University of Utah - ACCT 555ACCT 555 WEEK 1. 100% Correct Answers.

Document Content and Description Below

ACCT 555ACCT 555 WEEK 1 Week 1 Homework 2-16 (Objective 2-6)The following questions deal with auditing standards. Choose the best response. a. International Standards on Auditing are established by ... the (1) International Accounting Standards Board. (2) International Auditing and Assurance Standards Board. (3) Auditing Standards Board. (4) Global Auditing Standards Board. b. Which of the following best describes what is meant by U.S. generally accepted auditing standards? (1) Acts to be performed by the auditor. (2) Measures of the quality of the auditor’s performance. (3) Procedures to be used to gather evidence to support financial statements. (4) Audit objectives generally determined on audit engagements. c. The general group of U.S. generally accepted auditing standards includes a requirement that (1) field work be adequately planned and supervised. (2) the auditor’s report state whether or not the financial statements conform to generally accepted accounting principles. (3) due professional care be exercised by the auditor. (4) informative disclosures in the financial statements be reasonably adequate. d. What is the general character of the three generally accepted auditing standards classified as standards of field work? (1) The competence, independence, and professional care of persons performing the audit. (2) Criteria for the content of the auditor’s report on financial statements and related footnote disclosures. (3) The criteria of audit planning and evidence gathering. (4) The need to maintain an independence in mental attitude in all matters pertaining to the audit. 2-17 (Objective 2-7)The following questions concern quality control standards. Choose the best response. a. A CPA firm is reasonably assured of meeting its responsibility to provide services that conform with professional standards by (1) adhering to generally accepted auditing standards. (2) having an appropriate system of quality control. (3) joining professional societies that enforce ethical conduct. (4) maintaining an attitude of independence in its engagements. b. The nature and extent of a CPA firm’s quality control policies and procedures depend on The CPA Firm’s Size The Nature of the CPA Firm’s Practice Cost-benefit Considerations (1) Yes Yes Yes (2) Yes Yes No (3) Yes No Yes (4) No Yes Yes c. Which of the following are elements of a CPA firm’s quality control that should be considered in establishing its quality control policies and procedures? Human Resources Monitoring Engagement Performance (1) Yes Yes No (2) Yes Yes Yes (3) No Yes Yes (4) Yes No Yes d. One purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to (1) enable the CPA firm to attest to the reliability of the client. (2) satisfy the CPA firm’s duty to the public concerning the acceptance of new clients. (3) provide reasonable assurance that the integrity of the client is considered. (4) anticipate before performing any field work whether an unqualified opinion can be issued. 2-19 (Objective 2-7)For each of the following procedures taken from the quality control manual of a CPA firm, identify the applicable element of quality control from Table 2-4 on page 38.  a. Appropriate accounting and auditing research requires adequate technical reference materials. Each firm professional has online password access through the firm’s Internet Web site to electronic reference materials on accounting, auditing, tax, SEC, and other technical information, including industry data.   b. Each office of the firm shall be visited at least annually by review persons selected by the director of accounting and auditing. Procedures to be undertaken by the reviewers are illustrated by the office review program.   c.All potential new clients are reviewed before acceptance. The review includes consultation with predecessor auditors, and background checks. All new clients are approved by the firm management committee, including assessing whether the firm has the technical competence to complete the engagement. Ans. Acceptance and continuation of clients and engagements  d.Each audit engagement must include a concurring partner review of critical audit decisions.  e.Audit engagement team members enter their electronic signatures in the firm’s engagement management software to indicate the completion of specific audit program steps. At the end of the audit engagement, the engagement management software will not allow archiving of the engagement file until all audit program steps have been electronically signed.  f.At all stages of any engagement, an effort is made to involve professional staff at appropriate levels in the accounting and auditing decisions. Various approvals of the manager or senior accountant are obtained throughout the audit.  g.No employee will have any direct or indirect financial interest, association, or relationship (for example, a close relative serving a client in a decision-making capacity) not otherwise disclosed that might be adverse to the firm’s best interest.   h.Individual partners submit the nominations of those persons whom they wish to be considered for partner. To become a partner, an individual must have exhibited a high degree of technical competence; must possess integrity, motivation, and judgment; and must have a desire to help the firm progress through the efficient dispatch of the job responsibilities to which he or she is assigned.   