SOLVED

Learning Objective 24-7 1) The auditor is responsible for communicating significant internal control deficiencies to the audit committee, or those charged with governance. This communication: A) may be oral or written. B) must be oral. C) must be written. D) must be oral via direct communication. 2) Which of the following statements is most correct about an auditor’s required communication with management and those charged with corporate governance? A) The auditor is required to inform those charged with governance about significant errors discovered and subsequently corrected by management. B) Any significant matter reported to those charged with governance must also be communicated to management. C) Communication is required before the audit report is issued. D) Auditor does not have any requirement to communicate with anyone other than the company’s senior management. 3) While there is no professional requirement to do so on audit engagements, CPAs frequently issue a formal “management” letter to clients. The primary purpose of this letter is to provide: A) evidence indicating whether the auditor is reasonably certain that internal accounting control is operating as prescribed. B) a permanent record of the internal accounting control work performed by the auditor during the course of the engagement. C) a written record of discussions between auditor and client concerning the auditor’s observations and suggestions for improvements. D) a summary of the auditor’s observations that resulted from the auditor’s special study of internal control. 4) Which of the following is not required to be communicated to the audit committee or similarly designated body under auditing standards? A) Disagreements with the company over two acceptable accounting treatments for a significant transaction. B) Disagreements with management about the scope of the audit, applicability of accounting principles, or wording of the audit report. C) Difficulties encountered in performing the audit, such as lack of availability of client personnel and failure to provide necessary information. D) Auditor’s responsibilities under generally accepted auditing standards, including responsibility for evaluating internal control and the concept of reasonable rather than absolute assurance. 5) Discuss the three matters which Sarbanes-Oxley requires auditors of public companies to report to the audit committee. 6) Auditors are required to communicate either orally or in writing with the audit committee about internal control weaknesses. A) True B) False 7) Auditors must communicate in writing about internal control weaknesses to the audit committee or those charged with governance. A) True B) False 8) Client representation letters are required by professional auditing standards, whereas management letters are optional. A) True B) False Learning Objective 24-8 1) The audit firm issues an audit report for its client. The auditor’s have NO obligation to make further inquiries with respect to the client’s audited financial statements unless: A) a development occurs that may affect the company’s long term viability as a company. B) final resolution was made on disclosed contingency for which no liability needed to be accrued. C) new information comes to the auditor’s attention concerning an event that occurred prior to the date of the audit report that, if known, would have impacted the audit opinion. D) a lawsuit, in which the risk of loss was considered remote, was resolved in the company’s favor. 2) If an auditor discovers that previously issued financial statements are misleading, the most desirable approach to follow is to request that the client issue an immediate revision of the financial statements containing an explanation of the reasons for the revision. A) True B) False 3) Subsequent discoveries of facts requiring the reissuance of financial statements arise from events occurring after the date of the auditor’s report. A) True B) False