Final Exam Review Sheet PDF

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ACC 451 Final Exam Review Sheet

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Content:  Chapters 12, 16, 17, 18 and 19  35 Multiple Choice Questions (140 points total)  4 Short Answer Questions (60 points total)  Comprehensive  15 Multiple Choice Questions (60 points total)  3 Short Answer Questions (40 points total)

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Point Distribution:  New Material =  Comprehensive =

200 points (67% of exam) 100 points (33% of exam) 300 points

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Suggested Studying:  Review lecture notes  Read text, paying special attention to sections covered in lecture  Review recommended problems

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Topics Covered (New Material):  Chapter 12 (Auditing the HRM Process)

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ACC 451 Final Exam Review Sheet 

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HRM Process  Overview of process  Payroll transactions  Accrued payroll liability transactions Types of documents and records Major functions in the HRM process  Key segregation of duties Test of controls for payroll transactions  Assertions, possible misstatements, control activities, test of controls Substantive procedures  Substantive analytical procedures  Tests of details o Substantive tests of transactions o Test of details of account balances o Tests of details of disclosures

Chapter 16 (Auditing Cash and Investments)  Auditing cash  Types of bank accounts  Test of controls for cash  Substantive procedures for cash

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ACC 451 Final Exam Review Sheet Test of details for cash o Documents used for test of details o Substantive tests of transactions for cash  Assertions and example of audit procedure o Substantive tests of account balances for cash  Assertions and audit procedures Auditing investments  Test of controls for investments o Assertions, possible misstatements, control activities, test of controls o Key segregation of duties  Substantive procedures for investments o Substantive analytic procedures for investments o Test of details for investments  Substantive test of account balances and transactions  Assertions and example of audit procedure  Substantive test of disclosures  Assertions and example of audit procedure 

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Chapter 17 (Completing the Engagement)  Review for contingent liability  Definition

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ACC 451 Final Exam Review Sheet Examples 3 categories o When must a loss be accrued versus noted in disclosures versus neither accrued or disclosed  Main audit procedure performed  Other audit procedures Review for commitment  Definition  When to disclose in footnotes versus accrue a loss  Audit procedures Review for subsequent events for financial statement audit  Definition  Two types o Type 1 o Type 2  How to report in the financial statements  Dual dating Review of subsequent events for internal control audit  Auditor’s responsibility  Two types o Type 1 o Type 2  

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ACC 451 Final Exam Review Sheet  How to report in the financial statements Perform final analytical review Obtain written representation letter Perform final evaluation of audit results Perform the independent engagement quality review Finalize audit documentation Evaluate going concern considerations Subsequent discovery of facts existing at the date of the auditor’s report  Auditor’s responsibilities depending on managements actions Chapter 18 (Reports on Audited Financial Statements)  Audit Reports for Nonissuers  Audit Reports for Issuers  Audit Report on ICFR  Unqualified  Disclaimer of Opinion  Adverse Opinion  Audit Report on F/S  Standard Unqualified Audit Report  8 Elements  Explanatory Language o When is it used?       

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ACC 451 Final Exam Review Sheet

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o How does it modify the language of the report? o Examples  CAMs  Conditions for departure o Scope limitation  Resulting audit report options o Departure from gap  Resulting audit report options o Lack of independence of the auditor  Resulting audit report options Auditor’s responsibility for other information

Chapter 19 (Professional Conduct, Independence and Quality Control)  Professional Audit Standards for Private versus Public Companies  AICPA Code of Professional Conduct  Principles of Professional Conduct o 6 fundamental ethical principles  Rules of Conduct  Interpretations of Rules of Conduct  Disciplinary actions  Independence  Covered member  Financial relationships o Financial interest o Direct financial interest o Indirect financial interest o Personal loans o Unpaid audit fees  Business relationships o Job offers from clients  Family relationships o Immediate family o Close family  Actual/threatened litigation  Nonaudit services  Confidential client information  Exceptions to general rule  Quality control standards  Firm policies and procedures o PCAOB reviews and peer reviews  Elements of quality control (6 discussed)  5 Auditing Concepts to know after this class

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ACC 451 Final Exam Review Sheet Example Questions1:

1 Question 1 = C. Disclosure in the footnotes; Question 2 = B. Occurrence; Question 3 = D. Qualified and Disclaimer; Question 4. B. Provide reasonable assurance that firms do not associate with clients whose management lacks integrity.

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ACC 451 Final Exam Review Sheet 1. A Type II subsequent event usually requires A. An adjustment to the financial statements and the footnotes. B. An adjustment to the financial statements but no special disclosure is required. C. Disclosure in the footnotes. D. Neither an adjustment to the financial statements nor disclosure in the footnotes.

