misc concepts

Question 1

positive assurance most useful for

Answer 1

low assessed audit risk

Question 2

negative assurance

Answer 2

1) the assessed risk of material misstatement is low,
(2) a large number of small homogeneous balances is involved,
(3) a very low exception rate is expected,
(4) the auditor has no reason to believe that the recipients of the requests are unlikely to consider them, and
(5) the auditor has obtained sufficient appropriate evidence about the effectiveness of relevant controls

Question 3

Effective Internal controls and audit evidence

Answer 3

effective internal controls provides more assurance as the reliability of audit evidence

Question 4

completeness
existence
rights and obligations
valuation

Answer 4

proper recordance
truly exists
entity has ownership of items (ASSETS AND LIABILITIES)
items are at appropriate amounts

Question 5

A/R confirmations provide the strongest assertions for

Answer 5

existence and rights and obligations

Question 6

RISK OF AUDIT

Answer 6

OVERSTATED ASSETS

UNDERSTATED LIABILITIES

Question 7

DIFFICULTY IN CONFIRMATIONS

Answer 7

AUDIT INDIVIDUAL INVOICES WHICH ARE EASY TO CONFIRM

Question 8

TO INCREASE CONFIRM ACCURACY ALWAYS SHOW

Answer 8

DETAILS

Question 9

most effective in determinining A/R

A/R testing in general

Answer 9

subsequent review of cash receipts

ALWAYS HAS TO DO WITH CONDUCTIBILITY

Question 10

accounts receivable confirm usually detects

Answer 10

lapping

Question 11

confirmations not received

Answer 11

only apply additional tests to accounts that do not receive a 2nd confirm

Question 12

any internal function

example internal construction/scrapping

Answer 12

difficult to detect deficiences because there is little outside evidence

Question 13

noncash financing and investing activities must be

Answer 13

DISCLOSED

Question 14

DIRECT LIABILITY

Answer 14

NEVER REPORT PRINCIPLE

Question 15

TESTING OF SUB DISBURSEMENTS

Answer 15

LOW ASSESSED RISK OF MATERIAL MISSTATEMENT

Question 16

SUBSTITUTION

Answer 16

CASH AND ASSETS AUDIT TO PREVENT ASSETS FROM BEING USED TO COVER CASH SHORTAGES

Question 17

SUBSQUENT EVENTS IT IS NOT NECESSARY TO

Answer 17

COMMUNICATE MATERIAL WEAKNESS IN IC

Question 18

going concern procedure

Answer 18

inquire to legal

Question 19

summary of financial statements

Answer 19

MUST STATE CONSISTENCY W/ FS

Question 20

AUTHORITY DESIGNED FORM MAKES UNJUSTIABLE ASSERTION AUDITOR

Answer 20

REWORDS

Question 21

RSI

Answer 21

NEED NOT BE INCLUDED ; HOWEVER SEPERATE PARAGRAPH IN AUDIT REPORT

ALWAYS UNAUDITED

MUST PROVIDE LIMITED PROCEDURES NEVER AN OPINION - make sure no materiality exists to FS

Question 22

BASIC F/S NAMES CHANGED

Answer 22

IF AUDITOR DISAGREES QUALIFY

Question 23

REVIEW

Answer 23

MATERIAL MODIFICATIONS NEEDED

CONSISTS OF ANALYTICAL + INQUIRY

Question 24

COMFORT LETTERS
AUDITED
UNAUDITED

Answer 24

OPINION ON AUDITED TO COMPLIANCE W/ SEC

NEGATIVE ASSURANCE

Question 25

OTHER INFORMATION EXCLUDES

Answer 25

RSI

Question 26

group auditor decision cycle

Answer 26

1 - decide if they may serve as group auditor | 2 - question component auditors competence

Question 27

continuing auditor uses comparative statements MUST what date used

Answer 27

update prior report regardless of opinion issued if not revisions made then use original report date IF NOTE ADDED FROM PREVIOUS STILL USE ORGINAL DATE

Question 28

preclude

Answer 28

prevent from happening

Question 29

unaudited in relation to auditors responsibility

Answer 29

auditor must verify that it does not material effect F/S; can refer to in reports

Question 30

group auditor reference immaterial component reliance

Answer 30

relies on component audit work; no additional paragraph no reference needed

Question 31

inventory restatement

Answer 31

ALWAYS AT LOWER OF COST OR MARKET

Question 32

balance sheet audit tests

Answer 32

only ending VALUES

Question 33

predecessor reissuing report must

Answer 33

1 - read and compare current F/S 2 - obtain rep letter from current auditor 3 - obtain rep letter from management

Question 34

does auditor provide assurances as to managements rep letter

Answer 34

no an do not refer to

Question 35

reference to anothers work is found where

Answer 35

intro paragraph

Question 36

prospective financial report does not allow prospective financials criteria

Answer 36

REVIEWS assumptions

Question 37

projections contain

Answer 37

hypothetical assumptions; never for general use

Question 38

compliance attest cannot perform what service

Answer 38

reviews

Question 39

agreed upon procedures 1 - auditor 2 - client 3 - specified party

Answer 39

1 - employed by the client to aid specified party 2 - client employs specified party to evaluate assertion 3 - require that findings be independently derived.

Question 40

IFI

Answer 40

procedures used to review are part of report

Question 41

specificied elements an opinion report can be issued on

Answer 41

A/R; royalties; profit participation; inventory

Question 42

OBOA contractual agreements must be between

Answer 42

client and third party

Question 43

GAAS

Answer 43

audits only

Question 44

pro forma

Answer 44

historical statements that are presented when there is a change found at a later date

Question 45

SSARS engagement management is responsible for

Answer 45

F/S fairly presented ONLY

Question 46

compilation does not require

Answer 46

management rep letter

Question 47

pro forma financial information

Answer 47

1 - can be reviewed or audited | 2 - can only provide assurance to the same level or greater then was provided on historical F/S

Question 48

COMPLIANCE REVIEWS

Answer 48

NO REPORTS

Question 49

examination rules apply to

Answer 49

ATTEST Service requirements

Question 50

``` SOX 402 403 404 406 ```

Answer 50

402 unlawful for credit lent 403 10%+ ownership file SEC report 404 management responsible for IC 406 adoption of ethic code for senior financial officers