Audit 4-6

what is the result of a client's refusal to permit inquiry of the attorney?

result in a disclaimer of opinion or withdraw from audit

What should one do when they have undistributed checks ?

returned to an independent party for follow up

Control procedures relating to the shipping department relate to what control "level"? aka entity, internal, etc

revenue

Where would one include the inquire of management and review loan agreements/minutes?

rights and obligations

when one is testing completeness in a sales transaction, what would they want to check?

sales invoices to shipping documents

what is the format (paragraphs) of a type 2 report for a service auditor?

scope service org responsibility service auditor responsibility inherent limitations description of test of controls opinion restricted use

what is the format (paragraph) in a service auditors report for a type 1 report?

scope service organization responsibilities service auditor responsibilites inherent risk factor other matter opinion restricted

An audit suspects that a client is fraudulently overstating revenue by creating fake sales. what would they do to identify it?

select sample of sales invoice and trace to the related shipping documents

what is the best way to test the existence assertion during audits of AR?

sending confirmations to customers

many entities use that to process payroll transactions?

service organizations

what should the auditor do if they believe that they found material misstatements in the opening balance of the FS?

set up a meeting with the predecessor auditor and client to discuss it

In GAGAS framework, what should one do with less than material findings?

should be communicated in writing to the appropriate officials

when one identifies an instance of noncompliance, what should the report of compliance do? what if they issued an adverse or disclaimer opinion?

should describe that noncompliance adverse or discalimer: report on noncompliance is allowed only when there is no compliance noted

how should one design review procedures for a review engagement?

should design analytical procedures and inquiry of management based on: - knowledge of industry - knowledge of client - risk that acct may unknowingly fail to modify accountant's review report

when one is performing an initial review of interim financial statements, what should they do?

should make inquiries of the predecessor auditor - if permitted, review the documentation

what should an auditor do when they come across financial statements that may be incomplete or inaccurate while performing a compilation engagement?

should obtain additional or revised information from the client - if the client refuses, they should withdraw

what should one report on governmental auditing standards? in reporting on financial audits

should report on internal control over financial reporting - description of the scope of the auditors testing of internal controls

when one is performing a report on a comparative FS, and all periods have been compiled or reviewed, what should they do?

should update the report on all periods

An auditor would most likely to identify a contingent liability by obtaining an:

standard bank confirmation

When a CPA examines a client's projected financial statements, the CPA's report should:

state that the CPA performed procedures to evaluate managements assumptions

what is managements responsibility relating to internal control with the mangement rep letter?

state their own assertion of internal control and their criteria used to evaluate the assertion affirms management didn't rely on the auditor's procedure as basis for assertion describes fraud resulting in material misstatement or fraud states whether there were significant changes in internal control since "as is" date of report

what is the content of a report for examination of prospective financial statements?

statement saying they're independent critiera against which the FS was measured practitioners responsibility to issue an opinion on statements examination was conducted in accordance with AICPA attestation standards

what is the process for determining what risks are "major risks"?

step 1 - define type A (greater than 750K spent) and type B (not that) step 2 - define high type A - material misstatements - weak internal control - questioned costs exceed 5% of total federal awards expended - audited within past 2 years step 3 - define high type B by professional judgement step 4 - get out the high type A and high type B

what is the conceptual framework for independence for GAGAS?

step 1: identify threats to independence step 2: evaluate significance of threats identified step 3: apply safeguards as ncessary

why do companies establish audit committees?

strengths the public sense of the independence of the auditor - if you're on the new york stock exchange, have to have an audit comittee

when one is auditing the PAYROLL account, and internal controls is STRONG, what procedures do they take? what about if it is WEAK?

strong - analytical procedures/valuation weak - completeness, existence, rights and obligations

what should one do if they become aware that fraud occurred?

such matters should be communicated to an appropriate level of management - should consider the impact of the matter on the compilation of review report

how does one test EXISTENCE in an inventory audit cycle?

take clients inventory report and compare to it to the clients prenumbered inventory tags take client inventory report and compare it to auditors test count

when auditing the INVENTORY cycle, how does one test completeness?

take the auditors test count and compare it to the clients inventory report take the clients prenumbered inventory tags and compare it to inventory report

how can one assess or get information about potential litigation?

talk to management review minutes of board obtain letter from clients attorney

what should one do if management refuses to give them a client letter during an interim review?

talk to management about it and see why not withdraw

In an integrated audit of a nonissuer, the responsibility of an auditor with regard to testing controls at a company with multiple business units is to

test controls over SPECIFIC risks at business units that are material to the company's consolidated FS

how can one test the completeness of the debt balance financing cycle?

test the bank statements with the financial statements

how can one test to ensure that items are stated at NRV in the balance sheet?

testing the aging in the AR balance analyze historical relations with write offs in comparison with sales and AR

If interim substantive procedures for an account identified no exceptions, which of the following would the auditor not perform on that account at year end?

tests of details for the entire year

in concluding on the effectiveness of controls of the FS audit, the auditor should consider the results of

tests performed as part of the internal control audit

what must one indicate in a GAGAS audit relating to deficiencies?

that either no weaknesses were found or that significant deficiencies were found

what is kiting fraud?

that is when you have cash in two places at once - you withdrawl from one bank and deposit it in the other, but no record of the withdrawl is shown in the first bank FOCUS ON BANK NOT BOOKS

what does the consistency assertion provide in an MD&A presentation?

that nonfinancial data has been accurately derived from related records

By tracing from the shipping document to the invoice, the audit confirms:

that shipments to customers were properly invoiced

what should an auditor do when they are reporting on a compilation engagement and the client asks them to omit substantially all disclosures?

that's fine as long as they indicate there is an omission or disclose it as long as it is not misleading

what should one document when they are addressing misstatements discovered in the audit?

the amount below which misstatements are clearly trivial all misstatements in audit and if they have been corrected conclusion about whether uncorrected misstatements are material and basis for that conclusion

who prepares the management rep letter? what is it on?

the auditor prepares the management rep letter - it is on the clients letterhead - signed by the client

who does the management rep letter protect?

the auditor!

if managements report fails to include one or more material weakness identified by the auditor,

the auditors report should state this and and should describe the omitted weaknesses - should also be communicated to those with governance

who should request inquiry of a client's lawyer?

the client management

who established the criteria in the Internal Control - Integrated Framework ?

the committee of sponsoring organizations of the treadway commission

When issuing letters for underwriters, commonly referred to as comfort letters, an accountant may provide negative assurance concerning:

the conformity of the entity's unaudited condensed interim Financial Info with GAAAP

if during the audit of internal control a deficiency is noted, the auditor should consider

the deficiency in determining the NET of substantial tests in the FS audit

when must the report be submitted for a single statement audit?

the earlier of: 30 days after the receipt of the audit report nine months after the end of the audit period

The auditor MAY provide negative assurance as long as:

the info is derived, directly or by analysis or computation, from the accounting records subject to IC capable of evaluation against reasonable criteria

when performing an agreed upon procedure engagement, who must agree on the procedures to be performed?

the practitioner and specified parties

if the client is the responsible party in an attestation agreement, and they do not provide the written assertion, what are the outcomes?

the practitioner should modify the report based on the scope limitation

what is the purpose of a compilation of the financial statements?

the proper assembling of the financial data based on the responsible parties assumptions

who sends the purchase order to the receiving department to let them know they can accept the goods?

the purchasing dept to the receiving dept - preferably don't include quantity

When there are material misstatements or deviations from the criteria of attestation requirements, what happens?

the report should be modified and the conclusion should be expressed directly on the subject matter

what is attestation risk?

the risk that the practitioner expresses an inappropriate opinion or conclusion when the subject matter or assertion is materially misstated

when one disposes of PP&E, what must be noted?

the serial number - reason for removing it

when testing completeness, generally, what should one compare?

the source documents to the GL

in forming an opinion on internal control, the audit should consider the results of

the tests of controls performed as part of the financial statement audit

who is the person in accounts payable who signs and mails checks? what else do they do?

the treasure - cancel the supporting documents once its paid

what does the separate report on compliance include?

the word "Independent" paragraph that it was audited with accordance of GAAS and date of audit report statement that audit was not directed primarily toward obtaining knowledge regarding compliance if there is or is not any compliance noted restricted use

when one adds an emphasis of matter paragraph, what must they include?

the words "substantial doubt" and "going concern"

what does it mean if something is "Impaired"?

there is a loss that is other than temporary, aka permanent loss

what should an accountant do when they are reporting on comparable financial statements, and the current year is being prepared and the previous one was compiled or reviewed?

there is no requirement to reference prior periods

when there is a management participation threat, what is the safe guard one uses?

there is none

what is the title for a standard compilation report?

there is none tricked ya

When reporting on a financial audit with governmental audit standards, what is the deal with internal control?

they do NOT issue an opinion on internal controls - requires a report on internal control and compliance only that describes scope of audit testing/findings

when one is performing an audit for a nonissuer, and they become aware of control deficiencies while performing audit, what must they do?

they have a responsibility of evaluating control deficiencies identified and in some cases report them

what must the auditor do for program specific audits?

they must contact the Inspector General of the applicable federal agency and obtain a current program-specific audit guide

what are the auditee's responsibilities in a single statement audit?

they must select the auditor must release the audit report

what should a CPA do if they are asked to give a comfort level but the person does not have a representation letter or a attorney opinion?

they should NOT provide negative assurance

when during a current engagement an accountant becomes aware of information that would have affected the report on the prior periods, what should they do?

they should add an other matters paragraph - date of original report - statement that prior period has changed - reason for change

If, during the preparation of the FS, the accountant assists management with significant judgements, what should the accountant do?

