Audit 1

Question 1

Auditor is responsible for

Answer 1

1. C-ompliance with laws, regulations and ethics
2. A-ppropriate competence and capabilities
3. P-rofessional skepticism
4. P-rofessional judgment

Question 2

Reasonable assurance

Answer 2

1. P-lan the work and properly supervise any assistants
2. R-isks of material misstatements, fraud or error must be identified and assessed
3. O-btain sufficient appropriate audit evidence
4. M-ateriality levels get determined and applied

Question 3

Inherent limitations

Answer 3

1. Nature of Financial reporting and Audit procedures

2. Timeliness of financial reporting and the balance between Cost and Benefit

Question 4

Auditors ultimately evaluate

Answer 4

1. W-arranties
2. I-ntangibles
3. A-sset life/salvage value
4. L-iabilities
5. I-mpairment
6. B-ad Debts
7. Y-bought a letter

Question 5

PCAOB consists of these types of members-ISSUERS

Answer 5

1. 2- must be CPA’s, other 3 must not be CPA’s
2. P-ublic accounting firms must register with PCAOB to audit public companies
3. A-bought a letter
4. C-an act as the chair of the board if they have not practiced for the last 5 years
5. C-annot receive payments from public accounting firms

Question 6

3 levels of auditing guidance

Answer 6

1. SAS-AICPA Statements on Auditing Standards and PCAOB Auditing Standards-
2. IP-Interpretive Publications
3. OAP-Other Auditing Publications

Question 7

Auditors should be alert for

Answer 7

1. C-ontradicting audit evidence
2. R-eliability of documents and responses to inquiries that may be used as audit evidence
3. A-dditional audit procedures (because of circumstances) in addition to those required by GAAS.
4. F-raud conditions(pressure, Rationalization, opportunity)
5. T-bought a letter

Question 8

Independence

Answer 8

1. Fact

2. Appearance

Question 9

Professional judgment is necessary when making decisions about

Answer 9

1. M-ateriality
2. A-udit risk
3. J-udgments made by management in applying the applicable financial reporting framework
4. E-vidence is sufficient, and appropriate that has been obtained
5. C-onclusion based on the audit evidence obtained
6. NET-The nature, extent and timing of audit procedures

Question 10

Fair Presentation means

Answer 10

1. D-isclosures are adequate
2. I-nformation is: Relevant, reliable, comparable, and understandable
3. E-ffect of material transactions and events is understood
4. T-erminology is appropriate
5. S-tructure is fairly presented
6. F-/S represent the underlying transactions and events
7. E-stimates are reasonable
8. G-AAP application is consistent
   COLA

Question 11

Unmodified audit opinion

Answer 11

1. Title-“Independent”
2. Addressee(GR: not to management)
3. Introductory Paragraph
4. MR- Management’s Responsibility for the financial statements
5. DIM-this responsibility includes: Design, Implementation, Maintenance
6. Auditor’s responsibility(GAAS)
7. Auditor’s Opinion(GAAP and other applicable Financial Reporting Frameworks)
8. Emphasis of matter paragraph
9. Other Matters paragraph
10. Other reporting Responsibilities
11. Signature of the auditor
12. Auditor’s address
13. Date of the audit report

Question 12

Addressee is not to whom GENERALLY?

Answer 12

Management

Question 13

Auditor’s responsibility(GAAS)

Answer 13

a. R-esponsibility word in heading
b. E-xpress an opinion on the F/S based on the audit
c. P-lan the audit
d. P-erform the audit
e. O-btain audit evidence
f. R-isk, assement of the risk of material misstatement
g. T-est Internal Controls
h. S-tatements(F/S)- relevant to the entities preparation and fair presentation of the F/S

i. C-ontrol, but not for the purpose of expressing an opinion on the effectiveness of the entities internal Control
j. R-easonableness of accounting estimates
k. A-accounting estimates
l. M-anagement, estimates made by management
m. E-valuating the overall presentation of the F/S

Question 14

Auditor’s Opinion paragraph

Answer 14

A statement that :the F/S present fairly, in all material respects, the financial position of the entity as of the balance sheet date and the results of operations and its cash flows for the period then ended, in accordance with the applicable financial reporting framework.

