; plant assets were retired. DR accum dep and CR PPE 2447-what would an auditor do to search for unreorded FA; inspect the property ledger and the insurance and tax record and then tour the facilty; look to see if assets are not on insurance premiums and tax payments 2823-in testing unrecorded retirement of PPE and auditor would; Select items of PPE from the accounting records and then tour the facility; tracing old equipment in the records to actual equipment. 2410-a weakness in ic over recording retirement of PPE may cause an auditor to; select items from the pppe accounting records and locate them in the plant. this is the most effective way to test. 2446= when control risk is low, substantive risk most likely applied would be limited to applying analytical procedures and recalculating the accruals; CR low= DR high = substantive test low 2475- in auditing payroll an auditor most likely would; comparr payroll cost i,e, DL to standard or budget. i.e substantive testing via analytical procedures 7626-an auditor is planning the test of detail of debt transactions. in order to find existence and occurance he would; existence = vouch back= examine big to small= review BOD minutes to obtain evidence of new agreement and then inspect new agreement. 7627; testing valuation related to stockholders equity transactions, the auditor may complete what substance test; = test of detail or analytical procedures; he would analyze the client's RE by reivewing property of direct entries to the RE account starting with the date of the previous audit = analytical procedures. 7625-when auditing the presentation and disclosure of clients payroll, auditor reads footnotes and other infor. to determine if all disclosure are presented in appropriate amounts. this would be Accuracy Not Understandability and classification want to undestand and where was payroll applied. 7639- audit reveiwed the footnotes for PPE presentation and disclosure to determine the Depr method, and estimated useful life used by client. this is the assertion of ; completeness when the PPE are in the footnotes the auditor would test them for completeness. Disclosure and Presentatio Completion Depr methods used and useful life Depr exp for the period Balance of each class of capital assets by nature or function Accum depr allw by class or in total Liens and mortgages Capitla and operating leases Valuations,alloc and accuracy; read footnotes and othe infor to determine info is accurate Rights and oblg'; inquire of management and reivew loan docs, minutes, and other docs to determine FA have been pledge or collateralized Understanding and class; auditor should read for understanding and classifiction of FA

Answer 145

The key audit responsibility is to view clients opening balances for material misstatements. Key points in going concern in EOM is subtantial doubt and going concerns. dates and time period are not in EOM paragraph. Going concern for a Reasonable period of time and financial reporting framework used FASB the issuance of fs plus 1 yr. GASB; FS date + 1yr. plus qtr year non applicable GAAP or cash basis and tax basis; issuance fs plus one year. The procedures to examine going concerns are:ADMITS Analytical procedure Debt compliance[ convenants BOD or shareholders Minutes Inquiry of clients legal counsel for lawsuits Third parties to provide financial support Subsequent events/after y- Factors that may indicate substantial doubt of going concerns FINE Financial Difficulty; loan defaults, denial of usual trade creditss, debt restructuring, disposal of asset, noncompliance with capital requirments Intenal matters; work stoppage, labor difficulty, substantial dependency on a particular project, uneconomic l-t committments, significant revision of ops. Negative trends; recurrent lossses, working capital deficits, negative cF, adverse financial ratios External matters; legal proceedings, new legislation, loss of key franchise, license or patent, loss of principal customer of supplier, natural disaters. Clients response to mitigate Substantial doubt; 4Ps Plan to borrow money or restructure debt Plan to sell a sell assets Plans to delay or reduce expenditures Plans to increase ownership; cash infusion. Mitigating factors must include both intent and ability to carry out the planned. Documentation requirement for going concern; condition of events that gave rise to going concern Any mitigating factors that the auditor consider signiificant Audit work to perform to evaluate plan auditor conclusion about whether substantial doubt remains or is alleviated the effect of the auditors conclusion on the evaluation of the financial statement and related disclosure and resulting reports Going concerns considerations; if in auditor judgements; the going concerns disclosures are inadequate, via departure from GAAP, may result in qualified material or adverse very material opinion. if management is unwilling to perform or extend it evaluation to meet period of time required for financial reporting framework request by auditor , auditor should is a qualified material or adverse very material opinion. if fs have been prepared using going concern framework, which is inappropriate, the auditor gives an adverse opinion. if the audit doubts about going concerns have been removed prior paragraph is not needed. Audit should communicate with those charged with governance on going concern.

