Outline how the auditor must perform the audit and

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outline how the auditor must perform the audit; and the last four, the reporting standards, outline how the auditor should communicate the results. Blooms Taxonomy: Comprehension Difficulty: 2 Learning Objective: 1.3 Page Reference: 7 Smieliauskas - Chapter 01 #31 32. What is information risk? The risk that a set of financial statements will be materially false or misleading. Blooms Taxonomy: Knowledge recall Difficulty: 1 Learning Objective: 1.3 Page Reference: 11 Smieliauskas - Chapter 01 #32 33. Describe the Sarbanes-Oxley Act. The Sarbanes-Oxley Act was drafted after the fall of Enron in 2001 and was enacted into law on July 30, 2002. The act created a five member Public Company Accounting Oversight Board (PCAOB) with the authority to tighten quality control of the audit practices and report on the results of inspections of audit firm practices. The legislation is to be implemented by the board in conjunction with the SEC in the US. Blooms Taxonomy: Knowledge recall Difficulty: 1 Learning Objective: 1.4 Page Reference: 12 Smieliauskas - Chapter 01 #33
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34. What are three key features of the Sarbanes-Oxley Act? Three key features are (any three): 1. Increased oversight of auditors, including audit standard setting by PCAOB 2. Increased penalties for corporate wrong-doers 3. More timely and extensive financial disclosures. 4. More timely and extensive disclosure on the way the firm is governed 5. New options of recourse for aggrieved shareholders. Blooms Taxonomy: Knowledge recall Difficulty: 1 Learning Objective: 1.4 Page Reference: 12 Smieliauskas - Chapter 01 #34 35. What is the Canadian Public Accountability Board? The CICA created the Canadian Public Accountability Board to act as an overseer of the audit firms who are involved in the audit of public companies. This board was organized to be a self-regulating part of the CICA. The government in Canada has not gotten as involved as the government in the US. Blooms Taxonomy: Knowledge recall Difficulty: 1 Learning Objective: 1.4 Page Reference: 12 Smieliauskas - Chapter 01 #35 36. What is operational auditing and who performs it? Operational auditing is the study of an entity, or a specific unit within an entity, in order to evaluate its performance. The operational auditor reports on whether the entity uses its resources economically and efficiently and whether it achieves its business objectives effectively. Internal auditors normally perform operational audits. However, independent accounting firms as part of their management advisory services also may conduct operational audits. Blooms Taxonomy: Knowledge recall Difficulty: 1 Learning Objective: 1.5 Page Reference: 14 Smieliauskas - Chapter 01 #36 37. Discuss the nature of value-for-money audits and give three examples of its application. Value-for-money audits involve studies of the management of government organizations, programs, activities, and functions. Its goal is to improve the government's accountability to taxpayers for the effective use of tax dollars. Examples of findings include: 1. Health care: Stronger efforts needed to control undesirable practices by unregulated health care providers 2. Education: Need to improve availability of programs for exceptional children.
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