Accounting 402 Final

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  1. Which organization can revoke the right to practice as a CPA
    the applicable state board of accountancy
  2. Which of the following standards are currently established by the AICPA
    Auditing standards applicable to audits of nonpublic companies
  3. FASB considers this nonautoratative guidance when there are no guidance available
    FASB concepts statements
  4. PCAOB provide this type of assurance for material mistatements due to errors or fraud
    Reasonable, but not absolute
  5. 3 items included explicitly in standard report for nonpublic company
    1) FINCH STMNTS comply with GAAP

    2) GAAP was followed during audit

  6. General group of 10 PCAOB auditing standards require that
    the auditors maintain an independent attidute
  7. Audit provides reasonable assurance of detecting what type of material
    fraudulent financial reporting

    misappropriation of assets
  8. 3 things included in integrated audit report of FINCH STMNTS of public company
    1)indicates  FINCH STMNTS responsibility of MGMT

    2) effectiveness of internal control tested

    3) report is signed by the CPA FRIM
  9. 3 financial stmts asserted by management
    Assets and liabilities

    1) existence

    2) completeness

    3) valuation
  10. 3 business characteristics indicative of high inherent risk
    1) substantial turnover of mgmt

    2) operating results highly sensitive to economic factors

    3) large likely misstatements detected prior to audits
  11. 2 reasons to obtain a representation letter
    1) remind client of mgmt responsibility of finch stmts

    2) document clients response to verbal inquires made by auditors during engagement
  12. why investigate related party transactions
    substance may differ from their form
  13. 3 reliable types of audit evidence
    1) confirmations mailed by outsiders to auditors

    2) correspondence between auditors & supliers

    3) canceled checks returned in the year end bank stmnts
  14. Analytical procedures are most likely to detect
    unusual transactions
  15. 3 primary approaches to auditing estimates
    1) review subsequent transactions

    2) develop independent estimate

    3) review & test mgmts process for developing estimate
  16. Primary purpose of the audit working papers
    support the auditors opnions
  17. what section of working papers would long term lease be held
    permanent working paper file
  18. 3 functions of audit working papers
    1) Assist audit team members responsible for supervision of work

    2) assist auditors in planning future engagements

    3) assist peer reviewers and inspectors in performing their roles
  19. 3 inherent risks relating to receivables and revenues
    1) restrictions placed on sales by laws and regulations

    2) decline in sales due to economic conditions

    3) declince in sales due to product obsolescence
  20. What provides the most assurance of valuation of AR
    assess the allowance for uncollectible accounts for reasonableness
  21. example of fradulent financial reporting relating to sales
    recording sales when the customers is likely to return the goods
  22. example of misappropriation of assets relating to sales
    theft of cash register sales
  23. when is it okay to not confirm AR
    1) AR is immaterial

    2) Use of confirmation would be ineffective
  24. 3 criteria to for AR to be recognized
    1) collectibility is assured 

    2) persuasive evidence of an arrangement exists

    3) price is fixed
  25. to determine that all sales have been recorded the auditors would select a sample of transactions from
    shipping documents file
  26. Which would likely be detected by an auditors review of he client's sales cutoffs
    inflated sales for the year
  27. to test the existence assertion for recorded receivables the auditors would select a sample from the
    AR sub ledger
  28. Which assertion relating to sales is most directly addressed when the auditors compare a sample of shipping documents to related sales invoices
  29. Auditors objectives of inventories and COGS
    1) determine valuation by appropriate method 

    2) existence 

    3) completeness of inventories
  30. 3 responsibilites of receiving department
    1) determine quantities of goods rcvd

    2) detection of damaged or defective items

    3) transmital of good received to store dept
  31. document issued by common carrier acknowledging the receipt of goods and setting the provision of the transportation agreement is the
    bill of lading
  32. what should be included as part of costs of manufacturing company
    • direct labor
    • raw materials
    • factor overhead
  33. Organization established by congress to narrow options in cost accounting under GAAP
    Cost Accounting Standards Boards
  34. When primary risk related to an audit is possible overstated inventory, the assertion most directly related is
  35. instead of physical inventory count on balance sheet date the client may take physician count prior to year end if
    1) internal control is adequate

    2) well kept records of perpetual inventory is maintained
  36. Auditor analytical procedures will be faciliated if the client
    Uses a standard cost system that produces variance reports
  37. What is the best audit procedure for the discovery for the discovery of damaged merchandise in a client's ending inventory
    observe merchandise and raw materials during the cliet's physial inventory taking
  38. Primary objective of a CPAs observation of a client's physical inventory count is to
    obtain direct knowledge that the inventory exists and has been properly counted
  39. What procedures are completed before the balance sheet date
    1) confirmation of receivables

    2) observation of inventory

    3) review of internal accounting over cash disbursement
  40. Audit of the balance of AP is designed to
    1) Verify AP were properly authorized

    2) Ascertain reasonableness of recorded liabilities

    3) Determine that all exisiting liabilities at the balance sheet date have been recorded
  41. Best audit procedure for determining existence of unrecorded liabilities
    Examine selected cash disbursements in the period subsequent to year end
  42. Erroneously recorded a large purchase twice. Which internal control would catch it
    reconciling vendors monthly statements with subsidiary payable ledger accounts.
  43. AP should compare information on each vendor invoice with
    receiving report and the purchase order
  44. In an audit the valuation of year end AP is addressed by
  45. The most signicant assertion relating to AP is
  46. Each voucher is submitted and paid only once, when a payment is approved, supporting documentation should be cancelled by the
    indvidual who signs the check
  47. In performing a test of controls the auditors vouch a sample of entires in the purchases journal to the supporting documents. Which assertion wold this test of controls most likely test
  48. 3 substantive procedures relating to payroll
    1) investigate flucuations in salaries, wages and commissions

