CPA Auditing and Attestation (AUD) › Audit Engagements-Evidence
A basic objective of a CPA firm is to provide professional services that conform to professional standards. Reasonable assurance of achieving this basic objective is provided through:
CPE
A system of peer review
A system of quality control
Compliance with Generally Accepted Reporting Standards
A system of quality control establishes policies and procedures that provide reasonable assurance of conforming with professional standards.
When an auditor requires verification of material accounts receivable balances, they would most likely:
Request a positive confirmation from the customer
Request a negative confirmation from the customer
Request a positive confirmation from management
Request a negative confirmation from management
A “positive confirmation” requires the recipient to respond affirmatively to the auditor regarding the account balance. The positive confirmation is used to confirm material amounts.
Of the following, which is not an instance to use an Emphasis of Matter paragraph?
Going concern issue
Change in accounting principle
Change of CEO
Special purpose framework
The only other time to use this paragraph would be when subsequent events lead to a change in the audit opinion.
A “proof of cash”
involves counting the physical cash on hand
recalculates the cash account
requires an attestation report from the controller
compares the beginning balance per the bank plus deposits minus checks with the beginning book balance plus receipts minus disbursements
A proof of cash is an audit technique designed to roll forward each line of the bank reconciliation from one period to the next. The beginning balance of the bank is compared to the beginning balance of the book and the receipts and disbursements are traced to the ending balances.
When no response is received from a positive confirmation the auditor should:
resend the confirmation
switch to a negative confirmation
write off the receivable
issue a qualified opinion
A “positive confirmation” requires an affirmative response. If during the course of an audit a “positive confirmation” is not received, it is incumbent upon the auditor to follow up on outstanding confirmations, resending the confirmation if no response is received.
Of the following elements, which is applicable to a CPA firm's quality control policy and procedures in an audit practice?
Professional skepticism
Engagement performance
Technology selection
Information processing
Performance of the engagement is one of the 6 interrelated elements of quality control.