Auditing & Assurance Services Flashcards
7 cards from real CPA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Auditing & Assurance Services flashcards as text
Which sampling method gives every item in the population an equal and nonzero chance of selection?
Answer: Simple random sampling
Simple random sampling ensures each item has an equal and nonzero probability of being selected, satisfying statistical sampling requirements.
An auditor discovers a material weakness in internal control over financial reporting. What must the auditor do?
Answer: Communicate the weakness in writing to management and those charged with governance
Under AU-C 265, auditors must communicate material weaknesses in writing to management and those charged with governance.
What is the primary purpose of an engagement letter in an audit?
Answer: To establish the terms and conditions of the audit engagement
An engagement letter establishes the agreed-upon terms of the audit, including the objective, scope, and responsibilities of each party.
When testing controls, an auditor finds 3 deviations in a sample of 60 items. The tolerable deviation rate is 5%. What should the auditor conclude?
Answer: The controls may not be effective; consider increasing substantive testing
A 5% sample deviation rate (3/60) equals the tolerable rate, and considering sampling risk, the auditor should increase substantive testing.
Which of the following best describes 'professional skepticism' as required by auditing standards?
Answer: A questioning mind and critical assessment of audit evidence
Professional skepticism involves a questioning mind and critical assessment of evidence, neither assuming dishonesty nor unquestioned acceptance of management claims.
Under PCAOB standards, how often must auditors of public companies rotate the lead engagement partner?
Answer: Every 5 years
PCAOB rules require rotation of the lead engagement partner after five consecutive years on the engagement.
Which type of audit opinion is issued when the financial statements are presented fairly except for a specific material departure from GAAP?
Answer: Qualified opinion
A qualified opinion is issued when there is a material but not pervasive departure from GAAP, using the phrase 'except for.'