    2) test computations of compensation under profit sharing

    3) test commission earnings
  49. Best way for the auditors to determine that every name on a payroll is that of a currently employee
    make a surprise observation of a company's regular distribution of paychecks
  50. Gross profit has declined from 30% to 20%, what should the auditors do
    consider the possibility of a misstatement in the finacial statements
  51. statement of cash flows. 3 sources of recipts and payments


  52. search for unrecorded liabilities for a public company includes procedures performed through
    date of the auditors report
  53. the aggregate misstatement in the financial statements is made up of
    known, projected and other misstatements
  54. Possible loss stemming from past events that will be resolved as to existence and amounts is refered to
    loss contigency
  55. which is the most likely to be considered a TYPE 1 subsequent event
    Customer checks deposited prior to year end, but determined to be uncollectable after year end
  56. Auditor completed audit on Feb 10 2010 when should the reprsentation letter be dated
    Feb 10 2010
  57. Which procedure is most likley to be included in the final review stage of an audit
    perform analytical procedures
  58. A material departur from GAAP will result in an auditor consderation of
    whether to issue an adverse opinion rather than a qualified opinion.
  59. the auditors report should be dated as of the date the
    auditors have accumulated sufficient evidence
  60. Opinion paragraph begins with "With the explanation given in note 6, this is
    improper type of reporting
  61. Auditor who wish to draw a reader attetion to financial statements note disclosure on significant transactions with related parties should disclouse this fact in:
    an emphasis of matter paragraph to the auditors report
  62. What type of audit opinion are appropriate when finch stmnts are materially and pervasively misstated
    • qualifed NO
    • adverse YES
  63. what ordinarliy involves that addition of an empasis of matter paragraph
    consistent modification
  64. audit report for a public client indicates taht the audit was perfored in accordance with
    Standards of the PCAOB
  65. audit report for public client indicates that the finch stmnts were prepared in conformity with
  66. when matter is properly disclosed in finc stmnts the likely result of substanital doubt about the ability of the client to continue as a going cocern is the issuance of which of the following audit opinions
    unmodified with emphasis of matter
  67. a change in accounting principles that the auditors believe is not justified is likely to result in shich of the follwig types of opinios
  68. In an integrated audit what must the audits communicate to the audit committee
    • known material weakness
    • known significant deficiencies
  69. In an integrated audit what leads to an adverse opinion on internal control
    known material weaknesses
  70. In an integrated audit what must be communicated by mangement to the audit committee
    • known material weaknesses
    • known significant deficincies
  71. An example of a material weakness in internal control
    ineffective oversight of financial reporting by the audit committee
  72. a weaknesses in internal control that allows a reasonable possibility of a misstaement that is material
    material weakness
  73. material weakness that is found and corrected before year end it
  74. mgmt documentation of internal control should include info on
    controls designed to prevent fraud
  75. procedure that involves tracing a transaction from origination through the company's finch report is referred to as
    walk through
  76. 3 typical questions asked during walk through
    1) have you been asked to override the process

    2) what do you do when you find an error

    3) what king of errors have you found
  77. a audit of internal control over finch reporting ordinarily assesses internal control as of whe
    the last day of the fiscal period
  78. 3 things reviewed during client's financial statements
    1) analytical procedures applied to financial data

    2) inquries about significant subsequent events

    3) obtaining an understaing of the client
  79. what must be obtained in a review of a nonpublic company
    • engagement letter
    • represetation letter
  80. a NON-independent CPA may perform what services for a NON-public company
  81. the proper report by an auditor relating to summarized finacial statements include
    an opinion on whether the summarize info is fairly stated in all material respects
  82. A proper compilation report on finch stmnts that omit notes disclosures
    indicates that mangements has omitted such information
  83. which form of account association always leads to a report intended solely for a certain specified parties
    agreed upon procedures
  84. which assertion is most difficult to attest to with respects to finch stmnts
  85. which report should a CPA NOT expres negative (limited) assurance
    stand compliation report on finch stmtns of a NONpublic company
  86. comfort letters to underwriters are normally signed by the
    independent auditor
  87. Which of the following audit procedures is best for identifying unrecorded trade accounts payable
    reviewing cash disbursements recorded to the balance sheet date to determine whether the related payable applies to the prior period
  88. Auditors may choose not to confirm AP becasue
    other reliable external evidence to support the balances is likely to be available
  89. A register/transfer agent system relating to capital stock is most likely used by
    A large publicly traded company
  90. An auditor obtains evidence of stockholders equity transactions for a publicly traded company by reviewing the entity's
    minutes of board of directors meetings
  91. Which of the following is not a primary objective in the audit of interest bearing debt
    establish the legality of outstanding debt
  92. Analytical procedures are required as a part of the
    procedures performed near the end of the audit
  93. Auditors must communicate internal control "significant deficiencies" to
    the audit committee
  94. Which of the follwing material events occurring subsequent to the balance sheet date would require an adjustmet to the financia statements before they could be issued
    settlement of litigation in excess of the recorded liability
  95. Which of the following auditing procedures is ordinarliy performed last
    obtaining a management representation letter
  96. Why send a letter of inquiry to client's attorney's
    corroborative audit evidence
Card Set:
Accounting 402 Final
2014-12-14 05:13:07
Accounting 402 Final

Accounting 402 Final
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