cpa audit review ch9 review 7

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Joens1313
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cpa audit review ch9 review 7
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2014-09-10 22:46:50
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cpa audit review ch9 review 7
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  1. The Committee of Sponsoring Organizations (COSO) of the Treadway Commission issued a document in 1992 that has been embraced by numerous organizations, including the AICPA and the GAO. That document is titled
    Internal Control--Integrated Framework.

    Many professional and regulatory bodies, including the PCAOB, have recognized the COSO’s internal control framework by incorporating its terms, definitions, and concepts into their policies, procedures, pronouncements, and other literature.
  2. In reporting on an examination of an issuer’s internal control over financial reporting, an auditor should include a paragraph that describes the
    Limitations inherent to all internal control.

    . The auditor’s report states that because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct, misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that (1) controls may become inadequate because of changes in conditions or (2) the degree of compliance with the policies or procedures may deteriorate (AT 501).
  3. 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 accepts responsibility for the effectiveness of internal control.

    B.Management documents the system of internal control.

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

    D.Management provides assurance that limitations inherent to internal control have been eliminated.
    D.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.
  4. Snow, CPA, was engaged by Master Co., a nonissuer, to examine the effectiveness of Master’s internal control over financial reporting as part of an integrated audit. Snow’s report should state that
    Because of inherent limitations, internal control may not prevent, or detect and correct, misstatements.

    The auditor’s report states that because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct, misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that (1) controls may become inadequate because of changes in conditions or (2) the degree of compliance with the policies or procedures may deteriorate (AT 501).
  5. 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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