Interim financial information such as third quarter sales, net income, and inventory and receivables balances. B. Which assertions may be tested for the "transactions and events" category of management assertions? A. During the consideration of fraud in a financial statement audit, the auditor should identify and assess risks that may result in material misstatements due to fraud. D. Retained until the audited entity ceases to be a client. D. Required during planning only. Chat - Best option for simple questions A lead schedule is quite useful for giving structure to audit documentation, making it easier to read. A C. Required for planning and overall review of the financial statements. Comparison of the financial information with similar information regarding the industry in which the entity operates. Audit documentation should (1) demonstrate that the engagement complied with PCAOB standards, (2) support the basis for conclusions about all relevant assertions, and (3) demonstrate that the. not summarized on lead schedules. Is based on evaluating whether the entitys antifraud programs and controls have been suitably designed and implemented. C. Authorization. Study Unit 10: questions Flashcards Preview - Brainscape In the audit approach, Lead schedules most often represent MS Excel files which are automatically filled in. In creating lead schedules for an audit engagement, a CPA often uses automated audit documentation software. Evaluate management's performance in causing this decline. D. Audit documents should be designed to facilitate the review and supervision of work done by auditors assigned to the engagement. D. Presentation and disclosure. Answer A CPA leaving a firm may take copies of information contained in client files to assist another firm in serving that client. Which account balance assertion for inventory should you be most concerned about verifying? B. B. must be available to begin creating automated lead schedules. A. According to SEC independence regulations. D. $163,800. Which of the following is the account balance assertion you would be most concerned about? Preparing for audit engagement: Are you ready? A checklist of What client information is needed to begin this process? The permanent section of audit documentation usually contains copies of important client documents. Material misstatements may exist in the financial statements. Bank statements obtained from the client. According to the AICPA Code of Professional Conduct, in which of the following circumstances may a CPA serve on a companys board of directors? Use generalized audit software to extract evidence from client databases. What client information is needed to begin this process? The number of subscribers increased steadily throughout the year and at December 31, 2013, there were 16,200 subscribers. You are concerned with unrecorded transactions in the purchasing cycle. documentation software. Which of the following assertions would not be tested when performing the SysTrust assurance service? Accepting a commission for recommending a product to an audit client. Perform the planned auditing procedures closer to the balance sheet date. For example, a cash lead schedule may, summarize findings recorded on the cash in bank, petty cash, and count of cash on hand detail, Answer (D) is incorrect because specific transactions are reflected in detailed audit documentation, Which of the following statements would an auditor most likely add to the negative form of. Assertions about classes of transactions and events. B. According to the Code of Professional Conduct of the AICPA, for which type of service may a CPA receive a contingent fee? Evidence supporting the financial statements consists of the accounting records and all other information available to the auditor. More detailed and covers areas that normally are not considered by the independent auditor. C. General ledger information, such as account numbers, prior-year account balances, and current year unadjusted information. Accounting records belong to the auditee. Study of relationships of the financial information with relevant nonfinancial information. B. C. A check issued by the company and bearing the payee's endorsement that is included with the bank statement mailed directly to the auditor. ", B. Detect all errors or fraudulent activities. Some of the store merchandise is held on consignment. Accept the confirmation but verify the source and content through a telephone call to the respondent. The sufficiency of evidence refers to the quality of audit evidence. A. A lead schedule contains the detailed accounts from the general ledger making, up the line item total. What client info is needed to begin this process? Blank confirmation requests are used to reduce the risk that recipients will respond without verifying the information. A. B. Whether the data were processed in a computer system or in a manual accounting system. D. The independent auditor may discard audit documents after two years. C. Specialized audit programs. To create these summaries, general ledger information is needed. To create these, summaries, general ledger information is needed. In creating lead schedules for an audit engagement, a CPA often uses automated audit documentation software. D. May be in paper, electronic, or some other form. Smith, CPA, is a partner of Johnson Accounting Firm. An auditors opinion, to be economically useful, is formed within reasonable time and based on evidence obtained at a reasonable cost. Lead schedules are summaries of detailed schedules. Help articles have been migrated to the new Help and Support. The auditors professional judgment must determine the necessary audit plans and the specific audit procedures that will gather sufficient appropriate evidence to reduce audit risk to an acceptably low level and enable the auditor to draw reasonable conclusions on which to base the opinion. Existence, rights and obligations, completeness, valuation and allocation. The examination report issued under the WebTrust service includes all of the following except. After testing a clients internal control activities, an auditor discovers a number of significant deficiencies in the operation of a clients internal controls. Of the following, which is the least persuasive type of audit evidence? What client information is needed to begin this process? D. Observation. Debt agreements. 