Answer 146

4980-would sent an inquiry letter to clients attorney on litigaton. Would the inquire talk to the appropriateness of management f/s disclosures. No. this is an evaluation done by the auditor. 2545-an attorney refusal to furnish the informaiton request by auditor would be considered a; limitation of scope of the audit that would stop an unmodified opinion. 5358-if auditor has substantial doubt of clients going conercne because of probable discontinuance of ops. he would express an qualifiied opinion if ; information about the going concern is not disclosed. the is a GAAP departure. FYI just because an is substantial doubt on going concern does not mean they can't get a unmod. opinion. 4979-what procedure would an auditor not use in evaluating accounting estimates: via management letter has disclosure. no disclosure is in the management letter. would use; subsequent events to determine est. Develop independent est. Determine how mangement develop est. 2569-what assumptions would auditor used in evaluation reasonable accounting est. Auditor looking for things theat don't look normal; deviation of historical patters; significant to the est.; sensitive to variation of est., subject to susceptible to misstatement and bias. 2695-what is not true about accounting est.; an accounting est. is an approxiamation of past events that can be determined on a timely cost-effective basise. if this were true, would not need estimate. 4717-who would recieve this letter; in connection with the audit of our fs, management has prepared, and funrnished to our auditors a description and evaluation of certain contingencies. audit letter to legal councel to corroberate management assetion of litigattions. 2992-an auditor concludes there is substantial doubt on entity going concern for a reasonable time period, if the entity disclosure is adequate, the auditor may report; disclaimer of opinion of going concern With adequate disclosures= unmodified with EOM or disclaimer. Unadequate; qualified or adverse 3213-what condition would have an auditor to have substantial doubt of going concern ob busisness; cash flow from ops is negative. Significant party transaction sb disclosed but are not reasons for substantial doubt going concern. 2559-what audit porcedure would assis' t an auditor in substantial doubt of gooing concern; confirm wiht third party the details of arrangement to maintain financial support for the entity. 4705-what procedure should auditor perform concerning litigation, claim and assessments; these are managment's matters, should obtain from management that is hase disclosed all unasserted claims that its lawyer has advised are probable of assertion 5843-what would be least likely included in attorney letter to auditor; an evaluation of client's ability as a going concern. this is an auditor responsibility. 2379-what situation would an auditor choose between expressing a qualified opinion an averse opinion; gaap departure is material, and inadequetly disclosed = qualified or adverse. 8941-what statement in an attorney letter would need futher investigation.; these are vague responses; i.e. it is our opinion that the company will be able to assert meritorious defense to this actions 7634-should a client include review of derivitive transactions reflected on the quarter-end balance sheet do id contengencies; no if they are refleted on the balance then they are not contingiciency. the are not repoted but should or should be reported based on probable, possible and remote.

Answer 147

5359: what matters would materiality limits apply; instance of management fraud. (1) no mention in the fraud section on materiality. (2) 2552- there is no mentional of materiality on availability of BOD and shareholders minutes 2513-what should be included in the rep letter; that the belief that misstatements id by the auditor and not corrected are immaterial. 6194-when doing a comparitive fs does all financial years covered be included in the rep letter. yes.

Answer 148

Management Rep. Letter: auditor prepares letter which is printed on clients letterhead and signed by client's CEO and CFO Purpose of letter; to confirm representation explicit and implicit given to auditor. reduce the possibility of missunderstanding concerning matters that are subject of the representation. Letter should be the same date and the audit report management letter should be the report based on the last piece evidence auditor must recieve the rep letter to issue a umod or unqualified opinion. refusal by management to furnish would result in disclaimer or withdrawal. letter should speak on the representation materiality related to fs' Doubt about the reliality of rep. letter. Contents of managemnt ltr. Should include following infor, in rep letter fs. management responsibility the fair presentation of fs and design, implemenation, and maintenance of ic relative to fair presentation of fs and free from material misstatement due to fraud. Completeness of informaition ; management gave all relevant information Fraud= ic Law and regualaiton; id suspected noncompliance uncorrected misstatement are immaterial litiagation and claims all known possible litigation and claims have disclosed and disclosed of applicable financial reporting framework. Estimates are reasonalbe Related parties are disclosed Subsequent events Additional representation

