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AUD Flashcards > Documentation > Flashcards

Documentation Flashcards

1
Q

When a CPA performs nonattest services for an attest client, what must the auditor establish in writing? (3 items)

A

1) the objectives of the engagement
2) the services to be performed
3) the client’s acceptance of its responsibilities

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2
Q

The overall objective of audit documentation is to provide

A

1) A sufficient and appropriate record of the basis for the auditors report
2) evidence that the audit was planned and performed in accordance with GAAS and applicable legal and regulatory requirements

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3
Q

Audit documentation should be prepared so as to…

A

Enable an experienced auditor, with no previous connection to the audit, to understand procedures performed, audit evidence obtained, and conclusions reached

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4
Q

T/F

audit documentation should include a written audit program (or set of audit programs) for every audit

A

TRUE

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5
Q

If information is added to the working papers after the issue report, documentation should include…

A

1) when and by whom changes were made and reviewed
2) specific reasons for changes
3) The effect, if any, of the changes on the auditors conclusion

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6
Q

Documentation completion period is how many days after the report release date? What can be done during this time?

A

60 days

Changes resulting from the process of assembling and completing the audit file may be made. These changes do not need to be documented. Examples include routine file-assembling procedures, deleting discarded documentation, sorting, and signing off file completion checklists. However, the auditor may not add new information to the working papers without documenting it.

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7
Q

T/F

After the documentation completion date the auditor may not add any new information, but can delete or discard documentation

A

FALSE

additions can still be added, but must be documented. No deletions or discarding can occur after the completion date (60 days after filing)

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8
Q

What is the retention period for how long audit documentation should be kept

A

AUC - 5 years
PCAOB - 7 years
Longer if other legal and regulatory requirements exist

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9
Q

T/F

audit documentation is the property of the client and is public information once financial statements have been published.

A

FALSE

it is the property of the auditor. It is confidential.

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10
Q

Client Representation letters should be addressed to who?

A

The auditor

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11
Q

Client Representation letters should be dated when?

A

No earlier than the date of the auditors report

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12
Q

Client Representation letters should be signed by who?

A

CEO

CFO

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13
Q

T/F

client representation letters can be a substitute for the application of minor auditing procedures

A

FALSE

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14
Q

T/F

Client Representation letters should be obtained for all periods being reported on (PY and CY), even if management was not present during all of those periods

A

TRUE

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15
Q

T/F

Management’s refusal to furnish written representations always causes a disclaimer

A

FALSE

It precludes (prevents) an unqualified opinion and therefore ordinarily results in a disclaimer HOWEVER sometimes a qualified opinion can be appropriate

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16
Q

List the four special purpose frameworks that can cause the audit report to be documented differently

A

Cash Basis
Tax Basis
Contractual Basis
Regulatory Basis

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17
Q

All four special purpose frameworks call for a single opinion on the special purpose framework, except for which basis?

A

The Regulatory Basis has the option of providing a Dual Opinion on the special purpose framework and on GAAP. This is only an option, not required

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18
Q

Which special purpose frameworks require a description of the purpose for which the special purpose financial statements are prepared?

A

Contractual Basis & Regulatory Basis

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19
Q

Which special purpose frameworks do not require a description of the purpose for which the special purpose financial statements are prepared?

A

Cash Basis & Tax Basis

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20
Q

Do all of the special purpose frameworks require an emphasis-of-matter paragraph alerting readers “Re: Special Purpose Framework” ?

A

Yes, UNLESS it is the Dual Opinion Regulatory Basis. When providing a Dual Opinion that includes coverage over both the special purpose framework AND over GAAP, emphasis-of-matter paragraph is not required

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21
Q

Do all of the special purpose frameworks require an Other-Matter paragraph alerting restricted use?

A

No.

The Cash Basis and Tax Basis do not require this restriction paragraph. Additionally, if the Regulatory Basis is a Dual-Opinion, this restriction paragraph is not required.

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22
Q

What additional requirements are necessary under a Contractual Basis Special Purpose Framework Opinion?

A

The auditors must obtain an understanding of significant management interpretations of the contract

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23
Q

The words “Unmodified/Modified” are from… (AICPA or PCAOB?)

A

AICPA

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24
Q

The words “Unqualified/Qualified” are from… (AICPA or PCAOB?)

A

PCAOB

25
Q

The phrase “Emphasis of Matter” is from… (AICPA or PCAOB?)

A

AICPA

26
Q

The phrase “Explanatory Paragraph” is from… (AICPA or PCAOB?)

A

PCAOB

27
Q

The PCAOB “Explanatory Paragraph” term covers what three AICPA terms?

A

Basis for Opinion Paragraph
Emphasis of Matter Paragraph
Other Matter Paragraph

28
Q

What buzzwords are used in a Modified/Qualified Opinion?

A

“Except for”
“Effects of Matter Described”
“Possible Effects”

29
Q

What buzzwords are used in an Adverse Opinion?

A

“Do not present fairly”

30
Q

What buzzwords are used in a Disclaimer?

A

“Do not express opinion”

31
Q

What’s a buzzword phrase for negative assurance?

A

“Nothing came to our attention”

32
Q

What are buzzwords for Compilation Reports?

A

“Have not Audited or Reviewed”

“Do not express an opinion or any assurance”

33
Q

T/F

Since a compilation does not express any assurance or opinion, if there are departures from GAAP the auditor is not obligated to do anything about it

A

FALSE

A departure from GAAP still requires discussion in a separate paragraph in the compilation report

34
Q

T/F

Since a compilation does not express any assurance or opinion, if there are inconsistent applications of GAAP (but proper disclosures are present) the auditor is not obligated to do anything about it

A

TRUE

The compilation report does not need to be altered to discuss inconsistent applications of GAAP as long as everything is properly disclosed

35
Q

T/F

Since a compilation does not express any assurance or opinion, if there is substantial doubt about the ability of the client to remain a going concern the auditor is not obligated to do anything about it

A

FALSE

If the substantial doubt is not properly disclosed then it will be necessary to modify the compilation report.

