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auditing assurance services

Questions and Answers of Auditing Assurance Services

From the list, select the type of audit evidence used for each of the procedures in the table. Note that a selection may be used not at all or more than once. (1) Inspection (2) Recalculation(3)
Equipment acquisitions that are misclassified as maintenance expense most likely would be detected by an internal control that provides for:(1) Segregation of duties of employees in the accounts
The Chartered Professional Accountant examines all unrecorded invoices on hand as of February 28, 2019, the last day of the audit. Which of the following misstatements is most likely to be uncovered
Provide examples of two controls that improve completeness over recording of acquisitions transactions.
List the elements of the auditor’s report with an unmodified opinion and explain the meaning of each part.
Biomed Products Incorporated (BPI) is a public company, listed on the Toronto Stock Exchange (TSX), that manufactures and markets various types of medical equipment that monitors patients? vital
Based on facts in each scenario, recommend the most appropriate audit strategy (combined or substantive). Scenario Strategy Big Bank is a multinational bank that operates across the globe. Each day,
Based on the provided procedure, determine the most likely audit strategy (combined or substantive) that an auditor has selected for the specific cycle. Strategy (combined or substantive)
For the following audit procedures that were taken from an audit program, indicate whether each procedure is:(1) A test of control.(2) A substantive test of transactions.(3) An analytical
Tests of controls are most likely to be omitted when:(1) An account balance reflects many transactions.(2) Control risk is assessed at less than the maximum.(3) The understanding of the control
Explain the difference between overall audit strategy at the financial statement level and audit strategy at the assertion level.
You are the audit senior for the 2018 yearend audit of Vision Quest (VQ), a publicly traded Canadian company that is one of the largest and fastest online vision care providers in the world. Because
Identify whether each audit procedure listed below is a test of control or a substantive test of transactions. The following questions deal with audit evidence for the revenue cycle. Choose the best
Diane Smith, CPA (Chartered Professional Accountant), performed tests of controls and substantive tests of transactions for sales for the month of March in an audit of the financial statements for
A company’s sales have declined, while the bad-debt expense and accounts receivable have increased. What do these changes tell you?
When deciding upon which controls to test, the auditor considers cost effectiveness. Which types of controls are likely the least costly to test? Justify your response.
How are uncollectible accounts related to fraud risks?
Why is completeness a risk for cash receipts?
What is the major risk for sales returns?
Why is accounts receivable often an important account to audit?
Why is occurrence a high-risk assertion for revenue?
Jeff Jacobs is a junior accountant with the public accounting firm of Maxwell and King LLP. Jeff was assigned to do the audit of Astor Electronics Inc. The in-charge auditor informed Jeff that, based
Dev is working on the testing of internal controls over price changes in the inventory system. Dev has completed the controls testing to determine whether all price changes were approved by the
You have just completed control testing for accounts payable. You found three items for which no supporting documentation could be located and noted the exceptions. The explanation for the lack of
For the audit of Carbald Supply Company, Farda is conducting a test of sales for the first nine months of the fiscal year ended December 31, 2018. Incorrect revenue recognition has been assessed as a
Binu is performing tests of controls in the purchases cycle of Oakland Hardware Company. Based on the audit firm guidelines, a sample size of 50 purchases is selected from the cash disbursements
In addition to evaluating the frequency of deviations in tests of controls, an auditor should also consider certain qualitative aspects of the deviations. The auditor most likely would give
Identify whether the described control is preventative or detective. Control Preventative or Detective? Management reviews sales and cost of sales analytical reports for reasonableness. Invoices can
For each situation, identify the management assertion(s) most likely affected. Assertions: A. Cutoff B. Accuracy C. Completeness D. Existence E. Valuation F. Occurrence Assertion(s) (A,B,C,D,E,F)
Sylvie Beaubien is the engagement manager for the audit of Terra Enterprises. Sylvie is currently planning tests of details of balances for accounts receivable and is considering the use of
You are the audit senior on the audit of Great Eastern Hotel (GEH). This two-star hotel is located in a major coastal city and as such is prone to seasonal fluctuations. The 200-room hotel is open
Describe the various phases of the audit process. What is the relationship of the phases to the objective of the audit of financial statements?
Consulting with others is an important step in making professional judgments. Explain how consultation can overcome judgment traps and biases.