Answer 149

8692-auditor is most likely that a misstatement id during an audit is below quantitative materiality limits is qualitative material if it; if it change operation results from net loss to net income (controls quality and not $ misstatements) 6221-immaterial discoved by the auditor in prior year will be evaluate how in the current year; considered in the evaluation of audit findings in the current year because it may become material. 6813-under PCABO standards what does not represent an example of management basis; adjusting unexpired insurance do prepaid insurance. is management bais: decr allw doubt when there has been no change. Selective correction of misstatement when brought to their attention by auditor id by mamagement of additional adj. entries the offset misstatements the audit procedure on materiality and thresholds are based on = not materiality id are less than tolerable misstatement. 3706-what is not an example of a deficiency in the design of ic that may be a significant deciency of material weakness= not a design deficiency but still a significant deficiency or material weakness would be a deficiency in the operation of control. this mean the design is correct just a operation deficiency= observation deviation rate that exceeds the auditors expected rate. 3929-what would not be considered evidence of failure in the operation of ic. = not a failure in operation controls would say that design of controls have failed Insufficiecy of consciouseness is a design of control failure where as control consciouness is postive design in control

Answer 150

See paper notes

Answer 151

2570-when communicating ic related matters in a fs audit of non-issurers. an auditor report issued on significant deficiencies should indicates; for non issuer, the purpose of the audit was to report on the fs and not to provide assurance on ic. 5390-what is the vest describe responsibilities of auditor to report significant deficiencies and material witness of fs auditor of non issuer: required to communicate both to management of governance. 2737-what statement is correct concerning an auditors required communications with those charged iwht governance; should include disagrement with management about significant audit adjustments, whether or not satifactory resolved auditor is not required to make communication before audit fs as long as it is communicated in timely fashion. for issurer, SEC communication must be filed with audit fs report. 2576-what matters is an auditor required to communicate to those with governance; the process used by management in formulating sensitive accounting est. and the basis for conclustion regarding reasonable of est. 6876-what is a correct statement regarding nature and timing of communications between an accounting firm performing and initial audit of issure and the issurer audit committee; prior to engagement, firm should decribe in writing about independence. 4382-what matters in a fs audit is most appropriate to communitate with those charge with governance; an overview of the planned scope and timing of the audit. 4626-what is an auditor not required to communicate to those charged with governance; not required to communicate t those charged with governance the degree of reliance place onthe management rep. letter. 3079-what statement concerning material weakness and significant deficiency is correct with fs audit for non issurer; all material weakness are significant defeciencies. because material weakness in ic is important to merit attention by those charge with governance. 5009-what is not true about significant deficiencies in ic; auditor is not required to search for significant deficiency but if id should report. 2470-what of the following statement is correct concerning significant def. in ic with respect to fs audit for non issurer. auditor may communicate significant deficiencie during an audit and after completiing this is due to timing. 5387-a control deficiency would be considered a material weakness when the likelyhood that potential fs misstatement will not be prevented, or detected/corrected, and the magnitude of such misstatement are at minimum; Likelihood = Reasonable and magnitude=material 2530-what matters would an auditor most likely considered to be a significant def. in ic to communicated to management and governance.; evidence of a lack of objectivity by those responsible for accounting decision due to bias in fs. 6031- when is deficiency in operation exist. when a good design of ic is not being executed. 3874- what is not a reason why mostr companies have estab. an audit committee; SEC requires companies to have a audit comm. not true they recommend. 3727- a small company that has one emplyee, handling all CR duties and one emplyee reveiwing and approving would this be a case of compensating controls and bad segregation of duites; YES 3736-does other deficiency not significant def or material weak need to be communicated when management indicated that these control cost out weigh ic. should audit commicate these deficiencies in current year. NO

