Practice Quizzes

Question 1

When is the earliest an audit report may be dated?

Answer 1

auditor has sufficient & appropriate evidence to support an opinion

Question 2

change in Act principle that materially affects comparability of nonissue comparative FS and auditor concurs? what to do

Answer 2

refer to change in EMPHASIS OF MATTER paragraph following unmodified opinion paragraph

Question 3

first step in applying analytical procedures?

Answer 3

develop an expectation

Question 4

what is sampling risk?

Answer 4

probability that the sample chosen is not representative of the population as a whole

Question 5

how can an auditor assess control risk at a level higher than appropriate? how would deviation rate and tolerable rate compare?

Answer 5

the deviation rate in the auditor’s sample EXCEEDS the tolerable rate, but the deviation rate in the population is LESS than tolerable rate

if deviation rate>tolerable rate – higher risk

Question 6

how does sample size of test of controls vary compared to expected population deviation rate and the tolerable rate?

Answer 6

sample size and expected deviation rate rise or lower by the same amount. sample size is inversely correlated to tolerable rate

ex: auditor expects more errors (higher expected population deviation rate), they will increase sample and tolerate less (lower tolerable rate)

Question 7

how to ensure inventory purchases are properly authorized

Answer 7

matching of requisitions, receiving reports, and purchase orders

Question 8

how to ensure inventory records are accurate?

Answer 8

periodic inventory counts used to adjust perpetual records

Question 9

how does auditor report on responsibility in an AUP report?

Answer 9

there should be a disclaimer of responsibility for sufficiency of AUP procedures

Question 10

how does auditor reference consistency of accounting principles in an audit report?

Answer 10

Implicitly! no need to mention unless there is an issue, then can be mentioned in the emphasis of matter paragraph

Question 11

type of opinion if auditor is unable to obtain audited financial statements of a consolidated investee

Answer 11

qualified or disclaimer, as this is a scope limitation

Question 12

Regardless of the assessed level of control risk, an auditor would perform what type of tests?

Answer 12

substantive tests to restrict detection risk for significant transaction classes. cannot entirely eliminate substantive testing for significant transactions/balances

Question 13

date of management rep letter should coincide with what date?

Answer 13

auditor’s report

Question 14

in searching for unrecorded payables, what would an auditor do?

Answer 14

compare cash payments made AFTER balance sheet date with accounts payable trial balance. The auditor is looking for items that should have been recorded as of the balance sheet date, but were not.

Question 15

comfort letter?

Answer 15

letter containing negative assurance from the CPA to the underwriter or certain other requesting parties just before registering client’s securities. typically signed by the client’s independent auditor

Question 16

maximum number of days auditor of nonissuer should complete assembly of audit file?

Answer 16

60 days following report release date

Question 17

A group engagement team of a nonissuer should ask a component auditor to communicate:

Answer 17

whether it complied with ethical requirements relevant to the group audit and the independence requirements.

Question 18

type 1 report?

Answer 18

provides auditor an UNDERSTANDING of controls at the service organization

Question 19

type 2 report?

Answer 19

provides EVIDENCE of the OPERATING EFFECTIVENESS of a service organizations controls
if risk assessment includes an expectation that the controls are OPERATING EFFECTIVELY, you need a type 2

Question 20

independence for review v compilation

Answer 20

review = MUST BE INDEPENDENT
compilation = not required, but must disclose lack of independence

Question 21

assurance on a compilation report?

Answer 21

no assurance

Report should state the accountant does not express an opinion on the financial statements

Question 22

“statement of activities” is an adequate name for what type of report, and by what type of company?

Answer 22

Income statement for a not-for-profit. this is NOT a title for OCBOA

Question 23

before accepting an engagement, a successor auditor should inquire about what of the predecessor. after accepting?

Answer 23

inquire about the disagreements the predecessor had with client regarding audit procedures and accounting principles.
AFTER accepting, successor can inquire of the predecessor about matters of continuing accounting significance

Question 24

benefit of using computer assisted audit techniques ?

Answer 24

greater item of items can be tested at little additional cost

Question 25

how to assess COMPETENCY of internal auditor

Answer 25

education, certification, quality of workpapers

Question 26

sample error formula?

Answer 26

recorded amount - actual amount

Question 27

tainting factor?

Answer 27

sample error / recorded amount

Question 28

projected misstatement in a PPS sample, how to calculate

Answer 28

tainting factor x sample interval (see note on iPad)

Question 29

attribute sampling?

Answer 29

statistical approach to test controls. you CAN quantify this!

Question 30

what to do if you don't hear back on positive requests for AR confirms

Answer 30

ask the client to contact customers!

Question 31

required to inquire during compilation?

Answer 31

No!! performance requirements are typically limited to having an understanding of the industry and business, and reading the FS to make sure there are no obvious mistakes in applying accounting principles

Question 32

when is pre audit approval required by the audit committee

Answer 32

for all audit, tax, and review engagements. not required for non-audit services that do not exceed 5% of total revenue of the fiscal year of the audit

Question 33

when is independence impaired related to paying audit fees

Answer 33

if more than one year overdue in payment of professional fees

Question 34

analytical procedures in the planning phase example

Answer 34

comparing financial information with nonfinancial information anything that helps the nature, extent, timing of audit procedures

Question 35

Under DOL rules, independence is impaired when an auditor serves as what for employee benefit plans

Answer 35

an investment advisor

Question 36

how are an auditor's responsibilities extended under a 2 CFR 200 single audit?

