As a result of analytical procedures, the independent auditors determine that the gross profit percentage has declined from 30 percent in the preceding year to 20 percent in the current year. The auditors should:
Consider the possibility of a misstatement in the financial statements.
The search for unrecorded liabilities for a public company includes procedures usually performed through the:
Date of the auditors' report.
Which of the following is most likely to be considered a Type 1 subsequent event?
Customer checks deposited prior to year-end, but determined to be uncollectible after year-end.
Which of the following procedures is most likely to be included in the final review stage of an audit?
Perform analytical procedures.
Subsequent to the issuance of the auditor's report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should next:
Determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information.
Which of the following events occurring on January 5, 20X2 is most likely to result in an adjusting entry to the 20X1 financial statements?
Settlement of litigation.
A material departure from generally accepted accounting principles will result in auditor consideration of:
Whether to issue and adverse opinion rather than a qualified opinion.
The auditors who wish to draw reader attention to a financial statement note disclosure on significant transactions with related parties should disclose this fact in:
An emphasis of matter paragraph to the auditors' report.
In an integrated audit, which of the following must the auditors communicate to the audit committee?
1. known material weaknesses and 2. Known significant deficiencies
In an integrated audit which of the following lead(s) to an adverse opinion on internal control?
1. Known Material Weaknesses and 2. Known Significant Deficiencies
In an integrated audit, which of the following must be communicated by management to the audit committee?
1. Known Material Weakneses and 2. Known Significant Deficiencies.
Which of the following is most likely to be considered a material weakness in internal control?
Ineffective oversight of financial reporting by the audit committee.
Which of the following is defined as a weakness in internal control that allows a reasonable possibility of a misstatement that is material?
The auditors identified a material weakness in internal control in August. The client was informed and the client corrected the material weakness prior to year-end; the auditors concluded that management eliminated the material weakness prior to year-end. The appropriate audit report on internal control is:
A material weakness is a control deficiency (or combination of control deficiencies) that results in a reasonable possibility that a misstatement of at least what amount will not be prevented or detected?
A material amount.
A procedure that involves tracing a transaction from origination through the company's information systems until it is reflected in the company's financial report is referred to as a(n)
Which of the following is not a typical question asked during a walk-through?
What is the largest fraudulent transaction you ever processed?
An audit of internal control over financial reporting ordinarily assesses internal control;
As of the last day of the fiscal period.
Which of the following is NOT typically performed when the auditors are performing a review of client financial statements?
Confirmation of Accounts receivable.
Which of the following must be obtained in a review of a nonpublic company?
1. Engagement letter, and 2. Representation Letter
A CPA who is NOT independent may perform which of the following services for a nonpublic company?
A proper compilation report on financial statements that omit note disclosures:
Indicates that management has omitted such information.
Which of the following forms of accountant association always leads to a report intended solely for certain specified parties?
A report on an attestation engagement should:
Refer to the auditor's assertion concerning the subject matter.
When an accountant examines a financial forecast that fails to disclose several significant assumptions used to prepare the forecast, the accountant should describe the assumptions in the accountant's report and issue a(n)
A CPA's report relating to a SysTrust engagement is most likely to include:
An opinion on whether the system is electronically secure.