A "Type 1" event that occurs subsequent to the balance sheet is a subsequent event that gives information about a condition that arose after the balance sheet date.
True
False
False
A "Type 2" event does not require any adjustments or disclosures in the financial statements because the event occurred and manifested after the balance sheet date.
True
False
False
The auditor must communicate matters of concern to the audit committee.
True
False
True
If an auditor determines that during the course of an audit several adjusting entries need to be made to enable the financial statement to not be materially misstated, they should make the necessary changes.
True
False
False
The legal letter and client rep letter are procedures that can easily be done at interim in order to save time at yearend.
True
False
False
What procedures should an auditor perform if they are auditing the financial statements of a company and find that the company has several clearing accounts?
Clearing and other miscellaneous accounts could contain items that accounting staff did not know how to classify properly such as sales of capital assets. These accounts should be itemized line by line, vouched to supporting documentation and then reclassified to the corresponding proper account.
What are the four representations that must appear in the management representation letter?
management's responsibility for fair presentation of the financial statements in accordance with GAAP
availability of all financial records and related data
completeness of the minutes of meetings
irregularities involving management or employeesc
According to the CICA handbook, auditors should watch for unusual transactions in the course of their audit. List four examples of these transactions form section 6010.21.
abnormal terms of trade ex. Pricing, interest rates
transactions that are unusual in nature and size ex. made with unfamiliar enterprises
transactions whose substance appear to differ from their form
transactions that lack an apparent business reason
Why do auditors ask about related party transactions and where do they typically do this?
Auditors ask whether the client has engaged in any related party transactions in the engagement letter. Auditors have a responsibility to obtain reasonable assurance that related parties have been identified and disclosed in the financial statements. These types of transactions occur at non arm's length and therefore may not reflect the normal terms of trade that occur with arm's length transactions.
Does an auditor have any responsibilities after an audit report and accompanying financial statements have been issued?
The auditor does have responsibilities when there is a subsequent discovery of facts existing at the date of the audit report and consideration of the omission of audit procedures discovered after the report date.
account analysis:
identification of each important item and amount in an account followed by document vouching and enquiry to determine whether amounts should be classified elsewhere.
accounting estimate:
an approximation of a financial statement element, item, or account made by an organization's management.
analytical procedures:
audit evaluation of financial statement accounts by studying and comparing relationships among financial and nonfinancial data.
pro forma financial date:
presentation of financial statements "as if" an event had occurred on the date of the balance sheet.
review services:
accountant performs some procedures lesser in scope than an audit for the purpose of giving a negative assurance report on financial statements.
second partner review:
working papers and financial statements, including footnotes, are given a final review on large engagements by a partner not responsible for client relations.
