A2 - M3 Documentation

Question 1

Audit documentation should:

A.Option A.
Not contain critical comments concerning management.

B.Option B.
Not be permitted to serve as a reference source for the client.

C.Option C.
Be considered the primary support for the financial statements being audited.

D.Option D.
Show that the accounting records agree or reconcile with the financial statements.

Answer 1

Show that the accounting records agree or reconcile with the financial statements.

Question 2

Which of the following documentation is required for an audit in accordance with generally accepted auditing standards?

A.Option A.
A management representation letter that summarizes the timing and details of the auditor’s planned fieldwork.

B.Option B.
A list of the procedures performed and the findings obtained.

C.Option C.
An indication in the audit documentation that the accounting records agree or reconcile with the financial statements.

D.Option D.
A flowchart or an internal control questionnaire that evaluates the effectiveness of the entity’s internal control.

Answer 2

An indication in the audit documentation that the accounting records agree or reconcile with the financial statements.

Option A Engagement letter summarizes this

Option B agreed upon procedures not an audit

Option D Do not provide information about effectiveness of internal control

Question 3

Audit documentation should be prepared in enough detail so that:

A.Option A.
A reader of the financial statements who has no previous connection with the audit can understand the procedures performed and the evidence obtained.

B.Option B.
A reader of the financial statements who has a background in financial analysis can understand the procedures performed and the evidence obtained.

C.Option C.
An experienced auditor who has worked with the client in the past can understand the procedures performed and the evidence obtained.

D.Option D.
An experienced auditor who has no previous connection with the audit can understand the procedures performed and the evidence obtained.

Answer 3

An experienced auditor who has no previous connection with the audit can understand the procedures performed and the evidence obtained.

Question 4

Which of the following statements is most accurate regarding sufficient and appropriate documentation?

A.Option A.
Audit documentation is the property of the client, and sufficient and appropriate copies should be retained by the auditor for at least five years.

B.Option B.
If additional evidence is required to document significant findings or issues, the original evidence is not considered sufficient and appropriate and therefore should be deleted from the working papers.

C.Option C.
Sufficient and appropriate documentation should include evidence that the audit working papers have been reviewed.

D.Option D.
Accounting estimates are considered sufficient and appropriate audit evidence.

Answer 4

Sufficient and appropriate documentation should include evidence that the audit working papers have been reviewed.

Option A Property of auditors it’s their working papers not the client

Option B Should not be deleted in fact this is apart of working documentation to show how conclusions were reached

Option D Not on their own

Question 5

Which of the following documents the procedures that are applied and the conclusions reached in an audit engagement?

A.Option A.
Auditor’s report.

B.Option B.
Audit guide.

C.Option C.
Management representation letter.

D.Option D.
Working papers.

Answer 5

Working papers. (procedures and conclusion reached not overall summary)

Option A Auditor’s report. (does not provide audit procedures)

Question 6

Which of the following is a primary purpose of audit documentation?

A.Option A.
To maintain professional judgment.

B.Option B.
To assure that fraudulent financial reporting did not occur.

C.Option C.
To prevent legal liability related to the audit performed.

D.Option D.
To support that the audit was performed in accordance with GAAS.

Answer 6

To support that the audit was performed in accordance with GAAS. (along with support evidence to the audit report)

Question 7

Which of the following statements is correct regarding an auditor’s documentation of the risk assessment during an audit of a nonissuer?

A.Option A.
The auditor must document a complete understanding of the nonissuer’s industry.

B.Option B.
The form and extent of the documentation should be influenced by the nature, size, and complexity of the entity and its internal control.

C.Option C.
The extent of documentation must be consistent among all audits.

D.Option D.
The auditor’s risk assessment should be documented separately from the auditor’s documentation of the overall strategy and audit plan.

Answer 7

The form and extent of the documentation should be influenced by the nature, size, and complexity of the entity and its internal control. (to cater to the client’s need for the audit)

Option D could do seperately or together

Question 8

In the audit of a nonissuer, each of the following actions or events is required to be completed on or before the date of the auditor’s report, except:

A.Option A.
The entity’s audit committee or others charged with governance have agreed with the audit findings and conclusions in the auditor’s report.

B.Option B.
Management has asserted that they have taken responsibility for the financial statements.

C.Option C.
The audit documentation has been reviewed and found to support the conclusions reached.

D.Option D.
All statements comprising the financial statements, including the related notes, have been prepared.

Answer 8

The entity’s audit committee or others charged with governance have agreed with the audit findings and conclusions in the auditor’s report. (how can they agree if auditor’s report isn’t available)

Question 9

Which of the following statements is correct about actions taken after the documentation completion date?

