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An auditor's communication of internal control related matters noted in an audit usually should be addressed to:
Management and those charged with governance.
The director of internal auditing.
The chief financial officer.
The chief accounting officer.
Choice "a" is correct. An auditor's communication of internal control related matters noted in an audit usually should be addressed to management and those charged with governance. Choices "b", "c", and "d" are incorrect. The director of internal auditing, the chief financial officer, and the chief accounting officer all would have access to the letter; however, it would not be addressed to them since they do not have the same level of authority and responsibility to the shareholders as management and those charged with governance.
When reporting on conditions relating to an entity's internal control observed during an audit of the financial statements of a nonissuer, the auditor should include a:
Description of tests performed to search for material weaknesses.
Statement of positive assurance on internal control.
Paragraph describing the inherent limitations of internal control.
Restriction on the use of the report.
Choice "d" is correct. When reporting on conditions relating to an entity's internal control observed during an audit of the financial statements, the auditor should include a restriction on the use of the report. Choice "a" is incorrect. The auditor would not include a description of tests performed to search for material weaknesses since the auditor is not in fact obligated to search for them. Choices "b" and "c" are incorrect. An auditor would make a statement of positive assurance on internal control and include a
paragraph describing the inherent limitations of internal control in conjunction with an engagement to report on internal control. These comments would not be made when reporting on an entity's internal control in conjunction with an audit of the financial statements of a nonissuer.
An engagement to express an opinion on the internal control of a nonissuer will generally:
Require procedures that duplicate those already applied in assessing control risk during a financial statement audit.
Increase the reliability of the financial statements that have already been audited.
Be more extensive in scope than the assessment of control risk made during a financial statement audit.
Be more limited in scope than the assessment of control risk made during a financial statement audit.
Choice "c" is correct. An engagement to express an opinion on internal control will generally be more extensive in scope than the assessment of control risk made during a financial statement audit of a nonissuer. This occurs because assessing control risk is the
primary purpose of an engagement to express an opinion on internal control, whereas it
is an incidental result of an audit of a nonissuer. Choice "a" is incorrect. Since the results of the audit may be considered in performing the engagement to express an opinion on internal control, it is unlikely that the auditor would duplicate those procedures already applied. Choice "b" is incorrect. It is unlikely that the reliability of the financial statements that have already been audited would be increased if an engagement to express an opinion on internal control is performed. Choice "d" is incorrect. An engagement to express an opinion on internal control is more extensive in scope than the control risk assessment performed during an audit of a nonissuer.
Which of the following statements is correct concerning significant deficiencies noted in an audit of a nonissuer?
Significant deficiencies are material weaknesses in the design or operation of specific internal control components.
The auditor is obligated to search for significant deficiencies that could adversely affect the entity's ability to record and report financial data.
Significant deficiencies should not be re-communicated each year if management has acknowledged its understanding of such deficiencies.
The auditor should separately identify those significant deficiencies that are considered to be material weaknesses.
Choice "d" is correct. The auditor should separately identify those significant deficiencies that are considered to be material weaknesses.
Choice "a" is incorrect. Not all significant deficiencies are material weaknesses. Choice "b" is incorrect. The auditor is not obligated to search for significant deficiencies. The auditor is obligated to communicate to the client any significant deficiencies identified while auditing the financial statements.
Choice "c" is incorrect. The auditor is obligated to re-communicate significant deficiencies each year, even if management has acknowledged its understanding of such deficiencies.
Which of the following statements concerning an auditor's communication of significant deficiencies identified during the audit of a nonissuer is correct?
The auditor should request a meeting with management one level above the source of the significant deficiencies to discuss suggestions for remedial action.
Any report issued on significant deficiencies should indicate that providing assurance on internal control was not the purpose of the audit.
Significant deficiencies discovered and communicated at an interim date should be reexamined with tests of controls before completing the engagement.
Suggestions concerning administration efficiencies and business strategies should not be communicated in the same report with significant deficiencies.
