Flashcards in Sunday Quiz Deck (49):
Section 11(A) of the Securities Act of 1933...
Shifts the burden of proof in a lawsuit from the investor to the
CPA who audited the financial statements
An internal auditor was assigned to confirm whether operating personnel had corrected several errors in transaction files that were discovered during a recent audit. What automated tool would the auditor be likely to use?
The auditor is required to inform those charged with governance about...
Significant errors discovered by the auditor and subsequently
Corrected by management
What should an accountant consider in determining needs for retention of engagement documents?
The nature of the engagement and the firm's circumstances
A misunderstanding concerning the nature of an audit, review or compilation would be a...
Reasonable basis for requesting a change from an audit/review to
An auditor most likely would limit substantive audit tests of sales transactions when control risk is assessed as low for the existence assertion concerning sales transactions, and the auditor has already gathered evidence supporting...
Cash receipts and accounts receivable
A weakness in internal control over recording retirements of equipment may cause an auditor to...
Select certain items of equipment from the accounting records and locate them in the plant
Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle?
Authorization of credit memos by personnel who receive cash may permit the missappropriation of cash
To be responsible for, to commit
What is a control activity that most likely could help prevent employee payroll fraud?
The personnel department promptly sends employee termination notices to the payroll supervisor
The audit work performed by each assistant should be reviewed to determine whether it was adequately performed and to evaluate whether the...
Results are consistent with the conclusions to be presented in the auditor's report
In an audit of financial statements, what would most likely be considered a known misstatement?
An unrecorded liability related to services rendered by a vendor
During the period under audit
If the client refuses to disclose the newly discovered facts and their impact on the financial statements to persons known to be currently using IR likely to use the financial statements an accountant would not...
Notify the Better Business Bureau
Management override of controls can occur in unpredictable ways. Due to this fact, the auditor should perform procedures, in addition to the procedures already performed to address identified risks of material misstatements due to fraud, that include which of the following?
1 examining journal entries and other adjustments for evidence of possible material misstatement due to fraud.
2 reviewing accounting estimates for biases that could result in material misstatement due to fraud.
3 evaluating the business rationale for significant unusual transactions.
1, 2 and 3
An auditor is required to establish an understanding with a client regarding the services to be performed for each engagement. This understanding generally includes...
The auditor's responsibility for ensuring that the audit committee
is aware of any significant deficiencies that come to the auditor's attention
Which of the following is an element of the new format under the Clarity Project?
Standard formatting techniques such as use of bullets for lists
When qualifying an opinion because of an insufficiency of audit evidence, an auditor should refer to the situation in. Yes or no:
1 introduction paragraph
2 scope paragraph
No for intro
Yes for scope
Which of the following statements best explains why the CPA profession has found it essential to promulgate ethical standards and to establish means for ensuring their observance?
A distinguishing Mark of a profession is its acceptance of
responsibility to the public
What is an example of an appropriate heading for a Basis for Modification paragraph?
Basis for qualified opinion
In an audit of a special purpose framework, the auditor is required to obtain agreement of management that it acknowledges and understands its reponsibility. Such information would not include...
Required GAAP disclosures
What is not a major reason why an accounting audit trail should be maintained for a computer system?
Other information would most likely be...
Separate financial information not contained in the financial
The authoritative body designated to promulgate standards concerning an accountant's association with unaudited financial statements of an entity that is not required to file financial statements with an agency regulating the issuance of the entity's securities is the...
Accounting and Review Services Committee
Sound internal control procedures dictate that immediately upon receiving checks from customers by mail, a responsible employee should...
Prepare a duplicate listing of checks received
If there are no non-compliance issues, but there is are explanations as to how a particular program materiality was determined, at a minimum, how many paragraphs would an auditor's report on compliance contain?
One of a CPA firm's basic objectives is to provide professional services that conform with professional standards. Reasonable assurance of achieving this basic objective is provided through...
A system of quality control
An auditor is reporting on cash basis financial statements. These statements are best referred to in his opinion by which of the following descriptions?
Assets and liabilities arising from cash transactions, and revenue collected and expenses paid
As the acceptable level of detection risk decreases, an auditor may change the...
Nature of substantive tests from a less effective to a more effective procedure
A CPA in public practice may not disclose confidential client information regarding auditing services without the client's consent in response to which of the following situations?
A letter to the client from the IRS
Management's Responsibility for the Financial Statements is a...
Heading that should be in the auditor's report
An auditor may decide to increase the risk of incorrect rejection when...
The cost and effort of selecting additional sample items is low
Which respect to special purpose financial statements, if such statements contain items for which GAAP would require disclosure, the financial statements may...
Provide the relevant disclosure that would be required for those
Items in a GAAP presentation
According to the standards of the profession, which of the following will prevent a CPA performing audit engagements from being independent?
Employment of the CPA's spouse as a client's internal auditor
Auditor's who prefer statistical to judgmental sampling believe that the principal advantage of statistical sampling flows from its unique ability to...
Provide a mathematical measurement of uncertainty
If a CPAS wishes to select a random sample which must have a 90% confidence level and an upper precision limit of 10%, the size of the sample he must select will decrease as his estimate of the...
Occurrence rate decreases
The objective of a review of the interim financial information of a publicly held company is to...
Provide the accountant with a basis for reporting to the board
Of directors or stockholders
What is a correct statement concerning prospective financial statements?
Any type of prospective financial statements would normally be appropriate for limited use
According to the profession's standards, which of the following would be considered consulting services?
1 advisory services
2 implementation services
3 product services
Advisory, implementation and product services are all consulting services
An accountant has been asked to compile the financial statements of a Nonpublic company on a prescribed form that omits substantially all the disclosures required by GAAP. If the prescribed form is a standard preprinted form adopted by the company's industry trade association, and is to be transmitted only to such association, the accountant...
Need not advise the industry trade association of the omission
Of all disclosures
What factors would affect an auditor's judgment about the nature and extent of the audit documentation?
Risk of material misstatement of the assertion, account or
The timing of the audit when compared to the entity's fiscal year is not a factor that determines the...
Form and extent of document items related to risks identified and controls evaluated
Which of the following procedures most likely would assist an auditor in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?
Inquiring of the entity's legal counsel about litigation, claims and assessments
An auditor reviews the reconciliation of payroll tax forms that a client is responsible for filing in order to...
Identify potential liabilities for unpaid payroll taxes
In performing a count of negotiable securities, an auditor records the details of the count on a security count worksheet. What other information is usually included on this worksheet?
An acknowledgment by a client representative that the securities
were returned intact
Which of the following factors would most likely be considered an inherent limitation to an entity's internal control?
Human judgment in decision making process
When a company's stock record books are maintained by an outside registrar or transfer agent, the auditor should obtain confirmation from the registrar or transfer agent concerning the...
Number of shares issued and outstanding
Name 3 elements that should be encompassed by the quality control policies and procedures of an auditing firm?
1 acceptance and continuance of client relationships and specific engagements
2 relevant ethical requirements
3 human resources
Which of the following would be an appropriate title for a statement of revenue and expenses prepared using an other comprehensive basis of accounting (OCBOA)?
Statement of income- regulatory basis