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Flashcards in Deck 21 Deck (21):

Two types of government audit

- Financial
- Performance


Objectives of performance audits

1. Effectiveness, economy, and efficiency
2. Internal control
3. compliance


Quality control in accordance with GAGAS

Establish and maintain a system of quality control that is designed to provide the audit organization with reasonable assurance that the organization and its personnel comply with professional standards and applicable legal and regulatory requirements


Single Audit Act

- Governed by provisions of federal regulations in 2 CFR 200
- Requires entities that expend total federal assistance qual to or in excess of $750,000 in a fiscal year to have an audit performed in accordance with the act
- Materiality should be considered separately in relation to each major program


Risk-based approach

Includes the consideration of:
Current and priory audit experience; oversight by federal agencies; inherent risk


Percentage of coverage for low-risk auditees

Must test 20 percent of the total federal awards expended


Percentage of coverage for other auditees

Must test 40 percent of the total federal awards expended


The lower the assessed level of control risk (that is, the greater the reliance placed on the control), the more assurance the auditor just gather that the _____ are operating effectively



Statements on Quality Control Standards

A system of quality control for a firm encompasses the firm's organizational structure and the policies and procedures established by the firm in order to provide reasonable assurance of conforming to professional standards


Six interrelated elements of quality control are: (HELPME)

1. Human resources
2. Engagement/client acceptance and continuance
3. Leadership responsibilities
4. Performance of the engagement
5. Monitoring
6. Ethical requirements


Contingent fee arrangements

Those in which the amount of the fee is dependent upon the results of the services performed


Determine materiality is a _____ decision that can not be made by management



Competence of the internal audit function

Refers to the attainment and maintenance of knowledge and skills of the function as a whole at the level required to enable assigned tasks to be performed diligently and with the appropriate level of quality


Referring to the work of a specialist is not necessary when giving what kind of opinion?

Unmodified opinion (May make reference in a departure from an unmodified opinion)


Sox 404

Each annual report of an issuer must include managements assessment of the effectiveness of internal control over financial reporting


Three reasons to disclose information to a third party without the clients permission

1. Subpoenaed by the court
2. Investigation by the state board of public accountancy
3. Requested by auditors attorney if they are being sued


Low risk of incorrect acceptance _______ the sample size

Increases the sample size


Perpetual inventory journal entries

Cash or AR
and COGS


Periodic inventory system

Sales are recorded after every sale is made, while inventory is adjusted at the end of the period through a periodic count


Do Type 1 subsequent events require disclosure or adjustment of the financial statements?

Adjustments of the financial statements


Do Type II subsequent events require disclosure or adjustment of the financial statements?