CPA Auditing and Attestation (AUD)
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CPA Auditing and Attestation (AUD) › CPA Auditing and Attestation (AUD)
An auditor's communication of internal control related matters noted in an audit usually should be addressed to:
Management and those charged with governance
The director of internal auditing
The chief accounting officer
The chief financial officer
Explanation
An auditor's communication of internal control related matters noted in an audit usually should be addressed to management and those charged with governance.
At a minimum, an understanding with a client should include:
The specific audit procedures the auditor plans to perform
The objectives and limitations of the engagement, as well as the responsibilities of management and of the auditor
The assessed level of the risk of material misstatement
The auditor's opinion regarding whether the financial statements are free of material misstatement
Explanation
At a minimum, an understanding with a client should include the objectives and limitations of the engagement, as well as the responsibilities of management and of the auditor.
Of the following factors, which should most influence an auditor’s decision to modify the audit opinion of an issuer’s financial statements?
The type of users expected to rely on the financial statements
Whether the auditor’s opinion is based in part on the report of another auditor
The effect of a misstatement on the financial statements taken as a whole
Uncertainties related to management’s estimates as of the reporting date that are adequately disclosed in the financial statements
Explanation
The effect of a misstatement on the financial statements taken as a whole should most likely influence an auditor’s decision to modify the audit opinion.
Government Accounting Standards
Require a written report on internal control
Require a written report on compliance with applicable laws and regulations
May require a duty to report fraud
All of the answer choices are correct
Explanation
Under GASB standards the auditor is required to report on internal control. The written report is also required to establish compliance with applicable laws and regulations and may require a duty to report fraud.
Agreed-upon procedures can be performed as long as the following conditions are present:
Practitioner independence
Party agreement
Sufficient procedures
All of the answer choices are correct
Explanation
All of these factors must be present for an agreed-upon procedure engagement to be conducted.
Of the following duties included in the inventory cycle, which should be segregated to maintain proper internal controls?
Purchasing
Receiving
Warehousing
All of the answer choices are correct
Explanation
All of these duties, in addition to shipping, would need to be segregated in order to maintain proper internal controls.
Agreed-upon procedures can be performed as long as the following conditions are present:
Practitioner independence
Party agreement
Sufficient procedures
All of the answer choices are correct
Explanation
All of these factors must be present for an agreed-upon procedure engagement to be conducted.
Government Accounting Standards
Require a written report on internal control
Require a written report on compliance with applicable laws and regulations
May require a duty to report fraud
All of the answer choices are correct
Explanation
Under GASB standards the auditor is required to report on internal control. The written report is also required to establish compliance with applicable laws and regulations and may require a duty to report fraud.
Each of the following types of controls is considered to be an entity-level control, except those:
Pertaining to the company's risk assessment process
Regarding the company's annual shareholder meeting
Addressing policies over significant risk management policies
Relating to the control environment
Explanation
Entity level controls include controls related to the control environment, the risk assessment process, and the policies over risk management policies. Controls regarding the company's annual shareholder meeting are controls related to a specific event rather than the entity as a whole.
Of the following factors, which should most influence an auditor’s decision to modify the audit opinion of an issuer’s financial statements?
The type of users expected to rely on the financial statements
Whether the auditor’s opinion is based in part on the report of another auditor
The effect of a misstatement on the financial statements taken as a whole
Uncertainties related to management’s estimates as of the reporting date that are adequately disclosed in the financial statements
Explanation
The effect of a misstatement on the financial statements taken as a whole should most likely influence an auditor’s decision to modify the audit opinion.