Question 1

Assessing disclosures does not require reasonable assurance of which of the following?

Accepted Answer

A) The disclosures are understandable to users. 
B) Disclosed events and transactions have occurred and pertain to the entity. 
C) All material and immaterial disclosures have been reported. 
D) The information is disclosed accurately and at appropriate amounts. 
A) The disclosures are understandable to users. 
B) Disclosed events and transactions have occurred and pertain to the entity. 
C) All material and immaterial disclosures have been reported. 
D) The information is disclosed accurately and at appropriate amounts.

Question 2

Assume that a major customer of the company that you are auditing files for bankruptcy during the subsequent period because of a deteriorating financial condition.Neither you nor the client becomes aware of the event until the bankruptcy filing is reported.What type of subsequent event would this be?

Accepted Answer

A) Type I subsequent event 
B) Type II subsequent event 
C) Neither Type I or Type II 
D) Both Type I and Type II 
A) Type I subsequent event 
B) Type II subsequent event 
C) Neither Type I or Type II 
D) Both Type I and Type II

Question 3

The materiality of a misstatement is based on only the quantitative amount of the misstatement.

Accepted Answer

A) True 
 B)False

Question 4

An audit firm culture that emphasizes "doing the right thing" does not incorporate which of the following to enhance audit quality?

Accepted Answer

A) Encouraging auditors to seek consultation with other members of the audit firm. 
B) Yielding to management's demands in order to promote additional service engagements. 
C) Taking sufficient time to deal with difficult client issues. 
D) Emphasizing long-term reputation over the immediate satisfaction of client preferences. 
A) Encouraging auditors to seek consultation with other members of the audit firm. 
B) Yielding to management's demands in order to promote additional service engagements. 
C) Taking sufficient time to deal with difficult client issues. 
D) Emphasizing long-term reputation over the immediate satisfaction of client preferences.

Question 5

Most audit firms use a schedule to accumulate the known and projected misstatements and the carryover effects of prior-year uncorrected misstatements.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is false regarding partner rotation and audit firm rotation?

Accepted Answer

A) During a cooling off period,the individual or audit firm may not engage in any meaningful audit-related interactions with the client. 
B) Rules are the same internationally regarding the terms of mandatory partner rotation and mandatory audit firm rotation. 
C) The issue associated with mandatory partner or audit firm rotation is the familiarity threat. 
D) Having a longstanding relationship with the client could aid audit quality because of the knowledge that the partner and members of the engagement team gain through time. 
A) During a cooling off period,the individual or audit firm may not engage in any meaningful audit-related interactions with the client. 
B) Rules are the same internationally regarding the terms of mandatory partner rotation and mandatory audit firm rotation. 
C) The issue associated with mandatory partner or audit firm rotation is the familiarity threat. 
D) Having a longstanding relationship with the client could aid audit quality because of the knowledge that the partner and members of the engagement team gain through time.

Question 7

A policy providing a reserve for returned products at the original sales price rather than at replacement cost violates GAAP.

Accepted Answer

A) True 
 B)False

Question 8

Contingent liabilities The auditor will discuss contingencies with the appropriate executives and management of the company.Identify at least five sources of evidence to corroborate management's representations regarding contingencies.

Accepted Answer

Corroborating evidence of contingent lia

Question 9

Which one of the following is not an example of an additional procedure that typically relates to the discovery of subsequent events?

Accepted Answer

A) Partner review of all workpapers. 
B) Reading interim financial statements and comparing them to the audited statements to note significant changes. 
C) Reading the board of directors' minutes for all meetings during the year and after year- end through the end of field work. 
D) Management inquiry. 
A) Partner review of all workpapers. 
B) Reading interim financial statements and comparing them to the audited statements to note significant changes. 
C) Reading the board of directors' minutes for all meetings during the year and after year- end through the end of field work. 
D) Management inquiry.

Question 10

If management or those charged with governance do not demonstrate a commitment to internal control over noncompliance with laws and regulations,then the auditor should withdraw from the engagement.

Accepted Answer

A) True 
 B)False

Question 11

PCAOB AS 14 provides important insight that auditors must consider as they decide whether management's refusal to correct a detected misstatement is indicative of intentional bias.

Accepted Answer

A) True 
 B)False

Question 12

A deviation from historical patterns is one of the factors that an auditor focuses on when evaluating the reasonableness of an estimate.

Accepted Answer

A) True 
 B)False

Question 13

Multiple internal control deficiencies in the same cycle may actually decrease the likelihood of misstatement in that cycle.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is explicitly required by the Sarbanes-Oxley Act of 2002 for audits of public companies?

Accepted Answer

A) Subsequent event review. 
B) Engagement quality review. 
C) Disclosure of all contingent liabilities. 
D) Seven year client rotation. 
A) Subsequent event review. 
B) Engagement quality review. 
C) Disclosure of all contingent liabilities. 
D) Seven year client rotation.

Question 15

Before releasing the audit report,which of the following would the auditor most likely do?

