Question 1

Which of the following would be a Type II subsequent event?

Accepted Answer

A) Information becomes available that provides evidence about the valuation of an estimate or reserve that had been accrued at year end. 
B) A sale of inventory below carrying value provides evidence that the net realizable value was less than cost at year end. 
C) A stock dividend or split that takes place during the subsequent period should be disclosed.In addition,earnings-per-share figures should be adjusted to show the retroactive effect of the stock dividend or split. 
D) A material change occurs in the value of investment securities after the balance sheet date. 
A) Information becomes available that provides evidence about the valuation of an estimate or reserve that had been accrued at year end. 
B) A sale of inventory below carrying value provides evidence that the net realizable value was less than cost at year end. 
C) A stock dividend or split that takes place during the subsequent period should be disclosed.In addition,earnings-per-share figures should be adjusted to show the retroactive effect of the stock dividend or split. 
D) A material change occurs in the value of investment securities after the balance sheet date.

Question 2

Research has shown that auditors' qualifications of audit reports are better predictors of going-concern problems than are Z-score models.

Accepted Answer

A) True 
 B)False

Question 3

Which one of the following is not a purpose of the management representation letter?

Accepted Answer

A) It clearly documents the audit procedures that were performed by the auditors. 
B) It further acknowledges management's responsibility for the financial statements. 
C) It confirms oral responses obtained by the auditor earlier in the audit and the continuing appropriateness of those responses. 
D) It reduces the possibility of misunderstanding concerning the matters that are the subject of the representations. 
A) It clearly documents the audit procedures that were performed by the auditors. 
B) It further acknowledges management's responsibility for the financial statements. 
C) It confirms oral responses obtained by the auditor earlier in the audit and the continuing appropriateness of those responses. 
D) It reduces the possibility of misunderstanding concerning the matters that are the subject of the representations.

Question 4

If an omission of an important audit procedure is discovered,the auditor should immediately issue a disclaimer of opinion for the audit.

Accepted Answer

A) True 
 B)False

Question 5

In addition to risk factors,an important consideration in client continuance decisions involves the audit firm's growth strategy.

Accepted Answer

A) True 
 B)False

Question 6

The audit committee is typically independent of the board of directors.

Accepted Answer

A) True 
 B)False

Question 7

Events or transactions occurring after the balance sheet date and before the audit report date,can be useful in identifying and evaluating the reasonableness of estimates.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is the best example of a Type I subsequent event?

Accepted Answer

A) A related-party transaction occurs during the course of the audit. 
B) The company defaults on its line-of-credit with the bank subsequent to year end but previous to the release of the audit opinion. 
C) Litigation that was accrued as a liability in the year under audit is settled subsequent to year-end for an amount in excess of estimates. 
D) The company initiates an initial public offering subsequent to year-end. 
A) A related-party transaction occurs during the course of the audit. 
B) The company defaults on its line-of-credit with the bank subsequent to year end but previous to the release of the audit opinion. 
C) Litigation that was accrued as a liability in the year under audit is settled subsequent to year-end for an amount in excess of estimates. 
D) The company initiates an initial public offering subsequent to year-end.

Question 9

Engagement Quality Review Morgan Thompson,CPA is a partner in a medium-sized CPA firm and takes an active part in the conduct of every audit she supervises.She follows the practice of reviewing all audit files of staff auditors on her team as soon as it is convenient,rather than waiting until the end of the audit.When the audit is nearly finished,Thompson reviews the audit files again to make sure that she has not missed anything significant.Because she makes most of the major decisions on the audit,there is rarely anything that requires further investigation.When she completes the review,she prepares a draft of the financial statements,gets them approved by management,and has them assembled in her firm's office.No other partner reviews the audit documentation,because Thompson is responsible for signing the audit reports. REQUIRED: (1)Evaluate the practice of not having a concurring partner review of the audit documentation by another partner in the firm,(2)explain some of the procedures the reviewer should perform as part of the review process,and (3)what documentation should be included.

Accepted Answer

(1)By not having a review of the audit d

Question 10

A management letter is the same as a management representation letter.

Accepted Answer

A) True 
 B)False

Question 11

Disclosures can be made either on the face of the financial statements in the form of classifications or in parenthetical notations and/or in the notes to the statements.

Accepted Answer

A) True 
 B)False

Question 12

Auditors should obtain a management representation letter at the end of each audit.

Accepted Answer

A) True 
 B)False

Question 13

Auditors should have heightened skepticism regarding period-end adjusting journal entries that relate to accounts with significant estimates.

Accepted Answer

A) True 
 B)False

Question 14

Auditors are required to evaluate the likelihood of each client continuing as a going concern for a reasonable period into the foreseeable future.

Accepted Answer

A) True 
 B)False

Question 15

When responding to the auditor as a result of the audit client's letter of inquiry,how might the attorney limit the response?

Accepted Answer

A) Limit the response to litigations in process. 
B) Limit the response to asserted claims. 
C) Limit the response to matters to which the attorney has given substantive attention in the form of legal consultation or representation. 
D) Limit the response to items which the attorney believes will result in loss to the client. 
A) Limit the response to litigations in process. 
B) Limit the response to asserted claims. 
C) Limit the response to matters to which the attorney has given substantive attention in the form of legal consultation or representation. 
D) Limit the response to items which the attorney believes will result in loss to the client.

Question 16

An audit opinion is a guarantee that the business is a going concern.

