40 Questions
What is the primary purpose of obtaining an understanding of internal control?
To design audit procedures appropriate in the circumstances
What is the auditor's responsibility regarding going concern?
To evaluate the appropriateness of management's use of the going concern basis of accounting
What is the purpose of communicating with those charged with governance?
To discuss the planned scope and timing of the audit
What is the auditor's report based on?
Audit evidence obtained up to the date of the auditor's report
What does the auditor evaluate regarding the financial statements?
The overall presentation, structure and content of the financial statements
What is the auditor's responsibility regarding internal control?
To identify significant deficiencies in internal control
What does the auditor provide to those charged with governance?
A statement on the auditor's independence
What is the auditor's conclusion based on?
The audit evidence obtained up to the date of the auditor's report
What is the primary purpose of an Emphasis of Matter paragraph in the auditor's report?
To highlight a matter that is uncertain and may impact the financial statements
When would an auditor include an Emphasis of Matter paragraph in the auditor's report?
When there is an uncertainty related to exceptional litigation or regulatory action
What is the correct heading for an Emphasis of Matter paragraph?
Emphasis of Matter
What is the auditor's responsibility when including an Emphasis of Matter paragraph?
To include a clear reference to the matter being emphasized and to where relevant disclosures can be found in the financial statements
What is the purpose of an Other Matter paragraph?
To highlight a matter other than those presented or disclosed in the financial statements
When would an Other Matter paragraph be included in the auditor's report?
When the auditor deems it necessary to draw attention to a matter not presented or disclosed in the financial statements
What is the key difference between an Emphasis of Matter paragraph and an Other Matter paragraph?
Whether the matter is presented or disclosed in the financial statements
What is the auditor's responsibility when including multiple Emphasis of Matter paragraphs?
To present each paragraph separately with a clear heading and reference to the relevant disclosures
What action should the auditor take if they identify a material inconsistency?
Discuss the matter with management and perform other procedures as necessary
What is the purpose of the 'Other Information' section in the auditor's report?
To disclose the other information obtained by the auditor
Under what circumstances is the auditor required to include an 'Other Information' section in the auditor's report?
When the auditor has obtained or expects to obtain some or all of the other information
What is the auditor's responsibility with respect to the other information?
To identify the management's responsibility for the other information
What should the auditor do if they become aware that the other information appears to be materially misstated?
Perform additional procedures to conclude whether a material misstatement exists
What should the auditor include in the 'Other Information' section of the auditor's report?
A statement that management is responsible for the other information
When is the auditor required to obtain all of the other information?
For audits of financial statements of listed entities
What should the auditor do if they identify a material inconsistency in the financial statements?
Discuss the matter with management and, if necessary, perform other procedures
What does the auditor report on in the statement of financial position?
The current asset portion
What is the purpose of the auditor's report on accounts receivable?
To disclose the reason for a disclaimer of opinion
What should a CPA indicate in the auditor's report on summary financial statements?
The CPA has audited and expressed an opinion on the complete financial statements
Which of the following is NOT a special purpose audit engagement?
Audits of financial statements in accordance with PFRS
Which of the following is NOT an example of another comprehensive financial reporting framework?
Generally Accepted Accounting Principles (GAAP)
What type of report should the practitioner issue if the financial statements are not presented fairly in conformity with the prescribed basis?
Disclaimer of opinion
What basis of accounting was used by RIEL Company to prepare its financial statements?
Accounting basis prescribed by a government agency
What is the purpose of the auditor's report on summary financial statements?
To indicate that the CPA has audited and expressed an opinion on the complete financial statements
What type of financial reporting provisions are typically found in a bond indenture or a loan agreement?
Financial reporting provisions of a contract
When forming an opinion on special purpose financial statements, which standard should the auditor apply?
PSA 700 (Revised)
What information should the auditor's report on special purpose financial statements describe?
The purpose for which the financial statements are prepared and the intended users
If management has a choice of financial reporting frameworks, what should the explanation of management's responsibility for the financial statements include?
A statement of management's responsibility for determining the applicable financial reporting framework
What is the purpose of the Emphasis of Matter paragraph in the auditor's report on special purpose financial statements?
To alert users of the auditor's report that the financial statements are prepared in accordance with a special purpose framework
When auditing a single financial statement or a specific element of a financial statement, what standard should the auditor apply?
PSA 700 (Revised), adapted as necessary
What type of financial statements may not be suitable for another purpose?
Special purpose financial statements
What is the main purpose of the auditor's report on special purpose financial statements?
To provide an opinion on the financial statements
Study Notes
Internal Control and Audit Procedures
- Understanding internal control is crucial for designing appropriate audit procedures.
- The purpose is not to express an opinion on the effectiveness of the Company's internal control.
Accounting Policies and Estimates
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management.
- Assess the appropriateness of management's use of the going concern basis of accounting.
Audit Conclusions and Reporting
- Conclusions are based on audit evidence obtained up to the date of the auditor's report.
- The auditor communicates with those charged with governance regarding the planned scope and timing of the audit and significant audit findings.
Emphasis of Matter Paragraphs
- An Emphasis of Matter paragraph refers to a matter appropriately presented or disclosed in the financial statements that is fundamental to users' understanding.
- Circumstances that may require an Emphasis of Matter paragraph include uncertainty related to litigation or regulatory action, early application of a new accounting standard, a major catastrophe, or a significant subsequent event.
- The paragraph should include a clear reference to the matter being emphasized and relevant disclosures in the financial statements.
Other Matter Paragraphs
- An Other Matter paragraph refers to a matter other than those presented or disclosed in the financial statements that is relevant to users' understanding of the audit, the auditor's responsibilities, or the auditor's report.
- The auditor should discuss the matter with management and perform procedures to determine whether a material misstatement of the other information exists.
Special Purpose Financial Statements
- When forming an opinion and reporting on special purpose financial statements, the auditor should apply the requirements in PSA 700 (Revised).
- The auditor's report should describe the purpose for which the financial statements are prepared and, if necessary, the intended users.
- An Emphasis of Matter paragraph should alert users that the financial statements are prepared in accordance with a special purpose framework and may not be suitable for another purpose.
This quiz evaluates the understanding of internal control, audit procedures, and accounting policies. It assesses the appropriateness of accounting estimates and disclosures, as well as the use of the going concern basis of accounting.
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