Auditing Standards Flashcards
7 cards from real CA 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 Standards flashcards as text
Which type of audit opinion is issued when the financial statements are presented fairly in all material respects?
Answer: Unmodified opinion
An unmodified (clean) opinion means the auditor concluded the financial statements are fairly presented in accordance with the applicable framework.
A CPA firm's independence is impaired when a partner has a:
Answer: Direct material financial interest in an audit client
A direct material financial interest in an audit client impairs independence under both AICPA and SEC independence rules.
Under the AICPA's risk-based audit approach, which component of the audit risk model represents the effectiveness of controls in preventing or detecting misstatements?
Answer: Control risk
Control risk is the risk that a material misstatement will not be prevented or detected on a timely basis by internal controls.
Which document outlines the nature, timing, and extent of planned audit procedures and serves as a guide for the audit team?
Answer: Audit program
The audit program specifies the procedures to be performed, their timing, and the extent of testing planned for each audit area.
Which of the following is an example of a substantive analytical procedure?
Answer: Comparing current-year interest expense to prior-year balances relative to outstanding debt
Substantive analytical procedures use plausible relationships (e.g., interest expense relative to debt) to develop expectations and identify potential misstatements.
Which PCAOB standard governs the auditor's responsibilities regarding related party transactions?
Answer: AS 2410
AS 2410 establishes requirements for auditing related party transactions and relationships, including identifying undisclosed relationships.
When an auditor issues a disclaimer of opinion, it means the auditor:
Answer: Was unable to obtain sufficient appropriate audit evidence to form an opinion
A disclaimer of opinion is issued when the auditor is unable to obtain sufficient appropriate evidence, such as in a severe scope limitation.