Flashcards in Flashcards 6 Deck (21):
In reporting on compliance with laws and regulations during a financial statement audit in accordance with Government Auditing Standards, an auditor should include in the auditor's report:
material instances of fraud and noncompliance with laws and regulations that were discovered.
A registered public accounting firm must make representations to the audit committee:
at least annually and prior to accepting the initial engagement.
Public Company Accounting Oversight Board (PCAOB) Rule 3526 requires that registered public accounting firms make representations to the audit committee regarding independence both prior to accepting the initial engagement and annually thereafter.
When audited financial statements are presented in a client's document containing other information, the auditor should:
read the other information to determine that it is consistent with the audited financial statements.
The auditor is precluded from including which of the following statements in his or her communication of internal control related matters identified in an audit?
No significant deficiencies were identified during the audit.
While the auditor may communicate there were no material weaknesses identified during the audit, AU-C 265.16 precludes “a written communication stating that no significant deficiencies were identified during the audit.”
When is SSARS used vs SSAE?
SSARS - preparation, compilation, and review (of historical financial statements)
SSAE - All others (examination, agreed-upon, review of PRO FORMA FS, etc.)
The procedure of an accountant making inquiries concerning actions taken at the board of directors' meeting is:
The accountant is required to make inquiries concerning actions taken at the board of directors' meeting while performing a review of the financial statements of a nonissuer, but not when performing a compilation.
Before reissuing a compilation report on the financial statements of a nonissuer for the prior year, the predecessor accountant is required to:
compare the prior year's financial statements with those of the current year.
An auditor may report on condensed financial statements that are derived from a complete set of audited financial statements only if the auditor:
indicates whether the information is fairly stated in all material respects in relation to the complete financial statements.
In auditing the financial statements of Star Corp., Land, CPA, discovered information leading Land to believe that Star's prior year's financial statements, which were audited by Tell, require substantial revisions. Under these circumstances, Land should:
request Star to arrange a meeting among the three parties to resolve the matter.
After fieldwork audit procedures are completed, a partner of a CPA firm who has not been involved in the audit performs a second wrap-up review of the audit documentation. This second review usually focuses on:
The fair presentation of the financial statements in conformity with GAAP.
An auditor who uses the work of a specialist may refer to the specialist in the auditor's report if the:
Auditor modifies the report because of the difference between the client's and specialist's valuations of an asset.
Which of the following comparisons would an auditor most likely make in evaluating an entity's costs and expenses ?
The current year's payroll expense with the prior year's payroll expense.
The most likely analytical review procedure involving costs and expenses would be to compare the current year's payroll expense to prior year.
When an auditor becomes aware of a possible noncompliance with laws and regulations by a client, the auditor should obtain an understanding of the nature of the noncompliance to:
Evaluate the effects on the financial statements.
Which of the following controls is most likely to prevent the improper disposition of equipment?
A separation of duties between those authorized to dispose of equipment and those authorized to approve removal work orders.
An auditor most likely would extend substantive tests of payroll when:
Overpayments are discovered in performing tests of details
An auditor's purpose in reviewing the renewal of a note payable shortly after the balance sheet date most likely is to obtain evidence concerning management's assertions about:
Understandability and Classification
(Classification of note as current or non-current)
An auditor most likely would limit substantive audit tests of sales transactions when control risk is assessed as low for the occurrence assertion concerning sales transactions and the auditor has already gathered evidence supporting:
Cash receipts and account receivable.
Both of these provide evidence with respect to both the completeness and the occurrence of sales transactions
Government Auditing Standards published by the United States Government Accountability Office define standards associated with the following types of engagements:
A Type l report on internal controls for a service organization should include:
management's description of the service organization's system.
Which of the following best describes an auditor's responsibility with respect to communicating internal control deficiencies of issuers?
The auditor is required to communicate all deficiencies in internal control to management, and deficiencies that constitute a significant deficiency or a material weakness to management and the audit committee.