they should discuss with management those judgements so they understand and accept responsibility for them

what should an auditor do if they are requested to include an opinion on the comfort level regarding compliance of requirements adopted by the SEC?

they should give positive assurance

When a review of interim FS is included with a registration statement, what should the auditor do?

they should include a statement that the auditors involvements should clarify that the report is not considered to be a report or part of the registration statement

in a review engagement, when an accountant notices that there are departures from the applicable financial framework, what should they do?

they should recommend that the FS should be revised - if they are not revised, they should modify their report or should withdraw

how can one audit the equity balance and transactions for the completeness assertion?

third party confirmations or stock certificates

what is benchmarking of automated controls? when can it be used

this is when one tests the the controls and they determine that they are using AUTOMATED controls, and that they HAVENT CHANGED from the previous year, and that they were effective before - therefore, do not have to reproduce the testing the following year IF LOW RISK

If the auditor determines that the required disclosures for one or more material weakness has not been included in the managements report,

this should be stated in the auditors report

who is the auditor supposed to communicate significant matters to?

those charged with governance

During a review engagement, the accountant has inquiries that should be addressed to appropriate individuals. Who are these individuals? what questions should they ask?

those who are INTERNAL, inside the company - changes in business activities - material subsequent events - status of uncorrected misstatements

who does the term "those charged with governance" refer to?

those who oversee the obligations and strategic direction of an entity - includes board of directors and audit comittee

who are the ones who SSARS applies to? statements on standards for accounting and review services

those who use unaudited FS for nonissuers

What are the reporting requirements for an agreed upon procedure? aka what must CPA document

title saying that they're independent identification of specified parties disclaimer of responsibility stated procedure and results of it statement saying they are not issuing an opinion

when testing controls in an integrated audit, what should the auditor mainly be testing for?

to ensure that the DESIGN of the controls is designed to meet the control objective to ensure that it is OPERATING effectively, including being performed by a qualified person

what is the point of having a "cutoff" test in auditing sales transactions? when should an auditor be on the look out for possible fraud?

to ensure the sales were recorded in the proper period - should look right before or right after year end

what are the responsibilities of the auditor in a single statement audit?

to express an opinion on FS and on the schedule of federal expenditures report on scope of testing of internal controls and compliance

what is the accountants responsibility in a SSARS engagement?

to have knowledge of the accounting principles and practices used

Why do auditors sometimes examine the repairs and maintenance account when auditing the PP&E balance?

to locate items that should have been capitalized - test completeness of asset additions

what is the purpose of a examination of prospective FS?

to make sure they are presented in accordance with AICPA guidelines to ensure underlying assumptions provide a reasonable basis for prospective statements

what is the objective of the accountant when performing a review?

to obtain limited assurance as a basis for reporting whether the accountant is aware of any material modifications that should be made to the FS

what is the purpose of evaluating the practitioners agreed upon procedures?

to present specific findings to assist users in evaluating an entity's compliance with specific procedures or internal control

what are the objectives of a single statement audit?

to provide an audit of the financial statements and reporting on a separate schedule of expenditures of federal awards compliance audit of federal awards

what is a service auditor's responsibility with regard to other information presented in a document containing management's description of its systems and the service auditors report?

to read the other information in order to identify material inconsistencies or misstatements

One way to determine rights and obligations of items when dealing with PP&E is:

to talk to BOD or look at minutes to see if fixed assets have been pledged as collateral

how does one, generally, test existence?

trace from journal to the source document

how are trading securities classified? available for sale? held to maturity?

trading - current, in NI afs - current/LT, in OCI HTM - current/LT, not shown anywhere available for sale has levels 1 2 and 3

where would one control the mailing of the check and remittance advice in an accounts payable process?

treasury (cash disbursements) department

A bank confirmation slip should be sent to all the banks the business did business with. T/F

true

A comfort letter is restricted. T/F

true

A member can have multiple roles and be involved in different conceptual frameworks. T/F

true

A member does not have to be independent to report on consulting services. T/F

true

A practitioner who is engaged to examine an entity's compliance with requirements of specific rules in accordance with SSAE should consider control risk. T/F

true

A service organization will generally have an auditor perform an attestation examination engagement to report on the controls of the service organization that are relevant to the users entities internal control over financial reporting. T/F

true

A written assertion is generally obtained in examination, review, and agreed upon procedure engagements. T/F

true

An accountant can advertise in a manner that is not misleading for them. T/F

true

An accountant may disclose their clients name as long as it does not suggest the client may be experiencing financial difficulties. T/F

true

An accountant should include on the face of the FS for a preparation engagement a description of the financial reporting framework. TF

true

An audit must be planned to support a low assessed level of control risk of noncompliance for major programs. T/F

true

An auditor has a responsibility in obtaining sufficient appropriate audit evidence about both the opening and closing balances. T/F

true

An auditor should not provide negative assurance in a financial forecast unless they provided an examination. T/F

true

An auditor should report all significant deficiencies and material weaknesses in internal control in GAGAS. T/F

true

An error in recording amortization of the excess of the investors cost over the investments underlying book value can cause a lower than expected return on equity method investment. T/F

true

Auditor should communicate on a timely matter with appropriate level of management all misstatements accumulated during audit. T/F

true

Auditors are required to tell those charged with governance disagreements with management, even if they are resolved. T/F

true

Equity method accounting are accounted separately from investments classified as trading or available for sale. T/F

true

GAGAS requires a written report on the auditor's understanding of internal control and the assessment of control risk in all audits. T/F

true

If one issues a report of compliance with the FS, the entire FS are restricted. T/F

true

In laws are not considered to be close relatives. T/F

true

In order to issue negative assurance, one must have the regulatory requirements or the contractual agreement been audited. T/F

true

Independence is impaired if a member makes management decisions for an attestation client. T/F

true

Independence is not required for compilations and non-attestation services. T/F

true

Lawyers can limit their responses to matter of which they have given substantial attention. T/F

true

One can restrict the use of a compiled or review report. T/F

true

One is required to audit the inventory cycle at both the beginning and ending of the year. T/F

true

One must ensure that the inventory is not damaged and not obsolete when performing an inventory cycle audit. T/F

true

Paid vouchers are returned to the accounting department for posting of the payment and filing of the documents. T/F

true

The accountant must be independent in order to perform a review of the financial statements in accordance with SSARS. T/F

true

The auditor should document the basis for any decision not to seek direct communication with legal counsil. T/F

true

The same auditor MUST perform the audit of the financial statements and the audit on the effectiveness of internal control. T/F

true

There should be a presumption in every audit that there is the risk of material misstatements due to revenue recognition. T/F

true

Two-way communication is required between the auditor and those charged with governance. T/F

true

When a return is approved, the sales return is recorded and related outstanding receivable is eliminated. T/F

true

independence must be maintained by covered members. T/F

true

one issues an opinion on compliance in a single audit report. T/F

true

when evaluating audit findings, the auditor should consider any potential biases in managements judgments about the amounts and disclosures in FS. T/F

true

The audit should control the mailing of independent confirmations.T/F

true - controllers CANNOT do this

Confirmation of accounts receivable is a required generally accounting principal. T/F

true - only not done when it would be ineffective, receivables are immaterial, and inherent and control risks are very low

one can report on a compliance engagement, even if they are not independent. T/F

true - they must disclose they are not independent

Nonaudit services can impair independence of an issuer client. T/F

true ex: bookkeeping, actuarial services, etc

Auditors are not required to provide comfort letters. T/F

true, they are not

how can one safeguard marketable securities when an independent trust agent is not employeed?

two company officials have joint control of marketable securities in a bank safe deposit box

over what time period is a type 1 service auditor asserting over? what about type 2?

type 1 - as of a specified date type 2 - over a specified period of time

how can a type 1 audit report help a user auditor? what about a type 2?

type 1 - help gain an understanding of controls type 2 - help gain understanding of operating effectiveness of controls + design and implementation

what does one have to get an understanding of when performing a review engagement? what does an accountant NOT have to get an understanding of?

understand: - client's business and industry DON'T need to understand: - fraud risk - internal control

when preparing an engagement under SSARS, what should the accountant have?

understanding of SSARS professional judgement be able to justify departures

what would an auditor do when the attorneys refuse to respond to the auditor? where they've given substantial attention to litigation matters

unmodified

When an auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern, what are the options that they have for opinions on it?

unmodified with an emphasis of matter paragraph disclaimer

What kind of opinion must an auditor issue on the financial statements to give negative assurance ?

unqualified or qualified, nothing less than qualified

When updating a financial report and they are presenting them with comparative financial statements, what should they do?

update the report on all periods presented

In order to maintain accurate perpetual inventory records, one can:

use periodic inventory counts to adjust perpetual records

What are pro forma financial statements?

used to demonstrate the effect of future or hypothetical events by showing how it might have affected the historical financials if it occurred during the period covered - based on managements assumptions

Testing the entity's computation of standard overhead rates generally provides assurance about:

valuation

when auditing the investment cycle, what stage or attribute does one determine if there has been any permanent impairment

valuation and allocation

for effective internal control, the accounts payable department generally should establish agreement of:

vendor invoice to purchase order to receiving report

In what department would one determine the mathematical accuracy of the vendors invoice? in determining payables

vouchers payable department

when one is testing for existence and occurrence of the sales transactions, what do they go off of?

vouching - sales journal to invoice

when is one required to have a single statement audit?

when an entity expend total federal assistance equal to $750,000 in a fiscal year

when should one communicate deficiencies in internal control/fraud? for GAGAS

when it has a material affect on the FS

When does one include an engagement letter?

when its an SSARS engagement - preparation, compilation, review

When should a practitioner not prepare prospective financial information?

