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AUD314204, AUD314339, AUD314436, AUD710322, AUD710798, AUD711116,…
AUD314204
What is the auditor’s responsibility when he has been engaged to report on effectiveness of internal controls over financial reporting for a non-issuer client, after he has identified material weakness in internal controls and has communicated to those charged with governance?
Auditor would issue an adverse opinion on the effectiveness of internal controls over financial reporting when there is existence of one or more material weakness. Thus, auditor may issue an adverse opinion if he identifies material weakness in internal controls over financial reporting.
AUD314339
Which of the following most likely would not be considered an inherent limitation of the potential effectiveness of an entity’s internal control?
Incompatible duties
Normally, incompatible duties are divided among individuals in a specific manner to avoid the internal control issues. This is not an inherent limitation of internal control.
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Collusion - Though there may be segregation of duties for ARCC, collusion between personnel may circumvent internal control.
Obsolescence - Change in operating environment may result in existing internal control getting obsolete, and, thus, requiring a modification in internal control to suit the new operating environment.
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Internal control only provides reasonable assurance that entity specific objectives will be achieved. Inherent limitations (Mnemonic: COCOC) which can result in breakdown of internal control include:
AUD314436
In auditing payroll, an auditor most likely would
In auditing a payroll, the auditor would, to ensure that employees are not overpaid, compare the payroll costs with entity standards or budgets set by management. This is primarily done to ensure that the numbers are reasonable.
AUD710322
The scope of audits of recipients of federal financial assistance in accordance with federal audit regulations varies. Which of the following elements do these audits have in common?
As per GAS standards, recipients of federal financial assistance require an auditor to document an understanding of internal controls established to ensure compliance with applicable laws and regulations.
AUD710798
An accountant who accepts an engagement to compile a financial projection most likely would make the client aware that the
Financial projections are prepared by the management given certain hypothetical assumptions, based on a "what if " scenario. An accountant need not verify the reliability of these assumptions during compilation of financial projections.
AUD711116
An accountant compiles the financial statements of a nonissuer and issues the standard compilation report. Although not specifically stated in this report, it is implied that?
When an accountant that issues a standard compilation report it implies that substantially all disclosures required by GAAP are included in the financial statements.
AUD714216
When compiling the financial statements of a nonpublic entity, an accountant should
In a compilation engagement, the CPA accountant assists the client in assembling data in the preparation of financial statements, but does not verify information and gives no assurance. To perform the compilation engagement, an accountant must have knowledge of the accounting principles and practices of the client's industry and accounting framework used by the client. Accountant must read the financial statement and notes to ensure that they are free of material error and appropriate in form. Inquiry and analytical procedure is done in review and audit engagements.
AUD714248
An accountant concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. The accountant believes that the financial statements do not require revision, but the client is unwilling to revise or eliminate the material inconsistency in the other information. Under these circumstances, what action would the accountant most likely take?
Auditor should only read the other information if it is consistent with the financial statements. If the auditor identifies material inconsistency and the inconsistency requires a modification in the financial statements and the client refuse to correct it the auditor would modify the audit opinion and issue a qualified or adverse opinion. If the inconsistency requires a modification of other information and client refuses to correct it the auditor should report an unqualified opinion with other matter paragraph describing the material inconsistency. Thus, the accountant would revise the accountant's report to include a separate explanatory paragraph describing the material inconsistency.
AUD714257
When auditing an entity’s financial statements in accordance with Government Auditing Standards (the Yellow Book), an auditor is required to report on
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The requirement is to identify whether an auditor performing an audit in accordance with Government Auditing Standards (the Yellow Book) is required to report on noteworthy accomplishments of the program or the scope of the auditor’s testing of internal controls or both. The Yellow Book mandates reporting only upon the scope of the auditor’s testing of internal controls.
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