cpa audit review ch9 review 6

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Joens1313
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cpa audit review ch9 review 6
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2014-09-10 22:43:18
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cpa audit review ch9
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cpa audit review ch9 review 6
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  1. When engaged to express an opinion about the effectiveness of a nonissuer’s internal control over financial reporting, the auditor should
    Obtain management’s written representation acknowledging responsibility for establishing and maintaining internal control.

    The auditor should obtain management’s written acknowledgment of responsibility for establishing and maintaining internal control. Management also should include an assertion about the evaluation of control effectiveness and the use of control criteria. Failure to provide these representations should cause the auditor to withdraw from the engagement.
  2. An auditor’s report on an examination of internal control over financial reporting is least likely to be issued as a result of

    A.A request to apply agreed-upon procedures relating to the effectiveness of an entity’s internal control.

    B.A request by management to report on internal control effectiveness.

    C.A review of the annual financial statements of a large corporation.

    D.An engagement to examine the effectiveness of an entity’s internal control based on criteria established by a regulatory body.
    C.A review of the annual financial statements of a large corporation.

    Auditors are engaged to audit and express an opinion on, rather than review, the annual statements of large corporations (issuers). A review is appropriate for nonissuers that seek a report expressing only limited assurance on financial statements, not internal control.
  3. The auditor of an issuer must express an opinion on the effectiveness of internal control. The opinion should be expressed
    As of a Specified Specified Date

    According to PCAOB’s AS No. 5, the report states the auditor’s opinion on whether the entity maintained, in all material respects, effective internal control over financial reporting as of the specified date based on the control criteria. The date typically is the end of the fiscal period. For a nonissuer, the practitioner may examine the effectiveness of internal control during a period of time (AT 501).
  4. A secondary result of the auditor’s understanding of internal control for a nonissuer is that the understanding may
    Bring to the auditor’s attention possible control conditions required to be communicated to the client.

    The auditor is not required to search for significant deficiencies or material weaknesses in internal control. However, the auditor may identify these conditions during the audit. Significant deficiencies and material weaknesses should be communicated in writing to management and to those charged with governance (AU-C 265).
  5. The activities of the user entity and the service organization have a high degree of interaction. The user auditor
    Need not test the service organization’s internal control if the user entity has effective controls related to service organization processing.

    The significance of controls at the service organization depends on the degree of interaction between its activities and those of the user entity. The degree of interaction is the extent to which the user entity can, and chooses to, implement effective controls over service organization processing. In these circumstances, the user auditor may be able to obtain an understanding from the user entity of the service organization’s services that suffices to assess the RMMs. Accordingly, the user auditor need not obtain a type 1 or type 2 report.
  6. Which of the following statements about significant deficiencies and material weaknesses in internal control is true for an audit of a nonissuer?

    A.An auditor may report that no significant deficiencies were noted during an audit.

    B.An auditor may communicate significant deficiencies and material weaknesses during an audit or after the audit’s completion.

    C.An auditor is required to search for significant deficiencies and material weaknesses during an audit.

    D.All control deficiencies are also considered to be material weaknesses.
    B.An auditor may communicate significant deficiencies and material weaknesses during an audit or after the audit’s completion.

    When early communication is important, the auditor may communicate significant matters orally during an audit. However, significant deficiencies and material weaknesses are required to be reported again in writing at the conclusion of an audit.

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