Audit Procedures and Internal Control

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the primary purpose of obtaining an understanding of internal control?

To communicate with those charged with governance

To express an opinion on the effectiveness of the Company's internal control

To design audit procedures appropriate in the circumstances (correct)

To evaluate the reasonableness of accounting estimates

What is the auditor's responsibility regarding going concern?

To modify the audit opinion based on the Company's going concern status

To provide an opinion on the Company's ability to continue as a going concern

To identify all potential events or conditions that may cast doubt on the Company's ability to continue as a going concern

To evaluate the appropriateness of management's use of the going concern basis of accounting (correct)

What is the purpose of communicating with those charged with governance?

To obtain their approval for the audit scope and timing

To provide them with a statement on the auditor's independence

To discuss the planned scope and timing of the audit (correct)

To obtain their input on the audit findings

What is the auditor's report based on?

Audit evidence obtained up to the date of the auditor's report Signup and view all the answers

What does the auditor evaluate regarding the financial statements?

The overall presentation, structure and content of the financial statements Signup and view all the answers

What is the auditor's responsibility regarding internal control?

To identify significant deficiencies in internal control Signup and view all the answers

What does the auditor provide to those charged with governance?

A statement on the auditor's independence Signup and view all the answers

What is the auditor's conclusion based on?

The audit evidence obtained up to the date of the auditor's report Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

What is the correct heading for an Emphasis of Matter paragraph?

Emphasis of Matter Signup and view all the answers

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 Signup and view all the answers

What is the purpose of an Other Matter paragraph?

To highlight a matter other than those presented or disclosed in the financial statements Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

What action should the auditor take if they identify a material inconsistency?

Discuss the matter with management and perform other procedures as necessary Signup and view all the answers

What is the purpose of the 'Other Information' section in the auditor's report?

To disclose the other information obtained by the auditor Signup and view all the answers

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 Signup and view all the answers

What is the auditor's responsibility with respect to the other information?

To identify the management's responsibility for the other information Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

When is the auditor required to obtain all of the other information?

For audits of financial statements of listed entities Signup and view all the answers

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 Signup and view all the answers

What does the auditor report on in the statement of financial position?

The current asset portion Signup and view all the answers

What is the purpose of the auditor's report on accounts receivable?

To disclose the reason for a disclaimer of opinion Signup and view all the answers

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 Signup and view all the answers

Which of the following is NOT a special purpose audit engagement?

Audits of financial statements in accordance with PFRS Signup and view all the answers

Which of the following is NOT an example of another comprehensive financial reporting framework?

Generally Accepted Accounting Principles (GAAP) Signup and view all the answers

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 Signup and view all the answers

What basis of accounting was used by RIEL Company to prepare its financial statements?

Accounting basis prescribed by a government agency Signup and view all the answers

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 Signup and view all the answers

What type of financial reporting provisions are typically found in a bond indenture or a loan agreement?

Financial reporting provisions of a contract Signup and view all the answers

When forming an opinion on special purpose financial statements, which standard should the auditor apply?

PSA 700 (Revised) Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

What type of financial statements may not be suitable for another purpose?

Special purpose financial statements Signup and view all the answers

What is the main purpose of the auditor's report on special purpose financial statements?

To provide an opinion on the financial statements Signup and view all the answers

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.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

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.