Memorization Deck Flashcards
(103 cards)
1
Q
What is the independence requirement for SSAE services?
A
Independence is required
2
Q
What type of assurance does an examination give?
A
Reasonable assurance
3
Q
What type of assurance do agreed upon procedures provide?
A
No assurance
4
Q
What are main procedure in the review service type?
A
Inquiries of internal personnel and analytical procedures
5
Q
What are the main services under SSARS?
A
Preparation
Compilation
Review
6
Q
Assurance type for preparation and compilation?
A
No assurance
7
Q
Independence requirement for preparation and compilation?
A
No independence requirement
8
Q
Which type of SSARS service type is restricted use?
A
financial projection
9
Q
What is the special thing in regards to independence for compilation engagements?
A
If there is no independence is needs to be disclosed
10
Q
What is the done in the form conclusions part of the audit process?
A
Subsequent events
Management representations
Evaluate audit results
Quality control - engagement
11
Q
“Who is responsible for ensuring that financial statements are accurate and comply with
accounting standards?”
A
audit committee
12
Q
What is the audit committee responsible for (3 things)?
A
Selecting and appointing the independent auditor
Resolving disagreements between the auditor and management
Reviewing the scope of the audit
13
Q
Who selects and appoints the independent external auditor?
A
The audit committee within the client’s board of directors
14
Q
The following are acceptable reasons for the change in scope of an engagement or engagement type:
A
The client was originally requesting the engagement for a bank loan and now the bank changed the level of assurance needed from positive to negative assurance.
15
Q
The following are unacceptable reasons for the change in scope of an engagement or engagement type:
A
Audit procedures may discover fraud or material misstatement.
Management does not want the auditor corresponding with third parties.
Management refuses to sign a representation letter.
16
Q
What is a recall of the types of audit opinions and why each opinion would be given?
A
Unmodified(non-issuer)unqualified(issuer): clean opinion, f/s are free from material misstatements
GAAS Issue:
Disclaimer of opinion: material and pervasive scope limitation
Qualified Opinion: material but not pervasive scope limitation
GAAP Issue:
Adverse: Material and pervasive departure from GAAP
Qualified: Material but not pervasive departure from GAAP
17
Q
“In the context of misstatements or an inability to obtain sufficient appropriate audit evidence, the term pervasive is used to what?
A
The effects or possible effects on the financial statements
18
Q
a type of assurance in which the auditor expresses no opinion on the financial statements
A
negative assurance
19
Q
a type of assurance in which the auditor expresses an opinion on the financial statements.
A
positive assurance
20
Q
“Based on the procedures performed, _____________________________________________ to indicate that the management assertion on XYZ is materially misstated.” In contrast with a reasonable assurance conclusion which would be formed in a positive sense, for example: “Based on the procedures performed, ____________________, the management assertion on XYZ is __________ _________
A
nothing came to our attention
in our opinion
reasonably stated
21
Q
should be followed in all cases with the exception of a few rare circumstances.
A
presumptively mandatory requirement
22
Q
must always be followed.
A
unconditional requirement
23
Q
- Not absolute, however still a high level of assurance that an auditor will detect material misstatements.
A
reasonable assurance
24
Q
: If an auditor has omitted the confirmation of investments but has performed alternative procedures that yield sufficient evidence, the omission does not impair the auditor’s ability to support a previously expressed unmodified opinion.
A
n. In other words, alternate procedures can sometimes compensate for standard procedures that were not completed, as long as they provide adequate support for the auditor’s conclusions.
25
A credit card balance with a bank audit client that exceeds ______ would impair independence.
10,000
26
When an auditor's close ________ works for an audit client during the period under audit in a ____ position, this would impair independence.
relative
key
27
An auditor has ______ _________, material or not, in the audit results of the client. This would impair independence
direct interest
28
According to SOX Title II, Auditor Independence, the lead audit partner must rotate off the audit every ________ years.
5
29
According to SOX Title I, Public Company Accounting Oversight Board, audit documentation must be maintained for ______ years.
7
30
Under SEC rules, covered persons include the audit engagement team and individuals within the audit chain of command. This includes any other partner, principal, shareholder, or managerial employee of the firm who provided _________ or more hours of non-audit services.
10
31
A cool-off period of ________ year is required before a member of an issuer's audit engagement team may begin working for a registrant in a key position.
1
32
The PCAOB will conduct annual inspections of registered public accounting firms that regularly provide audit reports for more than _________ issuers.
100
33
Independence is considered impaired if a covered member's aggregate outstanding balance from consumer loans has a balance greater than _____________ after payment of the most recent monthly statements made by the due date or within any available grace period.
10,000
34
According to the AICPA Code of Professional Conduct, a firm engaged to provide attest services to the public must be owned by greater than __________ of CPAs.
50%
35
Auditors of non-issuers must maintain audit documentation for at least _______ year(s) from the report release date.
5
36
Auditors of non-issuers must assemble final audit documentation within ________ days following the report release date.
