Mod 2 Wrong Answers Flashcards
Performance materiality is largely established to help provide assurance that…
Several immaterial misstatements do not combine to a
Material undetected amount of misstatement
Detection risk may be assessed in…
Either quantitative terms (ex. Percentages)
Or nonquantitative terms (range from minimum to maximum)
Performance materiality is ordinarily established at…
A lower level than materiality of financial statements
Performance materiality may be…
Revised throughout audit
Performance materiality is usually established for…
Financial statements as a whole
Performance materiality levels are established if applicable for…3
1 particular classes of transactions or
2 account balances or
3 disclosures
Management’s placement of substantial emphasis on meeting earnings projections…
Heightens an auditor’s concerns about risk factors
Insider purchases of additional shares of stock are less likely to be indicative of…
Intentional manipulation of financial statements than is undue
emphasis on meeting earnings projections
Errors refer to…
Unintentional mistakes in financial statements such as
misinterpretation of facts
Financial operations of many companies are not ordinarily…
Controlled by or limited to one location
Asking management if they have knowledge of fraud or suspect fraud is…
A requirement of inquiries that should be made to management
Overly complex organizational structure will…
Heighten an auditor’s concern about risk of fraudulent financial
Reporting
Large amounts of liquid assets that are easily convertible to cash represent more of a risk relating to…
Misappropriation of assets (rather than fraudulent financial reporting)
In determining what an auditor might reconsider when a client’s board of directors has refused to take any action relating to an auditor’s disclosure that the company has made immaterial illegal contributions, failure to take remedial actions may cause…
Auditor to decrease reliance on management representations
In determining what an auditor might reconsider when a client’s board of directors has refused to take any action relating to an auditor’s disclosure that the company has made immaterial illegal contributions, preliminary judgement about materiality levels would…
Not be expected to change
Management’s disregard for implementing internal control may cause…
Auditor to reject the engagement
Management’s refusal to allow auditor to perform tests before year end will…
Not necessarily stop the from successfully performing tests after
Year end
An item ordinarily included when the auditor establishes an understanding with a client regarding services to be performed. Auditing standards require that an auditor…
Ensure that audit committee is aware of significant deficiencies
That come to CPA’s attention
The auditor’s responsibility for determining preliminary judgements about materiality and audit risk factors is…
Not required for establishing an understanding with the client
An engagement letter should include an indication that…
Management is responsible for identifying and ensuring that the
Company complies with the laws and regulations applicable to its
Activities
Professional standards require that an auditor document the understanding through…
A written communication with the client
What information would a CPA consult for information on how various public companies have complied with disclosure requirements of new financial accounting standard? Why
AICPA Accounting Trends and Techniques
Issued annually summarizes such disclosures of 600 industrial
And merchandising corporations
An audit program should be designed so that…
Audit evidence gathered is sufficient to support auditor’s
conclusions
While constructive suggestions to management is desirable, the audit program is…
Not based on developing constructive suggestions
