Question 1

Which of the following individuals should sign the management representation letter?

Accepted Answer

A) The members of the audit committee and board of directors. 
B) The chief executive officer and the chief financial officer. 
C) The chief financial officer and the treasurer. 
D) The controller and the auditor. 
A) The members of the audit committee and board of directors. 
B) The chief executive officer and the chief financial officer. 
C) The chief financial officer and the treasurer. 
D) The controller and the auditor.

Question 2

If the auditor determines that informative disclosures are not reasonably adequate,the auditor must identify that fact in the auditor's report.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following correctly states the period for which the auditor is responsible for subsequent events?

Accepted Answer

A) The balance sheet date to the date the audit report is issued. 
B) The balance sheet date to the end of field work. 
C) The balance sheet date to the date of subsequent discovery of omitted procedures. 
D) All of the above. 
A) The balance sheet date to the date the audit report is issued. 
B) The balance sheet date to the end of field work. 
C) The balance sheet date to the date of subsequent discovery of omitted procedures. 
D) All of the above.

Question 4

Client Acceptance Newburg Company is in an industry in the early development stage,where there are minimal barriers to entry to the client's business model.Newburg Company's audit committee decided to put their 2014 audit out for bids.One of the Big Four CPA firms had performed their audits from 2011-2013,and although happy with the previous auditor,the audit committee believed they should rotate to another firm.On the last audit,the Big Four's audit fees were $500,000.Barnaby,CPAs,came in as the low bidder,making a proposal to Newburg Company regarding audit fees for 2014.Their proposed audit fee was $250,000. Required: (1)Based on this scenario,describe the ethical decisions that an auditor must make during portfolio management decisions such as the client acceptance and client continuance decision.What is the relationship between ethics and high audit quality? (2)What issues should the client's audit committee consider before going with the lowest bid?

Accepted Answer

(1)The ethical decisions that come into

Question 5

Testing subsequent events List the audit procedures to be performed to determine if subsequent events have occurred and have been appropriately addressed.

Accepted Answer

The audit procedures performed when test

Question 6

If the auditor concludes that there may be a going-concern problem,which of the following is not typically evaluated to determine the reasonableness of management's plans to overcome this problem?

Accepted Answer

A) Management's assumption about increasing prices or market share in relationship to current industry developments. 
B) Management's assumptions about cost savings related to a reduction in the work force should be recomputed and evaluated to determine any hidden costs. 
C) Management's past track record related to delaying unnecessary expenditures. 
D) Management's assumptions about selling off assets and their relationship to current market prices. 
A) Management's assumption about increasing prices or market share in relationship to current industry developments. 
B) Management's assumptions about cost savings related to a reduction in the work force should be recomputed and evaluated to determine any hidden costs. 
C) Management's past track record related to delaying unnecessary expenditures. 
D) Management's assumptions about selling off assets and their relationship to current market prices.

Question 7

If the auditor continues to have substantial doubt about the client continuing as a going concern,the auditor should evaluate the adequacy of the client's related disclosures.

Accepted Answer

A) True 
 B)False

Question 8

Most audit firms use a schedule to accumulate the known and projected misstatements and the carryover effects of prior-year uncorrected misstatements.Which of the following statements regarding this process is false?

Accepted Answer

A) Adjustments made to correct the financial statements are referred to as booked. 
B) Possible adjustments to the financial statements that are left uncorrected are referred to as waived. 
C) Tax effects are not shown on schedules of correcting errors. 
D) The nature of the misstatement,as well as the quantitative amount,is considered in the judgment of materiality. 
A) Adjustments made to correct the financial statements are referred to as booked. 
B) Possible adjustments to the financial statements that are left uncorrected are referred to as waived. 
C) Tax effects are not shown on schedules of correcting errors. 
D) The nature of the misstatement,as well as the quantitative amount,is considered in the judgment of materiality.

Question 9

According to the Foreign Corrupt Practices Act of 1977 (FCPA),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 and design and maintain an adequate system of internal accounting controls.

Accepted Answer

A) True 
 B)False

Question 10

The auditor should consider matters for disclosure only while gathering evidence during the course of the audit.

Accepted Answer

A) True 
 B)False

Question 11

Client continuance-related risks do not include which of the following key type of risk?

Accepted Answer

A) Client entity characteristics. 
B) Quantitative risk factors. 
C) Entity organizational or governance risks. 
D) All of these are key types of client continuance-related risks. 
A) Client entity characteristics. 
B) Quantitative risk factors. 
C) Entity organizational or governance risks. 
D) All of these are key types of client continuance-related risks.

Question 12

Audit firm culture plays a role in audit firm portfolio management in that some audit firms are willing to provide audits to riskier clients,while other audit firms are not willing to do so.

Accepted Answer

A) True 
 B)False

Question 13

Management letters to clients What is a management letter and how does it differ from a management representation letter?

Accepted Answer

The management letter is a letter from t

Question 14

When the auditor becomes aware of an event that occurs after the audit report date,but before the issuance of the audit report to the client and the event is disclosed in the footnotes,the auditor would date the report as if this fact had been known at year-end.

Accepted Answer

A) True 
 B)False

Question 15

A number of studies of bankruptcies have shown that certain combinations of ratios,like the Altman Z-score,have good predictive power in indicating the likelihood of bankruptcy.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a tool that is best used by the audit team to determine if the client has included all disclosures?