Answer 152

4704-what procedure would an auditor most likely perform to obtain assurance the slow-moving and obsolete items included in inventories are properly id; examining an analysis of inventory turnover; this is a way to value inventory. 11073-a client has a valid reason for requesting that a certain ar that auditor has selected for confirmation not be confirmed. under these circumstances the auditor should; do an alternative procedure to confirm by verifying account balance by inspecting the bank statments to the CR reports. always verify the account selected do not substitute. 2760 - the purpose of segration of duites of hiring personnel and distibuting payroll checks is to separtate; ARC; authorization of transaction from custody of assets 3216- on the flowchart with sale trans-CR trans- GL trans and GL masterfie- would AR file be here= yes.because affect be all. 2811-what control is most likely to prevent im proper disposition of equipment; SEG of dutie ARC; those authorizing dispose and those authorizing to approve removal work order. 7638-if an auditor is deciding not to use positive confirmation. what would be the least likely reason; look at last year results 2833-the scope of an audit is not restricted when an attorneys responses to an auditors as a results of a client letters of an auditors limits response to; when an attorney response is limited to matters tho which the attorney has given substantive attention in the form of legal representation and considered individuallu or collectively to be material. 2412-the confirmation of customers ar rarley provides reliable evidence about the completeness assertion because; completeness provide record of transaction. customer would be incline to report understatement of ar. 2505- a examination of a financial forecast is the professional service involved in= examination is like an audit; audit = examine = evaluation. evaluating the preparation of fs forecast and support underlying management assumptions; evaluate prep of prospective fs and evaluate the presentation of prospective fs in conformity with AICPA guidelines and issuing and examination report. 8423- to ensure that the auditor report for an issuer is prepared in accordance with Section 404 of the SOX act 2002, the report must; attest to an report on the ic assessment made by the management of issuer. due to management is responsible for design, assessment and implementation and effectiveness of ic, SOX require management assessment. 3808--what is not correct regarding control deficiencies in an integrated audit of non issuer; communicate of material weak and significat def is restricted. This is not the case with integrated audit. Just with audit of fs. 7171-what circumstances would a covered member independence be impaired with respect to non issuer client; member owns municipal untility bonds issued by a client, and the bond are not material to be member's wealth. financial interest = impaired whether material or immaterial.= violation of the Indepence rule. if trustee in investment held by client yes.

Answer 153

2586-what information should be considered when considering tolerable deviation rate for test of control: allowable risk of assessing too low, expected deviation rate. Never average dollar value. this is $ value risk. 2711-auditor would id contigent liab through ; AEIO; external factors lawyers inquiry letter and bank confirmation via endorser loan and open credits. Never AP confirmation thise are existing liabilites. 2530-what matters would an auditor most likely consider to be a significant deficiency in ic to be communicated to management and governance; evidence of lack of objectivity by management in accounting decisions. this could represent ic significant deficiency in fs due to management bias. remember a recurring losses that may indicate going concern is not is ic deficiency. 6350- what is an example of inherent risk that an auditor should considered. technology development that may render inventory obsolete. new tech my have error and omission in implementatio that my result in fs material misstatement. posting unauthorized je= control risk incorrect formula used to calculate lifo = control risk inaccurate physical count of inventory = control risk. 6874-what statement would not normally be included in a rep letter for a review of interim fs (issurer) Not in rep letter: we understand that a review consist of principally performing analytical procedures and inquires What is in rep letter: what happen and what was needed to do review: - management mande avalable all financial records and related data - to best of management knowledge and beliefs no events have occured subsequent to the bs and thorugh data of this letter that would require adjustment to or disclose in the interim fs - we acknowledge our responsibility for the design and implementation of programs and controls to prevent and dedect fraud 2740-the sampling unit in a test of controls pertaining to the **existence of payroll transactions** ordinarily is a vouch back from the **Payroll register** to a source document ( time card) 4352- for pcaob, at least how often should a registered public accounting co. be inspected by pcaob. every three years for accounting co with 100 or less client issurers more than 100 issurer= annually 4448- Government auditing standard require what fore ic reports; a written ic report in every audit. also within the ic report a separate id of those reportable conditions that are significant enough to be a material weakness.

Answer 154

3752- would financial statement have not been audited or reviewed and the accountant does not express an opinion be explicit statements in a compilation reports. yes; Implicit are accounting est or accouting records 5832 - what procedure would an auditor follow litigation inquire; AEIO; Discuss with management its policies and procedures for id and evaluating litigations. 6033- an examination report on compliance governed by SSAE would include: remember an examination is like an audit. it would give an opinion on whether entity complied in all material aspects, with the applicable compliance requirement. postive assurance 2915 auditor concludes a client is in substantial doubt of going concern . finanical statement are adequete (modified) discosed difficulty. Auditors reports under US Auditor standards by Include in EOM paragraph Specifically use the word going concern and substantial doubt. unmodified opinion is appropriate. 3748-what is not included in an accountants standard report on compilation of entitys f/s; no assurance, opinion, no limited,. should not include : a statement that the accountant does not express an opinion but express only limited assurance. should inclide:A statement that the accountant has not audited or reviewed the fs. - management is responsible for fs - statement that performed unders SSARS promulgated by the standards of Accounting and Review Services Committee of AICPA. 2784- an auditor testing l-t investments would use analytical review as the primary audit procedure to ascertain the reasonableness of the ;completeness of recorded investment income in relation to investment amount . analytical review = completeness Existence = inspection valuation and allocation = use list price to verify via NYSE Classification ; base on g/l of appropriate accounting principles 0182; a practione report on AUP taht is in the form of procedures and finding shoulc contain; Aup no assurance , no opinion, no limited . disclaim of opinion on the subject matter 5358; an audiotor has substanital doubt about an entity going coern because of probable discontinuance of ops, he would express an qualified opinion when, information inadequate. information of entity going concern is not disclosed. Required to be disclosed peer GAAP if not could lead to qualified or adverse opinion.

