CAS 260/265 (1)
G- What are the objectives of the auditor according to CAS 260? ( more than 1 answer)
A) To ensure that the financial statements are free from any misstatements and fraud.
B) To provide those charged with governance with timely observations arising from the audit that are significant and relevant to their responsibility to oversee the financial reporting process.
C) To promote effective two-way communication between the auditor and those charged with governance.
D) To prepare the financial statements on behalf of those charged with governance.
Answer is B & C
Objectives
9. The objectives of the auditor are:
(a) To communicate clearly with those charged with governance the responsibilities of the auditor in relation to the financial statement audit, and an overview of the planned scope and timing of the audit;
(b) To obtain from those charged with governance information relevant to the audit;
(c) To provide those charged with governance with timely observations arising from the audit that are significant and relevant to their responsibility to oversee the financial reporting process; and
(d) To promote effective two-way communication between the auditor and those charged with governance.
What is the going concern basis of accounting?
A. The entity will not continue in the future, so an audit is not required
B. Under the going concern basis of accounting, the financial statements are prepared on the assumption that the entity is a going concern and will continue its operations for the foreseeable future.
C. Under this, financial statements are analyzed to determine if the entity is a going concern
D. The going concern basis of accounting ensures financial statements are accurate and relevant
Answer B- Under the going concern basis of accounting, the financial statements are prepared on the assumption that the entity is a going concern and will continue its operations for the foreseeable future.
CAS 570.2
What does CAS 265 require an auditor to perform during an audit?
A. Audit the Financial statements relating to the going concern.
B. Gather documentation in order to create a report.
C. Assess significant deficiencies and communicate them to management.
D. Discuss significant revenue recognition issues with upper management.
Answer C- Assess significant deficiencies and communicate them to management.
CAS 265.5
G- When considering the need to communicate information directly with the governing body, what factor may influence the auditor's decision?
A) The auditor's personal preference for communication methods, regardless of the entity's internal communication processes.
B) The requirement for the auditor to communicate only with external regulatory bodies, bypassing the entity's governing body completely
C) The auditor's assessment of the effectiveness and appropriateness of the communication between a subgroup charged with governance and the full governing body.
D) A strict protocol that mandates all auditor communications must be funneled through the entity's legal department without exception.
Answer- C
Cas 260- A6. When deciding whether there is also a need to communicate information, in full or in summary form, with the governing body, the auditor may be influenced by the auditor's assessment of how effectively and appropriately the subgroup communicates relevant information with the governing body. The auditor may make explicit in agreeing the terms of engagement that, unless prohibited by law or regulation, the auditor retains the right to communicate directly with the governing body.
How does effective two-way communication assist during the audit?
A. It assists the auditor and those charged with governance in understanding matters related to the audit in context, and in developing a constructive working relationship.
B. It helps build trust between the auditor and those charged with governance to maintain a working relationship throughout the audit
C. It assists the auditor in obtaining from those charged with governance information relevant to the audit.
D. It assists those charged with governance to obtain an understanding of the auditor’s objective and scope of the audit
Answer- A-It assists the auditor and those charged with governance in understanding matters related to the audit in context, and in developing a constructive working relationship.
C- It assists the auditor in obtaining from those charged with governance information relevant to the audit.
CAS 265.4
What significant findings from the audit need to be communicated?
A. Circumstances that prohibit the company from continuing as a going concern
B. The deficiencies in the previous audit that were addressed in this one
C. The auditor's views about significant qualitative aspects of the entity's accounting practices, including accounting policies
D. Significant difficulties, if any, encountered during the audit
Answer C- The auditor's views about significant qualitative aspects of the entity's accounting practices, including accounting policies
CAS 260.16
Which of the following best describes the responsibility of auditors in CAS 265 regarding communicating deficiencies in internal control?
A. Auditors should communicate all deficiencies, regardless of their significance, to those charged with governance and management.
B. Auditors should communicate only significant deficiencies in internal control to those charged with governance and management.
C. Auditors are not required to communicate any deficiencies in internal control to those in upper management
D. Auditors should communicate significant deficiencies to shareholders without consent from upper management.
Answer- B. Auditors should communicate only significant deficiencies in internal control to those charged with governance and management.
CAS 265. 6(B)
G- What is included in the oversight responsibilities of those charged with governance regarding the entity?
A) Overseeing the marketing strategies and brand positioning of the entity to ensure competitive advantage.
B) Ensuring that the entity focuses solely on the maximization of shareholder value, without regard to internal control systems.
C) Ensuring that the entity designs, implements, and maintains appropriate internal control concerning the reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable laws and regulations.
D) Direct involvement in the day-to-day operations of the entity to ensure efficiency in task execution.
Answer C-
Cas 260- A33. Supplement matters- The oversight of management by those charged with governance includes ensuring that the entity designs, implements and maintains appropriate internal control with regard to reliability of financial reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations.
G-Which two of the following matters contribute to effective two-way communication between the auditor and those charged with governance? (More than 1 answer)
A) The auditor's expectation that communication will be two-way, and that those charged with governance will communicate with the auditor matters they consider relevant to the audit, such as strategic decisions that may significantly affect the audit.
B) Establishing a formal protocol where communication between the auditor and those charged with governance is limited to written reports at the end of the audit period, to ensure documentation integrity.
C) The purpose of communications. When the purpose is clear, the auditor and those charged with governance are better placed to not have a mutual understanding of relevant issues and the expected actions arising from the communication process.
D) The process for taking action and reporting back on matters communicated by the auditor and those charged with governance
Answer A & D
Cas 260- Under communication process- A38. Matters that may also contribute to effective two-way communication include discussion of:
• The purpose of communications. When the purpose is clear, the auditor and those charged with governance are better placed to have a mutual understanding of relevant issues and the expected actions arising from the communication process.
• The form in which communications will be made.
• The person(s) in the engagement team and among those charged with governance who will communicate regarding particular matters.
• The auditor's expectation that communication will be two-way, and that those charged with governance will communicate with the auditor matters they consider relevant to the audit, for example, strategic decisions that may significantly affect the nature, timing and extent of audit procedures, the suspicion or the detection of fraud, and concerns with the integrity or competence of senior management.
• The process for taking action and reporting back on matters communicated by the auditor.
• The process for taking action and reporting back on matters communicated by those charged with governance.
Q10 In CAS 265, what is the primary purpose of obtaining written representation from management?
A. To provide guidance to upper management on how to address issues identified with internal control.
B. To establish the financial statement assertions made by management.
C. To confirm management's acknowledgement of its responsibility for internal control deficiencies.
D. To detect instances of fraud or error in the financial statements.
Answer C- To confirm management's acknowledgement of its responsibility for internal control deficiencies.
CAS 265. 11(B)