when its info that: excludes the summary of significant assumptions when its a projection, it doesn't say its hypothetical or description of limitations on usefulness

when should one report noncompliance to outside parties? in GAGAS

when management fails to: satisfy a legal or regulatory requirement to do so take time and appropriate steps to respond to it

when are issuers required to have an integrated audit?

when nonaffiliates own $75 million or more of common equity

what are "questioned costs"?

when one is given a compliance task and there are questions of an amount greater than $25,000 there are questioned costs that are required to be reported

when does SSARS not apply?

when preparing one/few adjusting journal entries preparing tax returns bookkeeping

when should one modify their review report in a review engagement?

when summary of significant accounting policies is not included when a description of a special purpose framework is not included when there is not an adequate disclosure of how the framework differs from GAAP

when is a nonissuer available to do a review of the INTERIM financial statements?

when the latest financial statements have been audited if the auditor has been engaged to audit the entity's current year FS or has audited the latest annual FS same framework is used for interim FS

when would one give a qualified or adverse opinion when there are problems with the opening balance of FS?

when the opening balances contain a misstatement that materially effects current period - current period accounting policies are not consistently applied - change in accounting policy is not properly accounted for

what are "agreed upon procedures"?

when the practitioner is engaged by a client to issue a report of findings based on specific agreed upon procedures

when can an auditor comment on subsequent changes? aka when can they provide negative assurance

when the subsequent event occurred less than 135 days ago if it happened after 135 days, auditor is limited to reporting procedures performed and findings obtained

when is one allowed to report with SSARS and a speciality framework?

when there is a description of the specialty purpose framework disclosures similar to those required by GAAP

when is an internal control determined to not be operating effectively?

when they have a material weakness

when would one use derivatives in the investment cycle?

when they want to hedge against risks

when should an auditor not comment or provide assurance?

when they're dealing with market risk sensitive instruments qualitative disclosures information subject to legal interpretations

when do you include an inherent limitations paragraph? in relation to internal control

when you are REPORTING on internal control for nonissuers and issuers both

what should the accountant do if they do not receive a management rep letter?

withdraw from the engagement

what should one do when providing a comfort letter and there has not been a review performed?

write down the list of procedures performed and their results in order to get negative assurance

how does one communicate significant deficiencies? what about material weaknesses?

written to those charged with governance AND to management for BOTH

Does an auditor need to have an understanding of the the internal control for a comfort letter?

yes

Is independence impaired if a covered member or his immediate family has a loan to or from a client?

yes

can an auditor solicit information from those charged with governance?

yes

can one perform examination engagements for compliance?

yes

should one include arrangements to be made with the predecessor auditor in the engagement letter?

yes

Can one restrict any type of report?

yes - Assertions though solely assertions are not restricted

is a service auditors opinion restricted?

yes - just used for management of service company

Accounting Principles Rule - can one ever have a departure from GAAP in regards to AICPA?

yes if they can justify it

Can a firm provide both audit and tax services to the same client?

yes, as long as it is preapproved by the audit committee

can a audit team include a person who worked at the client at a point in time?

yes, as long as that person waited a year from their employement release "cool off period"

Should an auditor discuss matters with management before going to those charged with governance?

yes, as long as the situation does not involve management

Can one use the work of others in an integrated audit?

yes, as long as they are competent and objective - if there is high risk, maybe don't use the work of others as much

If all partners but one in a firm have died, can the remaining partner still use the name?

yes, for 2 years then have to switch - can't imply you're bigger than you actually are

can an auditor ever observe inventory before ore after year end?

yes, if the client keeps a well maintained perpetual inventory system - have to obtain evidence about anything that occured in the GAAP period between when audited and end of year

can an auditor report on a previously reported internal control weakness?

yes, if the material weaknesses are subsequently eliminated - all on a voluntary engagement auditors testing is solely restricted to those controls where they are eliminating the material weaknesses

does one acknowledge subsequent events in the management rep letter?

yes, stating that everything that requires adjustments or disclosure has been adjusted or disclosed

what is lapping fraud?

you steal customer A's money, then you get customer B's money and apply it to A's account, then get C's money and apply it to B's account, and so on basically you're taking a customers money for yourself and paying off their balance with someone elses money

which of the following statements extracted from a client's lawyer's letters concerning litigation, claims, and assessments most likely would cause the auditor to request clarification?

" I believe the plaintiff will have problems establishing any liability"

what must one include on every page in a compliance engagement, if any?

"see Accountant's compilation report"

what must an accountant include in a review engagement on each page?

"see independent accountants review report"

what are the auditor requirements for an integrated audit? for issuers and nonissuers both

- should plan and perform audit to complete objective of both IS and FS engagment - use same criteria that management uses to evaluate - test of controls should be designed to provide sufficient evidence to support both opinion on internal control and control risk assessment needed

what are the indicators of a material weakness?

-senior mgt identifies fraud (doesn't have to be material) -restate prior F/S to reflect correction of material misstatement (means internal controls were not preventive and detective) -auditor identifies material misstatement in F/S -ineffective oversight by audit committee

how does one do a JE for periodic?

1 JE at time cash sale calculate COGS at end: cogs inventory

when one is auditing accounts receivable, and they are valuating/allocating results of confirmations, what do they go off of? in order

1. AR aging to the GL

what is the overall procedure for a compliance examination?

1. Perform a risk assessment 2. design responses to risk assessment 3. determine if supplementary audit requirements exist 4. obtain written representations from management 5. prepare reports 6. prepare documents

what are the procedures of a service auditor ?

1. assess suitability of criteria 2. obtain an understanding of the service orgs system 3. obtain evidence regarding managements description 4. obtain evidence regarding design of controls 5. obtain evidence regarding operation effectiveness (TYPE 2 ONLY) 6. obtain written representation from management 7. consider subsequent events

when would negative confirmations be sent?

1. auditing large number of small account balances 2. control risk is low 3. no reason to suspect they'll be ignored

when one receives cash receipts, who are they distributed to?

1. cashier for a deposit slip 2. AR department: entered into records 3. accounting department: enter into control account

When control deficiencies are noted, the auditor should

1. consider compensating controls 2. decide whether there is a significant deficiency or material weakness 3. determine potential misstatements that could occur 4. design substantive tests

when can one disclose communication regarding confidential info?

1. court subpoena 2. quality review board 3. ethics divison of AIPCA

if a predecessor auditor wishes to reissue their review or their compilation, what should they do?

1. decide if old report is still appropriate 2. these procedures - read the new FS - compare prior period statements w/ new ones - obtain a letter from successor accountant

what are the auditors responsibilities when evaluating estimates?

1. determine the level of estimation uncertainty 2. assess managements written policies 3. verify all material estimates have been developed 4. determine estimates are possible 5. conform with gaap

what are the documents required when preparing a preparation engagement?

1. engagement letter 2. copy of FS prepared 3. significant findings

what are the documentation requirements for a going concern?

1. factors that lead to that assumption 2. mitigating factors 3. auditors conclusion whether it remains 4. audit work performed to evaluate plan 5. effect of auditor conclusion

how is independency impaired by employment relationships?

1. individual who was formally an employee is on engagement team 2. has a close relative or immediate family member be a KEY EMPLOYEE 3. person leaves the acct firm and takes a key employee position at the client's firm 4. if they talk to the client about assuming a position

what are the considerations regarding hedging activities?

1. management designated it to be a hedge 2. documented the hedging 3. management established expectation hedge will be effective

what is included in a type 2 service auditor report?

1. managements description of the organization system 2. management rep letter stating - management presented fairly the design and implementation of the organization system - controls are suitably designed for the objective - internal controls are operating EFFECTIVELY 3. auditors opinion on managements assertoin ALL THROUGHOUT A SPECIFIED PERIOD OF TIME

what should a type 1 service report contain?

1. managements description of the service org system 2. written management rep letter: - management description of service org system fairly presents the design and implementation of the system as of a SPECIFIED DATE - controls related to control objectives outlined in description - suitably designed to achieve control objectives as SPECIFIED DATE 3. auditor opinion on managements assertions

what are the objectives of a service auditor?

1. obtain reasonable assurance that - managements description of service org's system fairly presents the system - controls related to the objectives were suitably designed - WHEN INCLUDED IN SCOPE OF AUDIT the internal controls operated effectively to provide reasonable assurance that control objectives were achieved 2. report in accordance with service auditor findings

what is the order of internal controls for revenue cycle - sales?

1. preparation of sales order - receipt of purchase order, a SERIALLY NUMBERED sales order is prepared 2. credit approval - copy of approved sales order is sent to shipping 3. shipping - SERIALLY NUMBERED bill of lading is prepared 4. billing - prepares a SERIALLY NUMBERED sales invoice 5. Accounting - put in GL

what does the accounting department compare the receiving report to when it gets a receiving report? to confirm quantity

1. purchase order 2. vendors invoice

what are the internal controls regarding the expenditure process? when wanting to buy something

1. purchase requisition - properly approved and serially numbered 2. purchase orders - they first put out bids to ensure best price - indicates description, quantity, and related info 3. receipt of goods or service - copy of PO is an ok to accept goods - should NOT know quantity preferably

what are the audit procedures in order to obtain an understanding of the opening balances?

1. read the most recent financial statements and predecessors audit report 2. request management to to authorize the predecessor auditor to allow review of their documentation 3. perform audit procedures on current period transactions that provide evidence about opening balances or consistency

who gets a copy of the purchase order when one is placed?

1. requisition office 2. vendor 3. receiving department 4. accounting department

how does an audit determine the reasonablenesss of an estimate? the accounting procedures

1. review and test procedures used by management 2. develop independent estimate of the item for comparative purposes 3. review subsequent events and transactions

what are the items that the billing department matches to ensure shippments are based on valid orders?

