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principles of auditing
Questions and Answers of
Principles of Auditing
Which of the following best describes SAS 70 ?A. Security specification B. Auditing standard C. Encryption standard D. WAN specification
Both types of SAS 70 audit reports include a description of security controls.A. True B. False
Which term refers to Internet-based computing services where computational services are rented?A. Virtual machine B. Cloud computing C. Minicomputer D. Multiplexing
What does CAATT stand for?
Which rating description using the COBIT maturity model would be assigned to a business that does not recognize the need for IT security, nor has a recognizable system security administration
What is the formula for determining risk?
Which of the following best describes when not enough evidence was collected to make an appropriate determination as to the compliance of a specific control?A. Not determined B. Not applicable C.
A data DVD can store up to 256 GB of data.A. True B. False
A security token is an exampleof_, or “what you have,” authentication.
NIST 800-53A provides a guide for assecing security
Certification andeccreditatfon is an audit of federal systems prior to being placed into a production environment.
Frameworks differ in that they might offer varying levels of depth and breadth when compared with each other.A. True B. False
Avoiding the need for audits is one reason why organizations develop clearly documented policies, standards, and procedures.A. True B. False
Which of the following should organizations do when selecting a standard? (Select three.)A. Select a standard that can be followed.B. Employ the selected standard.C. Select a flexible standard.D.
\(\operatorname{CoSO}\) is the acronym for which of the following?A. Compliance Objectives Standards Organization B. Committee of Sponsoring Organizations C. Compliance Organization Standard
SAS 70 Type I includes everything in a SAS 70 Type II report, but it adds a detailed testing of the controls over a specific time frame.A. True B. False
Which of the following provides a framework for assessing the adequacy of implemented controls?A. NIST 800-53 B. NIST 800 C. NIST \(800-53 \mathrm{~A}\)D. NIST 800A
Which of the following does COBIT stand for?A. Control Objectives Beyond Information Technology B. Control Objectives for Information and Related Technology C. Compliance Organized By Information
a. Is internal auditing a management or an accounting function? Explain,b. Jill Jensen is confused as to the scope and primary beneficiary of internal auditing. Clarify these points for Jill.
a. State the requirements for becoming a Certified Internal Auditor,b. What must a CIA do to retain the certificate?
a. What is the objective of internal auditing?b. The scope of internal auditing is limited to financial statement audits.Do you agree? Explain.
a. Identify the five categories of general practice standards for internal auditors.b. Indicate the components of the standards framework for internal auditing and the purpose of each component.
Plow does the independence of an internal auditor differ from that of an external auditor?
a. Like internal auditing, operational auditing involves independent appraisal. Do you agree? Explain.b. The scope of operational auditing is similar to the scope of internal auditing. Is this true?
a. Identify the phases of an operational audit.b. How do these phases differ from a financial statement audit?
Explain the auditor's responsibilities in (a) selecting the auditee and(b) reporting the findings.
Identify the applicable standards when a CPA performs an operational audit.
a. Explain the scope of governmental auditing.b. Identify the types of government audits.
a. What agency establishes audit standards for government audits?b. What is the relationship between GAGAS and GAAS?
a. Identify the categories of GAGAS.b. State the general standards that apply to all government audits.
a. Identify the supplemental field work standards that apply in a financial statement audit.b. What reports are required by the supplemental reporting standards in a financial statement audit?
a. Indicate the nature of each paragraph of the auditor's unqualified report on compliance with applicable laws and regulations when no material instance of noncompliance is found.b. Identify the
What are the objectives of the Single Audit Act?
a. Who is required to have a single audit under the Single Audit Act?b. Who prescribes policies, procedures, and guidelines to implement the Act?c. What is a cognizant agency, and what are its
a. Identify the two main components of a single audit.b. What is the source of the standards that govern performance of each component?
a. State the nature of the general requirements with which all recipients of federal financial assistance are expected to comply, and give several examples.b. State the types of specific requirements
Identify the reports required under the Single Audit Act that are not required by GAAS or GAGAS.
What is the nature and extent of the SEC's authority over the public sale of securities?
a. Explain the composition of the Commission that heads the SEC.b. Describe the principal responsibility and primary functions of the Division of Corporation Finance.
a. Identify the components of the standard package of information required in the integrated disclosure system.b. What is meant by (1) incorporate by reference and (2) continuing reporting?c. What is
Identify the sanctions that may be imposed by the SEC under Rule 2(e) and the Securities Law Enforcement Remedies Act of 1990.
a. Define an attest engagement.b. State the three major activities involved in performing an attest engagement.
a. How are the attestation standards classified?b. Indicate the principal differences between the attestation standards and GAAS.
a. Identify the four types of attest engagements that have been recognized in professional standards.b. Indicate the levels of assurance and attestation risk associated with each type.
a. What types of reports are encompassed by the term special reports as described in SAS 62?b. State a common characteristic of the types of data covered by special reports.
a. When is a basis of accounting considered to be an other comprehensive basis of accounting (OCBOA)?b. Explain the effects on the auditor's standard report when reporting on financial statements
Distinguish between the levels of assurance that may be given when (a) auditing and (b) applying agreed-upon procedures to specified elements, accounts, or items of a financial statement.
a. Under what circumstances may an auditor issue a negative assurance in a compliance report related to audited financial statements?b. What are the reporting options for conveying the negative
a. How do the objectives of a review service differ from those of an audit?b. Identify two types of review services and the professional standards that apply to each.c. What is the principal source
a. What limited procedures are common to both types of reviews?b. What additional procedures are required in SAS 71 reviews?
a. What conditions must be met for an independent accountant to perform an examination of a management assertion about the effectiveness of an entity's internal control structure?b. Briefly describe
Identify two types of reports that may be issued on the internal control structure over the processing of transactions by service organizations and indicate by whom and for what purposes the reports
a. Identify and distinguish between two types of prospective financial information.b. What types of service may a CPA perform on such information?
a. What matters should be covered in an accountant's examination report on prospective financial statements?b. How does an examination report on a financial projection differ from one on a financial
a. What conditions must be met for an independent accountant to perform an agreed-upon procedures compliance attestation?b. Who determines the procedures in such an engagement?c. What is the
a. How may a CPA be associated with unaudited financial statements?b. Describe the reporting and additional disclosure requirements when a CPA is associated with unaudited financial statements.
a. What is the objective and nature of a compilation service on historical financial statements?b. Indicate the content of the accountant's standard report on a compilation of historical financial
a. What is involved when a CPA compiles prospective financial statements?b. Indicate the content of the report on the compilation of prospective financial statements.
