ACCT 3222

Audit Services correct answer: services by an independent CPA that provide financial statement users with (1) an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with an applicable financial reporting framework and (2) an opinion on the effectiveness of ICFR, which enhance the degree of confidence that intended users can place in the financial statements Attestation Services correct answer: Services performed when an independent pract...

Assertion correct answer: Statement or representation, explicit or implicit, made by management regarding the recognition, measurement, presentation, and disclosure of items included in the financial statements and notes Relevant assertion correct answer: An assertion that has a reasonable possibility of containing a material misstatement or misstatements that would cause the financial statements to be materially misstated and, therefore, has a meaningful impact on whether the account is fa...

Substantive procedures correct answer: audit procedures designed to detect material misstatements at the assertion level and to gather evidence to support management assertions Some risks impact at the F/S level correct answer: Management pressure to not violate debt covenants ex. Some risks impact at the assertion level correct answer: (transactions/accounts) Auditor's response to risk impact at the F/S level correct answer: - Make changes to the NET (nature, extent, timing), as n...

What are the three risk phases of an audit? correct answer: 1. risk assessment phase 2. risk response phase 3. reporting phase gaining an understanding of the client, identifying risk factors, developing an audit strategy, and setting planning materials correct answer: risk assessment phase performing tests of contrails and detailed substantive testing of transactions and accounting, concentrating effort where the risk of material misstatement is greatest correct answer: risk respon...

an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur correct answer: loss contingency 3 categories of the likelihood of loss correct answer: 1. Probably 2. Reasonably possible 3. Remote What is the accounting treatment for loss contingencies if probable and reasonably estimated? correct answer: record an adjusting entry to accrue the loss and disclose in FS notes What is...

Internal Control (IC) correct answer: - Management has the responsibility to design and maintain a system of IC that provides reasonable assurance that assets and records are properly safeguarded, and that the entity's information system generates information that is reliable for decision making. - Important for auditors because the auditor needs assurance about how well the assets and records of the entity are safeguarded and about the reliability of the data generated by the information sys...

Audit Risk correct answer: - The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. - Risk auditor will issue an unqualified opinion on materially misstated financial statements. Assertions in relation to Audit Risk correct answer: Consideration of audit risk at even lower levels/account balances/disclosures. - Audit risks at the assertion level consist of: 1) The risk that the relevant assertions related to the account ...

1. The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated is referred to as a. Inherent risk b. Audit risk c. Engagement risk d. Detection risk 2. Which of the following relates to the sufficiency of audit evidence? a. The auditor reviewed vendor invoices to support a sample of purchases rather than rely exclusively on the client’s receiving reports. b. When no exceptions were discovered in a preliminary sample, the au...

Auditing Prepaid Expenses correct answer: - Examples: prepaid insurance, prepaid rent, and prepaid interest - Prepaid expense balances are generally not highly material; as a result, substantive analytical procedures are often used to verify these accounts - Inherent Risk: generally assessed as low b/c these accounts do not involve any complex or contentious accounting issues. - Control Risk: prepaid expenses are typically process through the purchasing process; thus part of the assessment o...

Auditor's Responsibilities w.r.t. Auditing Standards and Standards of Professional Conduct correct answer: - Private Entity: CPA must follow standards established by the ASB, as well as the independence and other standards of professional conduct established by the AICPA Code of Professional Conduct; must also follow the three standards and three interpretations issued by the Independence Standards Board (1997-2001). - Public Entity: CPA must follow the auditing standards of the PCAOB, PCAOB ...

Transactions and Events: CAPCO correct answer: Completeness, Proper period cutoff, Accuracy, Classification, Occurrence Account Balances: CARE correct answer: Completeness, Allocation and valuation, rights and obligations, Existence Presentation and Disclosure: CURV correct answer: Completeness, Understandability and classification, Rights and Obligations and Occurrence, Valuation and Accuracy Types of Audit Evidence: correct answer: 1: Client's accounting records 2: Corroborating...