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principles of auditing and other assurance services
Questions and Answers of
Principles Of Auditing And Other Assurance Services
Jan Sharpe recently joined the public accounting firm of Spark, Watts, and Wilcox. She quickly established a repu¬ tation for thoroughness and a steadfast dedication to follow¬ ing prescribed
In confirming accounts receivable on December 31, 2001, the auditor found 15 discrepancies between the cus¬ tomer s records and the recorded amounts in the subsidiary ledger. A copy of all
Baerg & Vetzel, a public accounting firm, were the auditors of South-Western Development, Inc., a real estate company that owned several shopping centres in southwest¬ ern Ontario. It was
In 1998, the Board of Directors of Lively Plays Inc. fired George Drewerson, the co- founder and another senior management representative of the company, claiming that they had engaged in fraudulent
Marino Rossi, a public accountant, audited the finan¬ cial statements of Newfoundland Rugs Ltd. Cooke, the pres¬ ident of Newfoundland Rugs, told Rossi that the company was planning a private
A partner in your public accounting firm has asked you to explain to a group of juniors the importance of engagement letters and the importance of following up unusual or unexplained items discovered
Briefly describe the accounting organizations that exist in Canada and identify the professional designations they award.
Explain what is meant by determining the degree of correspondence between information and established criteria. What are the information and established criteria for the audit of Jones Ltd.'s tax
What roles are played by the CICA, the CGAAC, and the SMAC for their members?
Which is more authoritative for a Canadian auditor: the CICA Handbooks or the IFAC Handbook? Explain the differences between them.
State what is meant by the term "practice inspection"? What are the implications of the term for the CA profession?
The following questions deal with audits by public accounting firms. Select the best response for each question.a. Which of the following best describes why an independent auditor is asked to express
The following questions deal with types of audits and auditors. Select the best response for each question.a. Operational audits generally have been conducted by internal auditors and governmental
The following questions deal with generally accepted auditing standards (GAAS) and quality control procedures. Select the one response that is best for each question.a. The general standard, which
Daniel Charon is the loan officer of the Georgian Bay Bank. Georgian Bay Bank has a loan of \($540,000\) outstanding from Regional Delivery Service Ltd., a company specializing in the delivery of
In the normal course of performing their responsibilities, auditors frequently conduct examinations or reviews of the following:1. Federal income tax returns of an officer of a corporation to
For each of the following quality control procedures taken from the quality control manual of a medium-sized regional public accounting firm, identify the applicable element of quality control from
In light of recent business failures, the public has expressed concern about the usefulness of the financial statement audit and the auditor's report. Because of these concerns, the accounting
Raymonde, the owner of a small company, asked Holmes, public accountant, to conduct an audit of the company's records. Raymonde told Holmes that an audit is to be completed in time to submit audited
Four years ago, the European Exchange Club (EEC) was formed in an effort to create a united social group out of several separate regional clubs in the vicinity of the city of Decker, located in
Explain why auditor's reports are important to users of financial statements.
List the eight parts of an unqualified auditor's report and explain the meaning of each part. How do the parts com¬ pare with those found in a qualified report?
What are the purposes of the introductory paragraph in the auditor's report? Identify the most important informa¬ tion included in the introductory paragraph.
What are the purposes of the opinion paragraph in the auditor's report? Identify the most important informa¬ tion included in the opinion paragraph.What is meant by the term "appropriate disclosed
On February 17,2002, a public accountant completed the examination of the financial statements for Buckheizer Corporation for the year ended December 31,2001. The audit is satisfactory in all
Explain what action an auditor should take when a client tells the auditor that the company has changed from straight-line to accelerated amortization. Also explain what action an auditor should take
What is meant by "going concern consideration"? Provide an example of such a condition and describe how it might be appropriately disclosed in the financial statements.
Distinguish between the levels of materiality and per¬ vasiveness an auditor considers when assessing how to deal with a non-GAAP condition in the financial statements.
How does an auditor's opinion differ between scope limitations caused by client restrictions and limitations resulting from conditions beyond the client's control? What is the effect of each on the
At times, for a variety of reasons, an auditor must rely on another firm of auditors to perform part of an audit. What reference does the primary auditor make to the secondary auditor in the
The following questions concern unqualified audi¬ tor's reports. Choose the best response.a. An auditor's unqualified standard report(1) implies only that items disclosed in the financial statements
The following question concerns auditor's reports other than unqualified reports. Choose the best response.a.If an auditor issues an adverse auditor's report when there is a very material
A careful reading of a standard unqualified auditor's report indicates several important phrases. Explain why each of the following phrases or clauses is used rather than the alternative provided.a.
