Get questions and answers for Principles of Auditing

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In this chapter, the history of auditing has been briefly described from an international perspective. Identify the major differences with the"

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At IFAC/International auditing and Assurance Standard Board’s publication website h tp: /www.ifac.org/auditing-assurance/publications-resources"

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Describe two treats and related safeguards associated with each of the following independence activities (Code Section):A. Documentation of"

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What importance would internal controls have for an audit firm?"

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Using the references in footnotes to this chapter as a beginning place and accessing journal databases such as ABI Inform, discuss the theoretical"

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Should a corporate governance code be developed by governmental bodies and enforced by law or should a code be developed by private institutions as"

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Describe the system of oversight of the audit profession in your country. Compare this system with the PCAOB standards. Discuss differences. US"

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In your role as shareholder, check the compliance of your portfolio firm with a (randomly) select a Corporate Governance Code from www.ecgi.org."

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Accounting policies and practices that are most important to the portrayal of the company’s financial condition and results, and require"

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Which of the following is an example of a subsequent event?a. A bond issuance after the balance sheet date but prior to issuance of the financial"

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When auditing a fixed asset account such as land, buildings, and equipment, the auditor will normally:a. Vouch the book value of fixed assets to"

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The internal document commonly used to record a credit purchase in the purchases journal is a:a. Purchase requisition.b. Purchase order.c. Vendor’s"

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Compare and contrast a compilation engagement and review engagement."

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If auditors identify only one material weakness in a client’s internal control system, the appropriate report to issue is a(n):a. Qualified"

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a. Conclusions: Based on the new information and assuming management cooperates with your recommended course of action, how would you date your"

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All of the following are examples of a change in accounting principle except:a. A change from one acceptable accounting principle to another"

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In what circumstances is an auditor required or allowed to include an emphasis-of-matter paragraph in the audit report on the financial statements?"

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All of the following phrases would be found in the standard unmodified audit report for a private company except:a. In our opinion, the financial"

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a. Analysis and evaluation: Does KCI have a justified change in accounting principle? If so, how should the change be presented in the financial"

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Answer the following question based on the information presented for Cloud 9 in the appendix to this text and the current and earlier chapters. You"

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Mark Jackson is the partner on the audit team for a new client, Central Companies (CC). The client hired Mark’s firm in August 2022 in preparation"

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Analysis and evaluation: Suppose management does not agree to make adjustments to correct the material misstatements and does not properly present"

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In a public company audit, the audit report is addressed to the:a. Audit committee.b. The CEO and CFO.c. The SEC.d. The board of directors and"

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What is the significance of the date on the auditor’s report on the financial statements?"

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Your firm has been engaged to audit a private company that uses a tax basis of accounting to prepare the financial statements rather than using"

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a. Information gathering and analysis: What factors should Leo & Lee consider when deciding whether to use the Brazilian accounting firm? (Refer"

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If a client has a going concern issue that has been properly disclosed in the notes, the auditor should:a. Issue an unmodified report and add an"

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Marco Ramirez is the partner on the audit engagement of Sun Products, a private company based in New Mexico.Sun Products manufactures outdoor patio"

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a. Information gathering: Prepare a list of questions that you will inquire of management at the afternoon meeting regarding this new development.b."

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Explain the term “consistency” in the context of financial statements. Provide examples of situations that affect consistency of financial"

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Waveland South, a private company, is a new audit client for 2022. Waveland’s financial statements for 2021 were audited by the previous auditor."

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An emphasis-of-matter paragraph is used with an unmodified opinion when:a. A significant uncertainty exists that should be brought to the financial"

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Explain how the standard audit report on the financial statements would be modified if reference is made to a component auditor."

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Billy’s Burger House, a private company, is a chain of fast-food restaurants that has experienced fast growth in the last decade. The restaurant"

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When the audit opinion is based in part on the work of another auditor, all of the following changes are made to the standard unmodified audit report"

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Distinguish between a limitation of scope and a departure from the financial reporting framework. Provide an example of each."

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Steven Edwards has had difficulties throughout the audit of Kingston Catering. The company is a long-standing client of the audit firm and there have"

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Which of the following is an example of a modified opinion?a. A qualified opinion.b. A going concern emphasis-of-matter paragraph.c. A consistency"

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Which would auditors consider to be more serious: a client-imposed scope limitation or a situation-imposed scope limitation? Provide an example of"

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Mitch Jackson and Rosie Punter are part of the audit team for Hexagon Industries, a large manufacturing, private company client. The client’s"

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If the auditor encounters a material scope limitation and cannot obtain sufficient appropriate audit evidence regarding the fair presentation of the"

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Distinguish between a subsequent event and a subsequently discovered fact. What is the auditor’s responsibility for each?"

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You are completing an internship with a Big Four accounting firm and have worked on one client, a public company, during the entire internship. In"

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If an auditor becomes aware after the date of the auditor’s report but before the financial statements are issued, of a fact that may materially"

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What factors should the auditor evaluate when deciding whether to dual date the audit report on the financial statements for a subsequently"

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Phillips & Craig LLP was hired by Richards Manufacturing, a public company, to perform an integrated audit of the December 31, 2022, financial"

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Industrial Holdings Inc. (IH), a public company, has been a client of Walker LLP for several years. Walker has completed the integrated audit of IH"

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The dual dating of an audit report means:a. The release date of the financial statements was after the completion of fieldwork.b. A subsequent"

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List and briefly explain the components of the unqualified report on the effectiveness of ICFR."