Explain the content of the accountant's report on the application of accounting principles.
Distinguish between a "step up" and a "step down" change of engagement and explain when a change is acceptable.
State the four generally accepted standards of reporting.
a. What factors should an auditor consider in deciding whether financial statements are in conformity with GAAP?b. What is the GAAP hierarchy and how is it organized?
a. What pronouncements are recognized as promulgated accounting principles?b. Must a company always comply with promulgated accounting principles under Ethics Rule 203?
a. When is a change in an accounting principle made in conformity with GAAP?b. What circumstances resultin a change in an accounting principle under the consistency standard?
a. Is there explicit or implicit recognition of adequate informative disclosures in the auditor's report?b. What is the objective of the fourth reporting standard?
What questions should be asked by an auditor in determining the appropriate opinion to express?
Indicate the opinions that may be expressed for(a) a scope limitation (b) nonconformity with GAAP.
a. Explain the circumstance and the effects on the auditor's report when nonconformity with a promulgated principle results in an unqualified opinion.b. Contrast the effects on the auditor's report
a. Explain the effects on the auditor's report when the auditor is only asked to audit one basic financial statement,b. Contrast the effects on the auditor's report when a scope limitation results in
Indicate the effects on the auditor's report when a change in an accounting principle is(a) made in conformity with GAAP (b) not made in conformity with GAAP.
a. What is an uncertainty?b. What circumstances may result in only adding explanatory language to the auditor's report for an uncertainty?c. Explain the circumstances when there may be (1) a scope
a. Identify the factors that may provide information contrary to the going concern assumption.b. What are the effects on the auditor's report when there is adequate disclosure in the financial
a. Contrast the conditions that may enable the principal auditor to (1) not make or (2) make reference to another auditor in the auditor's report.b. Explain the effects on the auditor's report when
In reporting on comparative financial statements, what are the effects on the auditor s report of(a) different opinions,(b) updating a prior year's opinion, (c) changing auditors?
a. Distinguish three situations involving information accompanying audited financial statements.b. Describe the auditor's responsibilities for each type of information.
Circumstances may occur in the audit of an entity's financial statements when the auditor concludes that it is necessary to add explanatory language to the report while still expressing an
Identify the three categories of activities that pertain to completing the audit.
a. Distinguish between the terms subsequent events and subsequent events period.b. Define the two types of subsequent events and indicate the accounting treatment of each type.c. What is the
a. What evidence is required in an audit of litigation, claims, and assessments?b. What is a letter of audit inquiry?c. What effects may failure of a lawyer to respond to a letter of audit inquiry
a. What objectives are met in obtaining a client representation letter?b. What is the impact of a client's refusal to provide a rep letter.
a. What are the objectives of making an overall review?b. Who should make this review?c. How should analytical procedures be used in this review?
a. What are the two objectives to be achieved in evaluating the findings?b. List four steps in meeting these objectives.
a. What are the purposes of the auditor's final assessment of materiality and audit risk?b. Distinguish between the terms known misstatement, likely misstatement, and aggregate likely misstatement.
What is included in the technical review of the financial statements, what aids are used in the review, and who makes the review?
a. How and by whom is the opinion on the financial statements formulated, and how is it communicated?b. How are proposed adjustments and disclosures generally resolved?
a. Identify the primary reviewers of working papers and the nature of their reviews.b. What are the objectives of the engagement partner's review?c. Why may a second partner review be desirable?
What are the effects on a report on reportable conditions when the auditor separately identifies and describes material weaknesses?
a. Indicate the form and timing of the auditor's communication with the audit committee on the conduct of the audit,b. What matters should be included in the communication?
What information should the auditor include in a notification of parties other than the client about the postaudit discovery of facts when he or she has been(a) able (b) unable to make a
a. What responsibility does the auditor have upon discovery of omitted procedures after the report date?b. Indicate the possible consequences of the auditor's investigation of omitted procedures.
Identify several types of cash accounts that should be included as cash balances on the balance sheet and several others that should not.
Which transaction cycles relate directly to cash and how?
a. State the account balance audit objectives for cash that are associated with each category of financial statement assertions,b. Indicate the relative degree of inherent risk associated with each
Cash balances often constitute a very small percentage of an entity's current or total assets. Why then isn't less effort allocated to auditing cash balances?
What special considerations relate to applying the concepts of materiality and preliminary audit strategies to the audit of cash balances?
a. Identify three different tests of details of transactions that can be performed in auditing cash balances.b. Which of these tests need not be performed when control risk pertaining to cash
How does a proof of cash differ from an ordinary bank reconciliation?
a. What is meant by the term kiting?b. What procedures can be used by the auditor to detect kiting?
a. What types of information does the auditor seek to have confirmed on the standard form to confirm account balance information with financial institutions?b. What assertions are addressed by the
a. What is a compensating balance?b. What is the auditor's primary source of evidence about this item, and to what assertion does it pertain?
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