Accepted Answer

A) True 
 B)False

Question 17

When management is unable to provide an explanation for a previously unrecognized risk identified through the analytical procedures,the auditor must issue an adverse opinion.

Accepted Answer

A) True 
 B)False

Question 18

A management letter is not required.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not a main provision of the Foreign Corrupt Practices Act of 1977 (FCPA)?

Accepted Answer

A) No U.S.person or companies that have securities listed on U.S.markets may make a payment to a foreign official for the purpose of obtaining or retaining business. 
B) Companies that have securities listed on U.S.markets must make and keep financial records that accurately and fairly reflect the transactions of the company. 
C) Designing and maintaining internal accounting controls is the role of internal auditors when management conducts business in a foreign country. 
D) Certain payments made to an official to expedite the performance of the duties that the official would already be bound to perform are acceptable. 
A) No U.S.person or companies that have securities listed on U.S.markets may make a payment to a foreign official for the purpose of obtaining or retaining business. 
B) Companies that have securities listed on U.S.markets must make and keep financial records that accurately and fairly reflect the transactions of the company. 
C) Designing and maintaining internal accounting controls is the role of internal auditors when management conducts business in a foreign country. 
D) Certain payments made to an official to expedite the performance of the duties that the official would already be bound to perform are acceptable.

Question 20

Which of the following is not a typical analytical procedure for the completion of the audit?

Accepted Answer

A) Ratio analysis. 
B) Common-size analysis. 
C) Changes from the prior year. 
D) All of the above would typically be used. 
A) Ratio analysis. 
B) Common-size analysis. 
C) Changes from the prior year. 
D) All of the above would typically be used.

Which of the following would be a Type II subsequent event?

Research has shown that auditors' qualifications of audit reports are better predictors of going-concern problems than are Z-score models.

Which one of the following is not a purpose of the management representation letter?

If an omission of an important audit procedure is discovered,the auditor should immediately issue a disclaimer of opinion for the audit.

In addition to risk factors,an important consideration in client continuance decisions involves the audit firm's growth strategy.

The audit committee is typically independent of the board of directors.

Events or transactions occurring after the balance sheet date and before the audit report date,can be useful in identifying and evaluating the reasonableness of estimates.

Which of the following is the best example of a Type I subsequent event?

A management letter is the same as a management representation letter.

Disclosures can be made either on the face of the financial statements in the form of classifications or in parenthetical notations and/or in the notes to the statements.

Auditors should obtain a management representation letter at the end of each audit.

Auditors should have heightened skepticism regarding period-end adjusting journal entries that relate to accounts with significant estimates.

Auditors are required to evaluate the likelihood of each client continuing as a going concern for a reasonable period into the foreseeable future.

When responding to the auditor as a result of the audit client's letter of inquiry,how might the attorney limit the response?

An audit opinion is a guarantee that the business is a going concern.

When management is unable to provide an explanation for a previously unrecognized risk identified through the analytical procedures,the auditor must issue an adverse opinion.

A management letter is not required.

Which of the following is not a main provision of the Foreign Corrupt Practices Act of 1977 (FCPA)?

Which of the following is not a typical analytical procedure for the completion of the audit?

Auditing: Integral to the Economy

The Risk of Fraud and Mechanisms to Address Fraud: Regulation,corporate Governance,and Audit Quality

Internal Control Over Financial Reporting: Managements Responsibilities and Importance to the External Auditors

Professional Liability and the Need for Quality Auditor Judgments and Ethical Decisions

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, use, impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters

Exam 14: Activities Required in Completing a Quality Audit

Which of the following would be a Type II subsequent event?

Research has shown that auditors' qualifications of audit reports are better predictors of going-concern problems than are Z-score models.

Which one of the following is not a purpose of the management representation letter?

If an omission of an important audit procedure is discovered,the auditor should immediately issue a disclaimer of opinion for the audit.

In addition to risk factors,an important consideration in client continuance decisions involves the audit firm's growth strategy.

The audit committee is typically independent of the board of directors.

Events or transactions occurring after the balance sheet date and before the audit report date,can be useful in identifying and evaluating the reasonableness of estimates.

Which of the following is the best example of a Type I subsequent event?

A management letter is the same as a management representation letter.

Disclosures can be made either on the face of the financial statements in the form of classifications or in parenthetical notations and/or in the notes to the statements.

Auditors should obtain a management representation letter at the end of each audit.

Auditors should have heightened skepticism regarding period-end adjusting journal entries that relate to accounts with significant estimates.

Auditors are required to evaluate the likelihood of each client continuing as a going concern for a reasonable period into the foreseeable future.

When responding to the auditor as a result of the audit client's letter of inquiry,how might the attorney limit the response?

An audit opinion is a guarantee that the business is a going concern.

When management is unable to provide an explanation for a previously unrecognized risk identified through the analytical procedures,the auditor must issue an adverse opinion.

A management letter is not required.

Which of the following is not a main provision of the Foreign Corrupt Practices Act of 1977 (FCPA)?

Which of the following is not a typical analytical procedure for the completion of the audit?

Auditing: Integral to the Economy

The Risk of Fraud and Mechanisms to Address Fraud: Regulation,corporate Governance,and Audit Quality

Internal Control Over Financial Reporting: Managements Responsibilities and Importance to the External Auditors

Professional Liability and the Need for Quality Auditor Judgments and Ethical Decisions

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, use, impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters