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The flashcards below were created by user
Joens1313
on FreezingBlue Flashcards.
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Restrictions imposed by management prohibit the observation of physical inventories, which account for 35% of all assets. Alternative audit procedures cannot be applied, although the auditor was able to examine satisfactory evidence for all other items in the financial statements. The auditor should express
A disclaimer of opinion.
The auditor may become aware of a management-imposed scope limitation after accepting the engagement that is likely to result in a qualified opinion or a disclaimer of opinion. The auditor should request removal of the limitation. If it is not removed, the auditor should communicate with those charged with governance and determine whether alternative procedures can be performed. If the auditor cannot obtain sufficient appropriate evidence because of the limitation, (s)he should determine whether the possible effects of undetected misstatements could be material and pervasive. If they are, the auditor should disclaim an opinion or withdraw from the engagement (AU-C 705).
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Accounting for unused pre numbered purchase orders and receiving reports is usually performed in the vouchers payable department
false
Employees in the vouchers payable department should have no responsibilities related to purchasing or receiving goods. The purchasing department accounts for unused prenumbered purchase orders. The receiving department accounts for unused prenumbered receiving reports.
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If compiled financial statements presented in conformity with the cash receipts and disbursements basis of accounting do not disclose the basis of accounting used, the accountant should
Disclose the basis of accounting in the accountant’s report.
An accountant may compile financial statements that omit disclosures required by GAAP or a special purpose framework (other comprehensive basis of accounting, or OCBOA). The accountant may compile financial statements that omit substantially all the disclosures required by an applicable reporting framework if the omission is not, to his/her knowledge, done to mislead those who might reasonably be expected to use the statements. When reporting on statements that omit substantially all disclosures, the accountant should include in the compilation report a paragraph stating that (1) management has elected to omit substantially all the disclosures, (2) the omitted disclosures might influence the user’s conclusions, and (3) the statements are not designed for those who are not informed about such matters. Furthermore, statements prepared in accordance with an OCBOA are not appropriate in form unless they include (1) a description of the OCBOA, including a summary of significant accounting policies and a description of the primary differences from GAAP, and (2) informative disclosures similar to those required by GAAP.
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Brown, CPA, has accepted an engagement to examine the effectiveness of the internal control over financial reporting of Crow Company (a nonissuer) and to issue a report on such examination. In what form does Crow present its written assertion about effectiveness?
In a separate report that accompanies Brown’s report and in a representation letter to Brown
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The purpose of segregating the duties of hiring personnel and distributing payroll checks is to segregate the
Authorization of transactions from the custody of related assets.
In principle, the payroll function should be divided into its authorization, recording, and custody functions. Authorization of hiring, wage rates, and deductions is provided by human resources. Authorization of hours worked (executed by employees) is provided by production. Based upon these authorizations, accounting calculates and records the payroll. Based on the calculated amounts, the CFO prepares and distributes payroll checks.
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