Homework questions 7

1. An auditor must have adequate technical training in order to meet generally accepted auditing standards. By when does the auditor need this adequate technical training?

2. An auditor is to be independent in mental attitude. What are the two rules that established the appearance of auditor independence?

3. An auditor renders an opinion from Company X on its Year One financial statements on March 1, Year Two. However, because of financial difficulties, the audit fee from Year One is never paid. At the end of Year Two, Company X wants to hire the auditor again and promises to pay the fees for both years. The auditor is worried that there is a direct financial interest and Company X that causes an independence problem. To avoid a problem, by what time does the audit fee from Year One have to be paid?

4. To be in conformity with generally accepted auditing standards, due professional care must be exercised by the auditor. What is the standard for evaluating due professional care?

5. There are ten basic generally accepted auditing standards. These standards are divided into three categories: general standards, standards of fieldwork, and standards of reporting. There are three standards of fieldwork. What are these three?

6. How does an auditor document that an audit has been adequately planned?

7. How does an auditor document that an audit has been adequately supervised?

8. There are ten basic generally accepted auditing standards. These standards are divided into three categories: general standards, standards are fieldwork, and standards reporting. There are four reporting standards. What are these four?

9. Some of the reporting standards are explicit (must be stated) whereas some of the reporting standards are implicit (if not mentioned, the reader can assume that there is no problem). Which standards are explicit and which are implicit?

10. In applying the reporting standards, the auditor must be able to state the U.S. generally accepted accounting principles have been applied. How does the auditor know which accounting principles should apply?

11. To ensure that all audit engagements are performed appropriately, an auditing firm should have a system of quality control in place. What are the five elements of quality control?

12. What is a peer review?

13. What heading should be used for the auditors report?

14. An audit report has a date. What is the significance of that date?

15. What creates the need for a duel date audit report? What is the structure of a duel date?

16. How many paragraphs are included in a standard audit report? What are each of these paragraphs called? What is the purpose of each paragraph?

17. In the introductory paragraph of the standard unqualified audit report, the financial statements are identified. How are these statements identified?

18. In the introductory paragraph of the standard audit report, the responsibilities of both the management and the independent auditor are explained. What are those responsibilities?

19. The scope paragraph of the standard unqualified audit report can be divided into five sections. What are those five sections?