Roscoe, public accountant, has completed the exami¬ nation of the financial statements of Excelsior Corporation as of and for the year ended December 31, 2001. Roscoe also examined and reported on
For the following independent situations, assume you are the audit partner on the engagement.1. Kieko Corporation has prepared financial statements but has decided to exclude the cash flow statement.
The following are independent situations for which ^•you will recommend an appropriate auditor's report:1. ^Subsequent to the date of the financial statements as part of the post-balance sheet date
You are the senior on the audit of Kootenay Real Estate Holdings Ltd., a company listed on the Canadian Ven¬ ture Exchange whose year end is December 31. As you com¬ plete your audit and prepare
The following are two unrelated situations:1. You are the auditor of Xact Ltd., a company which at December 31,2001, had working capital of \($200,000\), total assets of \($2,500,000\), and total
The following tentative auditor's report was drafted by a staff accountant and submitted to a partner in the public accounting firm of Bettrioni & Bee.AUDITOR'S REPORT To the Audit Committee of
Following are the complete financial statements of Yu Manufacturing Corporation and the auditor's report of the examination for the year ended January 31, 2001. The examination was conducted by John
Grogus Limited (GL) is a private company, incorpo¬ rated in 1997 under federal legislation. GL was audited for the first time for the year ended July 31, 2001, by a CA who issued a qualified audit
Raven Limited is a Canadian company engaged in a wholesaling business and currently distributes three major product lines. Over the years, the company has distributed several other product lines,
After the auditor's report has been signed, the auditor:A. Does not have a responsibility to detect subsequent events.B. Has a responsibility to detect subsequent events only if they will have a
Which of the following would an auditor ordinarily perform during the review of events after the end of the reporting period?A. Analyse related party transactions to discover possible
The representation letter to a lawyer provides the auditor with:A. Initial information about litigation and claims.B. Corroboration of the information on litigation and claims provided by the
A client's refusal to provide a management representation letter to the auditor will normally require the auditor to:A. Issue a qualified opinion or a disclaimer of opinion.B. Contact the audit
When a question arises regarding the going-concern basis additional procedures may be necessary. Which of the following procedures is an example of a valid additional procedure?i. Consider the effect
What is the main purpose of an analytical review at the completion of the audit?A. To ensure the financial viability of the company.B. As a final evaluation to confirm the initial risk assessments
Professional standards require the auditor to communicate certain matters pertaining to the audit to those charged with governance. This communication would normally include all of the following
Identify the audit procedures normally associated with subsequent events.
Can facts discovered after the issue of the financial statements have an impact on the auditor's report? Discuss.
How would you define the two types of events that occur after the reporting period? What are the potential accounting effects of each type?
What procedures should the auditor perform when a question arises regarding going concern?
What are the objectives of the management representation letter? Under what circumstances are management representations considered acceptable audit evidence?
Explain the purpose of the performance of analytical procedures at the end of the audit.
Identify the items that should be included on all working papers.
What should the auditor do when aggregate uncorrected misstatements are material?
Contrast the roles of audit managers and audit partners in the final review stage of the audit.Why would a firm require a second partner review?
Give examples of items that might be reported by the auditor to those charged with governance.
You are an audit assistant allocated to perform the audit of Topporene Ltd for the year ended 30 June 2015. The managing director of Topporene is interested in the audit responsibilities for
Tanners Ltd is a wholesaler of packaging products and you are about to complete the financial report audit for the year end 30 June 2015. Before you finalise your audit opinion you are considering
The financial year of Hadrian Ltd ended on 30 June 2015. Your auditor's report was signed on 25 August and the financial statements were issued on 10 September. Listed below are events that occurred
You are the manager for the annual audit of Dishliskers Ltd, a company that develops new technologies to help improve the performance of racing greyhounds. There are some material issues still
You have completed your audit of Egral Ltd, a large listed company. Your main day-to-day contact during the audit was Ms Poon, the accountant, although you also had some dealings with the finance
Aeneid Systems Ltd provides a range of IT services to clients from advice in helping identifying system weaknesses to helping procure new IT solutions to project managing new systems development and
Ulysses Polytropos Ltd is an Australian company which manufactures travel products including suitcases, backpacks, wallets, hiking gear, clothing and other sundry travel related items. The market for
You are the audit manager of Jenstone Ltd, a furniture maker, and are preparing a final review of the financial report for the year ended 30 June 2015. You know from your discussions with the client
You are nearing completion of the 30 June 2015 audit of Goodies Ltd, a wholesaler of breakfast foods and bakery supplies. Your manager has completed the working paper review and has compiled the
Your client is Queenscorp Ltd, a diversified business operating throughout Australia. Year-end was 30 June 2015, the auditor's report was signed on 31 July 2015 and the financial statements were
You are the supervisor on the audit of Golden Pokie Club, a large suburban club in New South Wales.As well as the usual club facilities such as poker machines, bars and a bistro, the club also
You have just completed preliminary analytical procedures of your client Indonesia On-Line Ltd (IOL)which has a 31 March year-end. IOL is involved in the development and design of new computer
Earnings management is now a very common term in financial reporting. It refers to some of the management practices whereby accounting items are presented in a manner to achieve a certain economic
Initial substantive procedures for cash balance assertions may include which of the following:i. Trace opening balances for cash on hand and in bank to the previous year's working papers.ii. Review
The main evidence regarding year-end bank balances is documented in:A. The bank deposit schedule.B. The interbank transfer schedule.C. The bank reconciliation.D. The standard bank confirmation.