1. shipping documents 2. sales order 3. sales invoice

when are additional paragraphs needed in a compilation engagement?

1. special purpose framework is being used 2. disclosures are omitted 3. accountant is not independent 4. known departures

when one is communicating a significant deficiency and a material weakness, what are they including?

1. the definition 2. a description of the weakness and their potential effects - does not need to be quantified 3. sufficient info to understand context 4. restriction regarding use of the communication

for actual or potential litigation, claims, and assessments, the auditor should obtain audit evidence relevant to:

1. the period in which the underlying cause for legal action occurred 2. degree of probability of an unfavorable outcome 3. range of loss

when would positive confirmations be sent?

1. there are large individual errors 2. expected errors or items in dispute 3. when internal control is weak

How do attestation standards differ from GAAS?

1. there are no historical financial statements involved 2. it doesn't have any reference to GAAP

what is the purpose of the management rep letter?

1. to confirm representations that have been explicitly or implicitly given to the auditor 2. indicate and document the continuing appropriateness of such representations 3. reduce possibility of misunderstanding

when testing the fair value measurement and disclosure of an entity's fair value measurements, what do they do?

1. verify quoted market prices 2. managements significant assumptions 3. evaluate whether valuation model is appropriate

the PCAOB consists of :

2 CPA's and 3 non CPA's

how long are non lead and concuring partners subject to sit out of a time out period for an audit?

2 years for non 5 years for yes

what does the conceptual framework for the AICPA code of professional conduct INDEPENDENCE do?

3 Steps 1. identify threats to compliance with the fundamental principles 2. evaluate the significance of the threat 3. apply safeguards to eliminate threats

what are the documents that an auditor is required to include in a single statement audit?

5 documents 1. financial statements 2. schedule of expenditures of federal assistance 3. GAGAS 4. single audit statement 5. significant findings and questioned costs

how long must an audit engagement partner stay off an engagement for?

5 years total so on 5 years, off 5 years DOES NOT APPLY TO SMALL FIRMS

When performing an integrated audit, when must one communicate to management/those with gov the deficiencies noted? for a NONISSUER

60 days after issue date for CONTROL DEFICIENCIES by issue date for significant deficiencies & material weaknesses

how long can "other audit partners" stay on an audit engagement in a public company?

7 years

what is a control deficiency?

A control deficiency exists when the design or operation of a control does not allow mgmt or employees, in the normal course of performing their assigned functions, to prevent or detect/correct misstatements on a timely basis.

what is a significant deficiency?

A deficiency, or combination of deficiencies, in I/C over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting.

what are the audit procedures to determine evidence to see if there is a going concern?

ADMITS - admit evidence to prove going concern Analytical procedures Debt compliance/covenents Minutes of the board of directors Inquiry of legal counsil Third parties for necessary financial info Subsequent event evalutions

when completing a direct borrowing from notes payable, who does one have to gain authorization from, if anyone?

BOD

who must authorize the stock issuances, dividend declarations, and treasury stock purchases?

BOD - should be in the minutes

when one is in the process of buying PP&E, who are the ones who give the OK?

Board of Directors

what are the common concepts of attestation standards?

CAPE CORP COMPLIANCE with the standards ACCEPTANCE and continuance are satisfactory PRECONDITIONS for an attestation engagemnet ENGAGEMENT documentation standards acceptance of CHANGE using the work of an OTHER practitioner is allowed RESPONSIBILITY for quality control PROFESSIONAL skepticism

what are the elements of "developing a finding" in governmental auditing standards?

CCCE criteria: define expectations of a program or operations condition: situation or status that exists Cause: condition Effect or potential effect: clear logical link between condition and deviation from criteria

who signs the management rep letter?

CEO or CFO

What are attestation services?

CPA expresses a conclusion about an assertion - Compliance with laws NOT considered a Consulting engagement Independence Required OTHER THAN HISTORICAL FINANCIAL STATEMENTS

what is the purpose of an audit of the effectiveness of an entity's internal control? purpose of an auditors consideration of internal control in an audit of FS?

Effectiveness of IC - to give an opinion if controls are operating effectively consideration - enable the auditor to plan the audit and determine the NET of tests to be performed

what is allowed for prospective financial statements? in terms of report types for attestation services

Examination, agreed on procedures, preparations, and compliance

One must provide an opinion on compliance in a yellow book report. T/F

FALSE

Independence is not impaired by a suit for an immaterial dollar amount for work related to an attestation service. T/F

FALSE - it is bc attestation service - this would be true if it was UNRELATED to attestation engagemnet

One would inquire the attorney of the contingent liabilities in a review engagement. T/F

FALSE inquiry of INTERNAL personnel

The auditors responsibility is to consider the internal control of financial reporting as a basis for determining audit procedures and to ensure effectiveness of them for nonissuers. T/F

FALSE not effectiveness of them, that's not their job for NONissuers - NOT an integrated audit

what is the reasonable period of time one must determine if there is a going concern if they are using FASB framework? what about GASB? other?

FASB - issue date + 1 year GASB - FS date + 1 year any other - issue date + 1 year

One is required to follow SSARS when drafting financial statement notes for the client. t/f

False bc not preparation, compilation, or review of FS

A CPA's independence would be compromised if they accepted any gift from a client. T/F

False, a token gift

One must include a time frame in the "emphasis of matter" paragraph. T/F

False, do not have to

A comfort letter updates the opinion on previously issued FS. T/F

False, does not - covers the period from date of the last auditors report to the effective date of the registration

A review of prospective financial statements is allowed. T/F

False, it is not bc they didn't happen yet

Management representation letters are not required for SSARS engagements bc they are not audits. T/F

False, they do for ALL SSARS engagements

In a compilation engagement, one issues assurance. T/F

False, they don't - just help prepare financial statements and all that - attestation service

Confirmations have absolute assurance. T'F

False, they have reasonable - its easy for the customer to lie and say they owe less than they really do

when an auditor communicates to management any control deficiencies, they only have to inform management. t/f

False, they have to inform governance of any communication that they told mgmt about this

Significant deficiencies still allow an auditor to perform a review. T/F

False, they make it impractible

When can one use a partial presentation FS?

For limited use, not for general - should include description that its for limited use

when one is testing the existence of PPE for equipment balance, what do they compare?

GL to the fixed asset invoices, examing actual asset

what are the conditions that must exist for agreed upon procedures?

I AM SURE i can do this agreed upon procedure Independent AGREEMENT of procedures Measurability and consistency - whenever someone does it they get the same answer every time Sufficiency of the procedure - specified parties take responsibility Use of the report is restricted Responsibility for subject matter - either management or third party Engagement to perform agreed upon procedures for PROSPECTIVE FS

What are the contents of the compilation report?

ID of entity and prospective financial info management is responsible for the prospective FS info performed compilation in regards with SSARS does not express an opinion NO RESPONSIBILITY TO UPDATE

Management's written representation to the auditor in connection with a governmental audit would most likely include

Identification of management's interpretation of compliance requirements that are subject to different interpretations

If all of those charged w/ governance are not involved w/ managing the entity, what additional communications to those charged w/ governance should be made?

MARS material, corrected misstatement accountants that mgmt consulted with representation of managements requested significant issues or findings that were discusessed w/ mgmt

what can an auditor do when it detects material misstatements? in regards of what it can make management do

May request that management examine and perform procedures to determine amount of misstatements - auditor may request that management record an adjustment to correct

what is a preparation under SSARS? what kind of "service" is that, if any? independent?

Prepare financial statements in accordance with a specified framework - no audit or review services - no assurance and no attestation services - do not need be independent

Reporting standards for financial audits under GAGAS differ from reporting under GAAS in that GAGAS requires the auditor to:

Present the results of the auditors test of controls

what is a material weakness?

Reasonable possibility exists that a material misstatement in Financial Statements would not be found- and has more than a remote chance of occurrence.

what standards apply when an accountant is providing audit engagements? preparation, complilation, and review engagements? what about attestation engagements?

SAS (statement on auditing standards) prep - SSARS attestation - SSAE

what is the title of the "review" engagement under SAS? SSARS? PCAOB?

SAS/SSARS: independent auditors review report PCAOB: report of the independent registered public accounting firm

in the mangement rep letter, what does management give representations about?

SIR - MDS financial Statements completeness of Information Recognition Measurement Disclosures Subsequent events

what MUST be communicated to those charged with governance?

SPAM PODIUM selection of changes in accounting policies process used by management in formulating estimates adequacy of FS disclosures management judgements that are significant planned scope and timing other issues significant difficulties encountered impairment due to indepdence uncorrect misstatements/effects management disagreement

what type of standard is prospective financial statements? (SSAE, SSARS, etc)

SSAE & SSARS - examination and agreed upon procedures

what type of standard is proforma financial statements? (SSAE, SSARS, etc)

SSAE & SSARS - examination and review

what kind of service are service organizations? (SSAE, SSARS, etc)

SSAE only - examination

what kind of standard is Md&a? (SSAE, SSARS, etc)

SSAE only - examination and review

what kind of standards is used when one is performing a compliance test in connection with audited financial statements? what kind of assurance is provided?

SSAE, negative assurance

when one is performing agreed upon procedures on compliance, what kind of standards does that apply with? what kind of assurance is provided?

SSAE, no assurance

when one is performing an examination, what kind of standards apply? what kind of assurance is given?