Accepted Answer

A) Management representation letter. 
B) GAAS. 
C) Inquiry of the CFO. 
D) Checklists. 
A) Management representation letter. 
B) GAAS. 
C) Inquiry of the CFO. 
D) Checklists.

Question 17

Procedures such as a cutoff test and a search for unrecorded liabilities are related to subsequent events.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following types of information is not a type of evidence that the auditor should obtain concerning contingencies?

Accepted Answer

A) Information about major contracts in which contingencies may be present. 
B) Documentation of communication with internal and external legal counsel of the client. 
C) Accounts receivable confirmations. 
D) Documentation of contingent liabilities contained in corporate minutes,correspondence from governmental agencies,and bank confirmations. 
A) Information about major contracts in which contingencies may be present. 
B) Documentation of communication with internal and external legal counsel of the client. 
C) Accounts receivable confirmations. 
D) Documentation of contingent liabilities contained in corporate minutes,correspondence from governmental agencies,and bank confirmations.

Question 19

Which of the following is not a required communication with the audit committee?

Accepted Answer

A) Auditor's responsibility under GAAS. 
B) Analytical review. 
C) Audit adjustments. 
D) Uncorrected misstatements. 
A) Auditor's responsibility under GAAS. 
B) Analytical review. 
C) Audit adjustments. 
D) Uncorrected misstatements.

Question 20

Property and casualty insurance premiums are examples of estimates found on financial statements.

Accepted Answer

A) True 
 B)False

Which of the following individuals should sign the management representation letter?

If the auditor determines that informative disclosures are not reasonably adequate,the auditor must identify that fact in the auditor's report.

Which of the following correctly states the period for which the auditor is responsible for subsequent events?

Testing subsequent events List the audit procedures to be performed to determine if subsequent events have occurred and have been appropriately addressed.

If the auditor concludes that there may be a going-concern problem,which of the following is not typically evaluated to determine the reasonableness of management's plans to overcome this problem?

If the auditor continues to have substantial doubt about the client continuing as a going concern,the auditor should evaluate the adequacy of the client's related disclosures.

Most audit firms use a schedule to accumulate the known and projected misstatements and the carryover effects of prior-year uncorrected misstatements.Which of the following statements regarding this process is false?

According to the Foreign Corrupt Practices Act of 1977 (FCPA),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 and design and maintain an adequate system of internal accounting controls.

The auditor should consider matters for disclosure only while gathering evidence during the course of the audit.

Client continuance-related risks do not include which of the following key type of risk?

Audit firm culture plays a role in audit firm portfolio management in that some audit firms are willing to provide audits to riskier clients,while other audit firms are not willing to do so.

Management letters to clients What is a management letter and how does it differ from a management representation letter?

When the auditor becomes aware of an event that occurs after the audit report date,but before the issuance of the audit report to the client and the event is disclosed in the footnotes,the auditor would date the report as if this fact had been known at year-end.

A number of studies of bankruptcies have shown that certain combinations of ratios,like the Altman Z-score,have good predictive power in indicating the likelihood of bankruptcy.

Which of the following is a tool that is best used by the audit team to determine if the client has included all disclosures?

Procedures such as a cutoff test and a search for unrecorded liabilities are related to subsequent events.

Which of the following types of information is not a type of evidence that the auditor should obtain concerning contingencies?

Which of the following is not a required communication with the audit committee?

Property and casualty insurance premiums are examples of estimates found on financial statements.

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 individuals should sign the management representation letter?

If the auditor determines that informative disclosures are not reasonably adequate,the auditor must identify that fact in the auditor's report.

Which of the following correctly states the period for which the auditor is responsible for subsequent events?

Testing subsequent events List the audit procedures to be performed to determine if subsequent events have occurred and have been appropriately addressed.

If the auditor concludes that there may be a going-concern problem,which of the following is not typically evaluated to determine the reasonableness of management's plans to overcome this problem?

If the auditor continues to have substantial doubt about the client continuing as a going concern,the auditor should evaluate the adequacy of the client's related disclosures.

Most audit firms use a schedule to accumulate the known and projected misstatements and the carryover effects of prior-year uncorrected misstatements.Which of the following statements regarding this process is false?

According to the Foreign Corrupt Practices Act of 1977 (FCPA),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 and design and maintain an adequate system of internal accounting controls.

The auditor should consider matters for disclosure only while gathering evidence during the course of the audit.

Client continuance-related risks do not include which of the following key type of risk?

Audit firm culture plays a role in audit firm portfolio management in that some audit firms are willing to provide audits to riskier clients,while other audit firms are not willing to do so.

Management letters to clients What is a management letter and how does it differ from a management representation letter?

When the auditor becomes aware of an event that occurs after the audit report date,but before the issuance of the audit report to the client and the event is disclosed in the footnotes,the auditor would date the report as if this fact had been known at year-end.

A number of studies of bankruptcies have shown that certain combinations of ratios,like the Altman Z-score,have good predictive power in indicating the likelihood of bankruptcy.

Which of the following is a tool that is best used by the audit team to determine if the client has included all disclosures?

Procedures such as a cutoff test and a search for unrecorded liabilities are related to subsequent events.

Which of the following types of information is not a type of evidence that the auditor should obtain concerning contingencies?

Which of the following is not a required communication with the audit committee?

Property and casualty insurance premiums are examples of estimates found on financial statements.

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