In the aftermath of the Oscars envelope mix-up, the president of the Academy of Motion Picture Arts and Sciences (AMPAS) announced that was re-evaluating its long-running relationship with PwC. AMPAS
Marie encounters the following situations in doing the audit of a large auto dealership. Marie is not a partner.1. The sales manager tells her that there is a sale (at a substantial discount) on new
Tom Holton has a far too busy personal life to work overtime. To make certain that work does not interfere with his other plans, he tests only part of the assigned sample. For example, if he is asked
Which of the following best defines the “expectations gap”?(1) The difference between auditors and shareholders in their understanding of the financial statements of a specific company.(2) The
A single-partner Chartered Professional Accountant firm took on a new client in the uranium mining industry. Most of the firm’s clients operate in the retail service sector and the firm had until
In which one of the following situations would a Chartered Professional Accountant be in violation of the Code of Professional Conduct in determining the audit fee?(1) A fee is based on whether the
An auditor strives to achieve independence in appearance to:(1) Comply with the auditing standards of fieldwork.(2) Become independent in fact.(3) Maintain public confidence in the profession.(4)
An auditor strives to achieve independence in appearance to:(1) Comply with the auditing standards of fieldwork.(2) Become independent in fact.(3) Maintain public confidence in the profession.(4)
After accepting an engagement, a PA discovers that the client’s industry is more technical than at first realized and that the PA is not competent in certain areas of the operation.What should the
What are the fundamental ethical principles for professional accountants? How can those principles aid in analyzing an ethical dilemma?
In the opening vignette, the concept of audit quality indicators (AQIs) was discussed. These AQIs are quantitative measures that provide insight into audit quality. The intent is to have firms
The following questions concern quality control standards. Choose the best response.a. The nature and extent of a public accounting firm?s quality control policies and procedures depend on: b. Which
The following questions deal with auditing standards. Choose the best response.a. Which of the following best describes what is meant by “Canadian Auditing Standards”?(1) Acts to be performed by
You have been engaged to audit the financial statements of a Canadian public company. Which of the following statements is correct?(1) Your firm must be registered with the CPAB.(2) Your firm will
What is meant by “quality control” as it relates to a public accounting firm?
Who is responsible for establishing auditing standards for Canadian companies?
The Oscars snafu described in Auditing in Action 1-3 is not the first time that there has been a major mix-up at an awards ceremony. Denise Garrido was 2013 Miss Universe Canada for only 24 hours.
An individual who wishes to practise public accounting must be a member of one of the relevant provincial accounting bodies and meet the qualifications for performing an audit or review engagement.
Explain the difference between limited assurance and reasonable assurance.
What factors influence how much and when substantive tests may be performed?
Define substantive testing.
For each of the following situations, indicate what type of modification/audit report is most appropriate.a. There is a scope limitation and it is material. However, the overall financial statements
a. Are there any going concern issues for HCHG? Explain. If so, what are the mitigating circumstances?b. How will you recommend that the issues be handled in the financial statements and the audit
a. Explain your responsibilities with respect to the Shady Oaks cafeteria fire.b. How will this event be handled in the HCHG financial statements and the audit report?Fellowes and Associates
Describe procedures to be undertaken where group entities are audited by other auditors.
Explain the financial reporting principle underlying the audit verification of the existence and completeness assertions with respect to entities consolidated into group financial statements.
When inspecting securities on hand, what things should the auditor observe?
What substantive tests apply to the existence and valuation assertions for investment balances?
Explain lapping. Describe appropriate audit procedures to perform where it is suspected.
Outline the procedures involved in verifying the bank reconciliation.
Describe the procedures for counting cash on hand.
Explain why it is important to trace transfers between bank accounts on either side of the end of the reporting period.
Explain why the balance of cash on hand and at bank is always audited, and why a substantive approach is preferred.
Explain the use and audit of imprest accounts.
Consider the following statement:The audit of inventory is one of the riskiest areas of the audit. Management can manipulate the value of inventory through a variety of methods, such as through
You are the audit senior in charge of the audit of Blackburn Ltd., and you are auditing the company’s trade creditors at December 31, 2020. A junior member of the audit team has been checking
Explain why achieving an accurate cut-off of purchases and sales transactions is of critical importance in assuring the fairness of the financial statements. Illustrate your explanation with examples
a. Identify and explain any significant fraud risk factors for Featherbed.b. For each fraud risk factor you identify, explain how the risk will affect your approach to the audit of
Based on your answer to question 13.13, explain what type of audit opinion you would issue. Why?Fabrication Holdings Ltd. (FH) has been a client of KFP Partners for many years. You are an audit
Analyze the events surrounding the sale of FH’s land and buildings. Is it a subsequent event? If so, which type?Fabrication Holdings Ltd. (FH) has been a client of KFP Partners for many years. You
Hatami and Partners completed the fieldwork for the December 31, 2020, audit of Harbinger Corporation on March 1, 2021. The financial statements and auditor’s report were issued and mailed to
Springsteen Ltd. is a new audit client for the 2020 financial year. Springsteen’s financial statements for the 2019 year, the last with the previous auditor, were prepared on the assumption of a
Phil Nanere is the partner in charge of the audit for a new client, Western Wonderland (WW). The client engaged Phil’s audit firm in November 2019, in preparation for the 2020 audit. From January
List and describe the elements in the/the process/engagement wrap-up process. Why is important?