“and the report of the other auditors”

Question 15

Emphasis of matter paragraph MAY be necessary for

Answer 15

i. Uncertainty in situations
ii. Major catastrophe
iii. Related party transactions
iv. Subsequent events

Question 16

Emphasis of matter paragraph MUST be necessary for

Answer 16

1. Change in accounting principle
2. G-oing concern problems(MUST STATE IN REPORT)
3. P-repared in accordance with special purpose framework
4. S-ubsequent discovery of facts-leadsChange in accounting principle to change in opinion

Question 17

Other Matters paragraph Use Required

Answer 17

i. Restricts the use of the report
ii. Change in audit opinion
iii. Not reissued predecessor auditor’s report not reissued
iv. F/S are in comparative form
v. Material inconsistency in other information
vi. Choses to report on supplementary info in auditor’s report rather than in separate report
vii. Refers to required supplementary information

Question 18

Other Matters paragraph May be necessary

Answer 18

i. Cant withdraw
ii. Legal issues regarding mandatory disclosures
iii. More than 1 set of F/S

Question 19

Date of the audit report

Answer 19

The auditor’s report should be dated no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence

Question 20

What to test for going concern issues

Answer 20

1. A-nalytical procedures
2. D-ebt compliance
3. M-inutes
4. I-nquiry
5. T-hird parties
6. S-ubsequant events

Question 21

What might indicate that the client has a going concern problem?

Answer 21

1. F-inancial difficulties
2. I-nternal matters
3. N-egative trends
4. E-xternal matters

Question 22

Changing prior year opinion format(in emphasis or other matter paragraph)

Answer 22

1. D-ate of the auditor’s previous report
2. O-pinion type previously issued
3. R-eason for the prior opinion
4. C-hanges that have occurred
5. S-tatement that the “Opinion … is different”

Question 23

The old CPA should in a change of auditor situation-report on predecessor auditor presented

Answer 23

1. C-ompare the statements audited with the current period statements
2. R-ead the statements for the current period
3. I-nquire of and obtain a letter of representation from management at/near date of reissuance
4. D-ate the report as appropriate
   a. Unrevised- same as original report date
   b. Revised- Dual Date
5. O-btain a letter of representation from the successor auditor

Question 24

The New CPA should in a change of auditor situation-report on predecessor auditor NOT presented (Express an opinion in other-matters paragraph on this year’s statements only)

Answer 24

1. D-ate of the predecessor auditor’s report
2. O-pinion type and if changed
3. N-ature of emphasis or other matters paragraph included in report
4. S-tate that F/S were audited by predecessor auditor

Question 25

Prior Period not audited maybe compiled or reviewed (other matter paragraph)

Answer 25

1. M-aterial modifications in report description 2. S-tatement that the service was less in scope 3. D-ate of prior period report 4. S-ervice performed

Question 26

Subsequent event procedures

Answer 26

1. P-ost balance sheet transactions 2. R-epresentation letter should be obtained by management 3. I-nquiry 4. M-inutes of stockholders meetings 5. E-xamine latest available interim F/S

Question 27

Subsequent discovery of facts after release date (what auditor should do if changes report)

Answer 27

1. R-evised F/S along with new audit report (is advised) 2. I-nformation may not be relied on is advised to users 3. D-isclose information and its impact on the F/S

Question 28

What to do to prevent further reliance on F/S

Answer 28

1. D-issocociate 2. A-lert agencies 3. R-elying parties

Question 29

We forgot to audit an area

Answer 29

1. P-romptly undertake to apply omitted procedure if no alternatives exist 2. O-ther audit procedures were adequate 3. P-roceed as if it were a subsequent event if new information is found

Question 30

Material inconsistency not fixed by management

Answer 30

1. W-ithhold use of the report 2. O-ther matters paragraph describing the issue is included in report 3. W-ithdraw from the engagement a. False/fraudulent/deceptive/misleading

Question 31

Duties for supplementary information (in other matters paragraph or separate report)

Answer 31

1. P-resentation is evaluated | 2. R-eport on Supplementary Information

Question 32

Limited procedures for supplementary information

Answer 32

1. W-ritten management representations management rep letter 2. I-nquire of management 3. C-onsistent Information