cpa audit review ch9 review 2

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Joens1313
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cpa audit review ch9 review 2
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2014-09-06 19:37:41
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cpa audit review ch9
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cpa audit review ch9 review 2
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  1. When an auditor is to conduct an audit of a service organization, what considerations should the auditor make in the planning stages regarding internal controls of the organization?
    The auditor should determine whether management has adequately described complementary user controls.

    The service auditor should obtain an understanding of the service organization’s system, including controls within the scope of the engagement. Understanding controls at the service organization requires evaluating management’s description of the service organization’s system, including complementary user entity controls (AT 801).
  2. 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

    In a representation letter to Brown
  3. When reporting to the audit committee on conditions relating to an entity’s internal control observed during an audit of a nonissuer’s financial statements, the auditor should include a
    Restriction on the use of the report.

    The report is a by-product of the engagement. It is intended solely for the information and use of those charged with governance, management, and others within the organization (or specified regulatory agency) and is not intended to be and should not be used by anyone other than these specified parties (AU-C 905). But law or regulation may require the report to be given to governmental authorities. For issuers, the auditor must express an opinion on whether the client maintained, in all material respects, effective internal control over financial reporting. This report is not restricted as to use.
  4. Which of the following is a true statement concerning an attest engagement to examine an entity’s internal control over financial reporting?

    A.The responsible party evaluates the effectiveness of internal control.

    B.The practitioner relies on management’s assertion about the effectiveness of internal control.

    C.Management agrees not to include the practitioner’s report in a general-use document.

    D.Management relies on the practitioner’s audit in making the assertion about the effectiveness of internal control.
    A.The responsible party evaluates the effectiveness of internal control. 

    As part of engagement performance for both AT 501 and AS No. 5, the practitioner should obtain from management a written assertion about internal control effectiveness.
  5. In the audit of a nonissuer, the auditor reports on the effectiveness of an entity’s internal control over financial reporting. Which of the following is not a condition of that engagement?

    A.Management provides assurance that limitations inherent to internal control have been eliminated.

    B.Management accepts responsibility for the effectiveness of internal control.

    C.Management evaluates the effectiveness of the entity’s internal control using suitable criteria.

    D.Management documents the system of internal control.
    A.Management provides assurance that limitations inherent to internal control have been eliminated.

    By their nature, limitations inherent to internal control cannot be eliminated. Thus, management is not expected to provide such assurance.
  6. An auditor reports on an examination of the effectiveness of an entity’s internal control over financial reporting. If the control criteria used are established by a regulatory agency, the report should
    Contain a statement of restriction on use if the criteria have not been subjected to due process procedures and are appropriate only for a limited number of users.

    If the criteria were established by a regulatory agency after following due process procedures, including distribution of proposed criteria for public comment, and the criteria are available to users, a standard form of reporting may be used. If the control criteria have not been subjected to due process procedures, and the auditor determines that the criteria are appropriate only for a limited group of users (e.g., those who participated in their establishment), the appropriate form of the report should be modified to include a restriction on use stated in a paragraph following the opinion paragraph (AT 101).

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