A secondary result of the auditor's understanding of internal control for a nonissuer is that the understanding may
A. Provide a basis for determining the nature, timing, and extent of audit tests
B. Assure that management's procedures to detect fraud are
C. Bring to the auditor's attention possible control conditions required to be communicated to the client
Which of the following issues related to internal control over financial reporting are required to be communicated in writing to management and those charged with governance?
I. Deficiencies in internal control
II. Significant deficiencies
III. Material w
B. II and III only
Which of the following best describes the responsibility of an auditor of a private entity with respect to significant deficiencies and material weaknesses under AU-C 265, Communication of Internal Control Related Matters Identified in an Audit?
A. The au
C. The communication by the auditor must be in writing
When communicating significant deficiencies in internal control noted in financial statement audit of a nonissuer, the communication should indicate that
A. Fraud or errors may occur and not be detected because of the inherent limitations of internal cont
D. The purpose of the audit was to report on the financial statements, not to provide assurance on internal control
Which of the following statements about an auditor's communication of internal control related matters identified in an audit of a nonissuer is true?
A. The auditor may issue a written report to management and those charged with governance that no signifi
D. The auditor should communicate significant internal control related matters no later than 60 days after the report release date
Under the AICPA's auditing standards, which of the following statements about an auditor's communication of significant control deficiencies is true?
A. A significant control deficiency previously communicated during the prior year's audit that remains un
C. An auditor's report on significant control deficiencies should include a restriction on the use of the report
Which of the following representations should not be included in a written report on internal control related matters identified in an audit under the AICPA's auditing standards?
A. Significant deficiencies related to the design of internal control exist,
B. There are no significant deficiencies or material weaknesses in the design or operation of internal control
A CPA had previously communicated a significant control deficiency in connection with an audit of prior financial statements of a nonissuer. As of the current audit date, the deficiency has not been corrected. What communication should be made by the CPA?
D. The condition should be reported
Which of the following matters is an auditor required to communicate to those in the entity charged with governance?
I. Disagreements with management about matters significant to the entity's financial statements that have been satisfactorily resolved
II.
C. Both I and II
Which of the following matters will an auditor most likely communicate to those charged with governance?
A. A list of negative trends that may lead to working capital deficiencies and adverse financial ratios
B. The level of responsibility assumed by mana
D. The effects of significant accounting policies adopted by management in emerging areas for which no authoritative guidance exists
Which of the following matters should an auditor communicate to those charged with governance?
A. The basis for assessing the risks of material misstatement when the auditor intends to rely on controls
B. The process used by management in formulating sens
B. The process used by management in formulating sensitive accounting estimates
Which of the following disagreements between the auditor and management do not have to be communicated by the auditor to those charged with governance?
A. Disagreements regarding management's judgement about accounting estimates for goodwill
B. Disagreeme
D. Disagreements of the amount of the LIFO inventory layer based on preliminary information
An auditor should communicate misstatements to those charged with governance
A. If they were not recorded before the end of the auditor's field work
B. If they are uncorrected
C. If they are immaterial and corrected but frequently recurring
D. Even if the
B. If they are uncorrected
In an audit engagement, should an auditor communicate the following matters to those charged with governance?
Auditor's Judgments About the Quality of the Client's Accounting Principles / Issues Discussed with Management Prior to the Auditor's Retention
A
A. Yes / Yes
An auditor is most likely to communicate to those charged with governance that
A. The turnover in the accounting department was unusually high
B. The auditor encountered significant difficulties during the audit
C. The auditor discovered subsequent events
B. The auditor encountered significant difficulties during the audit
Firms subject to the reporting requirements of the Securities Exchange Act 1934 are required by the Foreign Corrupt Practices Act of 1977 to maintain satisfactory internal control. Moreover, the Sarbanes-Oxley Act of 2002 requires that annual reports incl
D. Determine whether management's report is complete and properly presented
The Sarbanes-Oxley Act of 2002 requires management to include a report on internal control in the firm's annual report. It also requires auditors to evaluate management's internal control report. Which of the following statements concerning these requirem
A. The auditors should provide recommendations for improving internal control in their assessment
Which of the following best describes a CPA's engagement to report on an entity's internal control over financial reporting?
