Deck 26 Flashcards Preview

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Flashcards in Deck 26 Deck (23):

In obtaining an understanding of the entity and its environment, including its internal control, an auditor is required to obtain knowledge about the:

Design of relevant internal controls pertaining to financial reporting in each of the five internal control components


When issuing letters for underwriters, commonly referred to as comfort letters, an accountant may provide negative assurance concerning:

The conformity of the entity's unaudited condensed interim financial information with GAAP.


Analytical procedures are most appropriate when testing which type of transaction?

Operating expense transactions


Management representations should be obtained about all of the following, except:

Management's consultation with other accountants


In evaluating the reasonableness of an accounting estimate, an auditor would be least likely to use which of the following approaches?

Review the minutes of board of directors and shareholder meetings


Explain the relationship between the PCAOB and the SEC

The PCAOB is subject oversight by the SEC, and only accounting firms registered with the PCAOB may prepare audit reports for the SEC issuers


Monthly bank statements should be received directly from the banks and reviewed by the:

Internal Auditor


It is not necessarily more efficient or cost-effective to focus on _______ controls rather than _____ controls

Automated, manual


Failure to make the minutes available is a scope limitation to preclude what kind of opinion?



Incorrect rejection and the likelihood of assessing control risk too high relate to the: (efficiency or effectiveness)

Efficiency of the audit


How should additions to land be verified?

Examining the related deed


How should additions to buildings and fixtures be verified?

Examining the related work orders and engineer reports


What procedure should be performed to assist in the evaluation of loss contingencies?

Obtain a letter of audit inquiry from the client's lawyer


The legal response to audit inquiries of external legal counsel should cover what period?

The period up to the audit report date (If the report date is on February 14, the response should made close to that day; usually the date before)


What matters are required to be communicated to those charge with governance?

Planned scope and timing of the audit; auditor's responsibility under GAAS; client's consultation with other accountants; uncorrected misstatements; adjustments discovered by the auditor and booked by the client


Matters that are not required to be commented to those charged with governance?

Troubles staffing the audit; auditor's judgment about the quality of the client's accounting personnel; use of a specialist


The audit report should include references to both:

PCAOB standards and GAAP (Do not have to reference GAAS)


Stratified mean per unit sampling is more efficient than unstratified MPU because:

It produces an estimate having a desired level of precision with a smaller sample size


In order for a practitioner to examine and report on management's assertion about the effectiveness of an entity's internal control, management must:

Present its written assertion about the effectiveness of control


Phases of a review of an audit client's financial statements

Understand, learn, inquiry, analytical procedures


GAGAS excludes this ethics principal:

Fraud detection


Indirect financial interest example

Investment held through a regulated mutual fund


Investment held in a blind trust

Example of a direct financial interest