03/10/2023 Business High School answered expert verified in creating lead schedules for an audit engagement, a cpa often uses automated work paper software. D. Operating cycle. B. Which of the following is an essential factor in evaluating the sufficiency of evidence? B. Verify that a control is being observed. An auditor should design the audit to provide reasonable assurance of detecting errors and fraud that are material to the financial statements. Also, confirmations may not be designed to provide assurance about information not given in the request forms. The securities of Donley Corporation are listed on a regional stock exchange and registered with the SEC. D. General journal entries. Course Hero is not sponsored or endorsed by any college or university. B. This discussion. SysTrust is an assurance service designed to. Which of the following is the least persuasive documentation in support of an auditor's opinion? D. To verify the accuracy of the balance sheet account balances. C. Balance Sheet. A. Occurrence, completeness, rights and obligations, accuracy, cutoff and classification. lead schedule is used to summarize like accounts (e.g., if a client Your online resource to get answers to your product and industry questions. A person identified as an audit committee financial expert of an issuer generally must have acquired the attributes of a financial expert through any of the following experiences, except. Compare recorded financial information with anticipated results from budgets and forecasts. Proper planning as intended by the first standard of fieldwork would occur when the auditor: The Nature of the CPA Firms Practice-YES, Involve Monitoring of one party by another: YES, Compilation of personal financial statements: NO. Answer (D) is incorrect because noting that an amount is overdue could discourage a customer, Philippine School of Business Administration, Manila (Main Campus). Which of the following is a correct statement regarding the nature and timing of communications between an accounting firm performing an initial audit of an issuer and the issuers audit committee? Interim financial information, such as third quarter sales, net income, and inventory and receivables, Specialized journal information, such as the invoice and purchase order numbers of the last few sales, General ledger information, such as account numbers, prior-year account balances, and current-year, Lead schedules are summaries of detailed schedules. Which of the following statements ordinarily is true concerning the content of audit documentation? B. The auditor ordinarily should perform certain auditing procedures, such as external confirmation of receivables (AU-C 505), observation of inventory (AU-C 501), and analytical procedures (AU-C 520), instead of relying completely on documentary evidence. Confirmation. D. Computations made by the auditor. B. 21 Q Choose File > Save As and name the new Financial Statement. In designing written audit programs, an auditor should plan specific audit procedures to test A. Existence, accuracy, rights and obligations, completeness. Audit documentation A. Try our solution finder tool for a tailored set of products and services. Request the senders to mail the original forms to the auditor. To assist the auditor to accurately interpret information obtained during an audit. Content be sufficient to provide support for the auditor's report, including the auditor's representation as to compliance with auditing standards. In creating lead schedules for an audit engagement, a CPA often uses automated workpaper software. B. In creating lead schedules for an audit engagement, a CPA often uses automated audit documentation software. C. Additional tests of details are required. According to the guidelines of the Department of Labor (DOL), the selected auditor must be, Independent for purposes of examining financial information required to be filed annually with the DOL, If requested to perform a review engagement for a nonpublic entity in which an accountant has an immaterial direct financial interest, the accountant is. B. Which of the following statements best describes the primary purpose of Statements on Auditing Standards? Analyses of capital stock and other owners equity accounts. Exist independently of the financial statement audit. I would not undertake that procedure because at best the results would only be persuasive and Im looking for convincing evidence.. C. $164,400. C. Rights and obligations. Suspense debits that management believes will benefit future operations. Audit documents that record the procedures used by the auditor to gather evidence should be A. Accounting records by themselves do not provide sufficient appropriate evidence. The more effective the internal control, the more assurance it provides about the reliability of the accounting data and financial statements. d. An example of an analytical procedure is the comparison of A. Under these circumstances, the auditor most likely would. C. Copies of bond and note indentures. Is the sole shareholder in a professional accountancy corporation and uses the designation and company in the firm title. The auditor may wish to verify the sources by calling the purported senders or by having the sender mail the original confirmation directly to the auditor. Inherent risk and control risk differ from detection risk in that they. An auditor of a manufacturer would most likely question whether that client has committed illegal acts if the client has, Holding other planning considerations equal, a decrease in the amount of misstatements in a class of transactions that an auditor could tolerate