Quiz Mods 1-4 Flashcards Preview

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Flashcards in Quiz Mods 1-4 Deck (35):

The objective of analytical procedures used in the overall review stage of the audit is to...

Assist the auditor in assessing the validity of the conclusions


The auditor should perform retrospective review of significant accounting estimates reflected in the financial statements of the prior year to determine...

Whether management judgements and assumptions relating to
The estimates indicate bias of management


The significant accounting estimates selected for testing should include those that are based...

On highly sensitive assumptions or otherwise significantly affected
By judgements made by management


What affect would fictitious credit sales have on accounts receivable turnover ratio?

They would lower it because the numerator and denominator
Would both increase by the same amount


Financial expert defined by SOX, is a person through education and experience as...5

1 public accountant
2 auditor
3 principal financial officer
4 comptroller or
5 principal accounting officer of issuer


Characteristics of a financial expert according to SOX:

has an understanding of...

GAAP and financial statements


Characteristics of a financial expert according to SOX:

Experience in...2

1 preparation or auditing of financial statements of generally
Comparable issuers and

2 the application of such principles in connection with the
Accounting for estimates, accruals and reserves


Characteristics of a financial expert according to SOX:

Has experience with internal...

Internal accounting controls


Characteristics of a financial expert according to SOX:

Has an understanding of...

Audit committee functions


There is no requirement that the financial expert had to obtain experience by...

Serving on a prior audit committee or board of directors


A management representation letter is written by...

The client to the auditor


The purpose of the management representation letter is to...

Serve as corroborating evidence with other evidence gathered
During the audit


"There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices." What is this passage likely included in?

The management representation letter


All material weaknesses are...

Significant deficiencies


Once the sequence of tags is accounted for, the auditor, by taking a sample of those tags and tracing to the physical inventory listing will obtain evidence about...

Items on tags being included in the listing


Establishing an Understanding with the Client, requires the CPA to address 4 areas with the client in the engagement letter

1 objectives of the engagement
2 responsibilities of management
3 limitations of the engagement
4 responsibilities of the practitioner


For the engagement letter, information about fees and billing...

May be included but is not required


The Statements of Standards for Accounting and Review Services (SSARS) do not specifically give a time period for retention of records. Therefore the firm must...

Establish policies and procedures to retain the engagement records
For a period sufficient


How long do standards require a firm to retain engagement documentation?

The firm should establish policies and procedures for the retention
of records for a sufficient period


Methods of determining the effectiveness of the design and operation of controls (obtaining evidence of control risk) include...4

1 inquiry
2 inspection
3 observation
4 reperformance


Name three substantive tests used in an audit?

1 analytical procedures

2 calculations

3 confirmations


The determination of the audit ability of an entity is...

One of the first matters the auditor considers in initial planning
For the audit before accepting it


One of the requisites of audit ability is...

Adequate, sufficient, reliable accounting records


Operating effectiveness of controls relates more to the auditor's consideration of...

Nature, timing and extent of audit procedures


The auditor should develop auditing procedures based on the auditor's understanding of the entity and its environment, including...3

1 composition of revenues

2 specific attributes of revenue transactions

3 unique industry considerations


Management must make certain representations to the auditor regarding the...6

1 financial statements
2 completeness of info provided to auditor
3 recognition
4 measurement
5 disclosure
6 info concerning subsequent events


The phrase, "No events have occurred subsequent to the balance sheet date that require adjustment to, or disclosure in, the financial statements," would be included in...

The management representation letter


Payroll fraud is when...

An employee is paid for hours not worked or when a no employee
is paid under the category of "payroll"


Having a supervisor approve a summary of hours helps ensure...

Only employees are paid and amount is for hours actually worked


An auditor is required to perform an audit professionally and in accordance with...

All standards


The auditor must understand all standards to...

Perform an audit in the first place


An auditor is required to have competence, skills, technical knowledge, and experience to perform an audit professionals and in accordance with...

All standards


Analytical procedures involve comparison of...

Recorded amounts to their expectations


Since analytical procedures involve the comparison of recorded amounts to expectations, the auditor is most likely to detect misstatement by performing...

Analytical procedures designed to disclose differences from expectations


Evaluations jeg the effectiveness of internal controls may not detect...

Misstatements caused by the circumvention or management
Override of internal controls