SSAE, reasonable assurance

Interim FS must include that they are unaudited on every page. T/F

TRUE - if this is not there, they should disclaim an opinion

Acknowledgement of management's responsibility for design, implementation, and maintenance of internal controls to prevent and detect fraud is a part of the management rep letter. T/F

True

Actual or threatened litigation may impair independence, regardless of who is the plaintiff and who is the defendant. T/F

True

All litigation claims, known or possible, is included in Management Rep Letter. t/f

True

An auditor can issue a separate report or a combined report when they are reporting on internal control. T/F

True

The accountant should clearly state that the reports from compilation and reviews are intended to be used for those identified parties. T/F

True

The auditor should obtain additional representations from management regarding issues specific to the entity's FS. T/F

True

what are the review requirements for an auditor who is performing a review engagement?

ULIARCPA Understandability with client Learn or obtain knowledge about entity's business Inquiry of appropriate individuals Analytical Procedures should be performed Review - other procedures should be performed Client representation letter should be obtained from mgmt Professional judgement should be used Accountant should communicate results

how often should the audit committee communicate to those charged with governance?

WITHOUT management, at least once a year

Is independence required for an examination of prospective FS?

Yes bc its an attestation - must have evidence too

Are uncorrected misstatements included in the management rep letter?

Yes, it states that effects of uncorrected misstatements are immaterial - summary is included or attached

What are attest engagements defined as?

a CPA is engaged to issue or does issue an examination or procedures report on subject matter that is the responsibility of another party, AS WELL AS ENGAGEMENTS RELATED TO PROSPECTIVE FINANCIAL STATEMENTS - NOT HISTORICAL

what is the biggest difference between a preparation engagement and a compilation engagement?

a compilation engagement issues a report while preparation does not

A report on internal control over compliance will include what regarding internal control?

a disclaimer on internal control regarding compliance

what is a professional code of conduct?

a distinguishing mark of a profession that accepts a high degree of responsibility toward the public

what is a comfort letter?

a letter from a CPA to an underwriter or a requesting party that provides assurance on the unaudited FS

how does title 2 of the code of federal regulations define a subrecipient?

a nonfederal entity that expends federal awards received from another entity to carry out a federal program

what does an "examination" conclusion expressed by the practitioner fall into?

a positive opinion, high level of assurance

what should one do if they do not receive a written assertion in an attestation agreement, and the client is NOT the responsible party?

a report may be issued as long as appropriate procedures are followed - form of the report varies and its use should be restricted

what kind of attestation engagement would a practitioner provide limited assurance about possible significant affects?

a review

what kind of approach does one take in selecting which tests of controls to test?

a top down approach start with financial statement entity level, then go to transaction accounts, then assertions

what is one of the most effective ways to detect misstatement in a test of controls?

a walk through

when a report is issued on the assertion itself, what must an auditor do?

a written assertion is generally obtained

which of the following objectives is achieved when an auditor decides to employ classical variable sampling? a. determine the inventory quantities on hand b. to determine the completeness of billing transactions c. determine the reliability of voucher processing d. determine efficiency of payroll system

a. inventory quantities on hand

An auditor tests an entity's control of obtaining credit approval before shipping goods to customers in support of management's financial statement assertion of: a. Valuation and allocation. b. Completeness. c. Existence. d. Rights and obligations.

a. valuation and allocation

An auditor testing long-term investments would ordinarily use substantive analytical procedures as the primary audit evidence to support the reasonableness of the A. Valuation of marketable equity securities. B. Classification of gains and losses on the disposal of securities. C. Completeness of recorded investment income. D. Existence and ownership of investments.

a. valuation of marketable equity securities

what affects whether earnings per share gets affected?

about of debits to the income statement vs the amount if credits to the income statement - if the amount of debits are higher, it decreases it

During a confirmation of accounts receivable, an auditor receives a conformation via the fax. what should the auditor do?

accept confirmation but verify the source and content through a telephone call

what are managements responsibility in an integrated audit? NONISSUERS only

accept responsibility for internal control evaluate the effectiveness of IC Support their evaluation with appropriate audit evidence provide a written assessment about effectiveness

what gives the greatest assurance that securities held as investments are safeguarded?

access to securities require the signatures and presence of two designated officials

If reporting on the assertion, it should;

accompany the practitioners report or the assertion should be clearly stated in the report

when an accountant makes reference to other accountants, where do they do this?

accountants responsibility paragraph

who compares the receiving report with the purchase order and vendor invoice to confirm quantity and price? in a AP transaction

accounts payable

what must one include in a written representation letter from management in an integrated audit?

acknowledge its responsibility for the effectiveness of IC states managements assessment affirms that mgmt did not rely on auditors procedures for assessment states management disclosed all deficiencies describes fraud resulting in MS

what are managements responsibilities in an integrated audit? for ISSUERS only

acknowlege their responsibility for the effectiveness of internal controls contain the assessment of internal controls

what should an accountant do when they determine that there are departures from the applicable financial reporting framework during a compilation audit?

add a disclosure about this departure - if they feel that a disclosure is inadequate, they should withdraw

when an accountant believes that a report modification should take place, how should they modify the report?

adding a separate paragraph disclosing the departure - paragraph should appear after accountant's conclusion paragraph "known departures from ______"

after obtaining an understanding of internal control and performing risk assessment procedures, an auditor decided not to perform tests of controls. the auditor most likely conlcuded that:

additional evidence to support a reduction in control risk was not cost beneficial to obtain

when management uses the going concern basis to prepare their financial statements but this framework was inappropriate in the auditors opinion, what kind of opinion should they give?

adverse opinion

what should the documentation of uncorrected misstatements include?

aggregate effect on the FS evaluation of whether materiality levels hav been exceeded effect of uncorrected misstatements on key ratios or trend

how can one ensure completeness of accounts payable?

agree the AP listings to the GL perform a search for unrecorded liabilities

what are the additional requirements for issuers in relation to communication with those charged with governance?

all critical accounting policies all material alternative GAAP treatments provide a draft of the audit report to audit committee - if no audit committee, to the board of directors

the attestation risk does not apply to what kind of engagements?

already agreed upon procedures - specific procedures and reporting findings without providing an opinion or conclusion

what are the required communications with governance when one is performing a review engagement?

any instances of fraud significant deficiencies or material weaknesses in internal control

when there are deficiencies found, what types of deficiencies have to be communicated to management & those charged with governance? how are they communicated?

any material weakness and any significant deficiency

The AICPA code of professional conduct governs :

any service that a member of the AICPA performs, including compilations and reviews.

what does the audit committee do?

appoint the auditor and the fee make sure the auditor is independent reviews the nature and details of the audit engagement maintains communication between BOD and auditor

If management is unwilling to make changes to correct material inconsistencies identified prior to the report release date, how should the auditor's report address the issue?

as a qualified or adverse opinion

when can an auditor comment on items that have tables, stats, etc?

as long as information is expressed in dollars or percentages

for a review on interim FS, in dealing with going concerns, what is the auditors responsibility for ISSUERS?

as long as it is properly disclosed, you do not have to include an explanatory paragraph

when an auditor does not receive replies to positive requests for year end AR, auditor would most likely:

ask the client to contact the customers to request that the confirmations be returned

concerns about _____, ________, and ___________can result in a qualified or adverse opinion for an examination engagement, or in a modified conclusion for a review engagement.

assertion, conformity with the criteria, or adequacy of disclosure

does one need a report for an attestation engagement? what about assurance?

attestation - yes assurance - either an opinion or conclusion, no report necessarily

what does independence apply to? what services

attestation services - audits, special reports, and reviews

what are the considerations when determining if something is "high risk"?

audit experience oversight by federal agencies inherent risk

A member in public practice shall not for a commission recommend or refer to any client any product or service when the member of the members firm also performs:

audit or review compilation examination

when one is performing a GAGAS financial report, what paragraphs change?

auditors reponsibility - performed under GAGAS and US GAAS both other matter paragraph is added

if managements report includes a material weakness but does not fairly present the weakness, the auditor:

auditors report should indicate this situation and fairly describe the material weakness

what are "significant audit findings"?

auditors views about qualitative aspects of the entity's accounting practices - aka accounting policies significant difficulties encountered during audit Disagreements with management EVEN IF RESOLVED

Generally Accepted Government Auditing Standards primarily apply to:

audits of federal financial assistance and government organizations

The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the

authorization of transactions from the custody of related assets

what the levels of fair value? what type of derivative are they used on?

available for sale level 1: observable quoted prices in the active markets level 2: observable prices in NONactive markets level 3: unobservable inputs

To satisfy the valuation assertion when auditing an investment accounted for by the EQUITY method, an auditor most likely would A. Inspect the stock certificates evidencing the investment. B. Examine the audited financial statements of the investee company. C. Review the broker's advice or canceled check for the investment's acquisition. D. Obtain market quotations from financial newspapers or periodicals.

b. examine the audited financial statements of the investee company

the primary evidence regarding year end cash balances in the FS is documented in the:

bank reconciliations

Material misstatements should be considered how?

based on quantitative and qualitative factors - in aggregate and individually

when you are reporting on managements responsibility in an interim review, for a public company, what paragraph should it be in?

basis for review results

which of the following items should be included in prospective financial statements issued in an attestation engagement performed in accordance with SSAE? A. all significant assertions used to prepare statements B. pro forma financial statements for past 2 years C. all significant assumptions used to prepare the FS d. Historical FS for past 3 years

c. all significant assumptions used

An auditor testing long-term investments would ordinarily use substantive analytical procedures as the primary audit evidence to support the reasonableness of the A. Valuation of marketable equity securities. B. Classification of gains and losses on the disposal of securities. C. Completeness of recorded investment income. D. Existence and ownership of investments.

c. completeness of recorded investment income

which of the following cognizant agencies is most likley to be assigned to an auditee? a. an independent federal agnecy that does NOT provide funding to the auditee b. federal agency that is located within the auditee's region c. federal agency that provides the most funding to the auditee d. preselcted federal agent whose sole purpose is to monitor single audits

c. federal agency that provide sthe most funding to the auditee

how must communication to those with governance occur? who can use it?

