Review Questions

  1. What is the procedure that best discourages the resubmission of vendor invoices after they have been paid?
    The cancelation of vouchers by CFO personnel.

    Canceling vouchers and supporting papers (with perforations, ink, etc.) upon payment prevents the payment of a duplicate voucher. If the person signing the check does the canceling, the documents cannot be recycled for duplicate payments. Securing the paid-voucher file from access by the accounts payable clerk is another effective control.
  2. What audit procedures would most likely assist an auditor in identifying conditions and events that may create a substantial doubt about an entity’s ability to continue as a going concern?
    Review compliance with the terms of debt agreements.

    Audit procedures designed and performed to achieve other audit objectives should be sufficient to identify conditions and events indicative of substantial doubt about the going concern assumption. They include (1) analytical procedures; (2) review of subsequent events; (3) review of compliance with debt and loan agreements; (4) reading minutes of shareholders’, directors’, and board committee meetings; (5) inquiry of the entity’s legal counsel; and (6) confirmation of arrangements to provide or maintain financial support (AU-C 570).
  3. A member’s working papers include, among other items, audit programs, analytical review schedules, statistical sampling results, analyses, and schedules prepared by the client at the request of the member. Working papers are the property of the member and need not be provided to the client unless required by?
    (1) statute, (2) regulation, or (3) contract
  4. For financial audits, generally accepted government auditing standards (GAGAS) incorporate AICPA standards. GAGAS prescribe additional requirements for reporting on
    Laws, Regulations,Reporting on Contracts, and Grants  -------------  and Internal Control

    The report on financial statements (or separate reports) should describe the scope of the auditor’s testing of internal control over financial reporting and compliance with laws and regulations and grant or contract provisions. Auditors also should state whether their tests provided sufficient appropriate evidence for opinions on the effectiveness of internal control and compliance.
  5. What is true about significant deficiencies identified in an audit?
    The auditor should identify those significant deficiencies considered to be material weaknesses.

    In a financial statement audit, the auditor is not required to perform procedures specifically to identify deficiencies in internal control or to express an opinion on internal control. But the auditor should report significant deficiencies or material weaknesses in internal control of which (s)he becomes aware. In such cases, they must be communicated in writing to management and those charged with governance (AU-C 265).
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Review Questions
CPA Audit Review Questions 1