Questions and Answers of Auditing International Approach

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
What defenses are available to auditors under the Securities Exchange Act?
Which of the following would be included in an accountants’ report on an agreed-upon procedures engagement? a. Identification of the law, regulation, or other matter that serves as the basis
Which of the following sections of the standard report on the financial statements of a non issuer would be modified in response to a material departure from GAAP?a. Refers to the component auditors,
Risk Capital Limited, a Delaware corporation, was considering the purchase of a substantial investment in Florida Sunshine Corporation, a closely held corporation. Initial discussions with the
Butler Manufacturing Corporation raised capital for a plant expansion by borrowing from a bank and making a stock offering. Butler engaged Weaver, CPA, to audit its December 2023 financial
Chriswell Corporation decided to raise additional long-term capital by issuing $20 million of 12 percent subordinated debentures to the public. May, Clark & Company, CPAs, the company’s
What role does an SOC report play in an integrated audit of an issuer?
A concern in all audits is the risk that payments are made that do not represent valid expenses. One common test is to match payments to valid invoices, and you must use IDEA to perform this
You are auditing Martha’s Prison Clothes Inc. as of December 31, 2023. The inventory for orange jumpsuits shows 1,263 suits at $782 for a total of $987,666. When you look at the invoices for the
During the audit of Mason Company Inc. for the calendar year 2023, you noted that the company produces aluminum cans at the rate of about 40 million units annually. On the plant tour, you noticed a
What do we mean by revenue recognition? What does GAAP say about proper revenue recognition?
What system-generated reports might auditors examine to find evidence of unrecorded sales? Of inadequate credit checks? Of incorrect product unit prices?
What are the primary control procedures to ensure completeness of recorded revenues?
The primary control procedure to ensure the occurrence of revenues requires which three documents to be matched prior to recording sales revenue?
What types of audit procedures are typically performed in testing operating effectiveness of controls over the revenue and collection cycle?
What is a voucher? What is a voucher package?
Sorenson Manufacturing Corporation was incorporated on January 3, 2022. The corporation’s financial statements for its first year’s operations were not examined by a CPA. You have been engaged to
Why is inherent risk for the existence of inventory an issue in the expenditure cycle audit?
You are in the final stages of your audit of the financial statements of Ozine Corporation for the year ended December 31, 2023, when the corporation’s president consults you. The president
What inventory costing methods does GAAP recognize?
What are the different types of cost included in cost of goods sold for a production operation? What are the significant risks that would make this calculation inaccurate?
What inventory information should auditors document when performing an inventory count?
What could be happening when a client’s managers take notes of auditors’ test counts while an inventory is being counted?
Define the three levels of fair values. Which one is the most difficult to audit? Why? Audits of which asset accounts are most likely affected by these most difficult fair values?
Which of the following internal control activities would most likely justify reducing the assessment of the risks of material misstatement for long-term notes payable?a. The use of prenumbered
You have been engaged to audit the financial statements of Broadwall Corporation for the year ended December 31, 2023. During the year, Broadwall obtained a long-term loan from a local bank pursuant
What role does the PCAOB play in connection with monitoring and regulating public accounting firms?
If fraud is discovered, to whom within the company should the auditor communicate that information?
What are the documentation retention requirements for nonpublic and public clients?
What is a control activity?
Materiality is ultimately a matter of professional judgment. However, during the planning process auditors make a calculation of preliminary materiality based on a benchmark or rule of
What four environmental conditions that increase user demand for relevant and reliable information?
What type of risk creates a demand for independent and objective audit services to decision makers like investors and creditors?a. Compile a company’s financial forecast based on management’s
An auditor’s purpose in auditing the information contained in the pension footnote most likely is to obtain evidence concerning management’s assertion about.a. Rights and obligations. b.
Which of the following would best be described as an attest engagement?a. An engagement to implement an ERP system. b. An engagement to develop a more efficient payroll process. c. An
An auditor seeks to test the accuracy of the amount recorded as revenue on a contract with a customer under ASC 606. Which PCAOB assertion is most likely being tested? a. Rights and
What does it mean for an auditor to be independent in fact? What does it mean for an auditor to be independent in appearance?
Define generally accepted auditing standards (GAAS). What is the purpose of GAAS?
What qualitative factors can impact materiality?
In testing the goodwill at an audit client in the retail industry, an auditor may seek to determine whether the account balance had been impaired. Such impairment procedures would be designed to test

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