Audit Review 2

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Joens1313
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308248
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Audit Review 2
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2015-09-21 23:48:57
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Audit Review
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Audit Review 2
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  1. In the first audit of a client, an auditor was not able to gather sufficient appropriate audit evidence about the consistent application of accounting principles between the current and the prior year, as well as the amounts of assets or liabilities at the beginning of the current year. This was due to the client's record retention policies. If the amounts in question could materially affect current operating results, the auditor would:
    be unable to express an opinion on the current year's results of operations and cash flows.
  2. Nonsampling risk is the risk -----------------------------------------------------------.
    Nonsampling risk is the risk that the auditor reaches an erroneous conclusion for any reason not related to sampling.
  3. Examples of nonsampling risk include the use of ---------------------------or ------------------------ and -------------------------------------------------------.
    Examples of nonsampling risk include the use of inappropriate audit procedures or misinterpretation of audit evidence and failure to recognize a misstatement or deviation.
  4. While auditors routinely communicate those weaknesses that are material in relation to the general purpose financial statements, under OMB Circular A-133, auditors are specifically required to communicate ---------------------------------------------------------------found during an audit.
    While auditors routinely communicate those weaknesses that are material in relation to the general purpose financial statements, under OMB Circular A-133, auditors are specifically required to communicate weaknesses material to federal programs found during an audit.
  5. When issuing an unmodified opinion, the auditor who evaluates the audit findings should be satisfied that the:
    estimate of the total likely misstatement is less than a material amount.
  6. A guarantee is a responsibility for the payment of a debt or performance of some obligation if the person primarily liable fails to perform. The presence of a guarantee would be a possible indicator of a --------------------------------------
    A guarantee is a responsibility for the payment of a debt or performance of some obligation if the person primarily liable fails to perform. The presence of a guarantee would be a possible indicator of a related party transaction
  7. Loans and guarantees are commonly entered into with --------------------------.
    Loans and guarantees are commonly entered into with related parties.
  8. The best way to detect the ----------------------------------------- is to vouch transactions already recorded in the accounting records (i.e., in the sales journal) to the source documents to compare the amounts on such documents with recorded sales.
    The best way to detect the overstatement of sales is to vouch transactions already recorded in the accounting records (i.e., in the sales journal) to the source documents to compare the amounts on such documents with recorded sales.
  9. Reporting on internal control under Government Auditing Standards differs from reporting under generally accepted auditing standards in that Government Auditing Standards require a:
    written report describing each significant deficiency observed, including identification of those considered material weaknesses.
  10. A U.S. entity prepares its financial statements in conformity with accounting principles generally accepted in another country. These financial statements will be included in the consolidated financial statements of its non-U.S. parent. Before reporting on the financial statements of the U.S. entity, the auditor practicing in the United States should:
    obtain written representations from management of the U.S. entity regarding the purpose and uses of the financial statements.
  11. If information accompanying the basic financial statements has been subjected to auditing procedures, the auditor may include in the auditor's report on the financial statements an opinion that the accompanying information is fairly stated in:
    all material respects in relation to the basic financial statements taken as a whole.
  12. the objective of the auditor, when engaged to report on supplementary information in relation to the financial statements as a whole, is (a) to -------------------------------------------- in relation to the financial statements as a whole and (b) to report on whether the -----------------------------------------------------------------.
    the objective of the auditor, when engaged to report on supplementary information in relation to the financial statements as a whole, is (a) to evaluate the presentation of the supplementary information in relation to the financial statements as a whole and (b) to report on whether the supplementary information is fairly stated, in all material respects, in relation to the financial statements taken as a whole.
  13. When planning a particular sample for a substantive test of details, the auditor should consider ---------------------------------------------------------.
    the preliminary estimates of materiality levels
  14. What would be a consideration in planning a sample for a test of subsequent cash receipts?
    Preliminary judgments about materiality levels
  15. An entity prepares its financial statements on its income tax basis. A description of how that basis differs from GAAP should be included in the:
    notes to the financial statements.
  16. If an entity prepares its financial statements on its income tax basis, a -------------------------------- should describe the special-purpose framework.
    If an entity prepares its financial statements on its income tax basis, a note to the financial statements should describe the special-purpose framework.
  17. If an entity prepares its financial statements on its income tax basis, a note to the financial statements should describe ----------------------------------.
    If an entity prepares its financial statements on its income tax basis, a note to the financial statements should describe the special-purpose framework.
  18. where should an auditor's report refer to the lack of consistency when there is a change in accounting principle that is significant?
    An other-matter paragraph following the opinion paragraph
  19. A lack of consistency caused by a material change in an applicable financial reporting framework between periods would be reported in an -------------------------------------------------------------------. Under these circumstances, the auditor issues a modified unmodified opinion.
    A lack of consistency caused by a material change in an applicable financial reporting framework between periods would be reported in an other-matter paragraph after the opinion paragraph. Under these circumstances, the auditor issues a modified unmodified opinion.
  20. A lack of consistency caused by a material change in an applicable financial reporting framework between periods would be reported in an other-matter paragraph after the opinion paragraph. Under these circumstances, the auditor issues ------------------------------ opinion.
    A lack of consistency caused by a material change in an applicable financial reporting framework between periods would be reported in an other-matter paragraph after the opinion paragraph. Under these circumstances, the auditor issues a modified unmodified opinion.
  21. The objective of tests of details of transactions performed as substantive tests is to:
    detect material misstatements in the financial statements.
  22. ----------------- are defined as tests of details and analytical procedures performed to detect material misstatements in the account balance, transaction class, and disclosure components of financial statements.
    Substantive tests are defined as tests of details and analytical procedures performed to detect material misstatements in the account balance, transaction class, and disclosure components of financial statements.
  23. what procedure would an auditor most likely perform to assist in the evaluation of loss contingencies?
    Obtaining a letter of audit inquiry from the client's lawyer
  24. When an auditor is asked to report on the fair presentation of financial statements of a regulated entity that are prepared in accordance with a basis of accounting prescribed by a regulatory agency, the auditor's report should:
    include a standard audit report modified as appropriate because of the departures from generally accepted accounting principles and in an additional paragraph express an opinion on whether the financial statements are presented in conformity with the regulatory basis of accounting.
  25. When an auditor is asked to report on the fair presentation of financial statements prepared in conformity with a regulatory basis of accounting, he or she is-------------------------------------------------------. An additional paragraph is added to this report which expresses the auditor's opinion on whether the financial statements are presented in conformity with the prescribed basis of accounting.
    When an auditor is asked to report on the fair presentation of financial statements prepared in conformity with a regulatory basis of accounting, he or she is required to issue a standard report modified for the departures from GAAP. An additional paragraph is added to this report which expresses the auditor's opinion on whether the financial statements are presented in conformity with the prescribed basis of accounting.

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