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auditing assurance services

Questions and Answers of Auditing Assurance Services

Fellowes and Associates Chartered Professional Accountants is a successful national accounting firm with a large range of clients across Canada. In 2020, Fellowes and Associates gained a new client,
Bravo Bags is a luggage retailer that operates out of a shopping mall. As required by the landlord, Bravo Bags has hired Brad Pope, CPA, to provide a report to the landlord as to whether Bravo Bags
Do an Internet search to find the SOC 3 report for Google’s Cloud Platform System for the latest period available. Required: a. Read the report. Identify the accounting firm that
The AICPA has developed assurance services related to electronic commerce called Trust Services. Do an online search for Trust Services on the AICPA website (www. aicpa.org). Required: a. Find
This question consists of 13 items pertaining to possible deficiencies in an accountant’s review report. Indicate whether each statement about a possible deficiency is correct (C) or incorrect (I)
The following report was drafted on October 25, 2018, by Major, CPA, at the completion of an engagement to compile the financial statements of Ajax Company for the fiscal year ended September 30,
Under which conditions would an online dating company be more likely to opt for a SOC 3 report over a SOC 2 report? a. The company wishes the report to be distributed only to a restricted set of
Which of the following is true of a SOC 2 engagement? a. The report resulting from a SOC 2 engagement can be made available for general use. b. A SOC 2 engagement is based on criteria from
Why might a company that does a lot of business online choose to obtain a SOC 2 report? Why might such a company choose to obtain a SOC 3 report?
What elements does a Trust Services engagement focus on and why might an e-commerce company consider purchasing such a service?
List 3 important risks associated with electronic commerce. What are the Trust Services Criteria and how do they relate to the risks you identified?
The AICPA Special Committee on Assurance Services developed six potential assurance services that could be offered by CPA firms. What are these six services?
Explain how internal auditors can play a vital role in helping management comply with the requirements of the Sarbanes-Oxley Act.
Why might a non-public company choose to engage an independent auditor to provide an audit of internal control over financial reporting?
Define an attest engagement. Discuss how attestation engagements are different from assurance services.
Dart Corporation engaged Jay Associates, CPAs, to assist in a public stock offering. Jay audited Dart’s financial statements and gave an unqualified opinion, despite knowing that the financial
What elements must a plaintiff prove in order to win action under Rule 10b-5 of the Securities Exchange Act of 1934? What was the significance of the outcome of the Ernst & Ernst v. Hochfelder
For each of the following scenarios, indicate whether or not independence-related SEC rules are being violated, assuming that the audit entity is a public company. Briefly explain why or why
An audited company has not paid its 2018 audit fees. According to the AICPA Code of Professional Conduct, for the auditor to be considered independent with respect to the 2019 audit, the 2018 audit
What are the eleven major sections of the Rules of Conduct in Part 1 of the Code of Professional Conduct?
Describe the six Principles of Professional Conduct, and indicate which CPAs are responsible for observing these six professional ideals.
Including the preface, what are the four major “Parts” of the AICPA Code of Professional Conduct? To what group of CPAs is each Part of the Code applicable?
You are auditing the financial statements for your new client, Paper Packaging Corporation, a manufacturer of paper containers, for the year ended March 31, 2019. Paper Packaging is a public
The following auditor’s report was drafted by a staff accountant of Nathan and Matthew, CPAs, at the completion of the audit of the comparative financial statements of Monterey for the years ended
For the year ended December 31, 2017, Friday & Co., CPAs (“Friday”), audited the 18-4, 18-6 financial statements of Kim Company and expressed an unqualified opinion on the balance sheet
On March 12, 2019, Kristen & Valentine, CPAs, completed the audit of the financial statements of Modern Museum, Inc., for the year ended December 31, 2018. Modern is a privately held company.
Devon, Inc., engaged Rao to examine its financial statements for the year ended 18-4, 18-6 December 31, 2018. The financial statements of Devon, Inc., for the year ended December 31, 2017, were
In 2017, your firm issued an unmodified report on Tosi Corporation, a private company. During 2018, Tosi entered its first lease transaction, which you have determined is material but not pervasive.
