Using microcomputers in auditing may affect the methods used to review the work of staff assistants because:
Choice 'd' is correct. When using microcomputers in an auditing task, audit documentation may not contain readily observable details of calculations (e.g., present value calculations). In order to review assistants' work, a supervisor may have to examine the formulas used on the microcomputer rather than simply examining the audit documentation.
Choice 'a' is incorrect. The standards of fieldwork, specifically planning and supervision, would not change with the use of microcomputers on the audit.
Choice 'b' is incorrect. Consulting service personnel should not be necessary to document the supervisory review.
Choice 'c' is incorrect. The familiarity of supervisory personnel with the capabilities and limitations of microcomputers would not have an effect on the review process.
When performing an engagement to review a nonissuer's financial statements, an accountant most likely would:
Choice 'd' is correct. A review is based on inquiry and analytical procedures. The accountant should inquire about actions authorized by the stockholders, the board of directors, or other management groups.
Choice 'a' is incorrect. The accountant is not required to obtain an understanding of internal control in a review engagement under SSARS. An understanding would be required in an audit or in a review of the interim financial statements of a public entity, conducted under auditing (PCAOB) standards.
Choice 'b' is incorrect. Distribution of a review report is not limited; however, each page of the financial statements should be marked, 'See Accountant's Review Report.'
Choice 'c' is incorrect. Confirmation is an auditing procedure used to corroborate stated account balances. A review is based on inquiry and analytical procedures, and would not include confirmation of balances.
To reduce the risks associated with accepting fax responses to requests for confirmations of accounts receivable, an auditor most likely would:
Choice 'b' is correct. In order to validate the legitimacy of a faxed confirmation, the auditor is likely to call the senders to verify the sources and contents.
Choice 'a' is incorrect. Examining shipping documents is an alternative procedure that is more likely to be performed if the confirmation was not received at all.
Choice 'c' is incorrect. Treating the faxes as non-responses would be to ignore an important source of audit evidence. Treating them as unadjusted differences may cause the auditor to conclude that the accounts receivable balance is misstated, when in fact it is not.
Choice 'd' is incorrect. Inspecting the faxes for forgeries or alterations is beyond the professional capability of the CPA.
When planning a sample for a substantive test of details, an auditor should consider tolerable misstatement for the sample. This consideration should:
Choice 'c' is correct. Tolerable misstatement is the maximum monetary misstatement in an account balance that may exist without causing the financial statements to be materially misstateD. Tolerable misstatement is a planning concept related to the auditor's preliminary judgments about materiality levels.
Choice 'a' is incorrect. The auditor's overall business risk is not related to the tolerable misstatement used in planning a sample for a substantive test of details.
Choice 'b' is incorrect. The tolerable misstatement should be adjusted for both qualitative and quantitative factors.
Choice 'd' is incorrect. The auditor should modify his or her consideration of tolerable misstatement if, during the audit process, information used to determine the initial level of tolerable misstatement changes.
