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business
auditing 12th

Questions and Answers of Auditing 12th

As the auditor for the Harns Company, you elect to use statistical sampling in performing tests of sales transactions. You decide to use shipping documents for the purpose of testing whether all
Explain the nature of the magnetic tape symbols in Figure 7-9.Figure 7-9 Data Control From Shipping Data Entry Computer Applications Run 1 Card to Tape, Surt and Edit Run Executed Sales Orders
Explain the nature of the processing runs in Figure 7-9.Figure 7-9 Data Control Data Entry Computer Applications From Shipping Executed Sales Orders Keypunch and Verily Assemble in Batches: Prepare
The internal control questionnaire in Figure \(8-3\) includes the following questions:1. Are prelists prepared for mail receipts?2. Are cash registers used for over-the-counter receipts?3. Are cash
You are asked by your supervisor to design and execute an attribute sampling plan pertaining to the proper execution of cash receipts transactions in the Christy Company. You decide that the
Trace the flow of(a) purchase orders and(b) receiving reports in the flowchart in Figure 9-2.S-12. Indicate the applicability of the internal control principle of independent internal verification to
a. Identify the computer runs that are illustrated in Figure 10-5.b. Which runs may be tested by the use of test data? AUDIT PROGRAM Type of testing: Transactions Cycle: Expenditure A. Payroll
The LMN Company maintains three bank accounts: City Bank-Regular, City Bank-Payroll, and Metro Bank-Special. Your analysis of cash disbursements records for the period June 23 to July 6 reveals the
What forms of business organization are permitted under Rule 505-Form of Practice and Firm Name?
There currently are thirteen Rules of Conduct. Listed below are circumstances pertaining to some of these rules:1. A member shall exercise due professional care in the performance of an engagement.2.
a. What aspects of a company's financial statements are covered in the first three reporting standards?b. What is the objective of the fourth standard of reporting?
Explain the reference in the fourth standard of reporting to(a) financial statements,(b) character of the examination, and(c) the degree of responsibility the auditor is taking.
Identify and explain the four types of opinions an auditor may render.
What conditions must be met to warrant the expression of an unqualified opinion?
Identify the circumstances that may warrant the expression of(a) a qualified opinion,(b) an adverse opinion, and(c) a disclaimer of opinion.
What are the effects on the form of the auditor's report of(a) a qualified opinion and(b) a disclaimer of opinion?
Indicate the changes in language in the opinion paragraph for each opinion that is other than unqualified.
What circumstances may cause substantive changes in the auditor's standard report
a. What factors may cause a scope limitation?b. What report modifications result from a scope limitation?
What factors should be considered by an auditor in determining whether(a) he can serve as the principal auditor, and(b) whether, as principal auditor, he should make reference to the work of another
What are the effects on the auditor's standard report of the decision to(a) make reference and(b) not make reference to another auditor?
When are financial statements presumed to be in conformity with GAAP?
What effect does inadequate disclosure have on the auditor's report?
a. What body is authorized to issue pronouncements on GAAP?b. Which pronouncements are recognized as being authoritative?
Indicate the possible effects on the auditor's report of a departure from(a) a promulgated principle and(b) a GAAP.
Enumerate the types of changes that are covered by the consistency standard.
a. What is meant by the term uncertainties?b. Identify four types of uncertainties.
Indicate the effects on the auditor's report of an uncertainty when the resolution of the matter may have a material effect on the financial statements.
What reporting requirements apply when the auditor wishes to emphasize a matter in his report?
What are the responsibilities of(a) the continuing auditor and(b) a predecessor auditor concerning comparative statements?
