Audit A6

Question 1

what to do on a subsequent event when cpa partner found n error in the REVIEW of the f/s after the report but before release date.

Answer 1

discuss with managment = yes notify user of f/s= no; if not releases dual date report after error fixed = yes. fixed and date with correction date

Question 2

what happen if error found that material effect in a review of the f/s after the report and release date

Answer 2

1. cpa partner advises client to immediately revised f/s and disclose to those who are relying on the report.
2. discuss with management and determine f/s needs revision.
3. management let partner know they will make revision
4. accountant perform additional review procedures
5. cpa partner dates and sign correct date. dual date

Question 3

what are the list of services for SSARS= statement on standards for accounting and review services (SSARS)

Answer 3

SSARS

listed of services are unaudited.

1. Preparation= no assurance no. attest services. accountant does not have to be independent. i.e. a bookkeppinng services that preopares f/s with quickbooks
2. Compilatons; no assurance could be independent. if not independent must discolse in paragraph with financial information.
3. Review = independent is required; doing things such as inquiry and analytical procedures. ratio analysis.

Give limited assurance on financial information. sometime there are thing accountant may not be aware of in the f/s.

If doing more than one SSARS services, than report highest level to llowest level

SSARS are not applicable to reivews of interim f/s on non issures or private co. whose annual f/s are audited. these are done through SAS

or PCAOB for issuer or public co.

Question 4

mcq a6-m1; under SSARS are reproducing clients f/s and preparing je completed

Answer 4

no. SSARS = prepare , compile and review f/s

Question 5

are personal financial plans that requrire f/s required to follow SSARS

Answer 5

no required and are excluded from SSARS along with

f/s used for

soley for submission to taxing authorities but the the preparation of f/s can be prepared alongside of the tax returrn ( this is SSARS)

in conjunction with litigation services that involve pending or potential legal or regulatory procedings

in conjunction with business valuations

Question 6

can compiling an individual personal financial statements to be used to obtain a mortgage is under the SSARS

Answer 6

yes. you can COMPILE f/s to obtain a mortgage

Question 7

what agency is the authoritative for SSARS

Answer 7

Accounting and Review Services Committee

Question 8

if an accountant that preparing, reviewing, or compiling f/s for non issurer can he depart from SSARS

Answer 8

yes but must give reason for departure

Question 9

under f/s of SSRS, each page of the f/s should state “no assurance is provided’ . if he is unable, he can do one or the other of the following

Answer 9

issue disclaimer that clears the no assurance of f/s

or

Perform a compilation

Question 10

what curcumstances would generally require an accountant to decline to perform a prep f/s

Answer 10

an accountant is not able to come to an understanding with management for services performed with developing the engagement letter.

Question 11

when preparing a nonissuer f/s an accountant is least likely to

Answer 11

perform control testing around this is not required per SSARS/

accountant can only do thing via engagement letter for f/s which include; using records, documents, explanation from managment, and other information requested. from management.

Question 12

in a preparation of f/s an accountant can omit information as long as it is not

Answer 12

misleading to the user

Question 13

A6-M2 excerise sim: preparing a b/s for f/s

Answer 13

Assets

Accrued interest a/r would be placed into Other a/r

Inventory also includes: Raw materials and Wip

Construction is progress is a PPE

Make sure to do your math correct

Prepaid ; can have in is deposits and prepd taxes

Liab: if not requested even though or exhibits liab are (444) negative

Show on report as 444 positive

Add all a/p item with the exception of a/p current adjustment

Accrued exp and accrued payables = enter in all acrrued and non ap including 10 ap adjustment

Where does deferred tax asset go. 250 even though it is with assets, it is a liab netted to DTL 750 when DTL is higher.

dtl 750 - dta 250 = 500 dtl.

Net asset : remember if div paid less from RE.

Question 14

a6 m3 - what are some of the required and not required things an auditor used in compilation

Answer 14

Required; enagement letter,

effects of going concern on f/s

accountant has the necessary understanding and knowledge of clients business industry and accounting principles,

communicate with upper management on false, fraud and missleading f/s.

read f/s and made sure selected framework is acceptable by management

Not required

analytical procedure or review of f/s

Audit procedures

Question 15

a6-m3 mcqs: if statement compiled for previous year omitted substantial disclosure required by GAAP and the current year does not can used compare years

Answer 15

No. due to they are not comparable.

Question 16

what is implied in compile f/s although not specifically stated

Answer 16

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

Explicit state:

accountant has not audited or reviewd the f/s

compilation is limited to presenting information that is representation of management

Question 17

when a accountant is not independent what should the compilation report state

Answer 17

compilation report should state that the accountant lacks independents

Question 18

an accountant agrees to the client request to change an change the engagement from a reivew to a compilation f/s . compilation report should include

Answer 18

If it is justified, no reference to the original engagement report.

