Communication and Reporting in an Integrated Audit
In which case might an auditor of an issuer render ad qualified opinion on internal control ? (i.e. Either, both, or neither of the below options)
I. when there is a scope limitation
II. when there is a material weakness in internal control.
Neither - a scope limitation requires the auditor to disclaim an opinion or withdraw from the engagement, and a material weakness in internal control requires the auditor to issue an adverse opinion. Neither situation would result in a qualified opinion.
Each page of a nonissuer's financial statement reviewed by an accountant should include the following reference:
A - See Accompanying Accountant's Footnotes
B - Reviewed, No Material Modifications Required
C - Reviewed, No accountant's Assurance Expressed
D - See Independent Accountant's Review Report.
D
When auditing an entity's financial statements in accordance with Government Auditing Standards (the Yellow Book), an auditor is require to report on: (i.e. either, both or neither)
I. Noteworthy accomplishments of the program
II. the scope of the auditor's testing of internal controls.
II. only - When auditing an entity's financial statements in accordance with Government Auditing Standards, and auditor is required to report on the scope of the auditor's testing of internal control, but not on noteworthy accomplishments of the program.
When performing a review of interim financial information, an accountant would typically do each of the following, except:
A - Test controls related to the preparation of annual financial information
B - Consider the results of the latest audit
C - Perform analytical procedures
D - Make inquiries of management
The auditor is required to communicate each of the following items to those charged with governance, except:
A - any significant findings from the audit
B - The auditor's responsibilities to complete the audit in accordance with generally accepted auditing standards.
C - All control deficiencies detected during the course of the audit.
D - An overview of the planned scope and timing of the audit.
C - The auditor is no required to communicate all control deficiencies to those charged with governance. However, control deficiencies that are determined to significant deficiencies and material weaknesses are required to be communicated to those charged with governance.
Which of the following would be used on a review engagement?
A - comparison of current-year to prior-year account balances
B - Recalculation of depreciation expense
C - Examination of loan documents
D - Confirmation of Accounts Receivable
A - A review consists of inquiries and analytical procedures. Comparison of current year and prior year account balances is an analytical procedure that would often be performed as part of a review.
B, C, and D are audit procedures and would not typically be performed as part of a review.
The auditor's report on complaicne and internal control over compliance desgined to meet the requirements of Government Auditing Standards (the yellow book), should include: (i.e. either, both, or neither)
I. the scope of the auditor's testing of internal controls
II. Uncorrected misstatements that were determined by management to be immaterial
I. only - the scope of the auditor's testing of internal controls is required to be included in the auditor's report on internal controls and compliance with laws and regulations in accordance with Government Accounting Standards (the yellow book)
II. are not included in the auditor's report on internal controls and compliance with laws and regulations, but may be brought to the attention of management.
Silver, CPA, has been hired by Andrews Co., a publicly held company, to conduct a review of its interim financial information. While performing the review procedures, Silver becomes aware of a significant change in the control activities at one of Andrew's branch locations. Which of the following might Silber consider performing in response to this situation? (i.e. Either, Both, or Neither)
I. Making additional Inquires, such as whether management has monitored the changes and considered whether they were operating as intended.
II. Employing analytical procedures with a less precise expectation
II. would not be true as this would make the accountant want to be more precise, not less.
In an integrated audit of a nonissuer, if an auditor concludes that a material weakness exists as of the date specified in management's assessment, the auditor should take what action?
issue an adverse opinion - the presence of a material weakness in internal control results in an adverse opinion.
When conducting a review engagement of a nonissuer, each of the following is considered an analytical procedures, except a comparison of the current-year's financial information to:
A - Expectations developed by the accountant
B - Financial statements of a comparable prior period.
C- Industry Benchmarks
D - Supporting documentation.
D - Comparing the current year's financial information to the supporting documentation is part of performing substantive audit procedures, not analytical procedures.
For financial statement audits, generally accepted government auditing standards (GAGAS) incorporate the Statement son Auditing Standards (SAS) that are issued by the AICPA. GAGAS prescribe additional standards on Either, Both, or Neither of the following:
I. Direct Reporting of illegal acts
II. Reporting on internal controls.
Both - Generally accepted government auditing standards (GAGAS) prescribe additional standards on the direct reporting of illegal acts. For example, the auditor is required to directly report illegal acts discovered during the audit to federal inspector generals if management fails to disclose such illegal acts to the grantor or fails to take appropriate remedial action. In addition, GAGAS also prescribe additional standards related to internal control reporting, such as requiring that th auditor provide a written report on internal control in every financial statement audit and specific reporting over internal control over compliance.
Each of the following is normally performed while conducting a review of financial information, except:
A - Obtaining litigation updates from external legal counsel
B - Reading minutes of the meetings of the board of directors
C - Making inquiries of financial management
D - Comparing disaggregated revenue data.
A - Inquiry of the entity's lawyer regarding litigation, claims and assessments generally is not required during a review of interim financial information but maybe appropriate in certain circumstances.
In an integrated audit of an nonissuer, an auditor should issue an adverse opinion on the effectiveness of an entity's internal control in which of the following situations?
A - The entity may not continue as a going concern
B - The financial statements are misstated
C - the auditor was aske by the client to provide the report to another practitioner
D - A material weakness exists
D
A and B would impact report on financial statements not internal controls
C would not affect an auditor's opinion
What type of analytical procedure would an auditor most likely use in developing relationships among balance sheet accounts when reviewing the financial statments of a nonissuer?
A - risk analysis
B - Regression analysis
C- Ratio analysis
D - Trend analysis
C - Ratio analysis is often used to examine relationships between balance sheet accounts.
While conducting an audit in accordance with Government Auditing Standards (the Yellow Book), an auditor determines that fraud has been committed in one of the client's government contracts. The auditor reports the fraud to the client's audit committee, which takes no action to report the fraud to the appropriate parties. To what entity is the auditor required to report this situation to?
The counterparty to the contract - Under Government Auditing Standards (GAS), the auditor has an additional responsibility to communicate fraud to individuals contracting for or requesting the audit.
Moore, CPA, has been asked to issue a review report on the balance sheet of Dover Co., a nonissuer. Moore will not be reporting on Dover's statements of income, retained earnings, and cash flows. Moore may issue the review report provided the:
A - Balance sheet is not to be used to obtain credit or distributed to others
B - Balance sheet is presented in a prescribed form of an industry trade association.
C - Scope of the inquiry and analytical procedures has not been restricted.
D - Specialized accounting principles and practices of Dover's industry are disclosed
C - an accountant may issue a review report on one financial statement, such as a balance sheet, and not on other related financial statements, if the scope of th accountant's inquiry and analytical procedures has not been restricted.