can be in writing or oral - significant audit findings should be communicated in writing if one feels that oral communication would be inadequate SOLELY for those charged with governance - it is restricted

What is the due diligence defense?

can be used by the underwriter so they will not be held accountable

how does one do a JE for perpetual inventory?

cash sales cogs inventory

how can one perform the completeness test for auditing debt transactions?

check the board minutes for evidence of any new debt agreements

when one is testing completeness for PP&E balance, what do they check to one another?

check the fixed asset schedule and have that agree to the GL

The classification of investments determines what two aspects of them?

classification & valuation

what should an accountant do when only one period is audited?

clearly mark the unaudited ones either: - reissue the prior period report OR - include an other matters paragraph in the current report

What is the audit committee?

committee of the board of directors who are "outside directors" - this means not an employee NOR do they have a material financial interest

what must one do with significant deficiencies in a GAGAS audit?

communicate all of them during the audit

when assuming responsibility for the work of the component auditor, what must be included in the communicatoin?

communication should be detailed and include work to be performed, compoenet materialty levels, and the levels where it is deemed "clearly trivial" indicators of possible management bias

how does one test ACCURACY in an Inventory cycle audit?

compare auditors test count vs clients prenumbered inventory tags

when one performs analytical procedures for a review engagement, what are they doing?

comparing current FS to prior periods comparing actual statements with budgets comparing ratios trends - looking for predictable paterns

what kind of standard is examination services? review? compilation? agreed upon procedures

compilation - SSARS everything else - ssae

having receiving reports prenumbered and periodically reconciled test which assertion?

completeness

Examination of accounts receivable and cash receipts provides the auditor with evidence with respect to both _________ and __________ assertions.

completeness and occurrence

In testing long-term investments, an auditor ordinarily would use analytical procedures to ascertain the reasonableness of the

completeness of recorded investment income

What is a material part in developing an opinion on the financial statements in a GAGAS audit?

compliance with laws, rules, and regulations with a direct and material effect on the FS

when one issues an interim report on a review engagement, what is the last paragraph?

conclusion, NOT opinion bc don't express an opinion

What are the responsibilities of an auditor in an interim financial reporting review?

conducting review in accordance with appropriate standards (SAS or PCAOB) - say the review is less in scope than an audit NOT SSARS

when a service organization provides services that affect the initiation, execution, processing, or reporting of a user company's transactions, those services are...

considered to be part of the users company information system

when one is a consignee, do they include the inventory in their count? what if they're a consignor?

consignee - no consignor - yes

if the client is the responsible party, and they do not provide a written assertion, what occurs? what if its an examination engagement? what about a review engagement?

constitutes a scope limitation - examination: qualified, disclaimer, withdrawal - use should be restricted review engagement: withdrawal - restrict use

what is the documentation required in a compilation audit?

copy of the FS engagement letter copy of the accountants report

The primary reason an auditor requests letters of inquiry be sent to a client's attorney is to provide the auditor with:

corroboration of the information furnished by management about litigation, claims, and assessments

An auditor analyzes repairs and maintenance accounts primarily to obtain evidence in support of the audit assertion that all: a. Noncapitalizable expenditures for repairs and maintenance have been recorded in the proper period . b. Expenditures for property and equipment have been recorded in the proper period. c. Noncapitalizable expenditures for repairs and maintenance have been properly charged to expense. d. Expenditures for property and equipment have not been charged to expense.

d. expenditures for property and equipment have NOT been charged to expense

For the most effective internal control, monthly bank statements should be received directly from the banks and reviewed by the A. Controller. B. Cash receipts accountant. C. Cash disbursement accountant. D. Internal auditor.

d. internal auditor

What function, when auditing the payroll and personnel cycle, should be kept independent from any other function?

data on which pay is based

when an audit suspects lapping, what can they compare to get further info?

date checks are deposited per bank and dates remittance credits are recorded

what is the date that is included in the comfort level?

date from the cutoff to the date of the report

When the shipping department returns nonconforming goods to a vendor, the purchasing department should send to the accounting department the

debit memo

When an accountant compiles projected FS, the accountants report should include a separate paragraph that:

describes the limitations on the projections usefulness

what should be included in the report when performing an examination of a financial projection?

description of hypothetical assumption description of purpose of projection reference to hypothetical RESTRICTION OF REPORT

how can one test the design effectiveness of a control? what about the operational effectiveness?

design - a walk through, which includes inquiry and and observation operations - reperformance/recalculation, observation, and inquiry

what is a deficiency in design? what about in operations?

design - when a necessary control is missing or when an existing control does not achieve the desired objective operation - when doesn't operate as designed or an inappropriate person performs task

what should an accountant do if they discover facts that become known to accountant after report release date?

determine if material misstatments would have affected the report and persons relying on FS - if so: advise the client to disclose the information immediately and discuss w/ managemnet

if management refuses to correct some or all of the misstatements, what should the auditor do?

determine the reason for not making the corrections and see if the material misstatments are free from material misstatements as a whole

how can one identify the effect of any identified control deviation?

determine the risk, evidence, and the effectiveness of the risk assessment

what does a financial reporting framework do?

determines what makes a complete set of financials

what does exercising due care entail?

dictates consultation or referral when a professional engagement exceeds CPA competence - using other people and critically reviewing work of those who helped with audit

If managements report contains additional information, the auditor should

disclaim an opinion on such information

What should an auditor do if management refuses to provide a management rep letter?

disclaimer of opinion or withdraw

what should an accountant do if they are told to omitt substantially all disclosures when preparing a FS in an engagement?

disclose the omissions make sure the omissoins arent misleading

what is the deal with related party transactions in the management rep letter?

disclosure of the identity management appropriately accounted for them

what should one do when there are subsequently discovered facts that become known to the accountant BEFORE release date?

discuss matter with management determine if the FS need revision

when an auditor receives financial interest of a client through an unsolicited gift or inheritance, what should they do ?

dispose of it as soon as possible - within 30 days preferably

when an accountant is issuing a report on comparative FS, and the current period is compiled and the previous report is reviewed, what should they do?

either 1. issue a compilation report and add a paragraph to report on current period - should include date of original report and statement that no review procedures were performed in connection with review OR 2. reissue prior period review report - may be combined with current period compilation - presented separately

what is the effect on the auditors report if auditor has the inability to obtain sufficient appropriate audit evidence?

either a qualified opinion or a disclaimer depending on how material

what should one do when one is performing a review engagement and they are not reissuing a predecessors report?

either: make a reference to the report of the predecessor accountants perform that level of service themselves

the monitoring component of internal controls EXCLUDES:

eliminating controls that are not operating effectively

what should the documentation of a review engagement include?

engagement documentation letter significant findings analytical procedures performed communications/ management management rep letter copy of reviewed FS

what is included in the "responsibility for quality control" aspect of common concepts for attestation standards?

engagement partner should take responsibility engagement team has appropriate competence discussing with the reviewer significant findings

When an auditor is testing controls, what are they testing the effectiveness of? the entire controls or just some parts

entire control overall - NOT individual controls

what are "major programs"? in relation to single statement audits

entities that have expenditures of federal assistance of $750,000 or more OR ones that are less than that but seen as high risk

what is included in the introductory paragraph when an auditor performs a review engagement?

entity FS review applying the analytical procedures to management and inquiries substantially less in scope than an audit

each audit organization performing audits in accordance with GAGAS must:

establish and maintain system of quality control have an external peer review at least once every 3 years

how would one treat a change in estimate? what about a change in principal? retrospectively or prospectively

estimate - prospectively principal - retrospectively

what kind of assurance does an examination give? what about a review? what is the result

examination - positive, high level of assurance - results in opinion review - negative assurance - results in a conclusion

what are the scope restrictions for an examination? what about a review? aka what kind of opinion do they produce

examination - qualified, disclaimer, withdrawal review - withdrawal only

In testing plant and equipment balances, an auditor examines new additions listed on the analysis of plant and equipment transactions for the year. This procedure is designed to obtain evidence concerning management's assertions about classes of transactions and events, and specifically, which assertion? A) Existence B) Cutoff. C) Authorization. D) Classification.

existence

what is a review type engagement under SSARS? What kind of "service" is that? independent?

express limited (negative) assurance on FS that have not been audited - say no material modifications should be made in order to be in conformity w/ framework - both an assurance and attestation - must be independent

Inquiry is enough evidence to ensure the test of controls design factor is working effectively. T/F

false

the PCAOB standards state that the relevance of the audit evidence depends on the auditors risk assessment. T/F

false - audit risk levels affect NET but relevance

When an entity invests in derivatives, they have to notify those charged with governance. T/F

false - examine the contracts for possible risk exposure

Restricting the selection of accounts to be confirmed to those customers with relatively large balances is a good way to improve the response rate of conformatoin of AR. T/F

false - including a list of items or invoices that constitute balance is

when a matter regarding noncompliance is inconsequential, one must still report it to those charged with governance. T/F

false - only if its intentional and mateiral

When performing a compliance engagement, and one finds a departure from the applicable financial reporting framework, they should give an adverse opinion. T/F

false! can't give an opinion bc its not an audit instead, they would disclose it or if not efficient, withdraw

