WGU D215 – Auditing (Actual)Exam Answered 100% Correct

What is the objective of a financial statement audit? - ANSWER Provide financial statement users with an opinion by the auditor on whether the financial statements are presented fairly in accordance with an applicable fi ...

What is the objective of a financial statement audit? - ANSWER Provide financial statement users with an opinion by the auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework Who are intended users of assurance services? - ANSWER Decision makers ie Investors Creditors Regulators What does "independent" mean in the context of assurance services? - ANSWER The person performing the service is not involved with the creation of the information & is objective in the evaluation of the information. What is an example of an "applicable financial reporting framework"? - ANSWER GAAP IFRS federal income tax basis of accounting What are the most common functions of the internal auditors? - ANSWER Evaluating and improving risk management Internal control procedures Elements of the governance process What are the three elements of an operational audit? - ANSWER Economy... Efficiency... Effectiveness... ...Of an organizations activities Who are the main users of company financial statements - ANSWER Current & potential investors Suppliers Customers Lenders Employees Governments General public Why might financial statement users demand an audit? - ANSWER Remoteness of the company (don't have direct access to company records), complexity of financial statements, competing incentives among management and users, and reliability of information Explain why auditors, or CPAs, are the appropriate professionals to complete an audit. - ANSWER They have the knowledge & expertise to assess the fairness of the info being presented by the preparers. They have access to the company records. Auditors have little incentive to aid the company in presenting the results in the best possible light because their work is regularly reviewed by regulators Describe managements responsibilities in terms of the financial statement audit. - ANSWER They must ensure the information included in the financial statements is presented fairly & complies with the applicable financial reporting framework. Designing, implanting & maintaining internal control relevant to the preparation & fair presentation of the financial statements. Providing the auditors with access to all records, documentation & personnel relevant to the preparation & fair presentation of financial statements & any additional info the auditors may consider relevant to complete the audit. What is professional skepticism? - ANSWER Auditor attitude while conducting an audit that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to fraud or error & a critical assessment of audit evidence What are non-audit services? - ANSWER Not assurance services CPA does not need to be independent. Examples: Management consulting Business valuation Mergers & acquisitions Tax Accounting What is the securities act of 1933 - ANSWER Regulates the disclosure of financial info during IPO & requires the financial info be audited What is the securities exchange act of 1934? - ANSWER regulates ongoing trading of securities after the IPO & requires the annual audit of public company's financial statements What is the Sarbanes-Oxley (SOX) act of 2002? - ANSWER Passed to help restore investor confidence after a series of corporate accounting scandals in the late 1990s & early 2000s. Enhances financial disclosures for public companies and placed more emphasis on corporate responsibility. Created the Public Company Accounting Oversight Board (PCAOB). what is PCAOB and what do they do? - ANSWER Public Company Accounting Oversight Board