On completion of the examination of his client's financial statements the CPA. in his report, must either express an opinion or disclaim an opinion on the statements taken as a whole. His opinion may
Assume that the following separate circumstances are sufficiently material to cause a departure from the auditor's standard report.1. Change from LIFO to FIFO, necessitating a restatement of prior
The following draft of an auditor's report has been submitted for review:To: Eric Jones, Chief Accountant Sunshine Manufacturing Co.We have examined the balance sheet of the Sunshine Manufacturing
You are newly engaged by the James Company, a New England manufacturer with a sales office and warehouse located in a western state. The James Company audit must be made at the peak of your busy
Presented below is an independent auditor's report that contains deficiencies. The corporation being reported on is profit oriented and publishes general-purpose financial statements for distribution
Lancaster Electronics produces electronic components for sale to manufacturers of radios, television sets and phonographic systems. In connection with his examination of Lancaster's financial
The CPA must comply with the GAAS of reporting when he prepares his opinion on the client's financial statements. One of the reporting standards relates to consistency.Required:a. Discuss the
Various types of "accounting changes" can affect the second reporting standard of the generally accepted auditing standards. This standard reads, "The report shall state whether such principles have
Nancy Miller, CPA, has completed field work for her examination of the financial statements of Nickles Manufacturers, Inc., for the year ended March 31, 19X1, and now is preparing her auditor's
Charles Burke, CPA, has completed field work for his examination of the Willingham Corporation for the year ended December 31, 19X0, and now is in the process of determining whether to modify his
About two years ago, you were engaged to conduct an annual audit of Pierson Company. This was shortly after the majority stockholders assumed control of the company, and discharged the president and
The annual reports of three major United States corporations contained departures from the auditor's standard report because of the following notes to financial statements:R.J. Reynolds Industries,
Leer, CPA, has discussed various reporting considerations with three of Leer's audit clients. The three clients presented the following situations and asked how they would affect the audit report.1.
Roscoe, \(\mathrm{CPA}\), has completed the examination of the financial statements of Excelsior Corporation as of and for the year ended December 31, \(19 \times 1\). Roscoe also examined and
What criteria are necessary for a report to be considered a "special report"?
What bases of accounting other than GAAP qualify as a comprehensive basis?
a. Indicate the applicability of generally accepted auditing standards to an examination of financial statements prepared on a comprehensive basis other than GAAP.b. Explain the primary requirements
In reporting on specific elements, accounts or items of a financial statement, what are(a) the applicability of GAAS and(b) the primary reporting requirements?
a. What type of assurance is an auditor permitted to give in a compliance report?b. Identify the alternative ways in which this type of special report may be issued.
a. Describe the essential characteristics of personal financial statements.b. What is the applicability of generally accepted auditing standards to these statements?c. How does the auditor's standard
a. Indicate the nature of additional information that an auditor may submit with his audit report.b. How does the auditor indicate the responsibility he is taking for the additional information?c. In
What two types of procedures are generally involved in the performance of a review service?
Enumerate the elements that should be included in a report on interim financial information (IFI) for a public entity.
Under what conditions should the auditor's report be expanded because of IFI included in notes to audited financial statements?
a. What is the objective of the accountant's review of financial statements of a nonpublic entity?b. Does the accountant have to perform procedures of a corroborative nature in such a review? Explain.
What are the essential points to be included in the accountant's report on the review of the financial statements of a nonpublic entity?
a. What are the auditor's responsibilities for required supplemental information?b. Identify the major points that should be included in a report on required supplemental information.
Identify the four circumstances in which the CPA may report on internal accounting control.
What steps are required in an engagement to express an opinion on internal accounting control?
Enumerate the content of an opinion report on internal accounting control.
a. What conditions must be met to issue a report on internal accounting control as a by-product of an audit engagement?b. Indicate the essential points to be covered in reporting to a governmental
a. What is the objective of the accountant's review of a forecast?b. What types of evaluations can an accountant make about the underlying assumptions of a forecast?
List the essential elements of the accountant's report on a forecast.
a. What types of services may be rendered when an accountant performs accounting services for a client?b. Who has the authority to set standards for accounting services?
What are the accountant's reporting requirements when he is associated with unaudited financial statements for a public entity?
Jiffy Clerical Services is a corporation which furnishes temporary office help to its customers. Billings are rendered monthly based on predetermined hourly rates. You have examined the company's
a. What is a CPA expected to do in completing a compilation engagement for a nonpublic entity?b. Enumerate the essential aspects of the accountant's report on a compilation service.
What are the limitations in applying the GAAS of an opinion as to conformity of financial statements with GAAP? Indicate the general effects of its application on the wording of the opinion in the
In addition to examining the financial statements of the \(A B C\) Company at December 31, 19X0, the auditor agrees to review the loan agreement dated July 1, 19X0 with the Main Street Bank to
The accounting firm of C.P. \& A. have examined the personal financial statements of Mr. and Mrs. People. There were no limitations on the auditor's examination, and no qualifications were made
As part of your annual audit of Fall Camper Company, you have the responsibility for preparing a report on internal control. Your workpapers include a completed internal control questionnaire and
The financial statements of the Liber Company have never been audited by an independent CPA. Recently, Liber's management asked John Burns, CPA, to conduct a special study of Liber's internal
Your staff assistant has prepared a draft of a report on quarterly information of the Royal Company, a public entity. You determine that the first paragraph of the report is correct but that a number
An inexperienced staff assistant issues a four-paragraph report on a financial forecast. The first and last paragraphs of the report are shown below.We have examined the accompanying financial
A CPA was engaged by the Alba Nursing Home to prepare, on the CPA's stationery and without audit, financial statements for \(19 \times 0\) and its \(19 \times 0\) income tax return. From the
Loman, CPA, who has examined the financial statements of the Broadwall Corporation, a publicly held company, for the year ended December 31, \(19 X 0\) was asked to perform a limited review of the
You have been engaged to perform a review service for the partnership of Reed and Wright. Your review does not uncover any material errors of omission or commission in the company's financial
The limitations on the CPA's professional responsibilities when he is associated with unaudited financial statements are often misunderstood. These misunderstandings can be substantially reduced by
The following report was prepared at the conclusion of a review service for a nonpublic entity:We have (1) assisted the management of \(X Y Z\) Company in the preparation of the accompanying balance
Brown, CPA, received a telephone call from Calhoun, the sole owner and manager of a small corporation. Calhoun asked Brown to prepare the financial statements for the corporation and told Brown that
a. What are the responsibilities of the executive committee of the AICPA Ethics Division?b. Identify the three subcommittees of this division.
Identify and describe the four parts of the AICPA Code of Professional Ethics.
What is the applicability of the Rules of Conduct to the practice of public accounting in the United States?
a. What groups are responsible for enforcement of the Rules of Conduct?b. Contrast the penalties that may be imposed by each group.
What authority do ethics committees have under the joint ethics enforcement plan?
How are trial board hearings initiated and decided?
What decisions can be made in hearings by a trial board?
What actions by a member result in automatic suspension or termination of membership?
What time periods are applicable in Rule 101-Independence to(a) financial interests and(b) business relationships?
Distinguish between direct and indirect financial interest as it pertains to a member and his family relationships.
What types of business relationships with a client are prohibited by Rule 101 ?
How may a CPA retain the appearance of being independent when he performs manual or automated bookkeeping services for an audit client?
Under what circumstances may a CPA be considered to be independent when serving on the board of directors of a charitable or similar nonprofit organization which is audited by him or his firm?
Enumerate the specific parts of Rule 201-General Standards.
What is the impact of Rule 202-Auditing Standards on the auditor?
a. What is the essence of Rule 301-Confidential Client Information?b. Indicate three exceptions to this rule.
a. What is the objective of Rule 302-Contingent fees?b. What exceptions are permitted under this rule?
What acts are considered discreditable to the profession under Rule 501?
Briefly explain what is permissible and what is prohibited under Rule 502-Advertising and Other Forms of Solicitation.
a. What is prohibited by Rule 503-Commissions?b. Explain the rationale of this rule.

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