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You have learned that the auditor is responsible for expressing an opinion on the financial statements. The term “financial statements” "

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All of the following are components of the standard unqualified report on the effectiveness of ICFR except:a. A title that includes the term"

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What factors do auditors consider when determining if an identified control deficiency is a significant deficiency or a material weakness?"

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You are a first-year staff at a regional accounting firm. The firm primarily services private company clients and performs more review engagements"

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Explain how the standard unqualified report on the effectiveness of ICFR would be modified for an adverse opinion."

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In an engagement to review financial statements of a private company, the auditor will do all of the following except:a. Confirm key account"

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Discuss the items an auditor communicates at the end of the audit to those charged with governance."

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Communication with those charged with governance must occur:a. After the audit report is issued.b. Before the audit report is issued.c. Before"

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AU-C 260 stresses the importance of communication with “those charged with governance.” Who are “those charged with governance?” Discuss why"

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All of the following statements are included in a management representation letter except:a. There have been no violations of laws or regulations.b."

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Why is the management representation letter obtained at the end of the audit? Discuss the impact on the audit if management refused to sign the"

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For a private company client that follows GAAP, auditors must consider the going concern assumption for a reasonable period of time, which is:a. One"

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As discussed in the “Management Representation Letter” section of this chapter, Section 302 of SOX requires the CEO and CFO of public companies"

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Evaluate why the accounting assumption of “going concern” is of interest to auditors. Are there specific audit procedures that must be performed"

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Katrina Ellis is the engagement partner of the audit of Champion Securities, an investment company. Most of Champion’s assets and liabilities are"

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What are the audit file assembly deadlines and the audit file retention policies for public and private company audits? Provide an analysis of why"

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The audit firm must retain the audit file of a public company client for:a. 7 years.b. 6 years.c. 5 years.d. 4 years."

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Columbia Metal Fabricators (CMF) makes steel components for the construction industry. It specializes in extreme precision manufacturing where"

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Explain the process of an engagement quality control review."

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If auditors discover fraud during the audit, it should first be reported to:a. The SEC.b. The PCAOB.c. The employee who is committing the fraud.d. An"

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Evaluation: You are drafting a document with items to discuss with BPH’s audit committee closer to the end of the audit. In addition to the kitchen"

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Mark Jackson is the partner on the audit team for a new client, Central Companies (CC). The client hired Mark’s firm in August 2022, in preparation"

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Discuss actions an auditor would take when misstatements identified during the audit are not corrected by the client."

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All of the following are examples of qualitative characteristics of a misstatement except:a. Affects management’s compensation for the period.b."

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a. Analysis: Explain your responsibilities with respect to the kitchen fire.b. Evaluation: Recommend how this event should be handled in the"

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Provide an example of why an auditor would reevaluate control risk near the end of the audit. Provide a different example of why an auditor would"

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At the conclusion of the audit, the wrap-up process involves all of the following except:a. Review of proper and complete execution of planned audit"

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Information gathering: If Leo & Lee does not have an internal qualified individual to serve as engagement quality control reviewer, what options"

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On October 14, Montevista Inc. made deposits with an overseas supplier totaling $500,000 for the production of specialty items. On October 27, the"

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Which of the following is a Type II subsequent event?a. Bankruptcy of a customer subsequent to year-end, which would be considered when evaluating"

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a. Analysis and evaluation: Evaluate the impacts the costing errors and inventory cutoff errors have on the audit and the assessments of control"

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Martin Rorke is reviewing the results of the review of subsequent cash receipts. There are several receipts listed from customers that were"

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Discuss the auditor’s responsibility for detecting subsequent events prior to the completion of fieldwork."

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Evaluation and conclusions: Evaluate whether the recall qualifies as a subsequent event and its impact on the 2022 financial statements, if any.King"

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Brad Scarlett is reviewing the results of the subsequent events audit procedures. Brad is writing a report for the audit partner based on these"

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Differentiate between the two types of subsequent events. List some audit procedures that may identify subsequent events."

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Answer the following question based on the information presented for Cloud 9 in the appendix to this text and the current and earlier chapters. You"

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Information gathering and analysis: Does KCI have a potential loss contingency? Discuss procedures the auditors should perform to gather evidence"

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Conversations between the board of directors of Acme Inc. and the engagement partner of the audit, Angelo Del Santo, have revealed that Acme uses"

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Describe the auditor’s process for preparing, sending, and receiving responses from legal letters, including at what point during the audit the"

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When a client does not maintain its own stock records, the auditor should obtain a written confirmation from the transfer agent and registrar"

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Andrews, CPA, has been engaged to audit the financial statements of Broadwall Corporation for the year ended December 31, 2022. During the year,"

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An auditor’s program to examine long-term debt most likely would include steps that require:a. Correlating interest expense recorded for the period"

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The following transactions and events relate to financing transactions at Weber Inc.1. Declare cash dividend on common stock.2. Issue bonds.3. Pay"

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What considerations apply in determining the appropriate level of detection risk for stockholders’ equity?"

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If an auditor performs analytical procedures on rent expense and finds that rent expense has increased 50%, he or she is most likely to perform which"

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Fabrication Holdings Inc. (FH) has been a client of KFP LLP for many years. You are an audit senior and have been assigned to the FH audit for the"

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Explain how an auditor will usually test interest expense when auditing notes payable."

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An auditor analyzes repairs and maintenance primarily to obtain evidence in support of the assertion that all:a. Non-capitalizable expenditures have"

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The following is a copy of the auditor’s working paper for auditing additions and disposals relevant to the balance of property, plant, and"

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Explain the importance of obtaining confirmations regarding notes payable."

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