2. In assessing control risk for purchases, an auditor vouches a sample of entries in the voucher register to the supporting documents. Which assertion would this test of controls most likely support? A. Completeness B. Occurrence C. Accuracy D. Classification

3. An auditor was unable to obtain sufficient evidence to support an entity's investment in a large foreign subsidiary. Between which of the following reports should the auditor choose? A. Adverse and unqualified/unmodified with an explanatory/emphasis-of-matter paragraph added. B. Disclaimer and unqualified/unmodified with an explanatory/emphasis-of-matter paragraph added. C. Qualified and adverse. D. Qualified and disclaimer.

4. What is the primary purpose of the acceptance and continuance of client relationships and specific engagements element of quality control? A. Guarantee that firms do not associate with clients whose management lacks integrity.

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ACC 451 Final Exam Review Sheet B. Provide reasonable assurance that firms do not associate with clients whose management lacks integrity. C. Guarantee that firms will not be sued as a result of association with a client. D. Provide reasonable assurance that firms will not be sued as a result of association with a client.

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Topics Covered (Comprehensive Material):  Chapter 1 - Introduction to Assurance and Financial Statement Auditing  Principle – Agent Problem  Assurance services, attestation and auditing  Major phases of the audit

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Chapter 2 – The Auditing Environment  Types of Audit, Attest & Assurance Services  Types of Auditors  Organizations that affect the auditing profession  10 GAAS  General standards (3)  Standards of fieldwork (3)  Standards of reporting (4)

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Chapter 3 – Planning the Audit  Client acceptance/continuance  Preliminary engagement activities  Determine engagement team requirements  Ensure that the audit team & firm are independent  Establish an understanding with the client  Planning the audit  Assess business risks  Establish materiality (Planning materiality and Tolerable misstatement)  Illegal acts  Related parties  Create an audit plan o Types of audit tests  Risk assessment procedures  Test of controls  Substantive procedures  Tests of details  Substantive analytical procedures  Dual purpose tests

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ACC 451 Final Exam Review Sheet 

Chapter 4 – Risk Assessment  Audit limitation  Audit risk elements  Audit risk model (and components of model) o Audit risk o Inherent risk o Control risk o Risk of material misstatement o Detection risk  Risk assessment process  Business risks  What Could Go Wrongs  Internal control effectiveness  Overall risk of material misstatement  Determine detection risk  Procedures performed in the risk assessment process o Inquiries o Analytical procedures

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Chapter 5 – Evidence and Documentation  Assertions (including example of each)  Existence/occurrence  Completeness  Valuation  Rights and obligations  Presentation and disclosure  Audit evidence  Quality versus quantity (appropriateness versus sufficiency)  Audit procedures for obtaining audit evidence  Types of audit procedures o Risk assessment procedures o Tests of controls o Substantive procedures  Inspection of records or documents  Inspection of tangible assets  Observation  Inquiry  External confirmation  Recalculation  Reperformance  Analytical procedures  Scanning  Audit testing hierarchy

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ACC 451 Final Exam Review Sheet  

Assurance bucket analogy Audit documentation

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Chapters 6 and 7 (Internal Controls)  Definition of ICs  Components of ICs  Limitations of ICs  Planning an audit strategy  Substantive strategy  Reliance strategy  Evaluating control deficiencies  Different types of deficiencies  Communicating control deficiencies  Performing an IC audit  Management versus auditor responsibilities  Using the work of others  Remediation of material weaknesses  Written representations  Auditor reporting on ICFR o Types of opinions

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Chapters 8 and 9 (Audit Sampling)  Audit sampling definition and use  Sampling risk versus nonsampling risk  Types of sampling risk  Nonstatistical versus statistical sampling  Types of statistical sampling techniques  Attribute sampling  Monetary-unit sampling  Steps in performing sampling procedures  Components of determining sample size (and how each affects the sample size) o Confidence level o Tolerable deviation rate o Expected population deviation rate  Sample deviation and upper deviation rates o Including final conclusions of testing

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ACC 451 Final Exam Review Sheet 

Chapter 10 (Auditing the Revenue Process)  Revenue process  Types of documents and records  Major functions in the revenue process  Test of controls for revenues  Occurrence assertion  Completeness assertion  Authorization assertion  Accuracy assertion  Cutoff assertion  Classification assertion  Substantive procedures for revenue  Substantive analytical procedures  Test of details o Substantive tests of transactions o Tests of details of disclosures o Tests of details of account balances  A/R confirmations  Positive versus negative confirmations

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Chapter 11 (Auditing the Purchasing Process)  Purchasing process – accounts affected  Purchase transactions  Cash disbursement transactions  Purchase returns transactions  Types of documents and records  Major functions in the purchasing process  Key segregation of duties  Test of Controls for Purchase Transactions  Assertions, possible misstatements, control activities, test of controls  Test of Controls for Cash Disbursement Transactions  Assertions, possible misstatements, control activities, test of controls  Substantive Procedures  Substantial analytical procedures  Test of details o Substantive tests of transactions o Tests of details of disclosures o Tests of details of account balances

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