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that the manager generally has more information about the true financial position and results of operations of the entity then does the absentee owner refers to
information asymmetry
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consider the following statements
under Sarbanes-Oxley, public company accounting oversight board is authorized to set auditing standards to be followed by those who audit financial statements for companies which a publicly traded
under Sarbanes-Oxley audits of public companies involved both the audit of the company's financial statements and an audit of the company's internal controls
both statement one in statement to are true
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a company's internal auditors assists on the audit of the company's financial statements being performed by members of an outside CPA firm. Name the type of engagement and the most likely criteria on which the financial statements are based
financial, generally accepted accounting principles
-
the risk that the auditor will not detect a misstatement that exists in the relevant assertion that could be material either individually or in aggregated with other misstatements is referred to as
detection risk
-
consider the following statements
GAAS standardsof fieldwork relate to the actual conduct of the audit
gas standards of fieldwork involved auditors qualifications and the quality of his or her work
statement one is true, statement to is false
-
and auditor watches company personnel take the physical inventory. What type of audit evidence is involved
observation
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as a test of sales for completeness, and auditor selects 50 sales invoices and vouches them to the respective shipping document. One factor involving the appropriateness of audit evidence has been violated
relevance
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in class in discussing the audit risk model we considered several cases as follows case one audit risk equals .05 inherent risk equals .60 control risk equals .30 detection risk equals points 278
case two audit risk equals .1, inherent risk equals .6, control risk equals .3, what is detection risk of case to compared with case one
.556, less audit work
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consider the following statements
one conceptually to decrease the level of detection risk the auditor would do additional substantial substantive testing i.e. more detect detailed testing and/or analytical procedures
second conceptually as the assessed level of control risk decreases, there is less of a need to lower detection risk to maintain the same overall level of acceptable audit risk
statement one is true, statement to is true
-
consider the following statements
first materiality has both quantitative and qualitative considerations
second when considering a preliminary judgment of materiality if the auditor sets a higher dollar amount for materiality, rather than a low dollar amount, more evidence i.e. substantial testing is required
statement one is true, statement to is false
-
consider the following statements
first for income statement accounts evidence is considered to be more timely the more closely pertains to transactions or events during the.
Second for balance sheet accounts evidence is considered to be more timely the more closely relates to the balance sheet date
statement one is true, statement two to his true
-
consider following statements
first auditing standards require that the possible successor auditor initiate a conversation with the predecessor auditor
second since internal auditors are employees of the company being audited, internal auditors can never assist external auditors in performing the financial audit
statement one is true, statement to is false
-
which of the following is not considered one of the three conditions indicative of fraud i.e. fraud risk triangle
collusion
-
the misappropriation i.e. theft of assets is called
defalcation
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which type of accounts receivable is requested to be returned to the CPA firmeven if the recipient i.e. customer who owes money to the company agrees with the amount shown on the confirmation
positive confirmation
-
when there are many accounts with small balances which type of Accounts Receivable might be appropriate? As discussed testing which should assertion is most likely to be the reason for this?
Negative, existence
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with respect to perform alternative procedures is a confirmation is not returned, what type of confirmation had been sent, and what might be the alternative procedure?
Positive confirmation, considering subsequent cash receipts
-
inherent risk and control risk to differ from detection risk and that they
exist independently of the financial statement audit
-
audits of financial statements are designed to obtain assurance of detecting misstatement due to
errors yes, fraudulent financial reporting yes, misappropriation of assets yes
-
which of the following statements best describes the auditors responsibility to detect conditions relating to financial stress of employees or inverse relationships between a company and its employees
the auditor is not required to plan the audit to discover these conditions but you consider them if year she becomes aware of them during the audit
-
which of the following factors most likely would cause a CPA to not accept a new audit Gateway
the prospective client is unwilling to make all financial records available to the CPA
-
before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessors
understanding as to the reasons for the change of auditors
-
with respect to planning an audit which of the following statements is always true
is acceptable to perform a portion of the audit of a continuing audit client at interim dates
-
while assessing the risks of material misstatement auditors identify risks, relate risk to what could go wrong, consider the magnitude of risks and
consider the likelihood that the risks a result in material misstatements
-
which of the following factors are included in an entities control environment
audit committee yes, integrity and ethical values yes, organizational yes
-
the objective of tests of details of transactions performed as tests of controls is to
evaluate whether controls operated effectively
-
a material weakness is a significant deficiencies or combination of Sydney significant deficiencies the results in more than a remote likelihood that misstatement of at least one amount will not be prevented or detected
a material amount
-
which of the following is most likely to indicate a significant deficiency relating to the client antifraud programs
audit committee passivity when considering oversight functions
-
which of the following controls most likely would reduce the risk of diversion of customer C-spine entities employees
a bank lockbox system
-
with properly designed internal control the same employee most likely would match vendors invoices with receiving reports and also
recompute the calculations on vendors invoices
-
which of the following controls most likely addresses the completeness assertion of for inventory
receiving reports are prenumbered and periodically reconciled
-
the audit working paper the reflects the major components of an on amount reported in the financial statements is the
lead schedule
-
in testing existence assertion for in asset and auditor ordinarily works from the
accounting records to the supporting evidence
-
a systematic process of one objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertaining the degree of correspondence between those assertions and establish criteria and communicating the results to interested users
auditing
-
and expressed her and lied representation by management about information is reflected in the financial statements
financial statement assertions
-
independent professional servicethat improve the quality of information, or its context, for decision-makers
assurance service
-
the magnitude of an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced
materiality
-
a service when a practitioner is engaged to issue, or does issue, a report on subject matter
attest service
-
transactions that have been recorded actually took place
occurance
-
all disclosures that should have been included in the financial statements have been included
completeness
-
receivables are determined using net realizable value
valuation and allocation
-
transactions and events have been recorded in the correct accounting.
Cutoff
-
Accounts Payable and other liabilities expected to be paid using current assets have been shown as current liabilities in the classified balance sheet
classification?
-
All assets liabilities and equity interests that should have been recorded have been recorded
completeness
-
assets liabilities and equity interests exist
existence
-
discuss the adequacy of the allowance for doubtful accounts with the credit manager
inquiry
-
watch client personnel take the companies physical inventory
observation
-
reviewing the general ledger for unusual adjusting entries
scanning
-
walking through an understanding by redoing companies internal controls to determine whether they are effective or not
re-performance
-
compare information on the receiving report of inventory with the related Accounts Payable bill for accuracy
inspection of records or documents
-
examine stock certificates of companies owned by the audit client is a test of marketable securities for existence
inspection of tangible assets
-
send letters to customers asking them about how much they oh the company
confirmation
-
foot the cost of inventory on an inventory listing to determine if it is added correctly
recalculation
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