Auditing Principles & Procedures Flashcards
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Read the first 7 Auditing Principles & Procedures flashcards as text
Which type of audit opinion is issued when the auditor concludes that the financial statements are fairly presented but includes an explanatory paragraph highlighting a significant uncertainty?
Answer: Unmodified opinion with emphasis-of-matter paragraph
An unmodified (clean) opinion with an emphasis-of-matter paragraph is used when statements are fairly presented but the auditor wants to draw attention to a significant matter such as a going concern uncertainty.
When an auditor uses the work of a component auditor in a group audit, what is the primary responsibility of the group auditor?
Answer: The group auditor bears sole responsibility for the group audit opinion
The group engagement partner is responsible for the direction, supervision, and performance of the group audit engagement and for the auditor's report on the group financial statements.
The concept of 'professional skepticism' in auditing requires the auditor to:
Answer: Maintain a questioning mind and critically assess audit evidence
Professional skepticism means the auditor maintains an alert, questioning attitude and critically evaluates audit evidence rather than defaulting to trust or distrust.
Which procedure would an auditor most likely perform to test the completeness assertion for accounts payable?
Answer: Review subsequent cash disbursements after year-end
Reviewing subsequent disbursements helps identify payments made after year-end for goods or services received before year-end that may not have been recorded, addressing completeness.
An auditor discovers that the client's bookkeeper both writes checks and reconciles the bank account. This situation represents a deficiency in:
Answer: Segregation of duties
Segregation of duties requires that custody, recording, and authorization functions be performed by different individuals; combining check-writing and bank reconciliation in one person eliminates a key control.
Which of the following best describes a 'walkthrough' in the context of internal control evaluation?
Answer: Tracing a transaction from origination through the accounting records to financial reporting
A walkthrough involves following one or more transactions through each step of the process to confirm the auditor's understanding of the system and whether controls are designed as documented.
Under which circumstance would an auditor issue a disclaimer of opinion?
Answer: Management imposes a significant scope limitation
A disclaimer of opinion is issued when the auditor is unable to obtain sufficient appropriate audit evidence due to a scope limitation so significant that no opinion can be expressed.