The management rep letter is optional. T/F

false, it is mandatory

an accountant restricts the use of a review engagement. T/F

false, it is not restricted

when one is performing an audit for a nonissuer, they have to perform an integrated audit. T/F

false, only for issuers - can be for internal controls only

There is a restricted use for the report of internal controls dealing with significant deficiencies/material weaknesses. T/F

false, only in a FS audit

Prospective financial statements can cover a period that is partially expired as well as one that has completely expired. T/F

false, only partially expired

In an attest engagement, the use of the accountants report should be restricted to specified parties when reporting on an assertion about the subject matter instead of reporting directly on the subject matter. T/F

false, there is no requirement for it to be restricted

One is not required to have an engagement letter when they are performing a review audit. T/F

false, they are

A CPA is required to follow SSARS when they are proposing correcting JE to the FS. T/F

false, they are not

In Government Auditing Standards, auditors are required to detect abuse. T/F

false, they are not

Pro forma financial statements and partial presentations are also considered prospective financial statements. T/F

false, they are not

The audit testwork and the test of internal controls are included in the audit review engagement. T/F

false, they are not - not doing an audit

financial statements that omit all required disclosures required by GAAP are still comparable to financial statements that include the disclosures. T/F

false, they are not - shouldn't issue a report on comparative FS

when restating prior period financial statements, the predecessor auditor or successor auditor may report can report on the whole FS but not solely on the adjustments. T/F

false, they can report on just the adjustments

Financial statements that have not been audited can be presented with financial statements that have been reported on. T/F

false, they can't

Oral communications with governance do not have to be documented. T/F

false, they do

One has to be independent in order to perform a compliance engagement. T/F

false, they do not have to - if they are not, they have to disclose it - this is an attestation service, not an assertion so you're okay

One must have an inquiry with a client's lawyer while providing a review of interim FS. T/F

false, they don't have to but if they feel its appropriate go for it

One does not have to state in the comfort level if they are independent of the entity. T/F

false, they have to state they are independent

an auditor counts the inventory. T/F

false, they just observe - observe how management does it - performs test counts

One should never use lock boxes and cash registers. T/F

false, they should - they're awesome bc bank just informs you you got money and from who

One should provide a disclaimer of opinion when performing a compilation engagement if management failed to provide records. T/F

false, they should withdraw - they cannot issue any type of opinion bc its an audit!! i'm proud of you if you got this one right if not, keep at it

Independence is not required in the department of labor. T/F

false,, it is required

what is the most significant part of the payroll and personnel cycle risks?

fictitious employees falsification of hours worked

where does the management rep letter come into play in regards to location of audit report?

final piece of evidence - at the end, covers up to date of audit report

Government Audit Standards defines three types of engagements which are:

financial audits attest engagements performance audits

Prospective Financial Statements

financial statements that deal with expected future data rather than with historical data

what are the types of prospective financial statements?

financially forecasted: the clients best expect financial results for a future period based on expected conditions and expected courses of action financial projection: that is a "what if" scenario, hypothetical assumptions

how can one test the valuation of the cash receipts ?

foot them

how should one test the bank reconciliation?

footing the bank rec and the list of outstanding checks agreeing balance per book to GL

what is the "percentage of coverage" for determinig major program determination?

for low risk, has to consume 20% of the total federal awards expended for high risk, it has to consume 40% of the total federal awards expended

when there is a GAAS financial reporting, what is managements responsibility?

for the entity's compliance with laws and regulations applicable to it

Accounts receivable confirmation requests yield significantly fewer responses than expected can be indicative of:

fraudulent activity

Independence is not impaired in a financial institution (bank) by:

fully collateralized car loans cash advance or credit card balance under 10K Bank account fully insured by gov

what are the uses of prospective financial statements?

general use: can only use financial forecasting for this one - this is for anyone who is not negotiating directly with client limited use: this can be either financially forecasted or financially projected - only be used by party or those directly negotiating with client

when is one allowed to charge a contingent fee in an audit?

generally, not allowed exceptions: - fee by court or public authority in tax matter - compilations of FS expected to be used by third parties when independence IS disclosed

when one is testing completeness for auditing purchase transactions, how can one do that?

go from the voucher to the purchase journal

what is "the yellow book"?

governmental auditing standards, GAGAS

What does the AICPA Code of Professional Conduct govern?

governs any service that is a member of the AICPA performs

when one is performing an examination of a prospective FS, and the AICPA guidelines are not followed, what kind of opinion should they get? what if significant assumptions are used?

guidelines not followed - qualified or adverse significant assumptions - adverse

how can one prevent lapping?

have one person get the cash receipts and another person look at funds deposited

how can one prevent or catch kiting?

having a bank transfer statement

hi

hi

who is allowed to have a "program specific audit"?

highly restrictive criteria - awards are expended under a single federal program - no financial statement audit is required

what is managements responsibility in a SSARS engagement?

identification of an applicable framework preparation and presentation of fair FS design, implementation and maintenance of IC

what should an auditor do if there is inventory on an off site warehouse?

if it is significant, go there and observe if it is not significant, just get a confirmation

what must one do when they notice there are deficiencies that were previously disclosed?

if it was a control deficiency - do not have to do anything significant def & material weakness - should be communicated again - with a reference to where it was communicated the first time

When is one allowed to report using both SSARS and a framework from another country?

if its only being reported in that other country: - with SSARS framework - report in accordance w/ another set of compilation or review standards if being reported in other country AND US, - in accordance with SSARS

should a user auditor ever made reference to a service auditor?

if they are issuing a unmodified opinion, no reference if they are issuing a modification of the user auditor opinion, then must reference

how often must the PCAOB conduct annual inspections of registered public accounting firms?

if they provide services for more than 100 issuers, annually if less than 100, once every 3 years

what are the factors that may indicate substantial doubt?

if you have substantial doubt, everything is not FINE Financial difficulties Internal matters Negative trends External Matters

Can a clients independence be impaired bc a client has an over due professional fee? for how long

if you haven't received the fee in over 1 year

Gaining a management rep letter is more likely to occur in what type of engagement?

in a review engagement

in a comfort letter, when should one provide positive assurance?

in regards to independence in regards to compliance of the FS with SEC act ASSUMING THEY ARE AUDITED

in a comfort letter, when should one provide negative assurance?

in regards to the compliance with the FS with SEC acti if they are UNAUDITED but have a review whether in regards if everything complies

what should one do when they are performing a compilation engagement and they are prepared in a special purpose framework?

include a separate paragraph that states - managements responsibility for determining applicable framework - indicates FS are prepared with special framework

for a review on interim financial statements, when there is a going concern for a NONissuer, what should the auditor do?

include an emphasis of matter paragraph whether there is a pre-existing going concern and still is there OR include it if there is a present going concern issue

a review report, when reporting on FS that use a specialty purpose framework, should:

include an emphasis of matters paragraph make reference to managements responsibility for determining applicable framework if prepared using the regulatory or contractual basis, a statement for the purpose for which they're prepared

what does something mean if it is "clearly trivial"?

inconsequential, both individually and in aggregate, when judged by any criteria or size

what is the title of the accountants report when they are involved in a review engagement?

independent accountants review report

when one is an issuer, they must communicate to those with governance:

info related to the planned scope and timing significant audit findings matters related to going concern reasons for modifying auditors opinoin reasons for and wording of explanatory language added

what should an auditor do if they become aware of noncompliance in a compilation engagement?

inform management. request management to consider the effects on the FS

what is the optional communication when reporting control deficiencies?

inherent limitations of internal control managements response indicate no material weakess

what is the formula for attestation risk?

inherent risk * control risk * detection risk

what types of procedures are used in review engagements?

inquiry and analytical procedures provide reasonable basis

A CPA who is NOT in public practice is obligated to follow which of the following rules of conduct?

integirty and objectivity - NOT independence

mitigating factors must include what in order to carry out planned procedures?

intent and ability

how long does an opinion of the internal controls relate to time period wise? what about opinion on FS?

internal controls - point in time FS - longer time period

what is the format (paragraph) of a sample report for GAGAS? On internal control and compliance

intro ICFR disclaimer definitions material weakness compliance disclaimer purpose of report

When you are communicating with management and those charged with governance with internal control, what should the format be in terms of paragraphs?

intro audit responsibility definitions of material weaknesses what those are say its for restricted use

what is the formatting for a combined report on internal control for integrated audit? reporting NONISSUER

intro management responsibility auditor responsibility - FS and IC definitions of INC definition of inherent risk opinionS on both FS & IC

what is included in a separate report for internal control? what is the set up, for NONISSUERS

intro managements responsibility auditors responsibility definition of internal control definition of inherent control opinion Report on FS Report of ICFR

in a sample report, what is included in a review report on a subject matter? AKA what are the paragraphs/format

intro scope inherent limitation CONCLUSION

when one assesses an "examination" report on a subject matter, what is the format (paragraphs)? this is attestation

intro scope inherent limitations emphasize certain matters opinion

when one has a examination report on an "assertion" about a subject matter, what is the format (paragraphs)?

introduction scope inherent limitations opinion (fairly stated)

what should an accountant do if they are unable to include on every page of the FS "there is no assurance" for a preparation engagement?

issue a disclaimer perform a complient engagement

An agreed upon procedure engagement is one in which the practitioner is engaged to:

issue a report of findings based on specific procedures performed

what is the timing for communicating control deficiencies?

issue date + 60 days

what should one do when there is a current period that is unaudited and the prior period was audited?

issue other matter paragraph that states - prior period statements were audited - no auditing procedures have been performed since the last audit

what kind of report should an auditor issue when they are performing more than one report? in terms of SSARS

issue the report that is for the highest level of services rendered

what kind of department is the payroll department? what can they NOT do?

it is a record keeping department - they cannot adjust pay rates or hours - they cannot sign checks

how does one determine materiality in a single statement audit?

it is considered separately in relation to each major program

Materiality in the management rep letter is limited to

items that management and the auditor agree are material

how does one communicate a control deficiency?

its written or oral to management only

When auditing prepaid insurance, an auditor discovers that the original insurance policy on plant equipment is NOT available for inspection. Policy's absence most likely indicates possibility of :

lien on the plant equipment

when performing a review engagement, and an accountant determines that a going concern has been lifted, what should they do? what if the going concern is still there?

