Auditing and Attestation Flashcards
7 cards from real AICPA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Auditing and Attestation flashcards as text
Which of the following best describes the purpose of a Type 2 SOC 1 report?
Answer: Describes controls at a service organization and tests their operating effectiveness over a period
A SOC 1 Type 2 report covers controls relevant to user entities' internal control over financial reporting and includes testing of operating effectiveness over a specified review period.
Under ISA (International Standards on Auditing), which standard governs the auditor's responsibilities relating to fraud?
Answer: ISA 240
ISA 240 addresses the auditor's responsibilities relating to fraud in an audit of financial statements, requiring fraud risk assessments and appropriate responses.
Which factor would increase the acceptable level of detection risk for a particular audit assertion?
Answer: Lower control risk because controls are operating effectively
When control risk is low (controls are strong), the auditor needs less substantive evidence, so acceptable detection risk can be set higher.
What is the auditor's primary responsibility regarding illegal acts by a client that have a direct effect on financial statement amounts?
Answer: Obtain sufficient audit evidence about whether the illegal act occurred and evaluate its financial statement effect
For illegal acts with a direct effect on financial statements, auditors must gather evidence about the act and assess the financial statement impact, similar to other material misstatements.
When planning the extent of audit procedures, the concept of 'tolerable misstatement' is best described as:
Answer: The portion of overall materiality allocated to a specific account balance or class of transactions
Tolerable misstatement is the maximum error an auditor will accept in an account and is set at or below the overall materiality level to provide a margin for undetected errors.
Under AICPA attestation standards, an agreed-upon procedures engagement differs from a review or examination primarily because:
Answer: The practitioner issues findings without expressing an opinion or conclusion
In an agreed-upon procedures engagement, the practitioner simply reports factual findings based on specified procedures; no opinion or conclusion is expressed, and users draw their own conclusions.
Which of the following is most indicative of a fraudulent financial reporting scheme rather than misappropriation of assets?
Answer: Revenue recognition accelerated to meet quarterly earnings targets
Fraudulent financial reporting typically involves manipulating revenue, expenses, or valuations to deceive financial statement users, such as premature revenue recognition.