Medical Products, Inc. (MPI) was created in 2016 and entered the optical equipment industry. Its made-to-order optical equipment requires large investments in research and development. To fund these
In February 2019, Ceramic Crucibles of America was notified by the state of 17-3 Colorado that the state was investigating the company’s Durango facility to determine if there were any violations
For each of the following items, assume that Josh Feldstein, CPA, is expressing an opinion on Scornick Company’s financial statements for the year ended December 31, 2018; that he completed
Namiki, CPA, is auditing the financial statements of Taylor Corporation for the year ended December 31, 2018. Namiki plans to complete the fieldwork and sign the auditor’s report about March 10,
Cole & Cole, CPAs, are auditing the financial statements of Consolidated Industries Company for the year ended December 31, 2018. On April 2, 2019, an inquiry letter to J. J. Young,
Which of the following matters should an auditor communicate to those charged with governance? Significant Audit Adjustments Management's Consultations with Other Accountants Yes No a. b. Yes
Which of the following audit procedures is most likely to assist an auditor in identifying conditions and events that may indicate substantial doubt about an entity’s ability to continue as a going
List the four overall steps in the auditor’s going concern evaluation process.
The FASB’s revised standard on leases, ASC 842, was effective for public companies beginning 2018. One significant implication of this standard is that operating leases that were previously kept
Maslovskaya, CPA, has been engaged to examine the financial statements of Broadwall Corporation for the year ended December 31, 2018. During the year, Broadwall obtained a long-term loan from a
On January 15, 2018, Leno, Inc., which has a March 31 year-end, entered into a transaction to sell the land and building that contained its manufacturing operations for a total selling price of
What procedures would an auditor use to verify the completeness, rights and obligations, and accuracy and valuation assertions for property, plant, and equipment?
Search the SEC’s website (www.sec.gov) or elsewhere on the Internet to identify a company that has been recently cited by the SEC for financial reporting problems related to inventory. Prepare a
Kachelmeier, CPA, is auditing the financial statements of Big Z Wholesaling, Inc., a continuing audit client, for the year ended January 31, 2018. On January 5, 2018, Kachelmeier observed the
List the three major steps in setting control risk in the inventory management process.
What duties are performed within the inventory management, raw material stores, and cost-accounting functions?
Discuss how an auditor would substantively audit the accrued payroll taxes account.
What is an example of a test of control or substantive test of transactions that can be performed using CAATs or audit data analytics for payroll transactions?
You are engaged to perform an audit of the Giordani Corporation for the year ended December 31, 2018. You have decided to perform the following cutoff test for payables and accruals. Select all items
In 2018, Kida Company purchased more than $10 million worth of office equipment 11-6, 11-9 under its “special” ordering system, with individual orders ranging from $5,000 to $30,000.
The revenue recognition accounting standard (ASC 606) specifies for a customer to have obtained control of a product in a bill-and-hold arrangement, all of the following criteria must be
You are engaged to audit the Ferrick Corporation for the year ended December 31, 2018. Only merchandise shipped by the Ferrick Corporation to customers up to and including December 30, 2018, has been
The “Accounts Receivable—Confirmation Statistics” working paper shown on the next page was prepared by an audit assistant for the 2018 audit of Lewis County Water Company, Inc., a continuing
The Art Appreciation Society operates a museum for the benefit and enjoyment of 10-6, 10-9 the community. During the hours the museum is open to the public, two clerks who are positioned at the
For each of the following situations, indicate the audit evidence that should be obtained to determine whether revenue should be recognized or not in the current period. Use the five-step approach
Describe the five-step process that is required for revenue recognition.
The firm of Le and Lysius was conducting the audit of Coomes Molding Corporation for the fiscal year ended October 31. Michelle Le, the partner in charge of the audit, decides that MUS is the
Determine the sample size for each of the control procedures shown in the following table (assuming a very large population): Control Procedure 3 Parameters 2 Risk of incorrect acceptance
As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses control risk lower than appropriate. The most likely explanation for this situation is that a.