most likely would cause the auditor to. In an audit based on International Standards on Auditing (ISAs), a successor auditor would normally become satisfied with opening balances by, Reviewing the predecessors working papers, The ultimate purpose of assessing control risk in a financial statement audit is to contribute to the auditors evaluation of the risk that. Occurrence. Materiality levels are generally considered in terms of the smallest aggregate level of misstatement that could be considered material to any one of the financial statements. Income Statement. Substantive procedures. A list of alternative procedures that were considered but not used in the audit. B. An issuer may hire an employee of a registered public accounting firm who served on the audit engagement team within the previous year for which of the following positions? But an electronic confirmation system may be sufficiently secure and well controlled to mitigate the risks of interception or alteration. Management is interested in maintaining the entitys earnings trend by using aggressive accounting practices. You are auditing a manufacturing company that has a large production facility. What client information is needed to begin this process? In determining whether transactions have been recorded, the direction of the audit testing should start from the A. Subscriptions are paid in full at the beginning of the member term. Never required. B. A member whose practice is primarily bankruptcy discloses a clients name. Existence or occurrence. Under the Sarbanes-Oxley Act of 2002, exactly how many consecutive years may an audit partner lead an audit for an issuer? incorrect because interim information is not necessary. Note: Use the Edit Multiple Accounts to quickly add grouping codes to many accounts at the same time. Which of the following are ordinarily designed to detect possible material monetary errors in the financial statements? B. B. A. The objective of assurance services is best described as: Which of the following statements best describes the primary purpose of Statements on Auditing Standards? C. Assertions about presentation and disclosure. Johnson audited the books of Hometown Bank. B. Which of the following statements is most accurate regarding audit documentation requirements? C. "I evaluate the degree of risk involved in deciding the kind of evidence I will gather." C. Occurrence, rights and obligations, completeness, valuation and allocation. Accounting Cycle and Classifying Accounts, Adjusting Accounts for Financial Statements, Asset Demand and Supply under Uncertainty, Business Analytics & Technology Management Chapter 2, Business Analytics & Technology Management Chapter 3, Business Analytics & Technology Management Chapter 4, Business Analytics & Technology Management Chapter 5, Business Analytics & Technology Management Chapter 6, Capital Budgeting and Managerial Decisions, Derivative Instruments and Hedging Activities, External Financial Statements and Revenue Recognition, Financial Intermediaries and Financial Markets, Financial Markets and Securities Offerings, Financial Statements and Accounting Transactions, Integrated Marketing Communications and Direct Marketing, Interactive Marketing and Electronic Commerce, Interpersonal and Organizational Communication, Introduction to Human Resource Management, Introduction to Human Resources Assessment, Managerial Accounting Concepts and Principles, Market Segmentation Targeting and Positioning, Organization and Operation of Corporations, Organizational Markets and Buyer Behaviour, Profitability Analysis and Analytical Issues, Profitability Analysis and Decentralization, Reporting and Analyzing Long Lived Assets, Responsibility Accounting and Performance Measures, Understanding Interest Rates Determinants. After making inquiries about credit granting policies, an auditor selects a sample of sales transactions and examines evidence of credit approval. C. Information obtained indirectly from independent outside sources is more persuasive than the auditor's direct personal knowledge obtained through observation and inspection. Which of the following statements is true concerning an auditors responsibilities regarding financial statements? For example, a . Recorded amounts of major disbursements with appropriate invoices. Which of the following is not a typical analytical procedure? Identify internal control weaknesses more prominently. The auditor should document findings that could result in a modification of the auditors report. Which of the following procedures would an auditor most likely perform to verify management's assertion of completeness? The controller of a small utility company has interviewed audit firms proposing to perform the annual audit of their employee benefit plan. A. Analytical procedures enable the auditor to predict the balance or quantity of an item under audit. Thus, judgment is required to select the specific auditing procedures needed to obtain that evidence. Last Modified: 10/11/2019, 10:37:26 AM This test of controls most likely is performed to support managements financial statement assertion(s) of, Classification and Understandability: No Existence: Yes, A CPA firm should establish procedures for conducting and supervising work at all organizational levels to provide reasonable assurance that the work performed meets the firms standards of quality. cash in bank, petty cash, and count-of-cash-on-hand detail schedules. A. a. By default, the reports and financial statements use the Account Classification grouping to display chart of accounts information. Actual fee would be substantially higher. D. Occurrence, rights and obligations, completeness, classification and understandability, accuracy and valuation. . C. The auditor weighs the cost of obtaining evidence with its usefulness. Apply audit procedures specifically directed to ascertaining whether an illegal act has occurred. The recipients are likely to sign the confirmations without devoting proper attention to them. An auditor