Exam 5: Professional Auditing Standards and the Audit Opinion Formulation Process

The ten standards of auditing, adopted by the PCAOB encompass three broad categories including: general standards, fieldwork standards and reporting standards.

What does the effectiveness of internal controls influence?

Which of the following statements about the auditing standards issued by the AICPA is true?

The PCAOB's general standards provide guidance to audit firms in selecting and training their professionals.

Which of the following is a procedure that requests a direct written response to the auditor form a third party?

An Integrated Audit requires the issuance of separate reports for the opinions expressed on the financial statements and on internal control.

At what level does the auditor assess the risk of material misstatement?

The Clarity Project is an initiative of the PCAOB to clarify the links between the standards of the PCAOB and the AICPA.

The PCAOB requires the audit be conducted with due professional care, which is a standard of care that would be expected of a reasonably prudent auditor.

Audit procedures can be classified as risk assessment procedures, test of controls or substantive tests.

Which of the following factors influence the risk of material misstatement?

What does business risk include?

The auditing standards. Under the clarified auditing standards, what is the structure of each auditing standard issued by the ASB? What is the purpose of each section?

If controls are effective, there is a higher likelihood that the financial statements are free of material misstatement.

To satisfy the fieldwork standards, what must an auditor do?

Assertions about existence address whether assets and liabilities exist and assertions about occurrence address whether recorded transactions, such as sales transactions, have occurred

Which assertion addresses whether all transactions and accounts that should be included in the financial statements are included?

Test of controls are a type of substantive procedure.

With a dual purpose test, what is an auditor likely to do?

Control risk refers to the risk that a misstatement could occur in an assertion about a class of transaction, account balance, or disclosure and that could be material, either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on a timely basis by the entity's internal control.