Choice "b" is correct. Any report issued on significant deficiencies should indicate that providing assurance on internal control was not the purpose of the audit. Choice "a" is incorrect. The auditor should communicate significant deficiencies to management and those charged with governance, but is not required to request a meeting with management one level above the source of the reportable conditions, to discuss suggestions for remedial action.
Choice "c" is incorrect. Significant deficiencies discovered and communicated at an interim date do not need to be reexamined with tests of controls before completing the
Choice "d" is incorrect. Suggestions concerning administration efficiencies and business strategies may be communicated in the same report with significant deficiencies (the significant deficiencies must be separately identified, however).
Which of the following representations should not be included in a report on internal control related matters noted in an audit of a nonissuer?
Significant deficiencies related to internal control design exist, but none is deemed to be a material weakness.
There are no significant deficiencies in the design or operation of internal control.
Corrective follow-up action is recommended due to the relative significance of material weaknesses discovered during the audit.
The auditor's consideration of internal control would not necessarily disclose all significant deficiencies that exist.
Choice "b" is correct. A report on internal control related matters noted in an audit should not state that
there are no significant deficiencies in internal control, since this statement might erroneously imply that the auditor searched for such conditions. Choice "a" is incorrect.
The auditor is permitted to state that no material weaknesses were identified during the audit. Typically this occurs in reports submitted to governmental authorities. Choice "c" is incorrect. The auditor may suggest that corrective follow-up action should be taken due to the relative significance of material weakness discovered. Choice "d" is incorrect. The auditor's report may state that his or her consideration of internal control would not necessarily disclose all significant deficiencies that exist.
In obtaining an understanding of an entity's internal control in a financial statement audit, an auditor is not obligated to:
A. Determine whether the control activities have been implemented. B. Perform procedures to understand the design of internal control.
C. Document the understanding of the entity's internal control components. D. Search for significant deficiencies in the operation of internal control.
Choice "d" is correct. When obtaining an understanding of an entity's internal control in a financial statement audit, an auditor is not obligated to search for significant deficiencies in the operation of internal control. Choice "a" is incorrect. In order to determine the nature, timing and extent of tests to be performed, an auditor must determine whether the control activities have been implemented. Choice "b" is incorrect. An auditor is required to perform procedures to confirm his/her understanding of the internal control systems' design, and to determine whether relevant controls have been implemented. Choice "c" is incorrect. An auditor is required to document his or her understanding of the entity's internal control components, even if he or she intends to use a substantive approach.
The GAO standards of reporting for governmental financial audits incorporate the AICPA standards of reporting and prescribe supplemental standards to satisfy the unique needs of governmental audits. Which of the following is a supplemental reporting standard for governmental financial audits?
Auditors should report the scope of their testing of compliance with laws and regulations and of internal controls.
Material indications of illegal acts should be reported in a document distributed only to the entity's senior officials.
All changes in the audit program from the prior year should be reported to the entity's audit committee.
Any privileged or confidential information discovered should be reported to the organization that arranged for the audit.
Choice "a" is correct. The auditor's report on compliance and on internal control over financial recording (based on an audit) must include the scope of testing of compliance and internal control. Choice "b" is incorrect. Material indications of illegal acts are not only reported to the members of the governing body of the audited entity and their senior staff officials but, in some circumstances, auditors should report illegal acts directly to external parties (such as the grantor agency).
Choice "c" is incorrect. Although GAO standards require that the auditor communicate information regarding the nature, timing and extent of planned testing to officials of the audited entity and to individuals contracting for the audit, reporting of all changes is not required. (For example, immaterial changes to the audit program need not be reported.) Choice "d" is incorrect. Certain privileged or confidential information may be prohibited
from general disclosure and should not be included in the audit report. The report should, however, disclose the nature of the information omitted and the requirement that makes an opinion necessary.
