Exam 18: Integrated Audits of Public Companies

Deficiencies in internal control identified by the auditor that are lesser than significant deficiencies

Which must the auditor communicate to management? Known Material Weaknesses Known Significant Deficiencies A) Yes Yes B) Yes No C) No Yes D) No No

PCAOB standards suggest that auditors emphasize nonroutine transactions as contrasted to routine transactions in their consideration of internal control.

Which of the following fits most directly under the control activities components of the COSO IC framework?

Which of the following is a strong indicator that a material weakness in internal control exists?

Assume that an auditor is focusing on two weaknesses in internal control.Although neither is by itself a material weakness,the two significant deficiencies in combination represent a material weakness.The client effectively remediates one of them prior to year-end but does not have time to remediate the other prior to year-end.What type of audit report on internal control is appropriate?

Which must management communicate to the audit committee? Known Material Weaknesses Known Significant Deficiencies A) Yes Yes B) Yes No C) No Yes D) No No

The minimum likelihood of loss involved in the consideration of a possible significant deficiency is:

A client imposed scope limitation relating to the audit of internal control ordinarily results in a qualified report.

Under PCAOB internal control reporting standards,what are the auditor's communication requirements to the audit committee with respect to material weaknesses?

An auditor identified a material weakness in internal control in December.The client was informed and the client corrected the material weakness shortly after year-end (December 31); the auditor agrees that the correction eliminates the material weakness as of January 31.The appropriate audit report on internal control under PCAOB standards on reporting on internal control is:

A material weakness involves a reasonable possibility that what size misstatement will not be prevented or detected?

Which of the following must be included in management's report internal control under section 404 of the Sarbanes/Oxley Act of 2002?

If management's report on internal control discloses a material weakness,the auditors (who agree that it is a material weakness)will issue a report that includes a qualified opinion.

Walkthroughs provide evidence that helps the auditor to: Evaluate design effectiveness Confirm whether controls have of controls been placed in operation A) Yes Yes B) Yes No C) No Yes D) No No

The amount involved with a significant deficiency is at least a material amount.

The PCAOB has outlined a number of circumstances that are indicators of a material weakness.In addition,other control deficiencies may or may not be a material weakness depending upon details of the circumstances involved.Categorize the following: Strong indicator of a material weakness in internal control Other control deficiency * Neither of preceding 2 columns a. Ineffective oversight of external reporting by the audit committee. b. Restatement of previously issued financial statements to reflect the correction of a material misstatement. c. Lack of effective antifraud programs. d. Lack of effective controls over the period-end financial reporting process. e. A deviation identified during tests of controls. f. Identification of material fraud on the part of senior management. g. Identification by the auditors of a material misstatement in circumstances that indicate that the client's internal control would not have detected it. h. A chief internal auditor who reports directly to the audit committee. i. Identification of immaterial fraud on the part of senior management. j. Ineffective oversight of internal control by the audit committee. *May be material weakness,significant deficiency,or lesser deficiency,but is not ordinarily considered a strong indicator of a material weakness in internal control.

Which of the following is a weakness in internal control that allows a reasonable possibility that a significant (but less than material)misstatement may occur and not be detected?

An auditor identified a material weakness in internal control in August.The client was informed and the client corrected the material weakness prior to year-end (December 31); the auditor agrees that the correction eliminates the material weakness prior to year-end.The appropriate audit report on internal control under PCAOB standards on reporting on internal control is:

A material weakness because the oversight of the external financial reporting function by the audit committee is ineffective will ordinarily result in communication to: The Stock Exchange That the PCAOB Company is Listed on A. Yes Yes B. Yes No C. No Yes D. No No