Auditing & Assurance Flashcards
7 cards from real CGA 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 & Assurance flashcards as text
Which of the following represents a condition that most likely indicates a heightened risk of management override of internal controls?
Answer: Management is under significant pressure to meet earnings targets
Pressure to meet earnings targets is a fraud risk factor under the fraud triangle, suggesting management may be motivated to override controls.
In attribute sampling used to test controls, what does the 'upper deviation rate' represent?
Answer: The maximum deviation rate in the population at a given confidence level
The upper deviation rate is the highest population deviation rate the auditor can conclude exists at a specified confidence level, based on sample results.
Which of the following would typically be included in the 'management representations letter' obtained at the end of an audit?
Answer: Management's confirmation that all known frauds have been disclosed to the auditor
The management representation letter includes management's written confirmation of disclosures made, including all known fraud involving management or employees.
An auditor performing a compilation engagement is required to:
Answer: Obtain an understanding of the industry and the entity's operations
Even in a compilation, the accountant must understand the industry and the client's business to identify whether the financial statements appear appropriate.
Which of the following is the best description of a 'material weakness' in internal control over financial reporting?
Answer: A significant deficiency that individually or in combination is likely to prevent detection of a material misstatement
A material weakness is a deficiency or combination of deficiencies in ICFR such that there is a reasonable possibility of a material misstatement not being prevented or detected.
Under the concept of auditor independence, which situation would most likely impair the independence of a public company auditor under SEC rules?
Answer: The audit firm provides bookkeeping services to the audit client
Providing bookkeeping services to a public company audit client violates SEC/PCAOB independence rules because it creates a self-review threat.
Which of the following best describes the purpose of a 'dual-purpose test' in auditing?
Answer: Performing a test that serves as both a test of controls and a substantive test of transactions
A dual-purpose test is designed to simultaneously evaluate the operating effectiveness of a control and provide substantive evidence about a transaction-level assertion.