Question 19

under a compilation report, is an accountant required to perform procedures designed to detect fraud or noncompiance with laws and regs.

Answer 19

No accountant is not.

nor does he have to inform mangement of inconsequential in all matters of fraud.. but can repor fraud if it comes to accountant attention.

Question 20

under SSARS, what circumstances would generally require an accountant to decline to perform compilation of f/s

Answer 20

accountant was unable to come to an understanding with representatives of the organization for services to be performed.

Question 21

what is an implicit statement does an accountant make when issuing standard report for compilations of a nonissure f/s.

Answer 21

implicit statements is the accountant is independent with respect to the entity. if not need to report.

Question 22

Compiled f/s should be accompanied by a report stating that

Answer 22

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

Question 23

what are explicit statment in the compilation f/s

Answer 23

Explicit;

the f/s have not been audited

the accountant does no express an opinion

Question 24

Does SSARS require that compilation reports be printed on accountants letter and manually signed by account

Answer 24

No. although signature is required but does not have to be manual.

Question 25

Under SSARS, if an accountant to decies to perform some analytical procedures. how would it related to compilation engagement

Answer 25

issued the report even though review procedures were performed on the engagement.

Question 26

the standard compilation report on f/s for a non issuer that omit substantially all disclosure should includw

Answer 26

a paragraph disclosing such omission include a diclaimer of opinion state that if the omitted disclosure were included, they might influence the useers conclusions.

Question 27

an accountant compilation report on the unaudited f/s for a nonissure should include

Answer 27

a disclaimer on opinion of the f/s . the report should not express an opinion on the f/s.

Question 28

what is the appropriate title for a report on a nonissuer f/s.

Answer 28

the report should include the word independent in the title and the compilation report does not contain a title.

Question 29

Can an compilation report be relied on to disclose errors,fraud or illegal ats

Answer 29

compilation report is not an assurance on the reliance to detect fraud, errors or illegal. also not there to provide accuracy or completion and no procedures or review done.

Question 30

a6-m5 mcqs:: an account compiled f/s in year 4 and reviewed in year 3 and clients wants comparitive f/s in yr4. what is accountants obtions

Answer 30

3 options; 1. issue compilation report with an extra paragraph describing the responsibility assumed for the for the prior pd and no review was done after year 3. 2. issure to separate reports for yr 4 and yr 3. 3. issue a combine report, including both full reports and a statement that no reivew procedures were performed after the date of the review report.

Question 31

an accountant has been engaged to review f/s that contains several departurs from GAAP. If f/s are NOT revised and modification of the standard review report is NOT ADEQUATE accountant should

Answer 31

if report contains several departures form GAAP and not adequete and not revised, the auditor should withdraw and provide no additional services. would not issue a special report after determining GAAP departure

Question 32

Before resissuing a compilation f/s for prior year, a predessor accountant should

Answer 32

1. get a letter from sucessor of engagement with former client. 2. compare the prior f/s to the current year f/s.

Question 33

when unaudited f/s are presented in comparative form with audited f/s and filed with the SEC the statment should be

Answer 33

1. marked as unaudited and no marking on withheld until audit or refererrd to in the audit report.

Question 34

if accountant engaged to review client f/s that are OBOA. what actions does accountant under SSARS

Answer 34

he would modify his report to reflect the fact the the f/s were present on OBOA. Does not have to justify OBOA in report.

Question 36

A6- m5; tools for anlytical procedures

Answer 36

ratios days in a/r= ending a/r/sale (net)/365 days in inventory= ending inventory/Cogs/365 days of a/p outstanding = ending a/p/cogs/365 Cash conversion cycle= days in a/r+days in inventory-days of payable outstanding profit margin= ni/sales (net) Return on asset= ni/avg. total assets return on sales = income befor interest income, interest exp and taxes/sales (net) return on equity= ni/avg total equity gross profit margin = sales (net) - Cogs/sales (net) operating cashs flow ratio= cash flows from ops/ending current liab. beps = income avail to c/s/weighted avg c/s outstanding pe ratio= price per share/basic earnings per share dividend payout = cash dividends/ni debt to equity = total liab/total equity. lower this ratio the better. protection against solvency total debt ratio = total liab/total assets. % of company assets financed by debt. equity multiplier= total assets/total equity times interest earned = income before interest exp and taxes /interest exp . higher the ratio says greater portion of assets financed by debt rather than equity