Answer 36

auditor is reponsible for procedures testing compliance on matters impacting federal reward programs

Question 37

what control deficiencies is an auditor required to communicate to those charged w governance? all of them?

Answer 37

not all of them!! only control deficiencies determined to be SIGNIFICANT DEFICIENCIES and MATERIAL WEAKNESSES are required to be communicated

Question 38

how to report on change in accounting estimate (one keyword)

Answer 38

PROSPECTIVELY change in estimate (ex: change in life of a depreciable asset) does not affect comparability of FS between periods -- so no need to modify report

Question 39

how to report on change in accounting principle?

Answer 39

change in principle (ex: method of accounting for inventory) is reported in an EMPHASIS OF MATTER PARAGRAPH (after the opinion paragraph) if it is material

Question 40

in an auditor standard report -- is there a need to mention consistency?

Answer 40

NO consistency between periods is implied, no need to state it. only mention in an EOM if a change in principle impacts consistency between periods

Question 41

when PLANNING for an integrated audit of an entity's internal control, what are things that the auditor might do? what is one thing they absolutely won't do during PLANNING?

Answer 41

consider changes in operations, preliminary judgements, evidence available DO NOT evaluate the operating effectiveness of the controls, this is obviously something that happens after planning

Question 42

embedded audit module, what is it?

Answer 42

a code designed to give auditor a notification in real time when transaction meets a criteria flagging it for review, good for paperless systems where an auditor needs to continuosuly monitor and analyze transaction processing

Question 43

when assessing the OBJECTIVITY of internal auditor, what should CPA do

Answer 43

auditor should figure out who the internal auditor reports to

Question 44

what are Free rents received as part of an award to carry out a federal program treated as

Answer 44

federal funds expended

Question 45

what is the registration statement referring to

Answer 45

securities act of 1933

Question 46

CPA thinks its justifiable, but they are changing from an audit to a review per client request. what do u have to do

Answer 46

u don't need to mention the audit at all, just simply say a review is substantially less in scope than an audit

Question 47

no assurance provided in a preperation engagement, but where does the auditor reference (hint: how many times)

Answer 47

EACH PAGE | say that there is no assurance provided

Question 48

finding significant defeciencies in internal control, what type of opinion does this mean

Answer 48

qualified if not fixed. only MATERIAL weaknesses will result in an adverse opinion

Question 49

overall result of a review?

Answer 49

Conclusion with LIMITED ASSURANCE. You are NOT expressing an opinion!!

Question 50

management rep letter required for a review?

Answer 50

you BETCHA! think -- you are INQUIRING in a review, so the management rep letter is like an inquiry u r making

Question 51

SSAE preperation audit, what does the CPA disclose in the report

Answer 51

that they have NO responsibility to update the report for events/circumstances occuring after report date

Question 52

financial information systems DESIGN & IMPLEMENTATION impair independence if auditor does this

Answer 52

yessir except those falling under the de minimis exception

Question 53

examination of AR & cash receipts provides auditor evidence for what assertions related to sales

Answer 53

completeness & occurence of sales transactions

Question 54

The auditor should consider the results of analytical procedures performed in the planning stage of the audit in identifying:

Answer 54

the risks of material misstatement due to fraud

Question 55

IS v BS accounts, which ones when looking at the relationships is more predictable

Answer 55

IS accounts! ex: interest expense is more reliable evidence than accounts receievable

Question 56

definition of a walkthrough

Answer 56

following a transaction from origination until it is in the financial statemets

Question 57

what two things (two words) can help an auditor determine the DESIGN of internal control?

Answer 57

observation & inspection to evaluate IC design

Question 58

to understand an entity's internal control, what is important for auditor to do

Answer 58

obtain knowledge of the controls & whether they have been implemented NOT required to understand the operating effectiveness to understand the internal contorl

Question 59

why is it important to understand the INFORMATION system relevant to financial reporting

Answer 59

to understand types of TRANSACTIONS processed, and how they are initiated, recorded, and summarized additionally included is how they prepare significant accounting ESTIMATES

Question 60

what are common walkthrough procedures? (4 things)

Answer 60

inquiry, observation, inspection of relevant documentation, and reperformace of controls

Question 61

to understand an entities internal control related to inventory, what is a good thing to do

Answer 61

review description of inventory controls obtaining and understanding is step one, so before doing test counts or anything, simply learn more by reading the descriptions

Question 62

when testing the completeness assertion for accounts payable, what is a good to use for the population?

Answer 62

list of vendors that the company has previously done business with

Question 63

what is the primary responsibility of the stock registrar?

Answer 63

to verify that stock is issued only with proper authorization

Question 64

what if related party transactions are not disclosed, but less than material?

Answer 64

even if it is not QUANTITIVELY MATERIAL, it is qualitatively material because it is important to disclose all related party transaction information

Question 65

what is an auditor required to communicate to those charged w governance regarding deficiencies found in internal control

Answer 65

both significant deficiencies and material weaknesses

Question 66

what needs to be found to issue an adverse opinion on IC?

Answer 66

MATERIAL WEAKNESS | significant defiencies will be a qualified opinion

Question 67

what defencies in internal control need to be communicated to management

Answer 67

ALL DEFIECIENCES the auditor finds | communicate defiencies that are significant or material to audit committee

Question 68

what is a cognizant agency?

Answer 68

agency that provides most amount of direct funding to a nonfederal agency