A.Option A.
An auditor must not make any additions to audit documentation before the end of the specified retention period.

B.Option B.
An auditor must not make any amendments to audit documentation before the end of the specified retention period.

C.Option C.
An auditor must not make any changes to audit documentation before the end of the specified retention period.

D.Option D.
The auditor must not make any deletions to audit documentation before the end of the specified retention period.

Answer 9

The auditor must not make any deletions to audit documentation before the end of the specified retention period. (deletions are bad in almost every question)

Question 10

Under the provisions of the Sarbanes-Oxley Act of 2002, registered public accounting firms are required to prepare and maintain audit work papers and other information related to any audit report for a period of:

A.Option A.
Five years.

B.Option B.
Seven years.

C.Option C.
Three years.

D.Option D.
One year.

Answer 10

Seven years. (seven years for a public company and five for a nonpublic)

documentation completion date is 14 days from report release day - 7 years retain documents for issuers (14-7 for issuers)

documentation completion date is 60 days from report release day - 5 years retain documents for non-issuers (60-5 for issuers)

Question 11

Which best describes the documentation completion date?

A.Option A.
Seven years from the report release date, based on auditing standards.

B.Option B.
Sixty days from the report release date, based on PCAOB standards.

C.Option C.
Five years from the report release date, based on auditing standards.

D.Option D.
Fourteen days from the report release date, based on PCAOB standards.

Answer 11

Fourteen days from the report release date, based on PCAOB standards. (14-7 issuer, 60-5 nonissuer)

Question 12

What is the maximum number of days in which a nonissuer’s auditor should complete the assembly of the final audit file following the report release date?

A.Option A.
60 days

B.Option B.
75 days

C.Option C.
14 days

D.Option D.
30 days

Answer 12

60 days (non-issuer 60-5, issuer 14-7)

Question 13

Which of the following correctly identifies the deadline for the completion of audit documentation of a nonissuer?

A.Option A.
Within 14 days after the report release date.

B.Option B.
Within 45 days after the last day of fieldwork.

C.Option C.
Within 60 days after the report release date.

D.Option D.
Within 90 days after the last day of fieldwork.

Answer 13

Within 60 days after the report release date.

Question 14

On which of the following dates would it be appropriate for an auditor of a nonissuer to discard audit documentation if the engagement letter was signed on June 30, Year 1, the audit was substantially complete on September 1, Year 1, and the audit report was released on March 15, Year 2?

A.Option A.
June 30, Year 3

B.Option B.
June 30, Year 6

C.Option C.
September 1, Year 6

D.Option D.
March 30, Year 7

Answer 14

March 30, Year 7 (any time after 5 years of the released date of audit report) so after March 15, Year 7

Question 15

Which of the following is not required documentation in an audit in accordance with generally accepted auditing standards?

A.Option A.
A written audit program describing audit procedures to be performed.

B.Option B.
The auditor’s assessment of the risk of material misstatement.

C.Option C.
A narrative description of the internal control system.

D.Option D.
An engagement letter

Answer 15

A narrative description of the internal control system. (GAAS for nonissuers which do not describe internal control and just an understanding is needed not an assessement documentation)

Question 16

The permanent (continuing) file of audit documentation most likely would include copies of the:

A.Option A.
Attorney’s letters.

B.Option B.
Lead schedules.

C.Option C.
Bank statements.

D.Option D.
Debt agreements.

Answer 16

Debt agreements. (LT files to be included almost indefinitely)

Question 17

The audit documentation that makes up the current file most likely would include a copy of the:

A.Option A.
Pension plan contract.

B.Option B.
Flowchart of the internal control.

C.Option C.
Articles of incorporation.

D.Option D.
Bank reconciliation.

Answer 17

Bank reconciliation. (ST files that will change year to year)

Question 18

Which of the following statements is most accurate regarding audit documentation requirements?

A.Option A.
If the results of audit procedures indicate a need to revise the previous assessment of risk, the new assessment should be documented and the original assessment should be removed.

B.Option B.
If an oral explanation serves as sufficient support for the work the auditor performed, the explanation should be documented in the working papers.

C.Option C.
If different audit procedures were performed due to a lack of responsiveness by the client, the lack of responsiveness should not be included in the working papers.

D.Option D.
The auditor should document findings that could result in a modification of the auditor’s report.

Answer 18

The auditor should document findings that could result in a modification of the auditor’s report.

Option A Should not be removed original assesement should be included along with new asessements and responses

Option C Should be included if alternative procedures were done because it helps explain why they were done opposed to how things are typically done

Option B Oral is not enough but can be used to explain or support informtation contained in the audit documentation