A CPA audits the financial statements of an issuer. Which statement relating to CAMs is TRUE?a. If the auditor determines that no CAMs existed, the audit report includes a paragraph defining CAMs and stating that no Cams existed.b. CAMs are not required to be communicated to the TCWG (Audit Committee).c. CAMs usually alter the opinion on the financial statements.d. CAMs involve matters of most significance to the audit.e. The paragraph discussing a discovered CAM should not include how the CAM was addressed in the audit.

A CPA audits the financial statements of an issuer. Which statement relating to CAMs is TRUE?a. If the auditor determines that no CAMs existed, the audit report includes a paragraph defining CAMs and stating that no Cams existed.b. CAMs are not required to be communicated to the TCWG (Audit Committee).c. CAMs usually alter the opinion on the financial statements.d. CAMs involve matters of most significance to the audit.e. The paragraph discussing a discovered CAM should not include how the CAM was addressed in the audit.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter17: Other Services Provided By Audit Firms

Section: Chapter Questions

Problem 17MCQ

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A CPA audits the financial statements of an issuer. Which statement relating to CAMs is TRUE? a. If the auditor determines that no CAMs existed, the audit report includes a paragraph defining CAMs and stating that no Cams existed. b. CAMs are not required to be communicated to the TCWG (Audit Committee). c. CAMs usually alter the opinion on the financial statements. d. CAMs involve matters of most significance to the audit. e. The paragraph discussing a discovered CAM should not include how the CAM was addressed in the audit.
Audit standards distinguish auditors’ responsibility for planning procedures for detecting noncompliance with laws and regulations havinga direct effect on financial statements versus planning procedures for detecting noncompliance with laws and regulations that do not have a direct effect on financial statements.Required:a. What are the requirements for auditors to plan procedures to detect direct-effect compliance versus indirect-effect compliance?b. For each of the following instances of noncompliance, explain why they are either directeffect (D) or indirect-effect (I) noncompliance:1. A manufacturer inflates expenses on its corporate tax return.2. A retailer pays men more than women for performing the same job. 3. A coal mining company fails to place proper ventilation in its mines.4. A military contractor inflates the overhead applied to a combat vehicle.5. An insurance company fails to maintain required reserves for losses.6. An exporter pays a bribe to a foreign government…
AUDITING Answer the following questions and explain the correct answers per item. Also explain why the other choices are incorrect 1. An accountant agrees to the client's request to change an engagement from a review to a compilation of financial statements. The compilation report should include: A. No reference to the original engagement. B. Reference to a departure from PSAs. C. Scope limitations that may have resulted in the change of engagement. D. Information about review procedures already performed. 2. The Philippine Framework for Assurance Engagements identifies two types of assurance engagements a practitioner is permitted to perform: a reasonable assurance engagement and a limited assurance engagement. Which of the following is the objective of a limited assurance engagement? A. A reduction in assurance engagement risk to a very low level in the circumstances of the engagement as a basis for a disclaimer of the practitioner's conclusion. B. A reduction in assurance engagement…
When asked to perform an audit to express an opinion on one or more specified elements,accounts, or items of a financial statement, the auditor(1) may not describe auditing procedures applied.(2) should advise the client that the opinion can be issued only if the financial statements have been audited and found to be fairly presented.(3) may assume that the first standard of reporting with respect to GAAP does not apply.(4) should comply with the request only if they constitute a major portion of the financialstatements on which an auditor has disclaimed an opinion based on an audit.
When auditors become aware of noncompliance with a law or regulation committed byclient personnel, the primary reason that the auditors should obtain a better understanding ofthe nature of the act is toa. Recommend remedial actions to the audit committee.b. Evaluate the effect of the noncompliance on the financial statements.c. Determine whether to contact law enforcement officials.d. Determine whether other similar acts could have occurred.
What are the auditor’s responsibilities to communicate information to the audit committee under PCAOB standards? If the auditor discovers that the audit committee routinely ignores such communications especially when they are critical of management’s use of GAAP in the financial statements, what step(s) might the auditor take at this point?
Which of the following ideas is NOT included in the "Purpose" section of the Principles Underlying an Audit Conducted in Accordance with Generally Accepted Auditing Standards? The auditor must plan the audit work properly and supervise any assistants. Management, and those charged with governance, are responsible for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework. The purpose of an audit is to provide users with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. Management has responsibility to provide the auditor with unrestricted access to individuals within the entity from whom the auditor determines it is necessary to obtain audit evidence.
After the audit report release date, auditors determine that an important auditing procedure was omitted. Which of the following initial courses of action is most appropriate?a. Perform the omitted procedure or an alternative procedure.b. Notify the board of directors and regulatory agencies that are currently relying on auditor’s reports.c. Determine whether the omitted procedure is important in supporting the auditor’s opinion on the entity’s financial statements.d. Engage another public accounting firm to conduct a quality assurance review.
Which of the following statements is not true with respect to the performance principle?a. Auditors are required to prepare a written audit plan during the planning stages of initialaudits but are not required to do so in continuing audits.b. Audit teams consider materiality in planning the audit, performing the audit, and evaluating the effect of misstatements on the entity’s financial statements.c. In assessing the risk of material misstatements, the audit team considers the effectivenessof the entity’s internal controls in preventing and detecting misstatements.d. Auditors are required to consider both the relevance and the reliability of evidence inevaluating whether the evidence they have gathered is appropriate.
Which of the following is correct regarding the use of confirmation letters in an audit of financial statements: a. Blank confirmation letters are usually preferred when the auditor expects an overstatement error in the account balance. b. A reply from a receivable confirmation letter received from the customer through the client is considered an invalid reply, thus another set of confirmation letter should be sent. c. A positive confirmation letter is preferred over a negative confirmation letter when the auditor, based on his past experience with the client, expects minimal to zero errors. d. When an auditor does not receive a reply from a customer for a negative confirmation letter in a considerable period of time, the auditor should send out another set of confirmation letter.
The existence of audit risk is recognized by the statement in the auditor's standard report that the auditor _______. A. Assesses the accounting principles used and also evaluates the overall financial statement presentation. B. Is responsible for expressing an opinion on the financial statements, which are the responsibility of management. C. Obtains reasonable assurance about whether the financial statements are free of material misstatement. D. Realizes that some matters, either individually or in the aggregate, are important while other matters are not important.
Which statement is incorrect regarding the external auditor's consideration of the work of internal auditing? а. During the course of planning the audit, the external auditor should perform a preliminary assessment of the internal audit function when it appears that internal auditing is relevant to the external audit of the financial statements in specific audit areas. b. The external auditor should consider the activities of internal auditing and their effect, if any, on external audit procedures. C. When the external auditor intends to use specific work of internal auditing, the external auditor need not evaluate and test that work to confirm its adequacy for the external auditor's purposes. d. The external auditor should obtain a sufficient understanding of internal audit activities to assist in planning the audit and developing an effective audit approach.