Question: What type of report on internal control

> Describe the primary purpose and intended users of each of the three types of service auditor reports presented in the Professional Standards.

> Comment on the correctness of the following statement: Because all attest services are assurance services, all assurance services are also attest services.

> An auditor’s client uses the services of a payroll service provider. Which type of service auditor’s report is most likely to be helpful to that auditor: SOC 1, SOC 2, or SOC 3? Explain why.

> What types of systems are included in a SysTrust engagement.

> List the principles that may be included in the criteria for a Trust Services engagement.

> Describe the objectives of the practitioners’ examination of Management’s Discussion and Analysis.

> Identify the circumstances under which CPAs may examine Management’s Discussion and Analysis.

> Describe the two types of compliance services that may be performed under AICPA AT section 601.

> Describe the major elements of a report on the examination of a financial forecast.

> “A company would normally include a financial projection in its annual report rather than a financial forecast.” Comment on the validity of this statement.

> Is it correct to say that when using nonstatistical variables sampling, one is unable to project the misstatements identified to the entire population? Explain why this is or is not the case.

> What is XBRL? How do assurance services relate to it?

> Comment on the accuracy of the following: A client’s uncorrected material departure from the suitable criteria identified during an examination conducted under the attest standards is treated as a departure from GAAP in a financial statement audit—either

> Explain the relationship between assurance services and attestation services.

> What are the general types of procedures performed during a review of the quarterly financial statements of a company that has audits of its annual financial statement?

> Jane Wilson has prepared personal financial statements in which her assets are valued at her historical cost, less appropriate depreciation. Is this presentation in conformity with generally accepted accounting principles? Can a public accounting firm au

> A client has prepared financial statements using a financial reporting framework generally accepted in another country. The statements are intended only to be used in that country. Describe the auditor’s reporting options.

> Comment on the following: “Because of the nature of the frameworks the clients use, audits of special-purpose financial reporting frameworks result in an audit report that is restricted for use by those within the entity.”

> Provide four types of special-purpose financial reporting frameworks.

> Can auditors express an unmodified opinion on financial statements that are not presented on the basis of generally accepted accounting principles? Explain.

> In communications with clients, should CPAs refer to themselves as auditors or as accountants? Explain.

> Explain how, in using the mean-per-unit method to evaluate results, the auditors use the differences between the audited values and the book values of the individual items in their sample.

> Assume that a public accounting firm is reviewing the financial statements of a nonpublic company and discovers that the firm is not independent. What options are available to the firm?

> When a CPA has prepared a client’s financial statements how is the fact that no assurance is provided indicated?

> What should the accountants do if they discover that the financial statements they are compiling contain a material departure from generally accepted accounting principles?

> Evaluate this statement: “Auditors perform attestation services and accountants perform accounting services.”

> Can the CPAs report on a nonpublic client’s financial statements that omit substantially all disclosures required by generally accepted accounting principles? Explain.

> What procedures are required when a CPA performs a compilation of financial statements?

> What form of opinion will the auditors normally issue with respect to summary financial statements that the client has developed from the audited financial statements?

> What is the purpose of a comfort letter? Discuss.

> Are engagement letters needed for accounting and review services? Explain.

> What are the types of procedures performed during the review of the financial statements of a nonpublic company?

> What options are available to an auditor when the client’s book value falls outside the confidence (acceptance) interval calculated using the estimate of the total value of the population?

> How does a review of the financial statements of a nonpublic company differ from an audit?

> What types of services may be performed by CPAs with respect to the financial statements of nonpublic companies?

> How do CPAs of public companies assist audit committees in performing their oversight function with respect to quarterly financial statements?

> Describe a unique reporting aspect about the CPAs’ required review of the quarterly financial statements of public companies.

> Evaluate this statement: “All companies should be audited annually.”

> Describe what is meant by a “walk-through.” Must walk-throughs be performed during audits of internal control over financial reporting? May the client perform a walk-through and the auditors then review the client’s work?

> Provide examples of antifraud programs that the auditors might expect the client to have.

> What is a compensating control?

> What is meant by the “as of” date when reporting on internal control over financial reporting?

> Comment on the accuracy of the following statement: “Because both significant deficiencies and material weaknesses must be reported to the audit committee, for practical purposes, there is no distinction between the two.”

> What conditions are necessary for the auditors to use either the ratio or difference estimation techniques?

> Describe the difference between a significant deficiency and a material weakness in internal control.

> What information must be included in management’s report on internal control over financial reporting in the annual report filed with the Securities and Exchange Commission?

> Describe the requirements involved when auditors are engaged to report on whether a previously reported material weakness continues to exist.

> Which types of deficiencies must be communicated to the audit committee?

> If an adverse internal control report is issued by the auditors, may an unqualified report be issued on the financial statements?

> The auditors have completed an examination of internal control and are preparing to issue a report. Does the opinion paragraph on the client’s internal control conclude on internal control or management’s assessment of internal control?

> Provide three examples of findings by the auditors that are at least significant deficiencies and strong indicators of the existence of a material weakness in internal control.

> Distinguish between entity-level controls and controls designed to achieve specific control objectives.

> Provide an example of a situation in which the performance of tests of controls for the internal control audit might affect the performance of substantive procedures in a financial statement audit.

