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auditing international approach
Questions and Answers of
Auditing International Approach
Which of the following is most likely to be an example of fraud?a. The auditor fails to properly determine the reason why so many of the client's customers complain that they have been overcharged.b.
Which of the following is an example of a privity relationship?a. A third party for whom the audit is being primarily conducted is known by the auditor.b. A third party unknown specifically by the
Which of the following is more likely to be a foreseen party?a. The president of the auditor's client.b. A local bank that might be expected to lend the client money relying, in part, on the audited
Which of the following is more likely to be a foreseeable party?a. A member of the general public, unknown to the auditor, who invests in stock of the auditor's client and relies on the audited
In the Ultramares case the plaintiff's charge of negligencea. Was disallowed because the plaintiff was not a foreseen party.b. Was disallowed because the plaintiff had a privity relationship with the
The C.I.T. Financial Corporation case resulted in extending the auditor's liability to third parties for ordinary negligence under common law toa. Foreseen parties.b. Foreseeable parties.c. Primary
The Rusch Factors case resulted in extending the auditor's liability to third parties for ordinary negligence under common law toa. Foreseen parties.b. Foreseeable parties.c. Primary beneficiaries.d.
The Rosenblum v. Adler case extended the auditor's liability for ordinary negligence under common law toa. Foreseen parties.b. Foreseeable parties.c. Primary beneficiaries.d. Those with privity
The three-point test for third-party lawsuits established in the Credit Alliance case included all of the following excepta. The accountant must be aware that a financial report will be used for a
Which of the following statements about the Securities Act of 1933 is not true?a. Third parties must prove that the auditor was guilty of negligence.b. Third parties' prima facie case is an alleged
Which of the following statements about the Securities Exchange Act of 1934 is not true?a. Third parties must prove that they relied on the financial statements and the auditor's opinion in making an
In the Hochfelder case, all of the following were factors in the case excepta. The Securities Exchange Act of 1934.b. Violation of federal criminal statutes.c. Scienter.d. Negligence.
For each of the following descriptions, indicate the letter or letters associated with that description. You may use a letter more than once or not at all. Description 1. Third parties that, in some
Indicate why each of the following statements is incorrect. Provide the correct statement.a. Using a foreseen standard for determining ordinary negligence, only clients could sue an auditor for
For each of the following scenarios, indicate whether action by the indicated party could be successfully brought against the auditor for (a) ordinary negligence under common law, (b) gross
Susan Jason, CPA, had been auditing the financial statements of Rosfeld Stores, Inc,, a large department store, for several years. During the last two years a nationwide economic recession had
XYZ Oil Co. had been a problem for its auditor, Joe Jones, CPA, for several years. The company's stock was traded in the over-the-counter market, and management was concerned with keeping net
Mr. Clyde Neglent, CPA, was engaged to perform an audit of Hidden Records, Inc., a retail department store. Mr. Neglent had investigated the business and its owners before accepting the engagement
Amy Love gingerly seated herself in the witness chair directly below the gently rotating fan hanging from the top of the high, arched ceiling. Her palms were slightly damp, but she hid this fact by
Potential conflicts of interest and other ethical matters were resolved between Custom Furniture Company and Ms. Hunt, and she began the audit. The loan officer of the bank was notified and told that
Briefly describe the purpose of the COSO framework of internal control effectiveness in the audit of internal control over financial reporting.
What are two statistical approaches available to the audit team for variables sampling?
What are the three phases that need to be conducted to determine whether an audit team can rely on IT controls?
Why should auditors be concerned about the source of data obtained from a client?
Define probability proportional to size sampling (PPS). What is the unique feature of PPS?
Is the audit team required to gain a comprehensive understanding of the audit client’s IT systems, processes, and infrastructure on each audit?
Describe how an auditor may use ADA in performing preliminary analytical procedures.
Describe what is meant by the IT dependency of a control activity. Why is it important for an auditor to understand this concept before testing the control activity for operating effectiveness?
What is meant by a predictable relationship when considering using ADA as a substantive analytical procedure?
What are the differences between an audit of internal control over financial reporting on an issuer and an evaluation of internal control on a financial statement audit for a non issuer?
Provide an example of a manual control activity that is dependent on a system-generated report for its effective operation.
Do the auditing standards provide explicit guidance for determining the level of evidence provided by ADA used as tests of details?
According to the AICPA, what are the five steps that need to be conducted when completing ADA?
When planning the ADA, what is the first step that needs to be taken?
How would an audit team best evaluate where the control activities are effective at an issuer?
Explain what is meant by information produced by the entity (IPE).
How would an audit team best evaluate whether the information and communication component is effective at an issuer?
In accessing client data, the auditor must consider the completeness and accuracy of the information produced by the entity, as well as the appropriateness of the data for the purposes of the
Under what circumstances should the audit team test IPE? What are the key objectives for the audit team’s test of IPE?
In a PPS application, how is the population size defined? What is the relationship between population size and sample size?
Assume that the execution of the ADA results in the identification of outliers, matters of audit interest, or notable items. What is the audit team required to do in these situations?
When performing an ADA, what should the audit team document upon completing of the procedures performed?
What are the most common tools used by audit teams when completing an ADA?
Explain how a test of operating effectiveness should be conducted when auditing the internal controls over financial reporting.
How does the audit team proceed if one component contains two separate dollar selections?
Why is it important for an auditor to be professionally skeptical when completing an ADA?
What is the audited value of a transaction or component of an account balance or class of transactions?