60
37
Auditors of issuers must assemble final audit documentation within _______ days following the report release date.
45
38
Threat that a financial or other interest will influence an auditor’s judgement or behavior
self interest threat
39
Threat that an auditor takes on a management role or functions on behalf of the entity under audit.
management participation threat
40
Threat that arises from auditors reviewing their own work or the work done by others in their firm.
self-review threat
41
Threat that the auditor may not act objectively due to their interests being in opposition to those of the client.
adverse interest threat
42
Threat that external influences will impact an auditor’s independence and objectivity.
undue influence threat
43
Threat that the auditor has personal relationships with those working for the entity being audited.
familiarity threat
44
Threat that an audit organization’s placement within a government entity, in combination with the structure of the government entity being audited, will impact the audit organization’s ability to perform work and report results objectively.
structural threat
45
It begins by looking at the entity level overall risks, then moves to the entity level controls, and finally the significant accounts and disclosures which may affect risk more adversely. It is referred to as top-down as it begins with the highest level at the company and moves into the individual controls as it moves along.
A top-down approach is a method to determine which controls should be tested
46
are “an engagement to audit internal controls” or “reporting on internal controls over financial reporting”.
integrated audit
47
What are the five components of the COSO internal control integrated framework?
Control Environment
Risk Assessment
Control Activities
Information and Communication
Monitoring
48
What does a SOC 1 Report cover?
Internal controls over financial reporting
49
What does a SOC 2 Report cover?
Security, availability, processing integrity, confidentiality or privacy controls.
50
What is the key differences between a SOC 1 type 1 and SOC 1 type 2 report?
type 1: does not assess the effectiveness of internal control over a period of time 6-12 months.
"if type 2 report is provided then provides the user auditor with assurance about the design, implementation,
and operating effectiveness of the service organization’s internal controls and therefore may provide evidence that
would allow a reduction in the assessed level of control risk for areas of the entity’s accounting that are affected by
the service organization."
51
the CPA provides information that is used by management in the preparation of financial statements. This type of engagement does not require the CPA to express an opinion on the financial statements.
preparation engagement
52
the CPA compiles the financial statements from information provided by management. This type of engagement does not require the CPA to express an opinion on the financial statements.
compilation engagement
53
In a ______________ engagement, the accountant is literally preparing the financial statements based on information management provides (e.g. trial balances & general ledgers). In a ____________ engagement, management __________ the financial statements, and the accountant will ___________________ finalize the financial statements.
preparation
compilation
prepares
read and help
54
the CPA reviews the financial statements and expresses an opinion on whether the financial statements are free of material misstatement.
review engagement
55
Review engagements and other SSARS engagements do not consider _________ ___________.
internal controls
56
A review is what?
substantially less in scope than an audit
57
Each page of the financial statements that are reviewed should include a reference that states, what?
“See Independent Accountant’s Review Report.”
58
If the reviewed financial statements include ___________ _____________, the accountant’s separate report on the ___________ ______________ should include a statement that the accountant did not become aware of any material modifications that should be made to the information.
supplemental information
59
What is the main difference between a preparation and compilation?
creating an appropriate report
60
means utilizing skills, experience, and training to work through audit difficulties and avoid audit pitfalls in each unique audit.
professional judgement
61
If an auditor does not have experience in the prospective client’s field, this is not a reason to decline the engagement. What can the auditor do?
The auditor can gain the experience or work with a specialist
62
What does the engagement letter outline?
Auditor's responsiblity
Management reponsibilitiies: f/s, internal controls, written representations, providing relevant financial records to auditor
Fee and billing conditions
63
When may an auditor provide audit documentation to third parties without the client's permission?
subpoena in court
auditor is sued by client
state board of accountantcy investigation
fraud or illegal acts by client
peer review
64
An auditor should make ___________ _____________ assessments during the planning stage on the audit. These assessments should be revised as appropriate throughout the audit.
preliminary materiality
65
The maximum amount that the financial statements as a whole can be misstated and still be considered free from material misstatement.
overall materiality
66
Usually less than OM, __________ ____________ calls for materiality thresholds at the transaction class, account balance, and disclosure level.
performance materiality
67
In the context of financial statements, specific materiality refers to the individual amounts or items that, if misstated, could have a material impact on the financial statements as a whole. It is the amount or threshold below which an error or misstatement is considered to be not material and therefore not requiring adjustment or disclosure.
specific materiality
68
What are the six interrelated elements of quality control?