Answer 155

2612-what procedures would an auditor most likely perform in searching for unrecorded liabilities; vouch a sample cash disbursement record just after y-e to recieving and vendor invoices. this would be the best comparison pf cash payments after b/s date related to related recieving report. Any payments made before y-e reflect a liab. that should have been recorded. 2680-an auditor tests controls of obtainting credit approval before shipping goods to customers in support of management assertion of ; valuation and allocation of ar to customers account are accurate. this is not existence; vouching a ledger to a source document. 4748-what factor would auditor least likely to consider when reporting on compliance with aspects of contractural agreement in connection with fs in accordance to SAS. when reporting on compliance, auditor will report on negative assurance and not an opinion. audit will give opinion of fs, user will get the compliance report, and what ever applicable convenants to the report and audit procedures completed. 6841-can a compilation report include an omission of gaap, the accountant must indicate the omission and; state if the disclosure were included, they might influence the user conclusion. account must aknowledge the report is not to mislead the user. there is no internal use restrictions. 2934-what is the internal control for voucher payment; approved voucher, prenumber po, and a prenumbered receiving report. auditor would select for unauthorized expenditures by getting the voucher package that has a cancelled check. 3768-audit firm is planning the audit and will staff auditor what would audit firm instruct staff auditor to consider about client. Economic conditions, prior knowledge of ic, complexity of ops and previous communication deficiency for the overall strategy and planning with staff auditor. 3857- a subsequent event of ic was discovered before date of the audit report. what is not an auditors responsibility regarding the subsequent event in a integrated audit; does not have to perform test of controls of the subsequent event. just have to iquire of management, examine documents, and get written rep letter. 6317- during an egagement review. accountant becomes aware of a material departure from GAAP. Account modifiies the report because managment will not revised the fs. would is accountant to do. reivew ; independent, limited assurance, no opinion, does analytical procedures and inquiry.; would disclose the departure in a separate paragrahp. this paragraph should appear, after the Accountants conclusion. And be headed Know Departure from Accounting Principles Generally Accepted of the US. Review does not express and opinion (i.e. positive assurance, positive or negative assurance. 2410- a weakness in ic over recording retirement of equipment may cause an auditor to; this test of controls: and not substantive testing. Select equipment items from accounting records and locate them in the plant to know if they are still being used. Weakness is issue with recording of retired equipment. No tracing, or inspecting and tracing, no reviewing ledger. all are substantive.

Answer 156

7704-if comparing dates of transaction to actual to vouchers and recorded dates this would be the assertion of Cutoff 3488- a cpa firm is performing an audit engagement on a town in accordance with 2 CFR 200 single audit. how are major programs determined. Would apply the risk-based approach. Risk base auditing allows auditor to test as little as 20% of federal program or as much as 40% of total programs Program in excess of $750K are generally considered to a major grants but is not inclusive of major programs there no judgement of major progara with the Office of the inspector general. 6115- non audit services of less than five percent of total revenues from the audit client do not need audit committee pre approval. and other non and audit services including tax services do. 5804-according to the AICPA Code of Professional Conduct, what financial interest in the clients during the engagagement would impairs the Cpa's independents. Direct and Material indirect financial interests. 5624- AICPA code of professional conduct : independent rules does not consider what circumstance to be a lack of independence; if an auditor's brother in-law father is the controller of the client being audited. According AICAP Code, close relative are members spouse who hold key positions. close relatives are parents, siblings, or nondependent children. brother in-laws or family member of brother in-laws are not. 7623-what functions represents a weakness in ic related to cash disbursements. think ARC must be done separatley. A treasurer returns voucher package to ap dept. for cancellation of vouchers. Weak Ic. Treasurer should paid voucher, cancell voucher and mail checks out and the return voucher to ap dept. 3172-what is the most effective control activity to detect vouchers that were prepared for payments for goods that were not recived. doing the full checks and balance of the voucher process payment procedures: match po, receiving report and vendor's invoice to each vocher in ap dept. 8424-in an integrative audit an auditor would issue a adverse opinion on the effective on ic for a material weakness. the financial audit opinion would be a separate adverse opinion on misstatement of the fs.

