Final Exam Auditing

Lakukan tugas rumah & ujian kamu dengan baik sekarang menggunakan Quizwiz!

The auditors lack independence with respect to the audited entity.

In which of the following circumstances would a qualified opinion not be appropriate?

Express an unmodified opinion with an emphasis-of-matter paragraph describing the going-concern uncertainty.

Independent auditors must consider whether the entity has the ability to continue as a going concern. If a substantial doubt exists but disclosure is adequate and no other basis exists for modifying the report, the auditors would normally...

Beginning of the year under audit; date of the financial statements.

Interim testing normally occurs between the _____ and the _____.

.1. Probable (Likely) --> Reasonably Estimatable --> Record --> Can't Reasonably Estimate --> Disclose in F/S Notes 2. Reasonably Possible (< Likely, > Remote) --> Disclose in F/S Notes 3. Remote (Not Likely) --> Do Nothing

Likelihood of Loss (Likelihood of Liability)

1. Qualified 2. Unqualified 3. Disclaimer 4. Adverse

Match the type of opinion with the conclusion of each type of opinion. 1. Financial statements are fairly stated overall, but there are one or more material misstatements. 2.Financial statements are fairly stated overall. 3. No opinion. 4. Financial statements are not fairly stated overall.

Is required by the PCAOB for large public companies and may be performed by a CPA for nonpublic companies.

A report on an entity's internal control over financial reporting:

Less work than an audit but more work than a compilation.

A review service engagement involving unaudited financial statements involves...

1. Lack of Consistency - From one GAAP method to another (e.g. LIFO->FIFO) - Change in form of reporting entity - From a non-GAAP method to GAAP - Change in GAAP principle 2. Explanatory Paragraphs - Emphasis-of-Matter Paragraphs -> related to F/S (e.g. material related-party transactions, subsequent events, comparability items (change in estimate, error corrections not involving GAAP, etc.) - Other-Matter Paragraphs -> related to the audit

Additional Unqualified Opinions, w. Modified Wording

The auditor is providing negative assurance.

An accountant's report includes the phrase "We are not aware". This phrase indicates:

Obtaining responses to an attorney letter.

An important method used by auditors to learn of material contingencies is...

Improve the quality of information, or its context, for decision makers.

Assurance services are defined as independent professional services that:

Examinations, reviews, and agreed-upon procedures.

Attestation engagements include:

A violation of generally accepted accounting principles is sufficiently material and pervasive that a qualified opinion is not justified.

Auditors will issue an adverse opinion when...

February 7, 2018

If auditors are appointed on January 3, 2017, the date of the financial statements is December 31, 2017, the date of the auditors' report is February 7, 2018, and the audit report release date is March 3, 2018, what is the appropriate date of the written representations?

Does not express an opinion.

In a compilation agreement, the accountant:

Restricts the report to specified users.

In an agreed-upon procedures engagement, an accountant:

Management has made all adjustments identified during the review.

During a review the auditor is required to obtain written representations from management. Which of the following is not one of the required elements of the representation?

Statements that conform to accounting principles that are generally accepted.

Other Comprehensive Basis of Accounting (OCBOA) includes all of the following except:

Date of interim work; date of the auditors' report.

Roll-forward work normally occurs between the _____ and the _____.

Merging of corporations creating fewer audit opportunities.

The AICPA Assurance Services Executive Committee identified five megatrends that can affect public accounting firms' business. Which of the following is not one of the megatrends they identified?

Compilation service consists primarily of inquiries of company personnel and analytical procedures applied to financial data.

The accountant's standard report for a compilation service would not include a statement that:

The auditors cannot form an opinion on the fairness of presentation of the financial statements as a whole.

The issuance of a disclaimer of opinion generally indicates...

Assist auditors in evaluating the overall financial statement presentation.

The primary objective of analytical procedures used near the end of an audit is to...

Analytical procedures, inquiry, and obtaining a management representation letter.

The procedures used in a review engagement are:

1. Public: Board of Directors & Shareholders, Audit Committee 2. Private: Board of Directors, Shareholders, Management (whoever retained the auditor).

To whom is the audit report addressed?

They report on the subject matter or assertion that is the responsibility of another party. There are 3 levels/types of assurance: 1. Examination - similar to an audit - high assurance 2. Review - level: moderate (limited assurance) - type: negative assurance 3. Agreed-Upon Procedures - assurance depends on the procedures

What are attestation engagements?

- Engagement Letter - Understand Client's Business - Analytical Procedures - Client Inquiry - Client Written Representations

What are review procedures?

1. Management's Discussion & Analysis (MD&A) If inconsistent with F/S, revise opinion or add other-matter paragraph. 2. Required Supplementary Information (RSI) e.g. oil & gas reserve report - Limited procedures - Other-matter paragraph describing supplementary info, procedures, & any issues. - In extreme situations: disclaim.