The audit of short-term investments can be a high-risk area for auditors. A case in Australia (AWA Ltd v. Daniels t/a Deloitte Haskins & Sells & Ors (1992) 10 ACLC 933) found the auditors
Your firm of accountants is the auditor of Oxford Ltd., a reporting entity. Oxford’s consolidated financial statements incorporate the financial statements of its four subsidiaries. Three
You are performing the audit of Toledo Ltd. for the financial year ended December 31, 2020. Under the terms of a major loan contract, Toledo is required to maintain certain financial ratios. If the
Ingrid Shalansky, an audit senior, was given the task of auditing Crabapple Ltd., an investment company. Her firm had not performed the audit before; however, from a discussion with the previous
Your firm is the auditor of Zhao’s Charity for Pensioners. The charity was formed many years ago from a large gift by the Zhao family, the income from which is used to pay pensions to needy people.
Your firm is the auditor of Trojan Trading Ltd. The audited financial statements for the year ended December 31, 2020, show the company’s revenue was $5 million and the profit before tax was
Mathias Co. sells cars, car parts, and gasoline from 25 different locations in one country. Each branch has up to 20 staff working there, although most of the accounting systems are designed and
You have been asked by the financial controller, Walid Hossain, of Potter Ltd. to carry out an investigation of a suspected fraud by the company’s cashier. The cashier, Alfred Blyton, has left the
Your firm is the auditor of Thai Textiles Ltd. and you are auditing the financial statements for the year ended June 30, 2020. The company has sales of $2.5 million and a before-tax profit of
Shiny Happy Windows Co. (SHW) is a window cleaning company. Customers’ windows are cleaned monthly and the window cleaner then posts a stamped addressed envelope for payment through the
You have spent two years working as an auditor. In that time, you have come across a number of errors in performing bank reconciliations. Outlined below are some of them:1. An unreconciled item of
You are an audit senior performing the audit of Stella’s Stars Ltd., a talent agency. In performing the audit, Stella informs you of the following:1. She does not want you to send the bank a
For each of the following statements identify the audit assertion to which it relates:a. All cash transfers are recorded in the correct period.b. All investment gains are recorded in the correct
Wear Wraith (WW) Co.’s main activity is the extraction and supply of building materials including sand, gravel, cement, and similar aggregates. The company’s year end is December 31 and your firm
Your firm is the auditor of Daybrook Insurance Brokers Ltd., which operates from a number of branches and provides insurance for the general public and businesses. The company obtains insurance from
Pineapple Beach Hotel Co. (Pineapple) operates a hotel providing accommodation, leisure facilities, and restaurants. Its year end was April 30, 2020. You are the audit senior of Berry & Co. and
A copy of the auditor’s working paper for auditing additions and disposals relevant to the balance of property, plant, and equipment (PPE) for the client New Millennium Ecoproducts is presented in
Your firm is auditing the financial statements of Newthorpe Manufacturing Ltd. for the year ended June 30, 2020. You have been assigned to the audit of the company’s property, plant, and
Securimax Limited has been an audit client of KFP Partners for the past 15 years. Securimax is based in Waterloo, Ontario, where it manufactures high tech armour-plated personnel carriers. Securimax
You attended the inventory count of your client Davis Hydraulics Ltd. You observed the following during the count:1. Warehouse staff counted specific areas of the inventory as determined by the
Refer to Professional Application Question 11.4 regarding Lily Window Glass Co. Now assume that you are the audit senior of Daffodil & Co. and are responsible for the audit of inventory for Lily.
Lily Window Glass Co. (Lily) is a glass manufacturer that operates from a large production facility, where it undertakes continuous production 24 hours a day, seven days a week. Also on this site are
You are the auditor of Fenton Electronics Ltd., which has recently installed a computerized bar code system to record goods received, sales, and inventory quantities. The company is a retailer of

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