i. Through our continuing employee evaluation and counseling program and through the quality control review procedures as established by the firm, educational needs are reviewed and formal staff training programs modified to accommodate changing needs. At the conclusion of practice office reviews, apparent accounting and auditing deficiencies are summarized and reported to the firm’s director of personnel. Ans. Human resources  j.The firm’s mission statement indicates its commitment to quality, and this commitment is emphasized in all staff training programs. Ans. Leadership responsibilities 2-20 (Objectives 2-2, 2-3, 2-6) The Howard Mobile Home Manufacturing Company is audited by Olson and Riley, CPAs. Howard Mobile Home has decided to issue stock to the public and wants Olson and Riley to perform all the audit work necessary to satisfy the requirements for filing with the SEC. Olson and Riley has never had a client go public before. Required • a.What factors should Olson and Riley consider before accepting the engagement? • b.List additional issues confronting auditors of companies that file with the SEC as compared to dealing with a private company audit client. Ans. 3-23 (Objectives 3-1, 3-2, 3-3, 3-4, 3-8)The following questions concern unqualified audit reports. Choose the best response. a. Which of the following statements about a combined report on the financial statements and internal control over financial reporting is correct? o (1)The auditor’s opinion on internal control is for the same period of time as the opinion on the financial statements. o (2) The report includes additional paragraphs for the definition and limitations of internal control. o (3)The introductory, scope, and opinion paragraphs are unchanged from a report for an audit of the financial statements only. o (4)GAAP is the framework used to evaluate internal control. b.The date of the CPA’s opinion on the financial statements of the client should be the date of the (1) closing of the client’s books. (2) finalization of the terms of the audit engagement. (3) completion of all important audit procedures. (4) submission of the report to the client. c. If a principal auditor decides to refer in his or her report to the audit of another auditor, he or she is required to disclose the (1) name of the other auditor. (2) nature of the inquiry into the other auditor’s professional standing and extent of the review of the other auditor’s work. (3) portion of the financial statements audited by the other auditor. (4) reasons for being unwilling to assume responsibility for the other auditor’s work. 3-25(Objectives 3-5, 3-7, 3-8)The following questions concern audit reports other than unqualified audit reports with standard wording. Choose the best response. a. The annual audit of Midwestern Manufacturing revealed that sales were accidentally being recorded as revenue when the goods were ordered, instead of when they were shipped. Assuming the amount in question is material and the client is unwilling to correct the error, the CPA should issue: (1) an unqualified opinion or adverse opinion. (2) a qualified “except for” opinion or disclaimer of opinion. (3) a qualified “except for” opinion or adverse opinion. (4) an unqualified opinion with an explanatory paragraph b. Under which of the following circumstances would a disclaimer of opinion not be appropriate? (1) The auditor is unable to determine the amounts associated with an employee fraud scheme. (2) Management does not provide reasonable justification for a change in accounting principles. (3) The client refuses the auditor permission to confirm certain accounts receivable or apply alternative procedures to verify their balances. (4) The chief executive officer is unwilling to sign the management representation letter. c. The opinion paragraph of a CPA’s report states: “In our opinion, except for the effects of not capitalizing certain lease obligations, as discussed in the preceding paragraph, the financial statements present fairly,” in all material respects,… This paragraph expresses a(an) (1) Unqualified opinion. (2) Unqualified opinion with explanatory paragraph. (3) Qualified opinion. (4) Adverse opinion. 3-26 (Objectives 3-1) A careful reading of an unqualified report indicates several important phrases. Explain why each of the following phrases or clauses is used rather than the alternative provided: a. “The financial statements referred to above present fairly in all material respects the financial position” rather than “The financial statements mentioned above are correctly stated.” b. “In conformity with accounting principles generally accepted in the United States of America” rather than “are properly stated to represent the true economic conditions.” c. “In our opinion, the financial statements present fairly” rather than “The financial statements present fairly.” d. “Brown & Phillips, CPAs (firm name),” rather than “James E. Brown, CPA (individual partner’s name).” e. “We conducted our audit in accordance with auditing standards generally accepted in the United States of America” rather than “Our audit was performed to detect material misstatements in the financial statements.” [Show More]

Last updated: 2 years ago

Preview 1 out of 9 pages