36
Q

What are buzzwords for a Review Report?

A 
"Reviewed"
"Less in scope than an audit" 
"Do not express an opinion"
"Not aware of any material modifications"
"Limited/Negative Assurance"
37
Q

What additional paragraph is present in a Review report that is not present in a Compilation Report?

A

The paragraph discussing limited/negative assurance

38
Q

What additional paragraph is present in a Review report that is not present in a Compilation Report?

A

The paragraph discussing limited/negative assurance

39
Q

When an auditor reissues the auditor’s report on previous financial statements at a continuing client’s request and those financial statements are not restated and the auditor does not revise the wording on the report, how should the report be dated?

A

Using the original report date on the reissued report.

If nothing in the report has changed, and no additional testing has been done, to change the original date would be misleading.

40
Q

T/F

The phrase “When read in conjunction with Note X” is used in the opinion paragraph when an auditor expresses a qualified opinion

A

FALSE

Professional standards state that an audit report should not use this phrase in the opinion paragraph of a qualified opinion report

41
Q

T/F

The phrase “With the Foregoing Explanation” is used in the opinion paragraph when an auditor expresses a qualified opinion

A

FALSE

Professional standards state that an audit report should not use this phrase in the opinion paragraph of a qualified opinion report

42
Q

T/F

The representation “Examination of Evidence on a Test Basis” is made implicitly when issuing the standard public company auditor’s report on comparative financial statements

A

FALSE

This representation is made explicitly

43
Q

T/F

The representation “Consistent Application of Accounting Principles” is made implicitly when issuing the standard public company auditor’s report on comparative financial statements

A

TRUE

44
Q

When an auditor has extreme doubt about the integrity of management and the representations obtained from them that will relate to the fairness of the FSs and the completeness of the transactions, they should do what?

A

Either withdraw from the engagement or write a Disclaimer

45
Q

What is the appropriate date for an audit report when a subsequent event requiring adjustments of financial statements, without disclosure of the event, comes to the auditor’s attention?

A

The date sufficient appropriate audit evidence has been collected

46
Q

When an audit report has been dual dated for a subsequent event, what is the auditor’s responsibility?

A

When dual dating is used, the auditor responsibility for events subsequent to the completion of fieldwork is limited to the specific event referred to in the notes to the financial statements

47
Q

What are the four requirements to be included in an audit report on comparative FSs when a predecessor auditor’s report is not being reissued

A

1) That the FS of the PY were audited by another auditor (do not mention name)
2) The date of the predecessor’s report
3) The type of report issued by the predecessor
4) If the report was other than a standard report, the substantive reasons for it

48
Q

T/F

The following statement may appear in an auditor’s engagement letter:

“Fees for our services are based on our regular per diem rates, plus travel and other out-of-pocket expenses

A

TRUE

49
Q

T/F

The following statement may appear in an auditor’s engagement letter:

“During the course of our audit we may observe opportunities for economy in, or improved controls over, your operations”

A

TRUE

50
Q

T/F

The following statement may appear in an auditor’s engagement letter:

“Our engagement is subject to the risk that material misstatements or fraud, if they exist, will not be detected”

A

TRUE

51
Q

T/F

The following statement may appear in an auditor’s engagement letter:

“After performing our preliminary analytical procedures we will discuss with you the other procedures we consider necessary to complete the engagement”

A

FALSE

52
Q

What matter will the auditor most likely include in a management representation letter?

A) Communications with the audit committee concerning weaknesses in internal control
B) The completeness and availability of minutes of stockholders’ and directors’ meetings
C) Plans to acquire or merge with other entities in the subsequent year
D) Management’s acknowledgment of its responsibility for the detection of employee fraud

A

B

53
Q

Which statement is ordinarily included among the written client representations obtained by the auditor?

A) Compensating balances and other arrangements involving restrictions on cash balances have been disclosed
B) Management acknowledges responsibility for illegal actions committed by employees
C) Sufficient audit evidence has been made available to permit the issuance of an unqualified opinion
D) Management acknowledges that there are no material weaknesses in internal control

A

A

54
Q

T/F

In using a specialist’s work, the auditor should document that the specialist assumes no responsibility to update the specialist’s report for future events or circumstances

A

FALSE

55
Q

T/F

In using a specialist’s work, the auditor should document that the specialist understands the auditor’s corroborative use of the specialist’s findings

A

TRUE

56
Q

The following sentence is most likely from what source:

“If a difference of opinion on a practice problem existed between engagement personnel and a specialist or other consultant, was the difference resolved in accordance with firm policy and appropriately documented?”

A

A Partner’s Engagement Review Program

57
Q

SSARS requires retention of documentation for how long?

A

The firm should establish policies and procedures for the retention of the records for a sufficient period.

The Statements of Standards for Accounting and Review Services (SSARS) do not specifically give a time period for retention of records. Therefore, the firm must establish policies and procedures to retain the engagement records for a period sufficient to meet the needs of the firm, standards, and regulations.

58
Q

An accountant is asked to issue a review report on the balance sheet, but not on other related statements. The scope of the inquiry and analytical procedures has not been restricted, but the client failed to provide a representation letter. What should the accountant issue under these circumstances?

A

A management representation letter is required for the issuance of a review report. Without this letter from management, the scope of the review is restricted, and the review cannot be completed. In this circumstance, the accountant would be precluded from issuing a review report on the financial statements and would ordinarily be precluded from issuing a compilation report on the financial statements.

AUD Flashcards (16 decks)

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