Why cant investors just read financial statements?
Bias, Complexity, Remoteness, Consequences
How are accounting and auditing different?
accounting - takes an event and turns into fin info
audtiting - verifies that fin info is representatitve of the t
Ch 1 Multiple Choice:
13. An independent audit aids in the communication of economic data because the audit
lends credibility to the financial statements.
14. Which of the following best describes the reason why an independent audito
Unrecorded Liabilities Procedures
The fact that the client made a journal entry to record vendors invoices that were received late
should simplify the auditors audit for unrecorded liabilities and reduce the possibility of a need
for a furthe
An audit confirmation is a procedure that is widely used in auditing and refers to direct
correspondence by the auditor with independent parties. It can produce evidence of existence and
ownership and sometimes even provide
Internal Control Questionnaire Items: Assertions, Tests of Controls, and Possible Errors or Frauds
Occurrence: The control provides evidence that only valid payroll transactions are being
recorded in the financial statements (i.e.
59)a. The control system of the company was good in the past since the IR = 0, so no additional audit
work required, this only based on little evidence & knowledge of auditing standards.
b. No additional audit work required, since the auditor knows the in
51) a. They might use returned goods as new products and make journal entries in sales & cash
b. Voucher must be done before the checks is printed, which the check is prenumbered.
c. Analyze the cash disbursement & receipt journal to see if any
52) a. The AICPA has responsibility for the audits of non-public entities, functions in financial
statement auditing, attest service, etc. The PCAOB has responsibility for the audits of public
entities, obtain information from the audit committee relevant
55) a. Audit confirmation is the auditors examining the A/R account of the customer for
verifying the existence and confirm it with the customer.
b. Confirmation letters are typically printed on the clients letterhead & signed by a client officer;
42) a. No. Since the client already made journal entries for the late receive, but the company are
expected to make the adjustments to the books.
b. No. The letter should be obtained when all liabilities have been recognized.
c. Yes. Because the internal
65. a) 1 3 Occurrence, 4 Completeness
b) 1. All payroll records and paychecks should be traced by viewing the personnel files for termination.
2. Select sample payroll deductions with signed authorizations.
3. Observe timekeeping operations.
4. Check repo
Internal Control over Sales Returns
Employees can falsify returned goods (no goods were actually returned) and take the cash from
the register as if it were provided to a customer.
Procedures that may prevent this type of fraud include:
the risk that the auditor may unknowingly fail to appropriately modify the opinion on financial
statements that are materially misstated.
Evaluations of financial information made by a study of plausible relationships
What are the nine categories of financial regulation?
1. government safety net
2. restrictions on assets
3. capital requirements
4. prompt and corrective action
5. chartering and examination
6. assessment of risk management
7. disclosure requirements
What is the primary function of the audit?
the primary function of the audit is to see if the financial statement assertions are fairly stated
according to GAAP consistently applied.
it isn't necessarily to detect fraud
to express an opinion stating whe
internal control structure
policies and procedures established to provide management with reasonable assurance that the
objectives of an entity will be achieved
law passed by congress in 2002 that gives the SEC significant oversight
Generally Accepted Auditing Standards (GAAS).
The standards by which the quality of the auditor's performance is judged.
Generally Accepted Accounting Principles (GAAP).
The standards by which the quality of the financial statements is judged.
Internal auditing is an independent, objective _ and _ acivity designed to add
value and improve an organization's objectives.
Internal Auditing helps an organization accomplish its objectives by bring a systematic, disciplined
Financial Statement Notes
Disclosures that provide additional information summarized in the financial statementing.
accounting methods, assumptions and estimates used by management
Are audited, whereas other disclosures such as supplementary schedules
AUDITOR'S STANDARD REPORT. What is an unqualified opinion?
The auditor's unqualified report states that the financial statements are presented fairly in all material
respects. The three-paragraph standard report includes all of the following:
What is an audit?
Objective to enable the auditor to express anopinion, based on evidence obtained, about a
matter of accountability, which is the responsibility ofanother party
Why have an audit?
Statutory requirement Co. Act 1993
Group Project #3
Team 4: Montana Epstein, Cindy
Lopez, Tammi Hall
These 2 transactions were done on same day for same amo
Name: _ Date: _
1.In performing an attestation engagement, a CPA typically
Supplies litigation support services
Assesses the risks of material misstatement
Expresses a conclusion about a written assertion
Provides management consulting advice