Audit Deck 6

Question 1

In an audit of F/S according to Gov Aud. Stand (GAS) - what is included in the report

Answer 1

The report should include:
- that compliance with laws and reg is the responsibility of mgmt
-

Question 2

Under what circumstances can you accept an engagement to compile pro forma financial information

Answer 2

• ## Can do it if the historical financial statements have been compiled, reviewed or audited

Question 3

What is the auditors responsibility for supplementary information that is outside the basic F/S but is required (like by GASB)

Answer 3

These are RSI - the auditor must do limited procedures to see if the required info has been provided, and whether or not it appears correct.

Question 4

When F/S are prepared under an OCBOA - how do you title the financial statements

Answer 4

They would include the financial reporting basis: example “Statement of Income” - regulatory basis” or titles that clearly describe what would be included in the statement.

Question 5

What would the report on internal controls and compliance with laws and regulations associated with a Government Auditing Standard (yellow Book) include:

Answer 5

A description of the scope of testing of Internal Controls

Question 6

What kind of programs do a GAGAS standard apply to

Answer 6

These standards apply to audits involving federal government programs or activities, or other entities that receive federal funds

Question 7

Why is the scope of the GAGAS audit larger than non-government audit ( what else do they require)

Answer 7

They require:

• Separate reporting on internal control
• Adherence to applicable laws and regulations
• This is why the scope is larger

Question 8

What is included in the separate report on I/C in a GAGAS audit

Answer 8

They include a

• Description of the scope of the auditors work obtaining an understanding of I/C
• They also include any significant deficiencies or material weaknesses notes

Question 9

can the regular GAGAs audit report and the report on Internal controls be combined?

Answer 9

Yes

Question 10

What is included in the government report on compliance

Answer 10

It reports on the compliance with laws, regulations, and the provisions of any grant agreement

Question 11

What are the three standard reports in a yellow book audit

Answer 11

1 - the audit report
2 - a report on Internal control which includes a description of the scope of the auditor’s testing of I/C

3- a report on any applicable compliance with laws or regulations

They are also required to report on fraud or illegal acts

Question 12

Under what circumstances is an auditor required to report fraud or illegal acts to outside authorities

Answer 12

• Management fails to report the information as required by law
• Management fails to take timely action to respond to the fraud or illegal act.

Question 13

When must a state or local government get a “Single Audit”

Answer 13

When they spend at least $750K in federal funding they need to do a single audit. The point is to verify that federal funds have been spent according to the programs they were received for

Question 14

What do you need to have in place when you do an agreed upon procedures engagement

Answer 14

• The procedures to be performed and the finds are agreed upon by client, CPA and a third party
• The report is restricted
• if it is for prospective financial statements in accordance with GAAP - you also need a “summary of significant assumption” presented the report don’t need this if SSAE

Question 15

What report can you issue if you are doing a GAS compliance audit and detect serious noncompliance

Answer 15

Noncompliance is considered as serious as a departure from GAAP and therefore you will issue:

• Qualified - if material and not pervasive
• Adverse - if material and pervasive

Question 16

Examination on a Financial Forecast is what types of engagement

Answer 16

It is an attest and assurance engagement.

Need to be Independent

Question 17

When you are reporting on Compliance what kinds of reports can you issue

Answer 17

Either an examination or agreed upon procedure

Question 18

What are the requirements / steps in a compliance examination or agreed upon procedure

Answer 18

• The CPA should obtain an understanding of the specified requirements
• Mgmt must accept responsibility for compliance with specified requirements
• If Examination - the end result is a report where ether CPA expresses an opinion on whether management complied with specified requirements
• If Agreed upon Procedures - The CPA will perform the procedures set by partied to evaluate compliance with specified requirement. The report will list 1) the requirements and 2) the procedures performed and 3) The results of the procedures

Question 19

What do you do if the quarterly data required by the SEC Regulation S-K has been omitted

Answer 19

The report must contain a statement that the co. has not presented the quarterly financial data

Question 20

What is the difference between a forecast and a projection

Answer 20

They are both prospective F/S

• Projections are future results based on hypothetical assumption in a “what-if” scenario - limited use
• Forecasts are what you expect the future to be based on what is actually happening - general use

Question 21

What types of engagements can you perform with prospective F/S

Answer 21

You can perform examinations, Compilations, and Agreed -upon Procedures
NOT A Review - isn’t allowed