Acc-497 , week 4, Knowledge Check

1.  

Typical objectives of a performance audit include:

Judging the appropriateness of an entity's program goals.

Determining whether financial statements fairly present the entity's operational results.

Determining whether financial statements fairly present in conformity with GAAP.

Assessing effectiveness and results, economy and efficiency, and internal controls. 

2.  

Gail McCook, the administrative assistant of a local CPA firm, merged the files listing GAAS standards and GAGAS standards. Because the firm performs both GAAS and GAGAS audits, it is important to identify which standards are applicable to which audits. The governmental audit partner, Gerald Henderson, has split up the list of standards among staff, and you have been assigned the standards below.

Required

For each of the following items in the preceding list, indicate whether standards are GAAS or GAGAS standards.

 
 

a) Pertinent information should be communicated to individuals contracting for or requesting the audit: 

b) The auditor must maintain independence in mental attitude in all matters relating to the audit:

c) The auditor must adequately plan the work and must properly supervise any assistants: 

d) When the audit findings involve deficiencies, the elements (criteria, condition, cause and effect) of the findings should be developed: 

e)  When the financial statement audit report contains an opinion or a disclaimer of opinion, a report on internal control over financial reporting and on compliance with laws, regulations, and provisions of contracts and grants must be provided as part of the report or as a separate report: 

f)  The auditor must identify in the auditor’s report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period: 

g)  The audit organization must establish a system of quality and have an external peer review at least once every 3 years: 

h) Auditors apply certain limited procedures in connection with RSI to provide assurance that it is fairly presented in relation to the basic financial statements: 

i) The auditor must exercise due professional care in the performance of the audit and the preparation of the report: 

j)  Known findings and recommendations from previous engagements that directly relate to the current audit should be considered in planning: 

3.  

Which of the following is not a required component of the audit report for a single audit?

A report on compliance for each major program and on internal control over compliance.

A schedule of findings and questioned costs.

A report on internal control over financial reporting and compliance with federal statutes, regulations, and the terms and conditions of the federal award.

An opinion on the completeness of the schedule of expenditures. 

4. 

 Threats to independence include all of the following except:

Familiarity threat.

Bias threat.

Undue influence threat.

Management representation threat. 

5.  

Tech Company has disclosed an uncertainty due to pending litigation. The auditor’s decision to issue a qualified opinion on Tech’s financial statements would most likely result from:

an inability to estimate the amount of loss.

a lack of insurance coverage for possible losses from such litigation.

a lack of sufficient evidence.

the entity’s lack of experience with such litigation.

6.  

A public entity changed from the straight-line method to the declining balance method of depreciation for all newly acquired assets. This change has no material effect on the current year’s financial statements but is reasonably certain to have a substantial effect in later years. The client’s financial statements contain no material misstatements and the auditor concurs with this change. If the change is disclosed in the notes to the financial statements, the auditor should issue a report with a(n):

unqualified opinion.

consistency modification.

“except for” qualified opinion.

explanatory paragraph.

7.

When an auditor is asked to express an opinion on an entity’s rent and royalty revenues, he or she may:

not accept the engagement unless also engaged to audit the full financial statements of the entity.

not accept the engagement because to do so would be tantamount to agreeing to issue a piecemeal opinion.

accept the engagement, provided distribution of the auditor’s report is limited to the entity’s management.

accept the engagement, provided the auditor’s opinion is expressed in a special report.

8. 

 One of the primary purposes of the Single Audit Act of 1984 (amended in 1996) is to:

Make audit activity legal at the federal level.

Promote the efficient and effective use of audit resources.

Allow federal auditors greater access to government entities receiving federal funds.

Detect fraud, waste and abuse in government entities. 

9.

Which of the following statements concerning the Single Audit Act of 1984 (with 1996 Amendments) is correct?

Only those entities receiving over $750,000 a year in federal financial assistance are required to have a single audit.

The single audit is optional for all entities receiving federal awards.

Those entities expending under $750,000 a year in federal awards may be exempt from single audit requirements.

The Single Audit Act only applies if an entity has high risk programs. 

10.  

A single audit conducted pursuant to the Single Audit Act Amendments of 1996 requires which of the following types of audits?

Financial Audit: Yes; Performance Audit: No

Financial Audit: No; Performance Audit: No

Financial Audit: Yes; Performance Audit: Yes

Financial Audit: No; Performance Audit: Yes