Misstatements and I/C deficiencies, written representations and subsequent events

Question 1

uncorrected misstatements consider materiality in terms of..

Answer 1

-size
-nature
-circumstances
-impact on prior periods

Question 2

misstatement materiality levels…

Answer 2

-based on risk and auditor judgment
-involve both quantitative and qualitative considerations
-based on smallest aggregate level

Question 3

overstate current ratio leads to

Answer 3

overstated current assets

Question 4

understate current ratio leads to

Answer 4

understated current liabilities

Question 5

management must accept responsibility for..

Answer 5

the preparation and fair presentation of all F/S covered by period of the auditor’s review

Question 6

management representation letters never reference

Answer 6

the resulting audit opinion

Question 7

materiality must be determined by

Answer 7

management and the auditor

Question 8

an accountant performing a review engagement must evaluate

Answer 8

the assumption that the entity will continue as a going concern for a reasonable time period

Question 9

subsequently discovered fact occurs…

Answer 9

at any time during the year under audit

Question 10

use these procedures to identify subsequent events

Answer 10

-obtain information about legal settlements or unusual transactions
-following up on transactions based on preliminary data
-reading minutes of financial information for the period after year end
-inquire with management

Question 11

are the subsequently discovered facts:

Answer 11

1. relevant to published F/S
2. after audit report is issued

Question 12

auditor action required regardless if no longer associated with a client

Answer 12

-discuss management steps taken–F/S should not be relied on
-determine if correction(s) needed
-prevent reliance on issued report if needed

Question 13

type 1 subsequent event

Answer 13

condition exists at the F/S date and requires adjustment

Question 14

type 2 subsequent event

Answer 14

conditional did not exist at the F/S date; wont adjust F/S but if material, needs to be disclosed in the F/S notes

Question 15

if audit procedures were omitted and are subsequently discovered

Answer 15

see if performing alternative test or procedures will reveal the report and F/S are still reliable

Question 16

dual date report

Answer 16

means auditor is assuming responsibility for all subsequent events occurring before date of completed field work AND take responsibility for only the single additional event

example
auditor is reponsible for all the events from:
the original report date March 6th AND ONLY THOSE at the dual date April 10th
BUT NOT between the dual date and report release date

Question 17

change report date

Answer 17

auditor indicates they have obtained sufficient appropriate evidence for and are taking responsibility for all subsequent events up to the new report date

example
auditor is responsible for all the events from:
the original report date March 6th UP UNTIL the change report date to April 10th
BUT NOT between the change report date and report release date

Question 18

when you use the original date on the reissued audit report, it….

Answer 18

removes any implication that records, transactions or events after the date of the audit report have been examined or reviewed

Question 19

auditors report must be dated as the

Answer 19

end of fieldwork