After identifying a significant related party transaction outside the entity’s normal course of business, an auditor should Evaluate the business purpose of the transaction.
In auditing related party transactions, an auditor ordinarily places primary emphasis on The adequacy of the disclosure of the related party transactions.
Subsequent to issuing a report on audited financial statements, a CPA discovers that the accounts receivable confirmation process omitted a number of accounts that are material, in the aggregate. Which of the following actions should the CPA take immediately? Perform alternative procedures to verify account balances.
An auditor might consider the procedures performed by the internal auditors because They are employees whose work may affect the nature, timing, and extent of audit procedures.
For a reporting entity that has participated in related party transactions that are material, disclosure in the GAAP-based financial statements should include The nature of the relationship and the terms and manner of settlement.
In which of the following instances would it be appropriate for the auditor to refer to the work of an appraiser in the auditor’s report? An adverse opinion is expressed based on a difference of opinion between the client and the auditor’s external specialist about the value of certain assets.
Ajax Company’s auditor concludes that the omission of an audit procedure considered necessary at the time of the prior audit impairs the auditor’s ability to support the previously expressed unmodified opinion. If the auditor believes shareholders are currently relying on the opinion, the auditor should promptly Undertake to apply the omitted procedure or alternate procedures that would provide a satisfactory basis for the opinion.
Auditors should obtain and evaluate sufficient appropriate evidence to support significant accounting estimates. Differences between the estimates best supported by the evidence and those in the financial statements
May be individually reasonable but collectively indicate possible bias.
During the audit of fair value estimates and disclosures, the auditor most likely should
Use the understanding of the audited entity’s process for determining fair value estimates to assess the risks of material misstatement.
The independent auditor should understand the internal audit function as it relates to internal control because The work performed by internal auditors may be a factor in determining the nature, timing, and extent of the independent auditor’s procedures.
Which of the following auditing procedures most likely would assist an auditor in identifying related party transactions?
Reviewing accounting records for nonrecurring transactions recognized near the balance sheet date.
After identifying related party transactions, an auditor most likely would
Determine whether the transactions were approved by the board of directors or other appropriate officials.
An auditor would be most likely to consider modifying an otherwise unmodified opinion if the client’s financial statements include a note on related party transactions Representing without substantiation that certain related party transactions were consummated on terms equivalent to those obtainable in transactions with unrelated parties.
In assessing the competence of internal auditors, an independent CPA most likely would obtain information about the
Quality of the internal auditors’ working paper documentation.
Which of the following statements is correct regarding an independent auditor’s reliance on a client’s internal audit staff?
An independent auditor should assess the organizational status of the director of internal audit.
Which of the following is not considered an auditor’s specialist?
A corporate balance sheet indicates that one of the corporate assets is a patent. An...
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