Question 37

A6-m4 MCqs: are the analytic procedures used for b/s

Answer 37

B/s = ratio analysis I/s= Trend analysis

Question 38

when performing a review of f/s via SSARS accountant would

Answer 38

Inquire via ask about action taken by BOD not review; Obtain understanting on i/c Restrict the use of accountants report (not normally restricted) confirm a sample (audit)

Question 39

what type of inquiry or analytical procedure is performed by an accountant

Answer 39

Inquiry concerning entitys procedures for recording and summarizing transactions. would not test management assertion would not inquire to attorney about contingency liab. would not test records

Question 40

what would be used in a review engagment

Answer 40

Comparing of current year to prior year balance would not do audit procedures Examine confirm Recalculate :

Question 41

the standard report after reviewing f/s should state

Answer 41

....is not aware of any material modification that should be made to the f/s would not ; believe that there is a difference between projected and actual results. this would be in SSAE Asses the accounting principles used and significant est. made by management ; this is in an issuer report.

Question 42

what is part on inquiry and analytical procedures and what in not part

Answer 42

what is Comparing f/s to budget and forecast inquire of managment about action taken by the bod study the relationship of f/s elements to conform to predictable patterns.what is not: observing the safegaurd of assets; i/c and audit

Question 43

what would preclude an accountant from issuing a report

Answer 43

not being independent i.e. you are the son of the owner of the co. that you are reviewing

Question 44

what isi true about a management rep letter

Answer 44

is must written with respect to **current managemen**t all periods being reported on.

Question 45

what report should accompany the review report

Answer 45

a report stating that a review is substantially less in scope than an audit. F/s report states; accoutant is not aware of any material modification that need to be made to the accompany f/s

Question 46

what should be included on each sheet of the review report

Answer 46

See Independent accountants review report.

Question 47

what procedure is likely to be performed in a review that in a compilation

Answer 47

obtain rep letter ceo = both but assiting entity with adjusting accounting records = compilatio and not review so if i see question like this chose CEO letter.

Question 48

before performing a review an accountant should

Answer 48

obtain sufficient know of accounting principle and practice of industry which enity operates. after stuff complete inquiries and analytical procedures.

Question 49

after reviewing f/s accountant should state in the report that

Answer 49

that ,, a reveiw includes primarily applying analytical procedures to management's financial data and making inquires to management's financial data and managment.

Question 50

what should and should not or **exception** an accountant perform under a review

Answer 50

should comparing current to previou or budget obtain rep letter make inquiries of payroll account regardign the completeness of account balances. should not test the process

Question 51

a6; m6: an accountant is perfoming a review under auditing standards for interim f/s. part of the plannning, reading audit documentation fromt prior year's annual audit. what is the least likely to affect his review.

Answer 51

any scope limitation relates to problems in performining the audit. which this is a review. If the scope limitation was overcomed, it would have little effect on performing the reveiw of interim f/s. would effected = corrected; could be an on going problem or noncorrected misstatements; because one period could impct another year. significant weakness in i/c; helps accountant id types of material misstatements id risk due to fraud; helps id RMM in interim f/s

Question 52

when an annual f/s of **public co.** had been audited and interim f/s have been reviewed. what standards would apply

Answer 52

PCAOB only

Question 54

what is not a required procedure in an engagement to review the interim f/s of a public held co.

Answer 54

does not have to corroborate evidence in entitys ability as a going concern. is in engagement; analytical procedures and inquiry such as; comparing dissaggregated rev data to current interim f/s obtaining evidence that interim f/s reconcile to accounting records inquire of managment ( insided and not out side inquiry)

Question 55

what is **not a** **difference** between a review of a public entities interim f/s and a review of the unaudited f/s of a nonissurer

Answer 55

not a difference; neither inquire to clients attorney on litigation, claims and assessement what is a difference public ; pcaob on interim f/s because these are submitted to SEC private ;ssars public; requires communication with predecessor auditors and private does not on unaudited f/s public requires a evaluation of i/c while private does not on unaudired f/s.

Question 56

what is not true about an auditors report on a reivew of an interim f/s of public co.

Answer 56

under pcaob, the review of interim f/s does not provide and opinion of f/s or opinion on in accordance to GAAP. what is true audit provide positive assurance in an audit report. where as in an interim review, negative assurance both use ; analytical procedures and inquiries Basis of standard are used in pcaob review of interim, but are not mentions like in SSARS reivew of unaudited f/s

Question 57

when planning a review of client interim f/s what procedure should be perform by accountant to gain knowledge of entities business and i/c.

