CFC Audit Coordination & Preparation 2

Question 1

Which document serves as the primary communication tool between external auditors and management to outline audit scope, timing, and resource requirements?

Accepted Answer

Engagement letter

Answer

The engagement letter formally establishes the audit scope, timing, fees, and responsibilities of both parties before fieldwork begins.

Question 2

A financial controller discovers a material weakness in internal controls just before an external audit. What is the MOST appropriate immediate action?

Accepted Answer

Disclose the weakness to auditors and implement compensating controls

Answer

Prompt disclosure to auditors with compensating controls demonstrates good faith and allows auditors to adjust their procedures accordingly.

Question 3

When preparing for an audit, which principle should guide the organization of the Prepared by Client (PBC) list?

Accepted Answer

Prioritize documents by audit risk and materiality to expedite fieldwork

Answer

Organizing PBC documents by audit risk and materiality helps auditors focus on high-priority areas first and reduces the overall audit timeline.

Question 4

Under PCAOB standards, which party is responsible for assessing the risk of material misstatement due to fraud?

Accepted Answer

Both management and external auditors independently

Answer

PCAOB AS 2401 requires auditors to assess fraud risk, while management under SOX Section 302/404 must also evaluate and disclose fraud risks in their certifications.

Question 5

A controller is coordinating a year-end audit while month-end close is still in progress. What is the BEST scheduling approach?

Accepted Answer

Allow auditors to begin testing completed transaction cycles while close continues

Answer

Auditors can efficiently test completed transaction cycles such as revenue and payroll while financial close activities continue on other areas.

(CFC) Certified Financial Controller Practice Test

(CFC) Certified Financial Controller Practice Test

CFC Audit Coordination & Preparation 2