Toews PPTs

Question 1

T/F

An audit does not provide assurance that indirect-effect illegal acts will be detected.

Answer 1

TRUE

Question 2

The following are:

1) Financial Forecasts & Projections
2) Pro Forma Financial Information
3) Internal Control
4) Compliance with laws, regulations, & contracts
5) MD&A
6) Applying AUP

Answer 2

SSAEs

Attestation Engagements

Question 3

A change in auditors is reported where?

Answer 3

on SEC Form 8-k

Question 4

These are:

1) Examining journal entries
2) Review accounting estimates for biases
3) Evaluating the business rationale for significant unusual transactions

Answer 4

Responses to when you suspect management override of controls/fraud

Question 5

T/F

Materiality only considers qualitative factors

Answer 5

FALSE

Materiality considers both quantitative and qualitative factors

Question 6

These are:

1) Safeguard assets
2) Reliable & accurate financial reporting (errors & irregularities)
3) Effective & efficient operations
4) Compliance with policies, laws and regulations

Answer 6

Objectives of Internal Controls

Question 7

Describe the difference between the Board of Directors and the Audit Committee

Answer 7

The BOD is a more broad oversight group. The Audit Committee is a section of the BOD that focuses on audit functions. There may be other committees that are subsections of the BOD

Question 8

These are:

a. Changes in the regulatory or operating environment
b. Changes in key personnel
c. Implementation of new computer system
d. Rapid growth domestically or internationally
e. New lines of business
f. Corporate restructurings
g. Adoption of new accounting principles

Answer 8

Events that might weaken/break controls. Look for these when performing Risk Assessment

Question 9

“Preparing budgets and forecasts and properly investigating variances…”

is an example of…

Answer 9

A Performance Review (Control Activity)

Question 10

“Change passwords; control over creation of new vendor files in the system”

is an example of…

Answer 10

Information Processing Controls (Control Activity)

Question 11

to prevent problems from occurring in the first place.

Answer 11

Preventative Controls

Question 12

alert management when preventative controls have failed.

Answer 12

Detective Controls

Question 13

procedures used to solve a problem. May also be a preventative control.

Answer 13

Corrective Controls

Question 14

What is the hierarchy of reporting internal control weaknesses?

Answer 14

Lowest to Highest

Control Deficiency (material or immaterial)

Significant Deficiency (more than remote chance of a consequential misstatement)

Material Weakness (more than a remote chance that a material misstatement would occur)

Question 15

more than remote chance of a consequential misstatement

Answer 15

Significant Deficiency

Question 16

more than a remote chance that a material misstatement would occur

Answer 16

Material Weakness

Question 17

Interpretation No. 1 to AU 339, Audit Documentation, entitled “Providing Access to or Copies of Audit Documentation to a Regulator,” contains guidance relating to providing access to or copies of audit documentation to a regulator. Under what circumstances does this apply to an attestation engagement?

Answer 17

In all cases; however, the letter to the regulator should outline the purpose of the regulatory request as understood by the practitioner

In addition, if the practitioner is not required by law, regulation, or contract to provide a regulator access to the attest documentation, but intends to provide such access, the letter should include a statement that “management of (the entity) has authorized us to provide you access to our attest documentation for (purpose).”

Question 18

What are the 6 articles in the Principles Section of AICPA? (PRIODS)

Answer 18

Responsibilities
Public Interest
Integrity
Objectivity & Independence
Due Care
Scope & Nature of Services

Question 19

T/F

If you only 1 share of stock of a client, you are not independent

Answer 19

TRUE

Question 20

You own stock in a mutual fund, which in turn owns a portion of a client. Are you independent?

Answer 20

This is an indirect financial interest. Therefore, yes, unless it is determined that this is material. Generally a mutual fund is so large that the client’s portion would be so small it would not be material.

Question 21

T/F

The user auditor should not make reference to the service auditor

Answer 21

TRUE

Question 22

Every publicly held company must devise, document, and maintain internal control sufficient to provide reasonable assurances that internal control objectives are met.

Answer 22

provision of the Foreign Corrupt Practices Act

Question 23

T/F

Compensating controls may limit the severity of a material weakness or significant deficiency.

Answer 23

TRUE

Question 24

T/F

Upon discovery an auditor should immediately report all material weaknesses and significant deficiencies identified during an audit.

Answer 24

FALSE

Communication does not have to occur immediately

Question 25

T/F disagreements with management about matters significant to the entity's financial statements that have been satisfactorily resolved are still required to be communicated by the auditor to the audit committee

Answer 25

TRUE

Question 26

T/F The auditor must communicate to the audit committee the initial selection of significant accounting policies in emerging areas that lack authoritative guidance

Answer 26

FALSE

Question 27

T/F For all nonaudit services, the auditor should obtain assurance that management assumes responsibility for both the service and results thereof. Additionally, management should oversee and evaluate the results of the services.

Answer 27

TRUE