Answer 57

considered the results of audited procedures that have been previously performed and how they tie to current years f/s remember doing analytical procedures happenn after the audit selecting of sampling of transaction would not be performed since this not an audit used in an audit procedure.

Question 58

What information would not be included in a representation letter for review of interim f/s

Answer 58

not in an representation letter; the stating of performing analytical procedures and inquiry. this in an engagement letter. rep letter mentions; from management; from the best our knowledge, no events have occurred subsequent to b/s and through date of the letter from management ; we aknowledge our responsibility for the design and implementation of program and controls to prevent and detect fraud. management ; we have made available to you all financial records and related documents

Question 60

what is correct concerning an engagement to compile and an engagement to review non issuer under ssars

Answer 60

no assuranace; yes for compile need no assurance; no for review need limited assurance. written management rep letter; no for compile, yes for review **need not obtain an understanding of ic ; no for compile and no for reivew is not required for both** accountant's independence; no for compile **(but must discosed if not independent for compile)** and yes for reivew

Question 61

if an accountant is conducting a review of public co. interim f/s and becomes aware of siginificant changes in control activities the auditior should

Answer 61

make additional inquires to mangement and perform analytical procedures with more (and not less) precise expectation.

Question 62

a6- m7 mcqs; when issuing letters for underwriter commonly know as comfort letters. an accountant may provid negative assurance concerning

Answer 62

negative assurance on the concerning the entitys unaudited condensed interim f/s with GAAP he would issue positive assurance on compliance with audited f/s and schedules included in the registration statement with the requirements of the SEC act of 1933. no mention of i/c in comfort letter no compilation of financial forecast.

Question 63

what matters is typically covered in the comfort letter

Answer 63

An opinion on whether the audited f/s comply in form wiath accounting requirements of the SEC. this is a positive assurance express on an opinion on audited fs and schedule requirement based on SEC 1933 act to be submitted to SEC

Question 64

a6 m8 mcqs: what would be acceptable for cpa firm under aicpa code of ethics.

Answer 64

cpa partnership using the same name of partnership when past partner leaves of dies. if partner turns to sole propietor up to 2 year before mandatory turn to sole proprietor

Question 65

what is and is not correct of cpa disclosing name of cilent without permission

Answer 65

under Confidential Client information rule, may disclose name unless client having financial difficulty or name result in cofidential information being released such as bankruptcy.

Question 67

according to eithical standards, what justify a departure from gaap

Answer 67

under the accounting principle rules of the code of professional conduct of the aicpa, f/s of data departure from gaap is justified when can demonstrate the due to unusual circumstances, such a legislation or evolution of new form of business transactio can lead to justified departure from gaap.

Question 68

under the ethical standards of profession, what business relation would not generally impaire the auditor's independents

Answer 68

auditor was advisor to clients bod.

Question 69

what action would violate the professional ethical standards

Answer 69

failure ot return clients records after client has demanded theire return. compiling f/s of client that employs cpa;s spouse as a bookkeeper woud not due to compiling does not need independents

Question 70

under ethical standards of profession, what situation involving nondependent or independent member of auditor family is most impaired

Answer 70

spouse employment with a client. spouse is considered a member.

Question 71

according to standards of the profession, which of the following activities may be required in exercising due care

Answer 71

consulting with experts or referral when a professional engagement exceeds the cpa personal competence. no requirement for obtaining specialty accreditation.

Question 73

to exercise due care an auditor wants to

Answer 73

auditor has responsibilties so he must critically judge those assisting with the audit by supervising work. does not need to examine all evidence just sufficient evidence that support audit. having experience and education would be training and proficiency

Question 74

what best describe contigent fees arrangement for an independent auditor

Answer 74

contignent fees would impair the independence. auditor want to make sure not outstanding balances with clients.

Question 76

under code of professional conduct, independent rules, what would not be consider a lack of independent

Answer 76

brother in-law is controller of client would not be impaired or lack independency. not an immediate family member

Question 77

under the aicpa code of professional conduct what activity results in act of discreditable to the profession

Answer 77

cpa solicits uniform cpa questions without written auithorization from aicpa using misleading information is a fail of integrity and objectivity rule neglence is a compliance rule.

Question 78

if a cpa had a personal $100k loan with a bank that he did compilation in he paid off the loan in year 1, the bank ask him to do audit. what cpa to do

Answer 78

he can do audit wit out impair because during the compile in year 1 he was not required ot be independent an not because loan was secured.

