403 MC Review - Chapter 1: Role of Public ACCT 91% The...

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Chapter 1: Role of Public ACCT 91% The PCAOB’s explicit responsiblilities: -establish independence standards for auditors of public companies -establish auditing standards for audits of public companies -sanction registered audit firms Chapter 2: Professional Standards 67% The quality control standards were established to provide reasonable assurance that professional services confirm with professional standards. The internal control for a non public company is not explicitly mentioned in the unqualified standard report although it is implicit in the reference to generally accepted auditing standards. Neither the AICPA (non public) audit report nor the international audit report include an opinion on internal control. 64% Testing whether employee time reports are approved by supervisors is an example of a test of a control, not a substantive procedure. The purpose of analytical procedures is to locate potential misstatements in the financial statements. The auditors should investigate this significant fluctuation to determine whether it results from a financial statement misstatement. A loss contingency is a possible loss stemming from past events that will be resolved in the future. A Type 1 subsequent event relates to a condition that came into effect before year-end; Type 1 subsequent events result in an adjusting journal entry. In this situation, the customer’s check may be assumed to have been uncollectible at year-end, and therefore it would be considered to be a Type 1 subsequent event. The representation letter should be dated as of the date the audit was completed. auditor becomes aware of facts existing at the report date that would have affected the report, s/he should next determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information. If such persons are believed to exist, the next step is to determine the best manner in which to disclose the information. The settlement of litigation is most likely to result in an adjusting entry (i.e., be a "Type 1 subsequent event) because the cause of the litigation most likely occurred before 20X2. Chapter 17 83%
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When the auditors take exception to the application of accounting principles in the client's financial statements, they will issue either an "except for" qualified, or adverse opinion, depending on the materiality of the problem. The auditor communicates only through the auditors' report An emphasis of a matter paragraph is appropriate when an auditor wishes to emphasize a matter concerning the financial statements, but not a matter concerning the scope of the audit engagement. (i.e., a decision not to confirm A/R) 83% A large amount of assets by itself is not indicative of high inherent risk. Operating results highly sensitive to economic factors, large past misstatements, and turnover of management all represent
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This note was uploaded on 10/13/2010 for the course ACCTG 403 at Pennsylvania State University, University Park.

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403 MC Review - Chapter 1: Role of Public ACCT 91% The...

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