ABA Audit & Attestation Services 3

Question 1

Which component of the internal control framework addresses the entity's values, ethics, and operating style?

Accepted Answer

Control environment

Answer

The control environment sets the tone of the organization and is the foundation for all other components of internal control.

Question 2

A review engagement provides what level of assurance compared to an audit?

Accepted Answer

Limited (negative) assurance rather than reasonable (positive) assurance

Answer

A review provides limited assurance expressed as negative assurance ('nothing came to our attention'), while an audit provides reasonable positive assurance.

Question 3

Which audit procedure involves independently verifying account balances by contacting third parties directly?

Accepted Answer

Confirmation

Answer

Confirmation is the process of obtaining a direct written response from a third party, such as confirming accounts receivable balances with customers.

Question 4

What is the primary purpose of a management representation letter in an audit?

Accepted Answer

To document management's acknowledgment of its responsibility for the financial statements

Answer

A management representation letter documents that management acknowledges its responsibility for the financial statements and provides written representations to the auditor.

Question 5

Under GAAS, an auditor is required to communicate 'significant deficiencies' in internal control to:

Accepted Answer

Those charged with governance in writing

Answer

GAAS requires auditors to communicate significant deficiencies and material weaknesses to those charged with governance in writing.

(ABA) Accredited Business Accountant Practice Test

(ABA) Accredited Business Accountant Practice Test

ABA Audit & Attestation Services 3