Question 81

under aicpa professional conduct, if a covered member is considering employment with client what should firm do

Answer 81

notify an appropriate person in the accounting firm when it is an attestation or audit cilent

Question 82

when would an ethical professional violation occured

Answer 82

issued a unqualifeid opinion on year 2 f/s when year fees have not been paid. auditor must not be impaired

Question 83

the concept of materiality would be least important to an auditor when considering

Answer 83

effects of a direct financial interest in teh client on the cpa's independent if it is immaterial compared to the decision to use positive of negative confirmation on a/r discovering of weakness in a client i/c adequecy of disclosure of a client illeagal acts

Question 84

an independent auditor must have

Answer 84

a technical training that is adequate to meet the requirements of a professonal auditor. per the general standards rules of the aicpa code of conduct.

Question 85

which of the following is true about the aicpa code of professional conductq

Answer 85

rules are for **any services** that a member of the aicpa perform including compilation and reivew.

Question 86

A6-M9 MCQ ; how many cpas should be on the board of the pcaob

Answer 86

two cpa and thre non cpas

Question 87

what are the attributes of a financial expert on an issurer audit committe

Answer 87

understanding of GAAP abiliity to access the applications of accounting principles in connection with est., accruals, and reserves financial expert through education, past experiance as a public accountant or past experience as a princial financial officer, controller, or princial accounting officer understanding of i/c related to financial reporting does not need to have had audit experience. or served on other audit committees or disclosure committee bod

Question 88

what is correct and incorrect on lead and other partner rotation for SEC rules

Answer 88

lead partner is 5 year rotation other partners is two year rotation not correct ; all partners 5 years non issurer are exempt

Question 89

can auditor on an issuer provices tax planning services

Answer 89

yes on tax planning no on; tax services to corp officer and immediate family tax services related to confidential tax transactions

Question 90

Section 404 of sox act 202 requires each annaul report to include

Answer 90

managements assessment of the effectiveness of i/c over finanical reporting

Question 91

how would a cfo that provide information to auditors with errors would be considered a violation of rules of so 202 improper influence of the conduct of the audit

Answer 91

if the officer of cfo intential put error information to fraudulently and misslead financials.

Question 92

what type of non audit services could impair auditor

Answer 92

performing services to design financiall systems and implemenation.

Question 94

who can audior provided tax services and who can he not

Answer 94

can chair of bod chair of audit committee can not officer of co.

Question 96

who can be hired that was on the audit engagement an now seeking employment on the client accounting team **within 1 yr**

Answer 96

staff accountant other officer, ceo cfo controll can not be hired within the one year. after one year.

Question 97

a6 m10 mcqs; what are the audit with independents of mind and apperance have

Answer 97

1. services the public interest; the collective well being of the community of people and entities served by the auditor 2. objectivity; maintaining an attitude of impartiality, having intellectual honest and being free of conflicts on interest. and ethics 3. integrity ; conducts work in a fact based, nonpartisan, and non ideological wiht regard to the audit 4. professional behavior; auditors honest effort in the performance of professional services in accordance with the relevant technical and professional standards

Question 98

if an auditor notice that the acturial did not give valuation of funds unpaid laib. the report is separarte non audit engagement. the unpaid claims was material this represents a

Answer 98

Self review threat. the non audit did not evaluate a part that was need in the audit A familarity theat would be management had a long relationship the auditor and auditor would take a non objection opinion Self interest threat; that a financial or other interest would sway auditor judgment. for example he had significant interest in retirement fund.

Question 99

what would be considered a safegard threat

Answer 99

safegaurd threats are designed to eliminate or reduce to an acceptable level threats to indepent if audit where making management decision=, this would be a managmeent participation threat or safegaurd threat. self interest threats might be mitigated by removing an auditor from an audit that he has financial intest. self reivew threat can be removed by having another firm to perform or reperform part of the audiot undue influence threat can be reduce by having a professional staff memeber who was not a memeber of the audit team reivew the work.

Question 100

mcq a6 m1-m10 mcqs; what constitutes a management function under GAGAS and result in the impairment of CPAs independents

Answer 100

developing program policies. An accountant could recommend i/c porcedures but can not give final determination.

Question 101

does an accoutant express an opinion on a review of interim f/s and what objective should his basis

Answer 101

does not express opinion but he does state limited assurance provided to f/s and objective is to provide basis for reporting whether material modifications should be made to conform with GAAP

Question 102

when a cpa is reporting on COMPARATIVE FS for non issuers. the cpa audited f/s in previous year and did a review in current year. CPA has added a separate paragraph for the review report to describe the responsibility in prior ye audit f/s should include

Answer 102

the type of opinion expressed previously when audited previously also should include the date of the previous repott opinion expressed and if other than unmodified, the reason for the modification and that no audit procedures have been performed since previous audit report date.