AFM201 Chapter 1: Audit Chapter 1 A Summary of Introduction to Audit

50 views2 pages

salmonmarten447

16 Oct 2011

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM201

Professor

Alan Mc Naughton

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Audit societies extensive monitoring of economic activities to help assure that capital markets are efficient. Auditing: the verification of information by someone other than the one preparing the information. Risk associated with financial statements information risk. Third party auditor independent verification of the information provided by second party three party accountability. Accountability relationships management is accountable to the users, users do not trust management sufficiently to rely on financial statements: users, management, auditor. Conflict of interest demand for audit services. Auditor lend credibility, providing assurance, and assurance engagement. Auditee actual designation of the company whose financial statements are being audited. Auditing systematic process of objectively obtaining and evaluating evidence regarding. External auditor assertions about economic actions etc, communicating results to users. Objective of audit express an opinion whether the financial statements present fairly in all material respects, the financial position, results of operation and cash flows in accordance with.

Related Questions

An auditor report by independent accountants:

A. ensures that the financial statements are error-free.

B. gives investors assurance that the company's stock is a safe investment.

C. gives investors assurance that the companys financial statements conform to GAAP.

D. is ultimately the responsibility of the management of the client company.

byzantiumraccoon702

1â33. Match the following defi nitions (or partial defi nitions) of the various types of services to the
appropriate service. Each service may be used once or not at all.
LO 1-1, 2, 6
Defi nition (or Partial Defi nition) Service
a. An attest engagement in which the CPAs agree to perform
procedures for a specifi ed party and issue a report that is
restricted to use by that party.
b. An engagement designed to express limited assurance
relating to subject matter or an assertion.
c. An engagement in which the CPAs issue an examination,
a review, or an agreed-upon procedures report on subject
matter or an assertion about subject matter that is the
responsibility of another party (e.g., management).
d. An examination designed to provide an opinion that is the
CPAâs highest level of assurance that the fi nancial statements
follow generally accepted accounting principles, or
another acceptable basis of accounting.
e. As required by the Sarbanes-Oxley Act and the Public Company
Accounting Oversight Board, an audit that includes
providing assurance on both the fi nancial statements and
internal control over fi nancial reporting.
f. Professional services that enhance the quality of information,
or its context, for decision makers.
g. An attest engagement designed to provide the highest
level of assurance that CPAs provide on an assertion.

1. Agreed-upon
procedures engagement
2. Assurance services
3. Attest engagement
4. Audit of fi nancial
statements
5. Compliance audit
6. Examination
7. Integrated audit
8. Operational audit
9. Review

magentahorse115

1. A CPA firm has carried out an audit of the GillespieCorporation. The CPA has uncovered a material misstatement in theinventory balance. However, the CPA does not feel that this problemis so serious as to eliminate the credibility of the financialstatements taken as a whole. What wording will be used to begin theopinion paragraph of the audit report?

A. In our opinion, except for adjustments, if any, that mighthave been foundâ¦

B. The scope of our work was not sufficientâ¦

C. In our opinion, except for the effects ofâ¦

D. Because of the effects ofâ¦

2. When an auditor issues a standard unmodified audit report,the implication is that the auditor:

A. Believes the financial statements are presented fairly inconformity with U.S. GAAP.

B. Does not know if the financial statements are presentedfairly in conformity with U.S. GAAP.

C. Believes the financial statements are presented fairly inconformity with U.S. GAAP except for a specific aspect of them.

D. Does not believe the financial statements are presentedfairly in conformity with U.S. GAAP.

3. A CPA's standard report on audited financial statements wouldbe inappropriate if it referred to

A. Management's responsibilities for the financialstatements.

B. An assessment of the entity's accounting principles.

C. The significant estimates made by management.

D. The CPA's assessment of sampling risk factors.

4. The introductory paragraph of the standard audit reportstates that the financial statements and the opinion expressedabout those statements are:

A. The responsibility of management.

B. The responsibility of the auditor.

C. The joint responsibility of the auditor and management.

4. None of the above.

5. Which of the following procedures would an auditor mostlikely perform to obtain evidence about the occurrence ofsubsequent events?

A. Comparing the financial statements being reported on withthose of the prior period.

B. Confirming a sample of material accounts receivableestablished after year end.

C. Inquiring as to whether any unusual adjustments were madeafter year end.

D. Investigating personnel changes in the accounting departmentoccurring after year end.

6. The date of the management representation letter shouldbe

A. The same date as the latest interim financialinformation.

B. The same date as the latest bank reconciliation.

C. No earlier than the auditor's report.

D. No earlier than the balance sheet.

7. The audit step most likely to reveal the existence ofcontingent liabilities is

A. A review of vouchers paid during the month following theyear-end

B. Mortgage-note confirmation

C. Accounts payable confirmations

D. An inquiry directed to legal counsel

8. The Form 10-K filed by management of a public companyincludes a section on managementâs discussion and analysis(MD&A) in addition to the annual financial statements. Which ofthe following best describes the auditorâs responsibility for theMD&A information?

A. The auditor must perform sufficient appropriate auditprocedures to opine on the MD&A information.

B. The auditor has no responsibilities related to the MD&Adisclosures.

C. The auditor must read the MD&A information to determineif there is any material inconsistency with the audited financialstatements.

D. The auditor must provide a disclaimer of opinion related tothe MD&A information.

orangeherring233

AFM201 Chapter 1: Audit Chapter 1 A Summary of Introduction to Audit

Document Summary

Get access

Related Documents

AFM201 Study Guide - Audit Risk, Financial Statement, Audit Evidence

AFM201 Study Guide - Midterm Guide: Trial Balance, Profit Margin, Cash Flow

AYB301 Lecture Notes - Ethical Code, Tax Avoidance, Arthur Andersen

Related Questions