AUD - ME 2 WMC QUESTIONS AND VERIFIED
ANSWERS
Do registered audit firms need to report the critical accounting policies and practices
used to the audit committee? - Answers - Yes
Is this statement true?
'A firm that does not have an adequate system of quality control may still have complied
with professional standards on a specific engagement.' - Answers - Yes
Is this statement true?
'The control environment is one of the quality control standards' - Answers - No, the
control environment is one of the components of internal control
Should the effect of the auditor's conclusion on the auditor's report be included in the
audit documentation? - Answers - Yes
Should mitigating factors considered insignificant be included in the audit
documentation? - Answers - No, only significant factors
If there are a lot of transactions in an account, should you focus on the transaction in
the account or the ending balance? - Answers - The ending balance as it would be more
efficient than checking every transaction
If there are only a few transactions in an account, should you focus on the transaction in
the account or the ending balance? - Answers - The transactions
What circumstances require modification of the accountant's report on a review of
interim financial information of a publicly held entity prepared on the basis of GAAP? -
Answers - lack of adherence to GAAP and lack of adequate dislcosure
Does an accounting change or an uncertainty require modification of the accountant's
report on a review of interim financial information of a publicly held entity prepared on
the basis of GAAP? - Answers - No they do not as long as disclosure is adequate
Would an auditor apply materiality limits to fraud involving employees with significant
roles in the internal control structure when obtaining specific written client
representations? - Answers - No, even immaterial fraud may have serious implications
with respect to the integrity of the employees involved
ANSWERS
Do registered audit firms need to report the critical accounting policies and practices
used to the audit committee? - Answers - Yes
Is this statement true?
'A firm that does not have an adequate system of quality control may still have complied
with professional standards on a specific engagement.' - Answers - Yes
Is this statement true?
'The control environment is one of the quality control standards' - Answers - No, the
control environment is one of the components of internal control
Should the effect of the auditor's conclusion on the auditor's report be included in the
audit documentation? - Answers - Yes
Should mitigating factors considered insignificant be included in the audit
documentation? - Answers - No, only significant factors
If there are a lot of transactions in an account, should you focus on the transaction in
the account or the ending balance? - Answers - The ending balance as it would be more
efficient than checking every transaction
If there are only a few transactions in an account, should you focus on the transaction in
the account or the ending balance? - Answers - The transactions
What circumstances require modification of the accountant's report on a review of
interim financial information of a publicly held entity prepared on the basis of GAAP? -
Answers - lack of adherence to GAAP and lack of adequate dislcosure
Does an accounting change or an uncertainty require modification of the accountant's
report on a review of interim financial information of a publicly held entity prepared on
the basis of GAAP? - Answers - No they do not as long as disclosure is adequate
Would an auditor apply materiality limits to fraud involving employees with significant
roles in the internal control structure when obtaining specific written client
representations? - Answers - No, even immaterial fraud may have serious implications
with respect to the integrity of the employees involved