HELP ME
Humans resources: selecting personanel for advancement who have the necessary qualifications
Engagement acceptance/continuance: deciding whether or not to accept or continue a client relationship
Leadership responsibilities: quality should take precedence over business opportunities
Performance of the engagement: Includes procedures for reviewing audit documentation and engagement reports so that the work meets the firm's quality standards
Monitoring professional development: monitoring the effectiveness of professional devlopment activities
Ethical requirements: Independence rules must be followed and respected
69
- Misstatements about which there is no doubt. These may include wrong accounts being used, wrong debits or credits, anything wrong with which there is no doubt.
factual misstatements
70
Difference between management and the auditor’s judgement about estimates. These may include unreasonable depreciation or liability accrual methods.
judgmental misstatements
71
are those that the auditor believes will be found in the financial statements, but have not yet been identified. The auditor will make adjustments to the financial statements to account for these misstatements.
projected misstatements
72
Audit risk formula
inherent risk * control risk * detection risk
73
The risk that the auditor may fail to detect material misstatements and thus provides an incorrect opinion.
audit risk
74
Substantive Testing/Test of Details. The risk that the auditor will miss something/not detect it during the audit. Only one that the auditor can control. Can lower it with the amount of substantive procedures the auditor performs.
detection risk
75
the risk that a material misstatement will be not detected or prevented by the firm’s internal controls.
Control Risk
76
The risk inherent in an entity increased by factors such as more complex transactions, high employee turnover, poor financial performance, new financial reporting guidance, and obsolete inventory.
inherent risk
77
This is the combination of CR and IR and can be used interchangeably to mean the two of them.
risk of material misstatement
78
three components of fraud triangle
pressure
opportunity
rationalization
79
are the most common ways to circumvent separation of duties. Additional controls need to be put in place to contain these concerns.
collusion and or management override
80
what are the parts of segregation of duties
Authorization of transactions
Recording of transactions
custody of assets
81
a notice sent to a supplier of goods or services to inform them of the payment that has been made. The notice includes the amount of the payment, the date of the payment, and the method of payment
remittance advice
82
an auditing tool that is used to track the movement of goods and shipments. It can be used to verify the accuracy of invoices, to track inventory, and to monitor the progress of shipments.
shipping document
83
a summary of all transactions that have occurred over a set period of time on a bank account. Bank statements are used in auditing to provide evidence of the financial activity of a company.
bank statement
84
used in auditing to document and track the receipt of goods and services. The report typically includes the date of receipt, the name of the supplier, a description of the goods or services received, the quantity received, and the unit cost
receiving report
85
a document used in auditing to verify the accuracy of a shipment of goods. This lists the quantity and type of goods being shipped, the origin and destination of the shipment, and the date of the shipment.
bill of lading
86
a document used by an organization to request goods or services from another organization. It is typically used in the auditing process to ensure that all purchases made by the organization are properly documented and authorized.
purchase order
87
used in auditing to support the existence of a vendor transaction. This includes the vendor's name, address, and contact information, as well as the date, invoice number, and a description of the goods or services purchased.
vendor invoice
88
a document that is usually sent with shipped goods that details the contents of the shipment. In auditing,
packing slip
the packing slip can be used to verify the accuracy of the goods that were shipped
89
a list of all the accounts for a business and their balances at a specific point in time. This is used in auditing to help verify the accuracy of the financial statements.
trial balance
90
used in auditing to reconcile the ending cash balance per the company's books with the ending cash balance per the bank statement.
bank reconciliation
91
used to audit an organization's cash receipts and disbursements. The journal can be used to track cash inflows and outflows, as well as to identify any discrepancies between the two. It ties in well with the bank reconciliation to display the annual activity between the beginning and ending cash balances.
cash receipts
disbursement journal
92
payroll record types
may be used in auditing, including time cards, payroll registers, and payroll journals.
93
is used in auditing to track the amount of time that invoices have been outstanding. This information is used to assess the risk of nonpayment and to determine whether the company has adequate provisions for bad debts.
A/R aging schedule
94
used in auditing to help verify the existence and accuracy of a company's fixed assets. The roll forward lists all of the company's fixed assets as of the beginning of the year, and then tracks any changes to those assets throughout the year. This information can be used to verify that the company's depreciation expense is accurate and that its balance sheet correctly reflects the value of its fixed assets.
fixed asset roll forward
95
used in auditing to show how the balance of a company's debt has changed over time. This information can be used to assess the financial health of the company and to identify any potential red flags.
debt roll forward
96
This refers to the results obtained from the sample of an audit population.
actual sampling results
97
: This refers to the results obtained from the entire population being audited.
actual population results
98
This is the amount of variation that is expected between the sample results and the actual population results.
expected deviation
99
This is the acceptable rate of deviation between the sample results and the actual population results. The actual rate of variance should not exceed this rate to be considered valid
tolerable rate
100
an estimate of the potential difference between the population’s true value and the sample’s estimated value based on the sample results. It is calculated by multiplying the sample’s absolute error by the sample size.
projected error
101
the degree of accuracy of a sampling method. In audit sampling, it is important to ensure that the sampling method is reliable so that the sample is representative of the population and the results are reliable.
reliability
102
the degree of detail or exactness of the information obtained from a sample. In audit sampling, it is important to ensure that the sample is precise enough to provide meaningful results.
precision
103
a measure of the spread of a population’s values around its mean. It is useful for understanding the variability of a population and can be used to determine the sample size needed for a given level of accuracy. In audit sampling, it is important to ensure that the sample size is sufficient to provide accurate results.
standard deviation