Answer 157

2974-when compiling a projected fs the accountant shoul include a paragraph that describe results may not be achieved and limitation on the usefulness of the projections. no mention of accounting principles used by management. 2652-what ic most likely would assure that all bills are correctly posted to the ar ledger. the auditor would compare the daily sale summaries (sales that happen and batched that day) to the daily posting of a/r this is credit sales that were posted to a/r batch. 8404- in an integrative audit of issure what would not be considered a entity level control;entity level control exist independent of audit done by entity such as executive committee process for assessing business risk, BOD control to monitor Audit committee, management estab. controls to monitor ops. Auditor assessment of IA is not an entity level control. 5374-what would be the most reliable procedure to test existance of an outside inventory location. observing inventory is the best and most reliable that inventory exist. confirmation would provide rights and obligation but not existence. Need to see it EXISTENCE 7646-what assertion has recalculation in it, the assertion of valuation, allowance and accuracy. 3714-what is a control deficiency that would not be considered a material weakness; and inadequate design of IT control this is a deficiency in the design of the control not a material weakness. Some examples of material weaknesses: fraud by management or employees, ineffective oversight of governance, audit team id a material weakness that was not client control did not detect. 2702-what objective does the auditor have in evaluating accounting estimates; is to determine whether the estimates are reasonable for the circumstances in the conformity of GAAP. there objective woud not be to determine bias because most estimate are subjective in nature and thus subject to bias. 2410-a weakness in ic over recording retirement of equipment may cause an auditor to determine if assets are still in uses. would select certan FA from accounting records and locate them in the plant. No sense of reviewing ledger to determne whether depreciation is taken. because there could be FA that are fully depreciated but not retired and still being used. 6681- an accountant is in engage to review the fs on non issuer taht contains serveral departures from GAAP. Management is unwilling to revise fs. audit believes that standard review is inadequate to communicate deficiencies. what should accountant do; withdraw from the engagement and provide not further services. Management unwillingness to revise the fs is not a reasonable basis for change in engagement. FYI entity should change the engagement and not auditor. this is based on justifiable reasons.

Answer 158

7642- What is not a required cash disclosure of completion; does not have to breakdown specific balance between Petty cash and ST Cash investments Require: policy in defining cash and cash equivalent Compensating balances Specific restrictions on cash including sinking fund requirements 6234-would an auditor accept a letter by client legal councel to determine loss contigency that did not give specific amounts. Yes. Remember management writes the letter to legal counsel due it needs to approve release of information. Auditor review the letter and mail it to legal. Then legal counsel responds to Auditor. 4932-what is least likely to be included in an examination report related to a financial projection: a statement " that had the accountants perform additional procedures, other matters might have come to their attention that have been report\> This is a statement in Agreed Upon Procedure. This an examination of projections Examination projections include:intended solely for the information of specified parties An opinion that projections is presented in conformity with AICPA guidelines An opinion that the underlying assumptions are suitably supported and provide a reasonable basis for management projections 8427- what statement are correct on how an auditor can obtain an understanding of thel ikely sources of potential misstatement in an integrated audit for nonissure -Integratvie = fs and icfr controls that management, Design, implemented and maintain to ID misstatement undertanding houw transactions are authorized, processed and recorded should be achieved. Walkthroughs are frequently the most effetive way or understanding sources of misstatemts Top-down approch= entity level = fs and ic What is not: Evaluation of entitys IT risk and controls should ber per utilziing an approach other than top-down' not true should utilze top down approach selecting controls to test both FS and IC. Top down; Entity level IC= control evironment, Management overide, company risk assessment of process, Central processing, monitoring ops, monitoring controls, period ending financial results, and Policies that address signiificant business controls and risk managent. Nothing outside of the entity. 1. FS Level 2. Accounts , transactions, and disclosure 3. Management Assertions; COVERU 6034-what assertion is a report of ic over complice: the auditor opinion is to express on compliance and not opinion of the operation effective on ic over compliance. so there will be a disclaimer on this 4628-what are some of the GAGAS prescribe addition standards compared to SAS Direct reporting of illegal acts and reporting on ic a written report on ic every fs audit and a specific reporting over ic over compliance but not on the operating effectiveness. This is disclaimed. 3800-what is an auditors responsibilty if a previous reported ic weakness is subsequently eliminated and management engages an independent auditor to attest to the improvment Attestment = examine ; like an audit = can express an opinion. auditor would express an opinion of the specific to examine,,ie., whether the weakness still has been eliminated. 4938- an accountant compile report o the unaudited fs should: Should disclaim an opinion that: the accountant does not express an opinion on the fs. Remember his is not expressing an disclaimed opinion which can not be done with compilation. 5726-an auditor is testing the reasonableness of dividen income from investmetnts. what is the most likely way he would compute to verify amount recieved. Electronically assessing the details of dividend records on the internet. most efficient. Would not confirm withe clients registr. would be time consuming