> The mean of the audited values in a sample is $20. The accounts in that sample have a mean book value of $21, and the entire population of 10,000 accounts has an average book value of $19. Using mean-per-unit sampling, calculate the estimated total audit

> Provide an example of a situation in which the performance of substantive procedures for the financial statement audit might affect the internal control audit.

> Identify management’s four overall responsibilities with respect to internal control over financial reporting that arise due to the Securities and Exchange Commission’s implementation of the Sarbanes-Oxley Act of 2002.

> What requirements exist when the auditors use the work of client personnel as a part of the evidence obtained for an audit of internal control? In which areas of the audit would one expect this to be most likely to occur?

> Comment on the following: “All controls should be tested either prior to or on the ‘as of’ date.”

> Comment on the following: “Inquiry alone does not provide sufficient evidence to support the operating effectiveness of a control.”

> Provide an example of a situation in which the design of controls may be effective but those controls do not operate effectively.

> Comment on the following: “Auditors must decide, based on cost considerations, whether to test the design effectiveness or operating effectiveness of controls.”

> A client operates out of 25 locations. Must the CPA perform tests related to internal control at each of these locations?

> When performing an integrated audit, auditors should identify significant accounts and disclosures. What makes an account significant? What factors should be considered in deciding whether an account is significant?

> When performing an audit of internal control over financial reporting, auditors may distinguish among the following types of transactions: routine, nonroutine, and accounting estimates. Distinguish between these three types of transactions and give an ex

> When using statistical sampling to evaluate results using mean-per-unit sampling, may one conclude at the tested risk levels that an account is not materially misstated whenever the projected misstatement is less than the tolerable misstatement?

> Auditors often perform walk-throughs in integrated audits. Describe the evidence that is typically provided by a walk-through.

> While performing a walk-through, auditors ordinarily make certain inquiries of employees. Provide three examples of such inquiries.

> Section 404 of the Sarbanes-Oxley Act of 2002 includes two sections. Describe those sections.

> Wade Corporation has been your audit client for several years. At the beginning of the current year, the company changed its method of inventory valuation from average cost to last-in, first-out (LIFO). The change, which had been under consideration for

> Explain three situations in which the wording of a report with an unmodified opinion might depart from the auditors’ standard report.

> When the current auditors make reference to the work of the component auditors, does this result in expression of a qualified opinion? Explain.

> Howard Green, a partner with Cary, Loeb, & Co., and his audit team have completed the audit of Baker Manufacturing. Determine the proper date of the audit report. ∙ December 31, 20X0: Baker’s year-end. ∙ February 15, 20X1: Green completed audit procedure

> Provide a list of the types of nonpublic company unmodified and modified audit opinions.

> Comment on whether you agree with the following and why: GAAP and GAAS represent two frequently used financial reporting frameworks.

> To which individuals and/or organizations is a public company audit report ordinarily addressed?

> Comment on the following: When using mean-per-unit sampling, increases in the tolerable misstatement result in an increased required sample size.

> Describe the reports containing audited financial statements that are customarily filed by a company subject to the reporting requirements of the SEC.

> What is the function of notes to financial statements?

> Assume that CPAs are attesting to comparative financial statements. Can the CPAs change their report on the prior year’s statements?

> Assume that CPAs are attesting to comparative financial statements. Can the CPAs express differing opinions on the sets of financial statements of two successive years?

> Comment on whether you agree with the following: In a nonpublic company audit report, the term “basis for modified opinion” paragraph is the same as the term “basis for qualified opinion” paragraph.

> Why are adverse opinions rare?

> The auditors know that the client’s accounting for deferred income taxes is not in accordance with generally accepted accounting principles, but because of a very significant scope limitation, they have not been able to determine the amount of the missta

> Describe the alterations from the standard report of a nonpublic company when a scope limitation has occurred and the auditors have issued a qualified opinion.

> Can the client change a set of financial statements to receive an unmodified opinion instead of an opinion qualified as to the adequacy of disclosure? Explain.

> What factors determine whether a misstatement is considered pervasive?

> Explain how the auditors may obtain an estimate of a population’s standard deviation to determine an appropriate sample size.

> Describe the difference between sampling risk and nonsampling risk.

> Comment on the following: “If the financial statements contain an immaterial departure from generally accepted accounting principles, the auditors issue a qualified opinion; if the financial statements contain a material departure from GAAP, the auditors

> What are the two circumstances that result in modified opinions?

> Comment on whether you agree with the following, and why: An audit report on comparative financial statements ordinarily compares current-year financial statements of two or mor companies with one another.

> What division of duties among independent departments is desirable to achieve maximum internal control over payroll?

> Describe how the auditors use analytical procedures in the examination of selling, general, and administrative expenses.

> What auditing procedure can you suggest for determining the reasonableness of selling, general, and administrative expenses?

> When you are first retained to audit the financial statements of Wabash Company, you inquire whether a budget is used to control costs and expenses. The controller, James Lowe, replies that he personally prepares such a budget each year but that he regar

> For which expense accounts should the auditors obtain or prepare analyses to be used in preparation of the client’s income tax returns?

> Identify three expense accounts that are verified during the audit of balance sheet accounts; also, identify the related balance sheet accounts.

> Identify three items often misclassified as miscellaneous revenue.

> In performing a substantive test of the book value of a population, auditors must be concerned with two aspects of sampling risk. What are these two aspects of sampling risk, and which aspect is of greater importance to auditors? Explain.

> Does incorrect required supplemental information included with audited financial statements result in a qualified or adverse audit opinion? Explain.