How do input controls affect management’s assertions with respect to the financial statements?
What is the tainting percentage? How is it calculated?
When documenting an audit data analytic (ADA), an experienced auditor with no prior connection to the engagement should be able to understand all these elements of the ADA except.a. Results of
Why are misstatements in logical units that are higher than the sampling interval not projected over the sampling interval?
Prior to analyzing the reasonableness of the client’s warranty expense and accrued liability, please consider whether any of the following potential issues with the Warranty Claim 2023 database
Which of the following is correct regarding including client data in audit documentation for an issuer?a. Analyzing trends in inventory costs. b. Identifying sales that did not follow the
What are test data, and how are they used to test a client’s automated controls?
Which of the following is a common use of ADA in performing tests of controls?a. The auditor performs an aging of accounts receivable. b. The auditor conducts a trend analysis on inventory
When evaluating the results of a PPS application, the audit team should compare the upper limit on misstatements to thea. Expected misstatement. b. Incremental allowance for sampling
For documentation of an ADA to be considered sufficient, all the following should be recorded except? a. Who reviewed work performed within the output of the ADA. b. Who performed the work
The unique feature of PPS sampling is that a. Sampling units are not chosen at random. b. A dollar unit selected in a sample is not replaced before the sample selection is
Analysis of accounts receivable collection periods by region is most likely a part of which of the following types of ADA?a. Risk assessment procedures. b. Tests of controls. c. Substantive
To determine the reliability of data, the auditor may consider all but which of the following? a. The process used to produce the data. b. The nature and source of the data. c. The
Which of the following statements is correct about PPS sampling? a. The risk of incorrect acceptance must be specified. b. Smaller logical units have a higher probability of selection in
One of the primary advantages of PPS sampling is the fact that a. It is an effective method of sampling for evidence of understatement in asset accounts. b. The sample selection
On the audit of an issuer, if an audit team completes a test of controls on a control activity that is designed to mitigate the risk of material misstatement for a relevant assertion, concludes that
This step requires you to complete some exceptions testing for the Employee p-card expenditures for the year ended 12/31/2023.Required: a. How many unique employees exceeded their annual
Your client, Adams Company is a large publicly traded national financing company that has been in business for over 15 years. The client has 37 subsidiary companies operating in more than 25
What additional issues are involved with miscellaneous, other, and clearing accounts?
What are auditors’ responsibilities with respect to accounting estimates made by management?
Aaron Rivers, CPA, is auditing the financial statements of Charger Company, a client for the past five years. During past audits of Charger, Rivers identified some immaterial misstatements (most of
J. Griffith audited the financial statements of Mets Magnificent Corporation for the year ended December 31, 2023. She completed gathering sufficient appropriate evidence on January 30 and later
What are subsequently discovered facts?
Ambrose is auditing the financial statements of Mays (dated December 31, 2023). The date of the auditor’s report is February 17, 2024, and the audit report release date is February 20, 2024. For
Michael Ewing is auditing the financial statements of Dallas Company for the year ended December 31, 2023. In concluding the process of gathering sufficient appropriate evidence, Ewing has asked to
Jay Ralph completed the December 31, 2023, audit of Raider Company on February 3, 2024; Raider’s financial statements and Ralph’s reports on Raider’s financial statements and internal control
How does internal auditing help a company accomplish its objectives?
Define attestation, accounting and review, and assurance engagements. Provide some examples of information that are evaluated in each type of engagement.
What four audit objectives do internal auditors try to achieve to add value to a company?
What are the standards that govern internal auditing?
What special professional certification is available for internal auditors?
What are key audit matters? If the audit team is engaged to communicate key audit matters, what type of communication is provided in their report on the financial statements?
What are the roles of a user entity auditor and a service entity auditor in an audit of a service organization’s controls?
Who is responsible for enforcing compliance with laws and regulations in the business?
What is governmental auditing?
What is the GAO and what do they do?
Why are clearly worded engagement letters so important in agreed-upon procedures engagements?
What type of transactions are governed by the Securities Act?
What are the general contents of an accountants’ report on an agreed-upon procedures engagement?
What is the sample rate of deviation? How does the audit team calculate it?
Distinguish between financial forecasts and financial projections. Which of these presentations of prospective financial information is appropriate for general use?
On September 23, 2024, Betsy Ross drafted the following report on Continental Corporation’s (a non issuer) financial statements.Required:List and explain the deficiencies and omissions in the
What was the purpose of the Single Audit Act of 1984?
What are the basic contents of the accountants’ report on an examination of a financial forecast? What additional information is provided in the report of an examination of a financial projection?
What levels of assurance are provided in agreed-upon procedures and examination engagements on prospective financial information?
The board of directors of Cook Industries Inc. (a non issuer) engaged Brown & Brown, CPAs, to audit the financial statements for the year ended December 31, 2023.Required: Identify the
What types of engagements may be performed by an accountant in a compliance attestation? What type of assurance is provided in each of these engagements?
In fraud examiners’ terminology, what is predication?
Identify and provide a brief overview of the procedures required under the three engagements defined under SSARS.
What are the major content(s) of the accountants’ report in a review engagement? A compilation engagement?
What are going-concern uncertainties? What is the audit team’s responsibility for evaluating going-concern uncertainties?
What is limited assurance? Why is limited assurance (and not an opinion) provided in a review engagement?
What is the auditors’ reporting responsibility for (a) Other information accompanying the audited financial statements, (b) Required supplementary information,(c) Other supplementary
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