Search the Internet (e.g., an entity’s website or sec.gov), and find an audit report for an entity’s audit of internal control over financial reporting. Determine whether the entity used the
Brown, CPA, is auditing the financial statements of Big Z Wholesaling, Inc., a continuing audit client, for the year ended January 31, 2018. On January 5, 2018, Brown observed the tagging and
Auditors use various audit techniques to gather evidence when an entity’s accounting information is processed using IT. Select the audit procedure from the following list and enter it in the
AS 2201 indicates that certain circumstances are indicators of a material weakness. What are these circumstances, and why do you think the PCAOB assessed them as being of such importance?
A walkthrough involves tracing a transaction through the information system. What types of evidence can an auditor obtain by performing a walkthrough?
The first element in management’s process for assessing the effectiveness of internal control is determining which controls should be tested. Describe the process management might use to identify
Ken Smith, the partner in charge of the audit of Houghton Enterprises, identified the following significant deficiencies during the audit of December 31, 2018, financial statements: 1. Controls
Cook, CPA, has been engaged to audit the financial statements of General Department Stores, Inc., a continuing audit entity, which is a chain of medium-sized retail stores. General’s fiscal year
The auditors for Weston University are conducting their audit for the fiscal year ended December 31, 2018. Specifically, the audit firm is now focusing on the audit of revenue from this season’s
Arthur, CPA, is auditing The Home Improvement Store as of December 31, 2018. As with all audit engagements, Arthur’s initial procedures are to analyze the entity’s financial data by reviewing
The current file of the auditor’s working papers should generally include a. A flowchart of the accounting system. b. Organization charts. c. A copy of the financial
Which of the following presumptions is least likely to relate to the reliability of audit evidence? a. The more effective internal control, the more assurance it provides about the accounting
List and define the assertions about account balances, and related disclosures, at the period end.
List and define the assertions about classes of transactions and events, and related disclosures, for the period under audit.
Which of the following concepts are pervasive in the application of auditing standards? a. Internal control. b. Expected misstatement. c. Control risk.d. Materiality and audit risk.
Distinguish between sampling risk (i.e., possibility that the sample drawn is not representative of the population) and professional judgment errors (nonsampling) risk.
Section 301 of the Sarbanes-Oxley Act requires that public companies have an audit committee. Independent auditors are increasingly involved with audit committees. Required: a. Describe
The audit committee of the board of directors of Rebel Corporation asked Tish & Field, CPAs, to audit Rebel’s financial statements for the year ended December 31, 2018. Tish & Field
Which of the following would an auditor most likely use in determining overall materiality when planning the audit? a. The anticipated sample size of the planned substantive tests. b. The
Tolerable misstatement is a. The amount of misstatement that management is willing to tolerate in the financial statements. b. Materiality for the balance sheet as a whole. c.
The engagement partner and manager review the work of engagement team members to evaluate which of the following? a. The work was performed and documented. b. The objectives of the
When planning an audit, an auditor should a. Consider whether the extent of substantive procedures may be reduced based on the results of tests of controls. b. Determine overall materiality
If the independent auditors decide that it is efficient to consider how the work performed by the internal auditors may affect the nature, timing, and extent of audit procedures, they should assess
List four factors that would cause the auditor to use a lower percentage for establishing tolerable misstatement.
Give three examples of qualitative factors that might affect the auditor’s choice of the percentage to apply to the benchmark used to establish overall materiality.
Which of the following is correct regarding the types of audits over which the ASB and the PCAOB, respectively, have standard-setting authority in the United States? PCAOB ASB Nonpublic company
Discuss why auditing standards are important for evaluating whether an auditor has done an adequate audit, especially when the auditor fails to detect a material misstatement in the financial
Why might understanding the characteristics of an entity’s business model be important for a financial statement auditor?
List the various types of auditors and describe their respective roles in a sentence or two each.
The auditing standards that are used to guide the conduct of the audit are a. Implicitly referred to in the critical audit matters section of the auditor’s standard report. b. Explicitly
Discuss why the emergence of advanced audit technologies, such as audit data analytics, is placing an even greater premium on auditors’ knowledge of fundamental business, accounting, and auditing
Identify the three sections of the auditor’s standard unqualified report for a public company client.

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