Auditing and internal control

It is always a good idea for auditors to begin an audit with professional skepticism characterized by the assumption that

• a potential conflict of interest always exists between the auditor and the management of the enterprise under audit

• in audits of financial statements, the auditor acts exclusively in the capacity of an auditor.

• the professional status of the independent auditor imposes commensurate professional obligations.

• ​financial statements and financial data are verifiable

When Auditee Company prohibits auditors from visiting selected branch offices of the business, this is an example of interference with

• reporting independence

• investigative independence.

• auditors’ training and proficiency

• audit planning and supervision.

After the auditors learned of Auditee Company’s failure to record an expense for obsolete inventory, they agreed to a small adjustment to the financial statements because the Auditee president told them the company would violate its debt agreements if the full amount were recorded. This is an example of a lack of

• auditors’ training and proficiency

• planning and supervision.

• audit investigative independence.

• audit reporting independence.

The primary purpose for obtaining an understanding of the company’s internal controls in a financial statement audit is to

• determine the nature, timing, and extent of auditing procedures to be performed.

• make consulting suggestions to the management.

• obtain direct, sufficient, and appropriate evidential matter to afford a reasonable basis for an opinion on the financial statements.

• determine whether the company has changed any accounting principles.

Which of these generally accepted auditing standards are not affected by the auditee’s utilization of a computerized accounting system?

• The audit report shall state whether the financial statements are presented in accordance with GAAP.

• The work is to be adequately planned and assistants, if any, are to be properly supervised.

• Sufficient appropriate evidential matter is to be obtained ... to afford a reasonable basis for an opinion regarding the financial statements under audit.

• The audit is to be performed by a person or persons having adequate technical training and proficiency as an auditor.

Which of the following is not found in the standard unqualified audit report on financial statements?

• An identification of the financial statements that were audited

• A general description of an audit

• An opinion that the financial statements present financial position in conformity with GAAP

• An emphasis paragraph commenting on the effect of economic conditions on the company

Assurance standards do not contain a requirement that auditors obtain

• adequate knowledge in the subject matter of the assertions being examined.

• an understanding of the auditee’s internal control structure.

• sufficient evidence for the conclusions expressed in an attestation report.

• independence in mental attitude.

Auditor Jones is studying a company’s accounting treatment of a series of complicated transactions in exotic financial instruments. She should look for the highest level of authoritative support for proper accounting in

• provincial securities commissions’ staff position statements.

• CPA Canada industry audit and accounting guides.

• CPA Canada recommendations in the Handbook.

• Emerging Issues Committee consensus statements.

Which of the following is not an example of a quality control procedure likely to be used by a public accounting firm to meet its professional responsibilities to auditees?

• Completion of independence questionnaires by all partners and employees

• Review and approval of audit plan by the partner in charge of the engagement just prior to signing the auditor’s report

• Evaluating professional staff after the conclusion of each engagement

• Evaluating the integrity of management for each new audit client

Which of the following concepts is not included in the wording of the auditor’s standard report?

• Management’s responsibility for the financial statements

• Auditor’s responsibility to assess significant estimates made by management

• Extent of auditor’s reliance on the auditee’s internal controls

• Examination of evidence on a test basis