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CPA. Aud EXAM WITH QUESTIONS AND ANSWERS 100% VERIFIED
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CPA. Aud EXAM WITH QUESTIONS AND ANSWERS100% VERIFIED
- Transaction tagging: The program electronically tags certain translations.
- Embedded audit modules: Parts of programs which collect date for the auditor
- Test data: The use of the client's system to process the auditor's data, off-line
- Integrated test facility: Use of the client's system to process the auditor's data, on-line.
- Parallel simulation - use of the auditor's system to process client data. - ANSWER 4-35
List and briefly define the types of computer assisted audit techniques (CAATs) that may
be used.
Debt/ Equity= Total liabilities/ Common stockholders' equity
Debt ratio = Total liabilities/ Total assets
Times interest earned = Recurring income before taxes and interest/ Interest - ANSWER
4-45 How are the debt/equity ratio, the debt ratio, and times interested earned
calculated?
-COMPLETENESS
-cut-OFF
-VALUATION, allocation, and accuracy
EXISTENCE and occurrence
RIGHTS and obligations
UNDERSTAND ability and classifications - ANSWER 3-7 Name the six major financial
statement assertions.
(COVERU)
,Purchasing department: prepares the purchase order
Receiving department: prepares the receiving report
Accounts payable department: records the payable and approves the invoice
Treasurer's department: signs and mails the check - ANSWER 4-15 Which of the
following departments would prepare the purchase order, prepare the receiving report,
record the payable, approve the invoice, sing the check and mail the check?
- The auditor's conclusion that risk of material misstatement is high would have to be
countered by a higher level assurance from substantive procedures. "Higher level of
assurance from substantive procedures" can be obtained by changing the nature,
extent, or timing of those procedures.
- The auditor's termination that the risk of material misstatement is low allows a
reduction in the assurance required from substantive procedures. This too may be
accomplished by varying the nature, extent or timing of such procedures. - ANSWER
3-54 How does the auditor's assessment of the risk of material misstatement affect
substantive procedures?
INDEPEND
We have audited the accompanying balance sheet of X Company as at December 31,
Year 1, and the related statements of income, retained earnings, and cash flows for the
year then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements
based on our audit.
We have examined the Corporation's financial statements in conformity with auditing
standards generally accepted in the United States of America. These standards require
that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the overall presentation of the financial
statements. We believe - ANSWER 1-10 What is the content and format of the standard
auditor's report? "(Write it until you can see it!)- SUBSTANTIVE APPROACH - only
substantive tests are used, either because there are no effective controls, or because it
would not be efficient to test the operating effectiveness of controls.
- COMBINED APPROACH - tests of the the operating effectiveness of control and tests of
,substantive procedures are both used. - ANSWER 3-52 The two approaches an auditor
may use to respond to identified risks at the relevant assertion level are as follows:
A SIGNIFICANT RISK is one that requires special audit consideration. The following
factors may be indicative of a significant risk:
Non-routine, unusual, or complex transactions.
Business risks that could result in material misstatement.
Fraud risk.
Related party transactions that are material.
Accounting estimates or other subjective measures of financial information.
Accounting principles that have varying interpretations. - ANSWER 3-50 What is a
significant risk?
(continued from prior slide)
A statement identifying that the engagement was conducted according to AICPA
attestation standards.
A list of procedures performed and associated findings.
A statement that the practitioner did not conduct an examination, a disclaimer of
opinion, and a statement that if additional procedures had been performed other
matters might have been reported.
A statement of restrictions on the use of the report.
Where applicable, reservations or restrictions concerning procedures of findings. -
ANSWER 2-25 List some of the key elements in a report on an engagement to apply
agreed-upon procedures.
The monitoring process may include:
- Management and supervisory activities
- Separate internal control evaluations
- The internal audit function
- Evaluation of communications from external parties - ANSWER 3-42 What activities
may be considered part of the monitoring component of internal control?
, EPS = Net income - Preferred dividends/ Weighted average number of common shares
outstanding
P/E ratio = Market price per share/ Diluted earnings per share - ANSWER 4-44 What is
the formula for EPS and P/E ratio?
The following represent factors that may impact the "auditability" of a client:
-The sufficiency and availability of records on account
-Management's attitude concerning internal control environment - ANSWER 3-4 What
factors may impact the "auditability" of a client?
Training
Independence
Professional Care
Planning and supervision
Internal control, Entity, and Environment
Evidence
Accounting = GAAP
Consistency
Disclosure
Opinion expressed - ANSWER Generally Accepted Auditing Standards
TIP PIE ACDO
A financial forecast is the statement of prospective financial position and results of
operations, based on responsibility party best judgment as to future events, conditions,
and courses of action based on circumstances and courses of action existing at the date
of the forecast. A forecast is suitable for general or limited use.
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