Module 4-E
What is the maximum number of days in which a nonissuer's auditor should complete the assembly of the final audit file following the report release date?
60 days
Which of the following statements concerning material weaknesses and significant deficiencies is correct?
All material weaknesses are significant deficiencies.
Uncorrected misstatements should be documented in a manner that allows the auditor to:
All of the answer choices are correct.
In an audit of financial statements, which of the following would most likely be considered a known misstatement?
An unrecorded liability related to services rendered by a vendor during the period under audit
Which of the following is true regarding significant deficiencies?
Auditors must communicate them to the audit committee.
Which of the following factors should an auditor consider in making a judgment about whether an internal control deficiency is so significant that it is a significant deficiency?
Both I and II
An auditor has determined a materiality threshold of $100,000 for a client. The auditor has accumulated audit evidence that supports an allowance for bad debts in the range of $1.5 million to $1.8 million. The client recorded $800,000 as the allowance for bad debts and declines to record any additional allowance. What proposed adjustment will the auditor include in the summary of unadjusted differences?
Debit bad debt expense $700,000; credit allowance for bad debts $700,000.
Which of the following circumstances most likely would cause an auditor to suspect that material misstatements exist in a client's financial statements?
Differences between reconciliations of control accounts and subsidiary records are not investigated.
An auditor finds several errors in the financial statements that the client prefers not to correct. The auditor determines that the errors are not material in the aggregate. Which of the following actions by the auditor is most appropriate?
Document the errors in the summary of uncorrected errors, and document the conclusion that the errors do not cause the financial statements to be misstated.
Which of the following is the term used in financial statement audits to indicate unintentional misstatements of amount or disclosures?
Errors
Which of the following is an example of a likely misstatement in a financial statement audit?
Extrapolation of errors in a sample of inventory price testing
Which of the following is an example of a known misstatement in a financial statement audit?
Fixed asset addition in-transit was recorded in the wrong reporting period.
The types of misstatements that are relevant to the auditor's consideration of fraud include which of the following?
I and II
To what degree, if at all, is a significant deficiency related to a material weakness?
It is less severe than a material weakness.
Which of the following is required documentation when evaluating the summary of uncorrected misstatements at the end of an audit?
Levels of materiality applied, and how those considerations were determined
Which of the following auditing procedures most likely would provide assurance about a manufacturing entity's inventory valuation?
Testing the entity's computation of standard overhead rates
Which of the following qualitative factors would an auditor consider most relevant to the consideration of whether a discovered misstatement is material?
The audit team found a misstatement that, if recorded, affects the client's compliance with loan covenants.
An auditor has set the materiality level for the financial statements as a whole at $125,000. Which of the following misstatements would the auditor most likely consider material?
The client did not disclose $47500 of related party transactions in the footnotes.
A client decides not to make an auditor's proposed adjustments that collectively are not material and wants the auditor to issue the report based on the unadjusted numbers. Which of the following statements is correct regarding the financial statement presentation?
The financial statements are free from material misstatement, and no disclosure is required in the notes to the financial statements.
In evaluating the overall effect of audit findings on the auditor's report, the auditor should document all of the following except:
a summary of all uncorrected misstatements related to known and likely misstatements.
According to the PCAOB, each of the following statements is true with respect to the auditor's responsibility to communicate material weaknesses in internal control over financial reporting, except:
all such weaknesses must be communicated in writing to all stockholders.
In an audit of a nonissuer's financial statements, projected misstatement is:
an auditor's best estimate of misstatements in a population extrapolated from misstatements identified in an audit sample.
Each of the following is a type of factual misstatement, except:
differences between management and the auditor's judgment regarding estimates.
When issuing an unmodified opinion, the auditor who evaluates the audit findings should be satisfied that the:
estimate of the total likely misstatement is less than a material amount.
In a financial statement audit of a nonissuer, an auditor would consider a judgmental misstatement to be a misstatement that:
involves an estimate.
In evaluating the overall effect of audit findings on the auditor's report, the auditor should document all of the following except:
the auditor's conclusion as to whether undetected misstatements, individually or in aggregate, do or do not cause the financial statements to be materially misstated, and the basis for that conclusion.
When determining whether uncorrected misstatements are material, individually or in the aggregate, an auditor of a nonissuer would consider each of the following, except:
the cost of correcting the misstatements.
For uncorrected misstatements, the auditor should document all of the following, except:
the individual responsible for the misstatement.