Answer 159

5745-An practiioner has been engagaed to perform AUP via SSAE to prospective FS. what condition must be met. The practioner and specified parties must agree upon the procedures and criteria to be performed by the pactioner. 6286-when is an accountant not required to comply with SSARS; under SSARS accountant are engaged to prepare, compile or review FS and not when reproducing clients prepared fs without modification when preparing je's 4955- when an auditor determines high level of control risk on revenue cycles. what will give him most likely the risk (RMM due to fraud or error) to the assessment; Control risk; ic RMM = due to fraud or error; sales manager does not enforce the clients policies regarding authorization and approval of sales transactions 6221-if a misstatment (due to fraud or error) was discovered by auditor were immaterial in the aggregage in prior yr. how such misstaterment be handle the current audit; Considered in the evaluation of audit finding in the current year. focus is to correct misstatement existing on bs. because it could material in the current year. no control testing need in the currrent year on prior immateriality

Answer 160

3144= Tracing bills of lading sales invoices provides evidence that: Bill of lading ( shipping documents) are tracing of evidence that shipments to customer were invoiced 6713-what procedure would provide the appropriate for the completeness assertion as it applies to inventory Performing cutoff procedures provides the assurance that goods ( shipped or recieveed) are appropriately incluuded or excluded from inventory = completeness = looking for unrecorded transactions. Tracing inventory back from tag listsing to physical is extistance. not necessary to use the key word "vouch back" just look to see if "back" is in the sentence. Exam Trick. read the sentence for clairity. 8941-what statement that is recieved from attorrny require further investigation; a statement such as "will be able to assert meritious defense to this action" souund vague not vauge ; the possible liab. in this proceeding is nominal in amount; 5329- tracing copies of sales invoices to shipping documents Sales billed to customer were shipped Tracing shipped document back to sale invoice = invoice was recorded 3922-what are the correct order steps in top down approach when using control test 1. evaluate risk at fs level 2 consider control at the entity level ( non external) 3. then focus on accounts, disclosures, and assertions for which there is a reasonable possibility of material misstatement due to fraud and errorr.