lifted - OPTIONAL emphasis of matters paragraph remains - include a emphasis of matters paragraph

In a review report, it states "requires us to perform procedures to obtain _________ assurance as a basis for reporting whether we are aware of any ____________.

limited, material modifications

what is the accountants role in a compilation of prospective financial statement?

look at assumptions and make sure they follow SSARS

how does one determine the severity of a deficiency?

looking at the likelihood and magnitude of them

when one is considering whether a service auditors report is satisfactory, the user auditor should:

make inquiries concerning the service auditor's professional reputation

what are managements actions when they have a subsequent event occuring after release date?

make known old FS should not be uesd issue revised FS with disclosure

whose responsibility is it to evaluate and address control deficiencies?

management

what is included in "completeness" for management rep letter?

management gave the auditor with the completeness of information and access as agreed upon

who are the parties involved in a SSARS engagement?

management, auditor, and users

What are mitigating factors?

managements plan for dealing with going concern - plans to borrow money - plans to borrow assets - plans to delay or reduce expenditures - plans to increase ownership

in the management rep letter, what is included in the financial statements section?

managements responsibilities - the fair presentation of FS in accordance w/ framework - design, implementation, maintenance of IC free from material misstatement

an auditor is required to confirm accounts receivable if the accounts receivable balances are:

material to the financial statements

When one has a material weakness in internal control, what kind of opinion do they get? what about a significant deficiency?

material weakness - adverse significant deficiency - still unmodified can't do qualified opinions bc no exceptions

what should an auditor include in the overall planning of an integrated audit?

matters affecting the industry AND business prior knowledge of the business of IC relative complexity managements method of evaluating IC effectiveness

what does it mean if one has a material weakness in internal control?

means that there is a reasonable possibility that a material misstatement of entity's FS will not be prevented or detected on a timely basis

if managements report is incomplete or improperly presented, the auditor should

modify his or her own report to discuss the situation

what should one do if they notice a subsequent event occurred but management does not report on it?

modify their opinion

when must one disclose the communication of control deficiencies in an internal control audit?

must be disclosed by release report date

what is the deal with disclosing signatures, dates, places of work in compilation engagements?

must disclose signature, city & state of acct firm, and date on each compilation engagement - if the city and state are on the letter head, you're ok :)

what is the level of understanding an auditor must have for a compilation engagement?

must have STAFF for a compilation staff qualifications transaction types and frequency accounting basis used to prepare FS Form of accounting records Financial statements form and content

in a single statement audit, what must one do with the compliance of the statutes?

must offer an opinion on them

what kind of conclusion is "review"?

negative assurance - provides a moderate level of assurance

when an auditor is reporting on pro forma financial information, what kind of assurance may be provided? when?

negative assurance if: appropriate amount of knowledge - performed audit - performed a review

when an auditors doubts about an entity being a going concern are removed, should they include the emphasis of matter paragarph still?

no

What kind of assurance is given for a compilation?

no assurance, therefore don't have to be independnet - have to state you're not independent

what is an agreed upon procedure? what kind of assurance does it provide/what kind of review

no level of assurance it gives a list of procedures

an accountant agrees to the client's request to change an engagement from a review to a compilation of FS. The compilation report should include:

no reference to the original engagement

When is preapproval of an audit engagement not required?

nonaudit services that do not exceed 5% of revenues

what kind of assurance can one issue on a report of compliance?

none

The consistency assertion in an MD&A presentation addresses whether:

nonfinancial data has been accurately derived from related records

are SSARS applicable for reviews of interim financial information when they're audited?

nope, bc they're audited only applies to nonissuers whose statements are unaudited

If an auditor of a nonissuer concludes that reasonable justification exists to change an audit engagement to an agreed-upon procedures engagement, then the report should:

not include a reference to the original audit engagement but may include a reference to procedures that have been performed.

wha should an auditor do when they are unable to perform necessary procedures or management does not provide appropriate representations ? when evaluating a review report

not issue a review report

what is negative assurance?

nothing came to the auditor's attention that cause the auditor to believe the entity failed to comply with specific aspects of contractual agreement or regulatory requirement

If a covered member learns that a person in a position to influence has received an offer from an attest client, what should he or she immediately do?

notify an appropriate person in the accounting firm

what should the accountant do if the client refuses to follow their procedures when there is a material event that is undocumented?

notify apporpriate personnel notify that accounting report should no longer be associated

what is included in a compilation engagement under SSARS? What kind of service is that? independent?

objective is to present in the form of FS info that is the representation of Management without taking any assurance on financials - it is an attestation engagement - do not have to be independent but must say if are or not

what should the engagement letter include in a preparation engagement?

objective of it management responsibility agreement with management that on each page of FS, there will be a statement saying "there is no assurance for this"

The standard that an auditor should be independent of mind and appearance in providing audits is included in the GAGAS principle of:

objectivity

What should an accountant do if they are preparing a FS and they notice information is incorrect?

obtain additional or revised info from the client - accountant should disclose material misstatemnet

what should the user auditor do when reporting on a service organization?

obtain an understanding of nature and significance of services provided by the service organization and effect of the user entity's internal control to assess material misstatements

when a service organization is used, what must the auditor do?

obtain an understanding of the relevant controls obtain evidence that the controls at the service organization are working effectively

when agreeing upon the scope of services for a comfort letter, what should an auditor do?

obtain an understanding of the specific matters to be addressed and ask to meet with requesting party/client clearly describe procedures to be performed clearly communicate they cannot provide any assurance on sufficiency of procedures

the PRIMARY purpose of sending a confirmation request to financial institutions to which the client has done business during the year is to:

obtain information regarding deposit and loan balances

when one is recording a journal entry made by the controller to include investment in stock and investment income of their subsidiary, what audit procedure should the perform?

obtain subsidiary's financial statements

when commenting on financial forecasts, the auditor should:

obtain understanding of IC Perform procedures required by attestation standards issue report on compliance

when does one usually report on compliance ? aka like when/ why, on what with what

on a contractual agreement or regulatory requirement

If the entity's going concern disclosures are INADEQUATE

one must advise a qualified or adverse opinion

when you are issuing a combined report on internal control over FS, what are the paragraphs? ISSUERS

opinion basis for opinion - MR & auditor responsibility definition of internal control definition of inherent risk CAM's

when one is issuing a separate report in internal controls for an ISSUER, what's the report framework (paragraphs)?

opinion say audited effectiveness of IC too basis of opinion - this is where Management responsibility and AR comes in definition of IC definition of inherent risk

what should an accountant do when the current period is audited and the previous period wasn't?

other matter paragraph that states: - service was less in scope than an audit bc review

when one issues a report of compliance with the auditors report, where is it included?

other matters paragraph

If no written assertion is provided by management in an attestation engagement, what should management do?

outcome depends on who the responsible party is

what is the person who hands out payroll checks in a large company?

paymaster

what is included in the accountants responsibility paragraph of a review engagement?

perform and obtain limited assurance as a basis for reporting whether aware of any material modifications

what should one do in an governmental audit if they have awareness of abuse that is quantitatively or qualitatively material to the audit?

perform further testing

what are the categories of performance audit objectives?

performance audit objectives are EPIC Economy, efficiency, effectiveness Prospective Analysis Internal Control Compliance

when one would send a "blank" confirmation, what kind of confirmation is that? positive or negative

positive - it is when the person receiving it writes in how much they owe

what is included in the preconditions for common concepts of attestation agreements?

practitioner must be independent the person responsible must take responsibility subject matter is appropriate

what are the types of service for an SSARS engagements ?

preparation, compilation, review

Upon receiving checks from customers by mail, the next step taken should be:

prepare a duplicate listing of checks received

an auditor most likely would inspect loan agreements under which an entity's inventories are pledged to support managements financial assertion of completeness with respect to:

presentation and disclosure

what should an accountant do when they are performing procedures but the procedures are not accomplished?

prevent the issuance of an audit reprot

when one is performing a review on comparative FS, and the period previously was compiled, but the current year there is a review, what should they do?

prior period should be updated and issued as the last paragraph of the current periods report

what kind of guidance do prospective financial statements follow? what about compilations ?

prospective - follows SSARS compilations - follows SSARS

what do attestation standards do?

provide guidance set boundaries provide measure of quality describe objectives

how long must audit documentation be maintained for in a public company? what about private?

public - 7 years private - 5 years

how long can an auditor be a engagement partner auditor for a certain client for a public client? what about private?

public - have to switch after 5 years private - can be however long

what is the overall steps taken when one is performing the valuation and allocation assertion?

recalculation of items - making sure that it is reasonable

One is more likely to use the blank form of confirmation of AR bc:

recipients are likely to sign other types of positive confirmations without careful investigation.

how does one audit the statement of cash flows?

reconcile the amounts included in the statement of cash flows to the other financial statement balances and allowances

when one is working with a component auditor, what must be communicated through engagement team?

related parties how group engagement team will use work of component auditor ethical requirements

what is the most efficient way to obtain information about a company's internal controls ?

rely on an audit report on internal controls planed in operation and their operating effectiveness

what is a type 1 service auditor report?

report on the design and implementation of a service organizations controls - does NOT provide assurance on EFFECTIVENESS

Audit reports should disclose the exclusion of confidential or sensitive information from an audit report by:

reporting the omission of info stating reason for omission

how does one obtain a comfort letter?

requesting party must obtain a representation letter or an attorneys opinion confirming they have a due diligence defense

when can one report and disclose noncompliance?

response from a predecessor auditor to a current auditor response to a court order compliance w/ requirements for audits of entities that receive federal financial assistance from gov agency