AUDIT CPA EXAM WITH ACCURATE
SOLUTIONS /GRADED A+
Advertising and other forms of solicitation rule -AICPA code of professional
conduct - ANSWER-advertising is OK unless it is false, misleading or
deceptive
misleading or deceptive if they: create false or unjustified expectation of
favorable results, imply the ability to influence a court or official,
intentionally underestimate fees
AICPA and state CPA societies - ANSWER-don't have power to revoke your
license
the code of professional conduct
joint ethics enforcement program - helps them enforce the code
they can sanction their members and can also suspend or terminate
membership without a hearing for certain things
AICPA CODE OF PROFESSIONAL CONDUCT - ANSWER-governs any service
that a member of the AICPA performs: (audits, special reports, compilations,
review, financial projections and forecasts as well as attestation)
a distinguishing mark of a profession that accepts a high degree of
responsibility toward the public
the code consists of principles and rules as well as interpretation and other
guidance
,principles provide the framework for the basis for the code
rules portion consists of rules, interpretations and rulings that govern the
specific performance of members based on whether they are public practice,
a member in business or an other member
An audit of of a single financial statement may be performed as a... -
ANSWER-separate engagement or
with the entity's complete set of financial statements
appropriateness of audit evidence - ANSWER-appropriate evidence must be
reliable (audit evidence hierarchy) and relevant
As planned level of reliance on the operating effectiveness of a control
increases the auditor should - ANSWER-obtain more reliable or more
extensive audit evidence
AEIOU
audit documentation responsibilites for government auditing - ANSWER-must
be maintained for three years after issuance - both auditor and auditee must
retain
30 day s
audit plan - ANSWER-written plan based on the audit strategy that outlines
the nature,extent and timing of the audit procedures to be perofrmed during
the audit which include:
,Risk assessment procedures - required in all financial statement audits
test of controls - performed at assertion level for each material acct balance,
transaction class and disclosure item (along with substantive testing)
substantive testing - test of details and analytical procedures
audit risk of noncompliance - ANSWER-risk of material noncompliance -
inherent and control risk
detection risk of noncompliance
same set up and inverse relationship as RMM and detection risk
Audit sampling definition - ANSWER-testing of less than 100% of the items
within an account balance or class of transaction in order to evaluate some
characteristic of the balance or class. Especially useful in cases where an
auditor has no special knowledge about likely misstatements
Inherent in audit sampling is sampling risk
Auditing sampling - 4 rules - ANSWER-Rule 1: Assume population is normally
distributed and is bell shape curve
Rule 2: Samples have to be unrestricted and randomly selected - every item
in the population must have an equal chance of being selected and CPA can't
use bias or judgement in deciding which items will be selected
, Rule 3: If the sample is large enough and is randomly selected then it should
be representative of the population
Rule 4: Standard deviation is a measure of variability, the more spread out
the more uncertainty we have
Variability --> Uncertainty <-- Larger sample size
Auditing standards - ANSWER-(GAAS) Generally accepted auditing standards
- mandatory on all audit engagements
(GAGAS) Generally accepted government auditing standards - audits of
government organizations, programs or activities that receive government
funds
(PCAOB) - established pursuant to SOX - establish auditing standards for
issuers
(ISA) International standards of auditing
auditors performing non audit services for entities for which they perform
audits should... - ANSWER-obtain assurance that audited entity management
performs the following:
assume all responsibilities
oversee the services
evaluate the adequacy and results of the services
accept responsibility for the results of the services
*when doing non-audit services you run the risk of impaired independence
due to the threat of self-review
SOLUTIONS /GRADED A+
Advertising and other forms of solicitation rule -AICPA code of professional
conduct - ANSWER-advertising is OK unless it is false, misleading or
deceptive
misleading or deceptive if they: create false or unjustified expectation of
favorable results, imply the ability to influence a court or official,
intentionally underestimate fees
AICPA and state CPA societies - ANSWER-don't have power to revoke your
license
the code of professional conduct
joint ethics enforcement program - helps them enforce the code
they can sanction their members and can also suspend or terminate
membership without a hearing for certain things
AICPA CODE OF PROFESSIONAL CONDUCT - ANSWER-governs any service
that a member of the AICPA performs: (audits, special reports, compilations,
review, financial projections and forecasts as well as attestation)
a distinguishing mark of a profession that accepts a high degree of
responsibility toward the public
the code consists of principles and rules as well as interpretation and other
guidance
,principles provide the framework for the basis for the code
rules portion consists of rules, interpretations and rulings that govern the
specific performance of members based on whether they are public practice,
a member in business or an other member
An audit of of a single financial statement may be performed as a... -
ANSWER-separate engagement or
with the entity's complete set of financial statements
appropriateness of audit evidence - ANSWER-appropriate evidence must be
reliable (audit evidence hierarchy) and relevant
As planned level of reliance on the operating effectiveness of a control
increases the auditor should - ANSWER-obtain more reliable or more
extensive audit evidence
AEIOU
audit documentation responsibilites for government auditing - ANSWER-must
be maintained for three years after issuance - both auditor and auditee must
retain
30 day s
audit plan - ANSWER-written plan based on the audit strategy that outlines
the nature,extent and timing of the audit procedures to be perofrmed during
the audit which include:
,Risk assessment procedures - required in all financial statement audits
test of controls - performed at assertion level for each material acct balance,
transaction class and disclosure item (along with substantive testing)
substantive testing - test of details and analytical procedures
audit risk of noncompliance - ANSWER-risk of material noncompliance -
inherent and control risk
detection risk of noncompliance
same set up and inverse relationship as RMM and detection risk
Audit sampling definition - ANSWER-testing of less than 100% of the items
within an account balance or class of transaction in order to evaluate some
characteristic of the balance or class. Especially useful in cases where an
auditor has no special knowledge about likely misstatements
Inherent in audit sampling is sampling risk
Auditing sampling - 4 rules - ANSWER-Rule 1: Assume population is normally
distributed and is bell shape curve
Rule 2: Samples have to be unrestricted and randomly selected - every item
in the population must have an equal chance of being selected and CPA can't
use bias or judgement in deciding which items will be selected
, Rule 3: If the sample is large enough and is randomly selected then it should
be representative of the population
Rule 4: Standard deviation is a measure of variability, the more spread out
the more uncertainty we have
Variability --> Uncertainty <-- Larger sample size
Auditing standards - ANSWER-(GAAS) Generally accepted auditing standards
- mandatory on all audit engagements
(GAGAS) Generally accepted government auditing standards - audits of
government organizations, programs or activities that receive government
funds
(PCAOB) - established pursuant to SOX - establish auditing standards for
issuers
(ISA) International standards of auditing
auditors performing non audit services for entities for which they perform
audits should... - ANSWER-obtain assurance that audited entity management
performs the following:
assume all responsibilities
oversee the services
evaluate the adequacy and results of the services
accept responsibility for the results of the services
*when doing non-audit services you run the risk of impaired independence
due to the threat of self-review
