Audit Coordination & Preparation Flashcards
7 cards from real CFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Audit Coordination & Preparation flashcards as text
Which audit standard governs the auditor's use of the work of an internal audit function for external audit purposes?
Answer: AS 2605 (Using the Work of Internal Auditors)
AS 2605 provides guidance on how external auditors can use internal audit work, requiring assessment of internal audit competence and objectivity.
A financial controller notices that the external auditor's sample size for accounts payable testing seems unusually small. The MOST appropriate response is to:
Answer: Inquire whether the sample size is sufficient given the assessed risk and account balance
Controllers can professionally question audit methodology when it appears inconsistent with the risk profile, ensuring audit quality without compromising auditor independence.
What is the PURPOSE of an audit readiness assessment conducted several months before year-end?
Answer: To identify and remediate control gaps before auditors arrive, reducing audit risk and time
An audit readiness assessment proactively identifies weaknesses in controls, documentation, and processes so they can be corrected before external audit fieldwork begins.
When auditors perform a walkthrough of a business process, what are they PRIMARILY evaluating?
Answer: Whether employees are following the documented process and controls as described
Walkthroughs confirm that controls operate as described in process documentation by tracing one or more transactions through the entire process from initiation to recording.
Which of the following BEST describes the concept of tolerable misstatement in the context of audit planning?
Answer: The maximum misstatement that can exist without affecting the auditor's opinion
Tolerable misstatement is an amount set below overall materiality that allows the auditor to conclude that misstatements in an account or class will not exceed overall materiality in aggregate.
A controller is coordinating the audit of a subsidiary recently acquired mid-year. Which additional audit consideration is MOST critical?
Answer: Allocation of purchase price, opening balance sheet accuracy, and pre-acquisition period exclusion from consolidated results
Acquisitions require purchase price allocation, audit of the opening balance sheet, and ensuring pre-acquisition results are properly excluded from consolidated post-acquisition earnings.
Under COSO's Internal Control framework, which component addresses the organization's commitment to integrity and ethical values as a foundation for all other controls?
Answer: Control Environment
The Control Environment is the foundation of COSO's framework and encompasses the tone at the top, governance, ethics, and organizational structure that shape how controls operate.