In working with the bank reconciliation and the subsequent period bank statement, the auditor finds that many of the cheques on the outstanding cheque list did not clear during the cutoff period.
The correct statement concerning the materiality of securities is:A. Short-term investments may be immaterial to the solvency position but material to the income statement.B. Short-term investments
The predominantly substantive approach is generally used for investing transactions because of:A. Infrequent transactions.B. High volume of transactions.C. Ineffective controls.D. Effective controls.
In the audit of group entities, where the auditor is not also the auditor of another group entity, the principal auditor may:A. Be able to rely on the work of the other auditor.B. Ask the other
Name and describe the two main procedures for internal control of cash and bank amounts.
Why is detection risk for verifying cash balances invariably low? Why does the auditor not often use analytical procedures for the audit of cash balances?
What is the purpose of ‘window dressing’? How would it be perpetrated? What is the main indicator of window dressing, and why does the indicator work?
Why is the predominantly substantive approach used for most entities in the audit of investment balances? Why is it rarely possible to obtain much evidence from analytical procedures in the audit of
You are the auditor of Bottlenose Ltd and planning the audit for the year ended 30 June 2015. The company has various bank accounts for which bank reconciliations are prepared monthly. The company
You have spent 2 years working as an auditor. In that time you have come across a number of errors in performing bank reconciliations. Outlined below are some of them.1. An unreconciled item of
Drental Ltd operates a chain of household goods retail stores in various towns and cities.Accounting for each shop is carried out at Head Office but the relevant shop manager is responsible for petty
Roof and Walls is a charity that provides accommodation for people who are in hardship or from disadvantaged backgrounds. The constitution of Roof and Walls stipulates how funds can be spent.Revenue
Ingrid Cox, an audit senior, was given the task of auditing Apple Ltd, an investment company. Her firm had not performed the audit before; however, from a discussion with the previous year's
You are working on the audit team of Wringer Ltd and you have been given the responsibility of auditing the investments auditor. You have been provided with the following information.1. During the
Other auditors of subsidiaries You are currently performing the year-end audit of South Seas Ltd, a large corporation with operations in Australia and the South Pacific region. The company's head
Substantive procedures for investments You are performing the audit of Toledo Ltd for the financial year ended 30 June 2015. Under the terms of a major loan contract, Toledo is required to maintain
Your firm is the auditor of Thai Textiles Ltd and you are auditing the financial statements for the year ended 30 June 2015. The company has a turnover of \($2.5\) million and a profit before tax of
Substantive procedures for cash balances You have been asked by the financial controller, Harry Rowling, of Potter Ltd to carry out an investigation of a suspected fraud by the company's cashier. The
During the observation of the inventory count, the auditor has responsibility to:i. Watch for damaged and obsolete inventory items.ii. Make some test counts of inventory quantities.iii. Supervise the
When the client engages an inventory specialist to take the inventory, the impact on the audit in this area is:A. To eliminate the need to perform test counts.B. To eliminate the need to observe the
When reviewing accumulated depreciation, the auditor seeks evidence as to the reasonableness, consistency and accuracy of depreciation charges. The substantive procedures performed seek to provide
Analytical procedures are not widely used in the audit of property, plant and equipment.Which of the following are valid comments about the use of analytical procedures in the audit of PPE?i. Compare
List the procedures that should be adopted in a physical inventory count.
What are the three audit strategy options that an auditor has for verifying the existence (and completeness) of inventories and what is the implication of each strategy for control risk?
How would an auditor test inventory cut-off at the year end?
When performing tests of details of balances for property, plant and equipment, it is necessary for the auditor to review accumulated depreciation. Discuss what this review entails.
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