cpa audit review overall 1

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cpa audit review overall 1
2014-06-13 00:20:42
cpa audit review overall

cpa audit review overall 1
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  1. Page, CPA, has T Corp. and W Corp. as audit clients. T Corp. is a significant supplier of raw materials to W Corp. Page also prepares individual tax returns for Time, the owner of T Corp., and West, the owner of W Corp. When preparing West’s return, Page finds information that raises going-concern issues with respect to W Corp. May Page disclose this information to Time?
    No, because the information is confidential and may not be disclosed without West’s consent.

    Conduct Rule 301 states that a member in public practice cannot disclose confidential client information without the client’s consent. The only exceptions are (1) in response to an enforceable subpoena; (2) a review of the CPA’s professional practice; (3) a discharge of professional obligations; and (4) a response to an inquiry made by the professional ethics division, trial board of the AICPA, or an investigative or disciplinary body of a state society or board of accountancy.
  2. With respect to the auditor’s planning of a year-end audit,  is it always true that it is an acceptable practice to carry out part of the audit at interim dates.
    YES - Much of the audit planning, including obtaining a sufficient understanding of internal control, assessing control risk, and the application of substantive tests to transactions can be conducted prior to the balance sheet date.
  3. A violation of the profession’s ethical standards would most likely occur when a CPA
    Is the sole shareholder in a professional accountancy corporation and uses the designation “and company” in the firm title.

    A firm name may not be misleading (Conduct Rule 505). The designations “and Company,” “and Associates,” or “& Co.” are misleading when a member is a sole owner because they may be interpreted to mean more than one owner.
  4. What procedure would an auditor most likely perform in obtaining evidence about subsequent events?
    Compare the latest subsequent interim financial information with the financial statements being reported upon.

    Subsequent events procedures include (1) reading the latest subsequent interim statements, if any; (2) inquiring of management and those charged with governance about the occurrence of subsequent events and various financial and accounting matters; (3) reading the minutes of meetings of owners, management, and those charged with governance; (4) obtaining a letter of representations from management; (5) inquiring of legal counsel; and (6) obtaining an understanding of management’s procedures for identifying subsequent events.
  5. An auditor may decide to increase the risk of incorrect rejection when
    The cost and effort of selecting additional sample items are low.

    The risk of incorrect rejection is the risk that the sample supports the conclusion that the recorded account balance is materially misstated when it is not. This risk relates to the efficiency, not the effectiveness, of the audit. Incorrect rejection ordinarily results in the application of additional procedures that finally lead the auditor to the proper conclusion. If the cost and effort of selecting additional sample items are low, a higher risk of incorrect rejection may be acceptable.