A. An attest engagement that results in issuance of an examination report relating to the effectiveness of internal control
B. An
A. An attest engagement that results in issuance of an examination report relating to the effectiveness of internal control
A CPA's understanding of internal control in a financial statement audit of a nonissuer
A. Is usually more limited than that made in an examination of internal control integrated with an audit of financial statements
B. Is usually more extensive than that
A. Is usually more limited than that made in an examination of internal control integrated with an audit of financial statements
Snow, CPA, was engaged by Master Co., a nonissuer, to examine the effectiveness of Master's internal control over financial reporting as part of an integrated audit. Snow's report should state that
A. Because of inherent limitations, internal control may
A. Because of inherent limitations, internal control may not prevent, or detect and correct, misstatements
An issuer subject to the Securities Exchange Act of 1934 is required to include in its annual report an auditor's opinion on whether internal control over financial reporting was
A. Sufficient to meet the needs of the shareholders
B. Properly designed and
B. Properly designed and operated effectively
The Sarbanes- Oxely Act 2002 (SOX) requires management of issuers to do all of the following except
A. Establish and document internal control procedures and to include in their annual reports a report on the company's internal control over financial repo
D. Provide a statement that the board approves changes in internal control procedures
A practitioner may accept an engagement to examine the effectiveness of a nonissuer's internal control over financial reporting in effect
As of a Specified Date/ During a Specified Period of Time
A. Yes / Yes
B. Yes / No
C. No / Yes
D. No / No
A. Yes / Yes
An auditor reports on an examination of the effectiveness of an entity's internal control over financial reporting. If the control criteria used are established by a regulatory agency, the report should
A. State that the practitioner assumes responsibilit
C. Contain a statement of restriction on use if the criteria have not been subjected to due process procedures and are appropriate only for a limited number of users
Cain Company's management engaged Bell, CPA, to examine the effectiveness of Cain's internal control over financial reporting. Bell's report, which was accompanied by management's separate report presenting its written assertion about the effectiveness of
A. Disclaim an opinion as to management's cost-benefit statement
Management of an issuer subject to SEC requirements requests the auditor to report on whether a previously reported material weakness in internal control continues to exist. The request comes 3 months after the annual audited financial statements and repo
C. The auditor may accept the engagement if management provides a statement that the identified material weakness no longer exists
A practitioner has been engaged to examine the effectiveness of a nonissuer's internal control. The practitioner has obtained from the responsible party a written assertion about the effectiveness of internal control. The assertion is contained in a separ
D. The practitioner does not need to place any restrictions on the use of this report
Issuers are required by the PCAOB to obtain an auditor's report attesting to the effectiveness of internal control over financial reporting (AS No. 5). Likewise, nonissuers may retain an auditor to issue a report on internal control in accordance with the
D. Both the AICPA standards and the PCAOB standards require management to provide a written assessment or assertion concerning the effectiveness of controls
During the audit of internal controls integrated with the audit of the financial statements, the auditor discovered a material weakness in internal control. The auditor most likely will express a(n)
A. Adverse opinion on internal control
B. Qualified opin
A. Adverse opinion on internal control
Which of the following is a true statement concerning the attest engagement to examine an entity's internal control over financial reporting?
A. The practitioner relies on management's assertion about the effectiveness of internal control
B. The responsib
B. The responsible party evaluates the effectiveness of internal control
King Corp. has received a local government grant and asked you, as a CPA, to examine the effectiveness of internal control that is required by the terms of the grant. The governmental agency responsible for the grant has prepared written criteria for such
A. Include the weakness in the report even though it is not covered by the agency's criteria
For a nonissuer, how do the scope, procedures, and purpose of an engagement to examine the effectiveness of an entity's internal control compare with those for the consideration of internal control in a financial statement audit?
Scope / Procedures / Purp
D. Different / Similar / Different
AU-C 402, Audit Consideration Relating to an Entity Using a Service Organization, applies to a financial statement audit of an entity that uses services of another organization as part of its information system. For this purpose, the user auditor may need
B. It should include an opinion
A service organization processes payroll data having a material effect on the financial statements of an audit client. The client has established certain internal controls over input and output data. If the user auditor intends to rely on the operating ef
D. If certain relevant controls exist only at the service organization and a service auditor issues a report only on the design of the controls, the user auditor may use the report as a basis for reliance on the controls
The activities of the user entity and the service organization have a high degree of interaction. The user auditor
A. Is not required to evaluate the service organizations controls
B. Should obtain absolute assurance that the service organization's intern
D. Need not test the service organization's internal control if the user entity has effective controls related to service organiztion processing
Green, CPA, is auditing the financial statements of Ajax Co. Ajax uses the DP Service Center to process its payroll. DP's financial statements are audited by Blue, CPA, who recently issued a report on DP's policies and procedures regarding the processing
A. Make inquiries about Blue's professional reputation
Payroll Data Co. (PDC) processes payroll transactions for a retailer. Cook, CPA, is engaged to issue a report on PDC's internal controls implemented as of a specific date. These controls are relevant to the retailer's internal control, so Cook's report ma
A. Contain a disclaimer of opinion on the operating effectiveness of PDC's controls