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CPA Auditing and Attestation certification
Auditing / Attestation | CPA-AUD Real Questions and VCE Practice Test
ASB Okays Direct Attestation
The latest SSAE, nearly unaltered from its publicity stage, adjustments the style CPAs can give assurance on their purchasers suggestions. previously, CPAs may report simplest on managements fact, as an instance, that a corporation maintained positive internal manage; but, with SSAE no. 9, Amendments to SSAEs Nos. 1, 2, and three, they could at once document that the company maintained helpful inside manage. (See Revamped SSAEs, JofA, July98.) youngsters, AICPA technical manager Jane Mancino emphasised that management would nevertheless need to situation assertions and CPAs would still be able to record on these as in the past.
Attestation requisites had been around for a decade, all through which attestation engagements have turn into more and more established. SSAE no. 9 is part of a sequence of projects supposed to raise the understandability and adaptability of the attestation specifications in a changing enterprise environment. for instance, the drafters of the primary SSAEs could not have conceived of WebTrust engagementswhich are performed under SSAEsat a time when the cyber web turned into an imprecise tool for a handful of computing device specialists.
the new observation amends, however does not replace, SSAE no. 1, Attestation specifications; SSAE no. 2, Reporting on an Entitys inner handle Over economic Reporting; and SSAE no. 3, Compliance Attestation.
large 5 show No Quarter
corporations may get to understand their auditors betterafter all, theyll be seeing them each 90 days in its place of just once a yr, in line with new enterprise policies. The large 5 have agreed to operate financial statement audits handiest for groups that permit them to review monetary statements each quarter. as a result of these businesses audit most of the firms listed on the new york stock exchange, American inventory alternate and Nasdaq, this coverage will affect many groups.
The Journal of Accountancy spoke about this new building with Dan M. man, who in his 18 years on the AICPA became at the center of auditing requirements surroundings (see Former AICPA Vice-President Honored, beneath). this is a really, very smart circulation, he talked about. Ive been talking to members of company boards about this for years. I for my part wouldnt serve on any board, mainly its audit committee, until the company agreed to timely experiences of quarterly statements. man referred to quarterly stories could help discover and stop fraudulent fiscal reporting and reduce end-of-yr surprises that include large fourth-quarter alterations.
Some organizations can also be concerned in regards to the can charge, spoke of guy, who acknowledged that there would be extra prices. however the huge public improvement that includes quarterly experiences a ways exceeds that charge.
What in regards to the others?a huge 5 agreement is not a SAS; other firms are free to do what they please. a couple of smaller establishments that audit public organizations declined to speak with the Journal about their audit policies at the present. however, the journal did communicate with Thomas N. Tone, CPA, who performs annual stories and quarterly compilations for privately held companies. He commented commonly on the price of a quarterly study a valued clientele books, no matter if a CPA is performing compilation, evaluation or audit. lots of our shoppers have strains of credit score drawing near $10 million, a few of which is unsecured or secured most effective via receivables. Their banks are looking to be aware of we've viewed whats happening each and every quarter.
Former AICPA Vice-President Honored
In the previous, the public Oversight Board has given its John J. McCloy Award to CPAs who were authorities on auditing requisites. This year, the board gave it to a person who performed a well known position in creating a lot of those standards. Dan M. man, CPA, PhD, (middle, with his wife, Teri, and POB Chairman A. A. Sommer, Jr.) joined the AICPA as director of auditing analysis in 1979, becoming vice-president of auditing in 1983. all over the next 14 years, he oversaw the issuance of greater than forty statements on auditing requisites, three statements on specifications for accounting and assessment capabilities and the entire statements on specifications for attestation engagements.
in addition to shepherding during the approval system so lots of the official counsel CPAs rely on, man has published a number of books and more than 50 articles interpreting that tips. despite the fact he retired from the Institute in 1997, guy nevertheless remains on exact of auditing concerns (see his feedback on new audit policies in big five demonstrate No Quarter, above).
The POB monitors actions of the AICPAs SEC observe area. The McCloy award, established in 1988, honors those who have made dazzling contributions to the auditing career.
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