Exam 14: Activities Required in Completing a Quality Audit

Significant changes in the competitive market and a decrease in the competitiveness of the client's products are potential indicators of going-concern problems.

Review activities that are completed towards the end of the audit are quite varied.

Which of the following is not a potential indicator of going concern problems for a client?

Analytical procedures conducted at the end of an audit are performed to examine trends and changes.What is typically another purpose of analytical procedures at the end of the audit?

Which one of the following is not a key condition indicating doubt about a client's ability to continue as a going-concern?

What is the letter called that is drafted by the auditor and reports observations to management which may help management perform more effectively?

Which of the following is not true regarding accounting estimates?

If the audit team encounters difficulties in performing an audit,who should the audit team communicate these matters to?

Which one of the following would the auditor consider to be an indication of a potential going-concern problem?

During the course of an audit,misstatements that are individually immaterial may be detected.What should the auditor do with these?

Which one of the following is the best example of a Type II subsequent event?

Fulton Educational Company,Inc.has a matter of material litigation that is threatened,but that has not gone to trial.The auditor's consideration of such a matter will not include which of the following?

When obtaining reasonable assurance that the financial statements are free from material misstatements,auditors should consider the applicable legal and regulatory frameworks that apply to the entity.

The audit documentation when performing an engagement quality review should include such information such as how much the firm paid for the review.

Final Analytical Procedures and Disclosures When auditing Global Alliance Industries,Inc.,the auditor performed extensive analytical procedures and found the following: (a)The commission expenses as a percentage of sales has stayed constant for several years,but has increased significantly in the current year.However,commission rates have not changed. (b)The rate of inventory turnover has steadily decreased for the past four years. (c)The inventory as a percentage of current assets has steadily increased for the past four years. (d)The number of days' sales in accounts receivable has steadily increased for three years. (e)The allowance for uncollectible accounts as a percentage of accounts receivable has steadily decreased for three years. (f)The absolute amounts of depreciation expense and depreciation expense as a percentage of gross fixed assets are significantly smaller than in the preceding year. REQUIRED: (1)Evaluate the significance of not disclosing or adjusting these items,if material,in the fair presentation of financial statements. (2)When assessing disclosures,what criteria do auditors use?

Rules are standardized internationally in terms of mandatory partner rotation and mandatory audit firm rotation.

Auditors are responsible for designing and maintaining policies and procedures to identify,evaluate,and account for contingencies.

Two paragraphs should be added to the auditor's report when the auditor concludes that substantial doubt remains about the client's ability to continue as a going concern for a reasonable period of time.

In an integrated audit,if one or more material weaknesses exist,the auditor will need to issue a qualified opinion on internal control over financial reporting.

Type I subsequent events Provide two examples of a Type I subsequent event and explain how these events would be treated in the financial statements.