Audit Ch 16
if the client has sold or assigned any receivables, the auditor must ______
confirm by direct communication with the purchaser or assignee
_________ extends the auditor's responsibility for disclosure through the later date only with respect to the specified item
dual-dating
the starting point for investigating significant variations in expenses generally is _______ of management
inquiry
a subsequent event that involves conditions coming into existence after the BS date requires ______
disclosure in the financial statements
the date the auditors grant the client permission to use the audit report
report release date
certain organizations are mandated by designated accounting standard setter to present _____ ______ info as unaudited schedules accompanying the fs
required supplementary
an event occurring after the date of the BS but prior to the date of the auditor's report
subsequent event
reasonableness standard:
the intentional misstatement of immaterial amounts may be deemed unreasonable
a guarantee of collectibility is given when A/R are sold ____ ____
with recourse
considers misstatements from past years and this year
iron curtain approach
an example of a subsequent event requiring pro forma financial statements is ____ _____
a business combination
an auditor determines that proceeds from the sale of scrap were recorded to hte miscellaneous revenue account. The auditor should propse an adjusting journal entry to classify the amount as ______
a reduction to COGS
the product warranty account is often verified in conjunction with the audit of ____
accrued liabilities
the relationship between the ______ (known and likely) misstatements and materiality is often documented in a working paper
aggregated
a subsequent event that provides additional evidence as to conditions that existed at the bs date and affects the estimates inherent in the process of preparing financial statements requires ______
an adjustment to the financial statement amounts
AICPA AU 265 requires that auditors communicate to the ____ _______ any significant deficiencies in internal control
audit committee
must communicate any significant deficiencies in IC and CAM to ______
audit committee
auditors should review the minutes of meetings, including meetings held through the date of the _____
audit report
under no circumstance should a name b added to the payroll without having received the formal ________ notice from the HR department
authorization
most important of all controls over payroll is the division of payroll work among several ______ of the company
departments
the most important audit objective when auditing the statement of cash flows is ______
determine the presentation and disclosure are appropriate
the most important control over payroll is the ________
division of payroll work among several departments
auditor's liability in connection with the registration of new securities with the SEC is extended to the ______ _______ of the registration statement (called an S1 review)
effective date
throughout the course of the audit, the auditors accumulate and communicate to management all _____ _____, other than those the auditors believe to be trivial
identified misstatements
info presented outside the basic fs, excluding required supplementary info, that is not considered necessary for the fs, to be fairly presented in accordance with the applicable financial reporting framework is called ____ info
supplementary
immaterial misstatement that are discovered by the auditors and not corrected by the client are accumulated in the audit ______ _____
working papers
throughout the course of the audit, the auditors accumulate and communicate to management all ______ misstatements other than those that are trivial
identified
what is required for a matter to be considered an unasserted claim ___ and _____
1. legal counsel has devoted substantial attention to it 2. it is probable that a claim will be asserted
provides additional evidence as to conditions that existed at the date of the financial statements (fs amounts should be adjusted)
Type 1 subsequent events
the existence of a good _____ program helps the auditors in their audit of expense accounts
budgeting
are misstatements for which there is no doubt
factual misstatements
most common loss contingency
litigation
the auditors' report should not be dated prior to the date they have gathered sufficient, appropriate evidence (this date is often the last day of fieldwork)
FACT
the professional standards require that the audit committee be informed bout fraudulent or illegal acts that the auditors become aware of
FACT
which of the following statements regarding required supplementary information (RSI) are correct?
1. auditors are required to obtain written representations from management regarding this information 2. auditors are required to compare RSI for consistency to the basic fs and other knowledge obtained during the audit
if, after issuing the audit report, the auditors determine they omitted significant audit procedures, the auditors should _______ ____ ____
1. consider consulting legal counsel 2. assess the importance of omitted procedures 3. attempt to perform the omitted procedures as needed
a client is aware of an unasserted claim that was not disclosed to the auditors. The auditors have sent a letter of inquiry to the client's attorney. The attorney _____ and ____
1. is not required to describe the claim in the reply to the auditors 2. should consider resignation if the client refuses to discuss the matter with the auditors
the output of the payroll department includes: x3
1. payroll journal 2. individual employee statements of earnings 3. payroll distribution schedule (not signed payroll checks)
If a CPA firm discovers a material misstatement in audited financial statements after the auditors report has been issued, and the client will NOT notify affected parties, the auditor should notify _____ ___ ____
1. the client's board of directors 2. each person known to be relying on the audited financial statements 3. regulatory agencies having jurisdiction over the client
procedures carried out by auditors at the client company's facilities on ora s close a practicable to the effective date of a registration statement filed under the Securities Act of 1933 is called a ___-
S-1 Review
arise from differences between the judgments of management and the auditors concerning accounting estimates, or the selection or application of accounting policies that the auditors consider inappropriate
judgmental misstatements
if legal matters are identified, auditors should directly communicated with the client's external legal counsel through a ___ ___ ______ prepared by management and sent by the auditors
letter of inquiry
auditors usually perform _____ substantive procedures on the statement of cash flows
limited
final responsibility for adjustments due to identified misstatements rests with _____
management
if auditors choose to refer to other information in the auditor's report, they may include an ____ _______ paragraph disclaiming an opinion on the other information
other-matter
occasionally, subsequent events may be so material that supplementary ___ _____ financial statements should be prepared giving effect to the events as if they had occurred as of the balance sheet date (use columnar format and usually only BS)
pro forma
the auditors' estimate of misstatements arising from situations in which they used audit sampling to draw conclusions concerning the populations (subtract out factual identified amounts)
projected misstatements
the securities act of 1933 extends the auditor's liability in connection with the registration of new securities with the SEC to the effective date of the _____ ______
registration statement
the date auditors grant the client permission to use the audit report is called the ____ _____ date
report release
However, even after completing normal audit procedures, the auditors are responsible for evaluating subsequent events that come to their attention prior to the ____ ____ date
report release
shortly after year-end, a client's major customer declared bankruptcy. As a result, a large A/R outstanding at year-end is not uncollectible. This subsequent event should
result in an adjustment to the fs if caused by a condition outstanding at year end
AICPA Statement of Position 94-6 requires that company's disclose certain significant _____ and ______
risks and uncertainties
considers only misstatement in current year
roll over approach
auditor's estimate of total misstatement has to be _______ less than a material amount for the auditors to issue an unmodified opinion
significantly
the most important expense accounts: 5
1. advertising 2. r&d 3. legal expense and professional fees 4. maintenance and repairs 5. rents and royalties
AICPA AU 725 provied guidance on supplementary info regarding
1. comparing info with accounting records 2. obtaining written representations from management 3. inquiry of management