ICFR
Audit Sampling
Substantive Testing
Completing the Engagement
Audit Reports and Other Engagements
100
The textbook teaches us that we are required to obtain an understanding of a company's internal controls. In what workpaper did we document this for Oceanview Marine? What did we then use this for?
WP13-3. We used it to perform a preliminary assessment of control risk in WP13-4, which helped us to plan controls testing and substantive testing.
100
This term refers to the risk that a sample drawn is not representative of the population.
What is sampling risk
100
What are the two broad categories of substantive audit procedures an auditor can perform?
What are substantive analytical procedures and substantive tests of details
100
Name three audit procedures used to identify subsequent events.
What is inquire of management, inquire of legal counsel, review the interim financial information
100
The textbook teaches us that we are required to obtain an understanding of a company's internal controls. In what workpaper did we document this for Oceanview Marine? What did we then use this for?
WP13-3. We used it to perform a preliminary assessment of control risk in WP13-4, which helped us to plan controls testing and substantive testing.
200
This section of the Sarbanes-Oxley Act calls for the financial reports to include such certifications as (1) the signing officers have reviewed the report, (2) the financials are free from material misstatements, and (3) the signing officers are responsible for internal controls.
What is Section 302.
200
In Oceanview Marine WP14-7, report to the partner the outcome of our testing with respect to proper approval of purchase orders.
Tested 55 items, noted 3 exceptions, resulting in a cumulative upper exception rate in excess of our tolerable exception rate. Concluded control was not operating effectively and recommended that management seek to remediate.
200
In order to test the existence and accuracy of deposits in transit on a bank reconciliation, the auditor would ____________. (Hint: see Oceanview Marine WP 20-6).
What is agree the deposits in transit to the cut-off bank statement.
200
Fill in the blanks: According to AS 3, public company audit files must be archived _____ days subsequent to the report release date. Audit documentation must be retained ____ years from the date of completion of the engagement.
What is 45, 7
200
In this type of engagement, no assurance is provided and the CPA is not required to be independent of the client (although he must disclose his lack of independence in the report.)
What is compilation
300
Fill in the blank: In its 2011 S-1, Zynga reported a _____________, a deficiency in internal control such that there was a reasonable possibility that a material misstatement of the financial statements would not be prevented or detected timely. E&Y, Zynga's auditors, was required to report this matter to _________________.
What is a material weakness AND externally, to the audit committee, and to management.
300
This type of sampling is used to estimate the proportion of a population that possesses a specified characteristic.
What is attribute sampling
300
In a search for unrecorded liabilities, what documents are typically vouched to determine whether an item should be included or excluded from a company's liabilities at year-end? (Hint: see Oceanview Marine WP30-22).
What is receiving report / invoice.
300
Name three ways to identify a contingent liability requiring disclosure in the financial statements
What is read board minutes, read legal letters, review contracts (also: review tax returns, inspect other documents)
300
KPMG identified 6 control deficiencies during the audit of a large multinational manufacturing company. They were not considered to aggregate to a significant deficiency or material weakness. What type of opinion over the operating effectiveness of ICFR would KPMG most likely issue for this engagement?
What is unqualified
400
The four generic ways to test the operating effectiveness of a control (from least robust to most robust). Give some examples of where we performed these procedures for Oceanview Marine.
What is Inquiry, Observation, Examination / Inspection, Reperformance. See WP14-1.
400
From Oceanview Marine WP21-20 and 21-21, explain why we concluded that we could accept the population of accounts receivable as stated and conclude that our confirmation procedures support management's assertions pertaining to existence and accuracy.
Our projected misstatement of $7010 was less than tolerable misstatement of $40,000.
400
What does AU 330 The Confirmation Process say about the requirement for auditors to send confirmations?
What is there is a presumption that accounts receivable will be confirmed unless they are immaterial or the use of confirmations would be ineffective
400
What is the purpose of dual dating the audit report?
What is limit the auditor's liability as it relates to subsequent events. (Dual dated report includes (1) original date of report plus (2) date of subsequent event. Liability only extends through original date.)
400
How do audit procedures differ for interim review procedures for a publicly-traded company?
An audit consists of risk assessment procedures, controls testing procedures, and substantive test procedures. An interim review consists of analytics and inquiries only.
500
The process of correcting a material weakness in ICFR is known as this
What is remediation
500
Name two situations where a sample size of 1 item is most likely to be appropriate.
What is test of an annual control or test of an automated IT system control (since transactions are processed consistently)
500
During a physical inventory observation, the associate selected 30 items from the company's perpetual inventory record and traced them to the stock room floor. What financial statement assertion does this test address? (Hint: see Oceanview Marine WP22-15).
What is existence
500
On an integrated audit engagement, what is the QRP and what is his role?
Quality Review Partner (aka concurring review partner) Required by AS 7. Second set of eyes that reviews high risk audit areas to strengthen audit quality and mitigate potential conflicts of interest.
500
Deloitte was unable to observe the inventory at its client's China warehouse, which holds 90% of the Company's inventory. What type of opinion did Deloitte most likely issue for this client?
Either unqualified if scope limitation is not significant, qualified if scope limitation is significant but not pervasive, or disclaimer of opinion if scope limitation is significant and pervasive.
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