Answer 161

10292-what is the precedessor responsibility when his previosus audit with no changes is part of comparative fs with current statement Perform limited procedures; reading current fs get rep letter from sucessor and management current fs to prior fs 10235- can an auditor express an opinion on the fs taken as a whole or express an opinion on certain section of the fs or not express and opinion at all. Yes. he can express an opinion on the BS as long a he is he is not engenege to express opinion of fs as a whole and ther is adverse or disclaimer infor. this peicemeal. he can express disclaim opinion of is and sfc, but render unmod on b/s and he claim disclaim or adverse opinion of set of fs. The objective of the auditor is to preent missinterpretation of the degree of responsibility assumed by the auditor 9879- as the accesssable level f detection risk decrease this would change; AR= IR up \* CR up \* DR down\* Subtantial testing up Better evidence must be obtained to achieve a lower detection. If Dectect increase = then AR= IR down\* CR down \* DR up\* substantial test down. better evidence must be lower DR. Assess level of control risk via to high or to low is a evaluation of clients controls to determine RMM which is done before finding acceptable DR. 10280-what is tust about a/r confirmation: auditor would want to send confirmion base on single transactions than entire balances this way customer can evaluate the confirmation request better. Confirm is based on existence and rights but not valuation. Just be client owe balance does not mean they are going to pay it. 10241-if auditor is examining two set of FS one with a 5% grow based on historical data the other with a 10% base on new product. what is accountants report on examination 5% is are a financial forecast based on expected historical information and the 10% is a projection based on hypothetical release of a new project (restricted) both are appropriate for limit use and results my not be achieved statement. there is no possivie assurance 9890-what is the most likely ic procedure disigned to detect errors and irregularities concerning the custody of inventory. Comparing inventory records with physical inventory may detect discrepancies of custody of inventory. Doing a approval of je ( good for record keeping), segregation of general account to cost accountant ( good for record keeping), reconciliatio of WIP with job cost sheet (good for record keeping) 10234-what is the Single Audit Act dollar requirement: Federal Grants that expends more than $750K and not Recieved more than $750K ( what you spend) 10247-when client makes extensive use of IT, the auditor should consider the effects this may have on IC. what is the least likely affected. What it would not affect would be the audit objective with respect to evaluation iC. It would more likely affect audit eval of CRIME assess level of CR becaue evaluation clients RMM Which would affect audit procuedures. 9913-what type of evidence is most reliable in an audit and least reliable Evidence hiarchey: AIEOU Auditor Direct Personal Knowlede and Obseration External Evidence Internal Evidence Oral Evidence Other stuff to know Importance of effective controls; strong ic Documentary evidence Consistenc of evidence Info produce by client Most reliable: can not be manipulated Vendor invoice: external Cancel check: External Bank statement obtain from client; External Least reliable PO: internal can be manipulated 9930-what is trus about the requried procedure in a review of annual fs Review requirements: Mangament letter, Inquire and analytical procedures limited assurance Independents Obtain understanding of operation Not required Fraud assessment corraboration of managment's material est. is audit procedures communicating with predessor accountant understand understanding of ic ( in an interim fs review required via PCAOB) confirming ar 10266- an auditor is doing the current audit fs and becomes aware of evidence that would effect prior ye audti that he did. how should he handle Since the current audit is on the fs as a any infor must be true so the auditor must update the infor from previous audit. regardless of review about whether audit standard have been followed. 10249-during the audit planning what is required by auditor on Ic; Understanding MR of DIM and Documenting understanding of DIMs AUDITOR IS NOT REQUIRED TO EVALUATE THE OPERATING EFFECTIVENESS OF CONTROLS IN THE PLANNING PROCESS. 9938-accountant may report on AUP applied to specific elements, accounts, or items of fs provided that accountant is independent, should not provide and opinion, or any assurance (postive, negative or limited). the specified party or client is responsible for the procedures. 9920-what information should the independent auditor assess on the IA competency; Professional certs, educationanl level and professional exp., quality of auditor audit documentation, IA audit plan, audit procedures, IA function applies a systematic (IA policy manual) or discipline approach in quality contro. Assessing Objectivity: organizational status of the IA, policy prohibiting IA lacks independent 10318; what is true about a comfort letter. A review of interim fs is required before comfort letter is issued Comfort is for restriect use Sent to underwriter of specific requesting parties Provide negative assurance regarding unadited fs Rquesting party must provide the auditor with an attorneys letter or a representation letter. 9924-auditor is using varible sampling for inventory balance. in 2007 the audit sample size was 112 itmes in 2008 number of units, tolerable misstatement, and required confidence were the same as 2007, however the population variability increased due to introduction of new product line. for 2008 what is the reqired sample siz 2008 sample size would be larger than the population variability increaese which as a direct effect on sample size. 10303-what statement on an non issuer ic on the audit on ic is included'; A report of Ic = icfr which is not restricted. only if if was in audit of fs would it be restricted. A statement should be on; 1. inherent limitation on misstatement may occur and not be detected and 2. Projectiong of the evaluation of ic to future periods are subject to the risk that ith ic may become inadequate. 10302-what would least like cause auditor to reject a client Client unwilling to send out ar confirmation that may inconvienient cleints. Audit could do alternative procedures. Would influence ; not be able to supply financial information even if due to IT malfunction would influence. 9905 In planning the audit, auditor should considered materiality for fs as a whole in terms of; the smallest level of misstatement that could be considered material to any of the fs. Remember, materiality, the smallest hurts. 10258- a special report on fs prepared on cash basis (ocboa) should include A statement that the audit was conducted in accordance with GAAS. Special reports due require EOM paragraph but does not give a breif exapanation. it refers users to the Notes that discuss cash basis accounting

Aud notes study question Flashcards

(195 cards)