A100 FINAL EXAM QUESTIONS AND
ANSWERS WITH COMPLETE
SOLUTIONS LATEST UPDATED 2025
To conduct a financial audit means - ANSWER✔✔an examination of entity's
books and records, financial accounts, and policites and procedures
Financial audits are performed by - ANSWER✔✔external, independent auditors
who are certified public accountants (CPA'S)
In conducting an audit, the auditor must - ANSWER✔✔rely on the company's
internal controls
Internal controls - ANSWER✔✔Procedures and systems designed to: Promote
efficiency, safeguard assets, avoid fraud and errors, and keep accounting data
accurate.
Board of directors - ANSWER✔✔Elected by stockholders to represent
stockholders to management
external auditors - ANSWER✔✔give opinions to board of directors
Section 404: Audit of Internal Controls - ANSWER✔✔used by auditors
Five elements of Internal Controls - ANSWER✔✔Control Environment (most
important): management must set ethical tone for employees, Risk Assessment:
company must realize risks, Control Activities: Company must establish
procedures and policies to protect assets, Information and Communication: policies
, and procedures must be communicated to employees, Monitoring: must be
continual follow up to see how procedures are working.
Sampling - ANSWER✔✔using a random subset of the population in order to form
an opinion on the population as a whole
Audit evidence - ANSWER✔✔information gathered by the auditors for their
analysis and evaluation
materiality - ANSWER✔✔refers to size of error in financial statements. An error
is considered material if it is significant enough.
Fraud triangle (when fraud happens) - ANSWER✔✔financial need, perceived
opportunity, rationalization
Sarbanes-Oxley (Sarbox) - ANSWER✔✔established public company accounting
oversight board (PCAOB) under SEC to oversee auditing of publicly held
companies
Sarbox Implications for auditors - ANSWER✔✔7 year workpaper retention,
second partner review, quality review by PCAOB every year, can't provide
consulting services to audit clients, report to the audit committee, lead auditor must
rotate every 5 years, one year wait before auditor can work for a client.
Sarbox implications for companies - ANSWER✔✔Audit Committee: made up of
stockholders of corporation, oversight of internal audit, independent and one must
have financial expertise, hires and receives report from independent auditors.
Limits on loans made to executives, section 404 internal control audit required
ANSWERS WITH COMPLETE
SOLUTIONS LATEST UPDATED 2025
To conduct a financial audit means - ANSWER✔✔an examination of entity's
books and records, financial accounts, and policites and procedures
Financial audits are performed by - ANSWER✔✔external, independent auditors
who are certified public accountants (CPA'S)
In conducting an audit, the auditor must - ANSWER✔✔rely on the company's
internal controls
Internal controls - ANSWER✔✔Procedures and systems designed to: Promote
efficiency, safeguard assets, avoid fraud and errors, and keep accounting data
accurate.
Board of directors - ANSWER✔✔Elected by stockholders to represent
stockholders to management
external auditors - ANSWER✔✔give opinions to board of directors
Section 404: Audit of Internal Controls - ANSWER✔✔used by auditors
Five elements of Internal Controls - ANSWER✔✔Control Environment (most
important): management must set ethical tone for employees, Risk Assessment:
company must realize risks, Control Activities: Company must establish
procedures and policies to protect assets, Information and Communication: policies
, and procedures must be communicated to employees, Monitoring: must be
continual follow up to see how procedures are working.
Sampling - ANSWER✔✔using a random subset of the population in order to form
an opinion on the population as a whole
Audit evidence - ANSWER✔✔information gathered by the auditors for their
analysis and evaluation
materiality - ANSWER✔✔refers to size of error in financial statements. An error
is considered material if it is significant enough.
Fraud triangle (when fraud happens) - ANSWER✔✔financial need, perceived
opportunity, rationalization
Sarbanes-Oxley (Sarbox) - ANSWER✔✔established public company accounting
oversight board (PCAOB) under SEC to oversee auditing of publicly held
companies
Sarbox Implications for auditors - ANSWER✔✔7 year workpaper retention,
second partner review, quality review by PCAOB every year, can't provide
consulting services to audit clients, report to the audit committee, lead auditor must
rotate every 5 years, one year wait before auditor can work for a client.
Sarbox implications for companies - ANSWER✔✔Audit Committee: made up of
stockholders of corporation, oversight of internal audit, independent and one must
have financial expertise, hires and receives report from independent auditors.
Limits on loans made to executives, section 404 internal control audit required