What are some other reporting related topics regarding info. accompanying the F/S?

Information that became known to the auditors after the audit report date that, had it been known, may have caused an audit report revision.

What are subsequently discovered facts?

1. None 2. Audit filed w. F/S within 60-90 days after year-end with the SEC.

What are the audit requirements for (1) nonpublic entities and (2) public entities?

1. Events that provide additional evidence of conditions that existed @ F/S date. Example: Sell inventory for scrap / Lawsuit Concludes Treatment: Adjust F/S (do an adjustment/record) 2. Events that provide evidence of conditions that arose following the F/S date, but that F/S users should be aware of. Example: Merger / Uninsured Loss of Inventory Treatment: Disclose in the F/S Notes

What are the two types of subsequent events and how should they be reflected in F/S? Provide at least an example of each.

1. Rollover Method - Considers only current period income effect(s) of any uncorrected misstatements. 2. Iron Curtain Method - Considers the aggregate effect of the misstatements on the B/S. EX: $10,000 Performance Materiality Yr. 1 - 6,000 income incr. / Yr. 2 - 6,000 income incr. Rollover: Yr. 1 - OK / Yr. 2 - OK Iron Curtain: Yr. 1 - OK / Yr. 2 - Material Misstatement Yr. 1 - 12,000 income incr. / Yr. 2 - 11,000 income decr. Rollover: Yr. 1 - Material Misstatement / Yr. 2 - MM Iron Curtain: Yr. 1 - Material Misstatement / Yr. 2 - OK SAB 108 requires using both methods & propose adjustment if either method indicates the misstatements exceed performance materiality.

What are two methods of evaluating performance materiality of uncorrected misstatements. What does Staff Bulletin 108 require for evaluating performance materiality?

Possible (potential) current liability, of an unknown amount, that results from past actions, which will be resolved by some future event or events. (e.g. lawsuits or warrants)

What is a contingent liability?

An event that occurred between the date of the F/S and the audit report date.

What is a subsequent event?

A. Evaluate appropriateness of disclosure of event & can dual date to include it, if necessary. B. if info. would result in revision of audit report/F/S and users continue to rely on the F/S, the client must notify users that the F/S cannot be relied upon & new F/S issued. If mgmt. won't, auditors must notify SEC/users that rely on F/S.

What is auditor's responsibility for subsequently discovered facts if identified (A) before the audit report release date or (B) after audit report release date?

The date fieldwork is finished. (The date auditor has obtained sufficient, appropriate evidence)

What is the audit report date?

The systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested users.

What is the definition of auditing?

To impress upon management its primary responsibility for the financial statements.

What is the primary purpose of obtaining written representations?

When facts are discovered, can choose to dual date. Provides a way to modify F/S & report information discovered after the audit report date. Limits liability for events after the audit report date to the events specifically identified in the 2nd report date.

What is the purpose of dual-dating the audit report?

Need to understand the internal controls over the transaction regardless of the location of the control.

When a company uses a service organization to prepare its payroll, the company's auditors:

Disclaimer of opinion.

When an entity will not permit inquiry of outside legal counsel, the auditors' report on the entity's financial statements will ordinarily contain a(n)...

The auditors should disclaim an opinion and should state specifically that they are not independent.

When auditors lack independence, which of the following is true about the report on the entity's financial statements that should be issued?

Balance Sheet.

Which of the following account titles would not be appropriate for a company that prepared its financial statements using the tax basis of accounting?

Evaluating the reasonableness of management's estimates.

Which of the following best describes the auditors' responsibility with respect to management's estimates?

Management has appropriately documented the internal controls.

Which of the following is not a condition that must be met before an accountant can conduct an engagement concerning a nonpublic entity's internal control over financial reporting?

Management's opinion as to the effectiveness of its internal control over financial reporting.

Which of the following items would appear in written representations in the audit of a public entity but not a nonpublic entity?

Obtain a client representation letter from members of management.

Which of the following procedures should an accountant perform during an engagement to review the financial statements of a nonpublic entity?

Qualified opinion or disclaimer of opinion.

Which of the following reporting options is available if the client refuses to provide auditors with written representations?

Management's refusal to provide auditors with written representations.

Which of the following scope limitations would ordinarily be of most concern to the auditors?

Client

Which party should request a letter regarding litigation, claims, and assessments from the client's attorney?

Management

Who is responsible for an organization's financial statements?

Management

Who is responsible for the financial statements?


Set pelajaran terkait

Unit 3 Civil Liberties/Civil Rights

View Set

Oral Antihyperglycemic- Biguanide  

View Set

Abeka 7th grade history chapter 24

View Set

English 11 B: Cumulative Exam 86%

View Set

Academic Team Full Practice Set 2

View Set

23. Az ügyvédi tevékenység !

View Set

Professional Cooking - Chapter 12 "Potatoes"

View Set

Management 470 Final (All Quizzes)

View Set