is required to obtain an understanding of the entitys business, including business cycles and reasons for business fluctuations. B. During the confirmation of accounts receivable, an auditor receives a confirmation via the clients fax machine. D. May be in paper, electronic, or some other form. C. Lead schedules. Which of the following statements would an auditor most likely add to the negative form of confirmations of accounts receivable to encourage timely consideration by the recipient? Extensive analyses of inventory prepared by the client at the auditors request are working papers that belong to the auditor and need not be furnished to the client upon request. A. The following statements were made in a discussion of audit evidence between two CPAs. Adjusting journal entries. The total on a lead schedule should match the total for the corresponding line item in a client's financial statements. Learn more. Consider withdrawing from the audit engagement and disassociating from future relationships with the client. B. According to the PCAOB, an accounting firm is most likely to be independent of its audit client if. B. The auditor also plans and performs the audit with professional skepticism. Audit evidence can come in different forms with different degrees of persuasiveness. Which of the following generalizations does not relate to the reliability of audit evidence? Specialized journal information such as the invoice and A. 72. C. General ledger information, such as account numbers, prior-year account balances, and current year unadjusted information. B. The trust securities were not material to the CPA but were material to the childs personal net worth. Call us at +1 800 968 0600. The primary objective of this audit is to provide assurance to the, A CPA is most likely to refer to one or more of the three general auditing standards in determining. adjusting entry information is identified subsequent to the Which of the following statements is(are) true regarding a CPA employee of a CPA firm taking copies of information contained in client files when the CPA leaves the firm? What client information is needed to begin this process? If you do not report any differences within 15 days, it will be assumed that this statement is correct.. An auditor has identified the controllers review of the bank reconciliation as a control to test. Which of the following presumptions is correct about the reliability of audit evidence? The more effective the internal control system, the more assurance it provides about the accounting data and financial statements. Which of the following elements ultimately determines the amount of audit work that is necessary in the circumstances to afford a reasonable basis for an opinion? material misstatement is, The auditors of a nonissuer (nonpublic) company must An auditor's opinion, to be economically useful, is formed within a reasonable time and based on evidence obtained at a reasonable cost. With the introduction of computers, accountants have been able to perform fewer manual calculations. In creating lead schedules for an audit engagement, a CPA often uses automated audit documentation software. This test of controls most likely supports managements financial statement assertion(s) of. A company sells a particular product only in the last month of its fiscal year. Lead Schedule: Indicate the work done, write the observations and conclusions to your findings. Knowingly makes false and misleading journal entries in the records if some are material. It consists of (1) accounting records and (2) sources of information other than accounting records. Whether the CPA should undertake an audit engagement. A CPAs retention of client-provided records as a means of enforcing payment of an overdue audit fee is an action that is. Which of the following qualifications is least likely required to provide CPA ElderCare (PrimePlus) services? Recalculation. Under these circumstances, the auditor should. Which of the following is required for a CPA firm to designate itself as Members of the American Institute of Certified Public Accountants on its letterhead? They omit the amount or other information to be confirmed and ask the confirming parties to fill in the information. An indication that the accounting records agree or reconcile with the financial statements. A CPA is permitted to disclose confidential client information without the consent of the client to, A violation of the professions ethical standards most likely would have occurred when a CPA. C. Rights and obligations. Professional judgment involves applying relevant knowledge and experience to the facts and circumstances of an audit. The entitys period-to-date financial results and position. Information to develop this estimate can be obtained from all of the following except: A. Tracing transactions through the system to determine whether procedures are being applied as prescribed. Most evidence on which the auditor bases the opinion is persuasive, not conclusive, because of the inherent limitations of the audit: (1) the nature of financial reporting (e.g., use of accounting estimates dependent on forecasts), (2) the nature of audit procedures (e.g., the possibility of fraud involving collusion or the failure of management to provide all the information requested), and (3) the need to perform the audit (a) within a reasonable period of time and (b) to achieve a balance between benefit and cost. Positive confirmation requests obtain evidence only when responses are received. Audit documents should be the primary support for the financial statements being examined. Lead schedules are summaries of detailed schedules. ALL, With respect to records in a CPAs possession, the Code of Professional Conduct provides that. Include a list of items or invoices that constitute the customers account balances. Schedules of details of physical inventory counts conducted by the entity. balances, and current year unadjusted information.
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