Accepted Answer

A) Issue a management letter. 
B) Perform an analytical review. 
C) Check on a schedule of partner rotation. 
D) Estimate client fee for subsequent services to be performed. 
A) Issue a management letter. 
B) Perform an analytical review. 
C) Check on a schedule of partner rotation. 
D) Estimate client fee for subsequent services to be performed.

Question 16

Which of the following items is not typically requested from the lawyer of a company regarding contingencies?

Accepted Answer

A) Any limitations on the lawyer's response such as not devoting substantial attention to the item or that the amounts are not material. 
B) Information about the attorney's other clients with similar contingencies. 
C) A description of each contingency,as well as progress and action that the company plans to take. 
D) A comment on the completeness of management's list of contingencies and an evaluation. 
A) Any limitations on the lawyer's response such as not devoting substantial attention to the item or that the amounts are not material. 
B) Information about the attorney's other clients with similar contingencies. 
C) A description of each contingency,as well as progress and action that the company plans to take. 
D) A comment on the completeness of management's list of contingencies and an evaluation.

Question 17

If the auditor failed to confirm receivables when that should have been done and it may be too late to confirm now,what should the auditor do?

Accepted Answer

A) Issue an adverse opinion. 
B) Extend the previous work done on subsequent collections to help determine that the receivables existed and were properly valued at the balance sheet date 
C) Automatically decide that the previously issued audit report cannot be supported in light of the omitted procedures. 
D) Issue a disclaimer of opinion. 
A) Issue an adverse opinion. 
B) Extend the previous work done on subsequent collections to help determine that the receivables existed and were properly valued at the balance sheet date 
C) Automatically decide that the previously issued audit report cannot be supported in light of the omitted procedures. 
D) Issue a disclaimer of opinion.

Question 18

Which of the following is not an indicator of a potential going-concern problem?

Accepted Answer

A) Negative trends in profitability. 
B) External matters increasing regulatory requirements. 
C) Significant changes in competition. 
D) An Altman Z-score above 3.0. 
A) Negative trends in profitability. 
B) External matters increasing regulatory requirements. 
C) Significant changes in competition. 
D) An Altman Z-score above 3.0.

Question 19

After an audit report is issued,the auditor discovers through a peer review that an important audit procedure has been omitted.In this case,what should the auditor do?

Accepted Answer

A) Notify all parties known to be relying on the report. 
B) Immediately request the client recall the report. 
C) Contact his or her professional liability insurance carrier. 
D) Determine whether the report can still be supported in light of the omitted procedure. 
A) Notify all parties known to be relying on the report. 
B) Immediately request the client recall the report. 
C) Contact his or her professional liability insurance carrier. 
D) Determine whether the report can still be supported in light of the omitted procedure.

Question 20

As part of a quality audit,the audit firm must have policies and procedures in place for conducting an engagement quality review of each audit before issuing the audit opinion for public companies.

Accepted Answer

A) True 
 B)False

Assessing disclosures does not require reasonable assurance of which of the following?

The materiality of a misstatement is based on only the quantitative amount of the misstatement.

An audit firm culture that emphasizes "doing the right thing" does not incorporate which of the following to enhance audit quality?

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 is false regarding partner rotation and audit firm rotation?

A policy providing a reserve for returned products at the original sales price rather than at replacement cost violates GAAP.

Contingent liabilities The auditor will discuss contingencies with the appropriate executives and management of the company.Identify at least five sources of evidence to corroborate management's representations regarding contingencies.

Which one of the following is not an example of an additional procedure that typically relates to the discovery of subsequent events?

If management or those charged with governance do not demonstrate a commitment to internal control over noncompliance with laws and regulations,then the auditor should withdraw from the engagement.

PCAOB AS 14 provides important insight that auditors must consider as they decide whether management's refusal to correct a detected misstatement is indicative of intentional bias.

A deviation from historical patterns is one of the factors that an auditor focuses on when evaluating the reasonableness of an estimate.

Multiple internal control deficiencies in the same cycle may actually decrease the likelihood of misstatement in that cycle.

Which of the following is explicitly required by the Sarbanes-Oxley Act of 2002 for audits of public companies?

Before releasing the audit report,which of the following would the auditor most likely do?

Which of the following items is not typically requested from the lawyer of a company regarding contingencies?

If the auditor failed to confirm receivables when that should have been done and it may be too late to confirm now,what should the auditor do?

Which of the following is not an indicator of a potential going-concern problem?

After an audit report is issued,the auditor discovers through a peer review that an important audit procedure has been omitted.In this case,what should the auditor do?

As part of a quality audit,the audit firm must have policies and procedures in place for conducting an engagement quality review of each audit before issuing the audit opinion for public companies.

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

Assessing disclosures does not require reasonable assurance of which of the following?

The materiality of a misstatement is based on only the quantitative amount of the misstatement.

An audit firm culture that emphasizes "doing the right thing" does not incorporate which of the following to enhance audit quality?

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 is false regarding partner rotation and audit firm rotation?

A policy providing a reserve for returned products at the original sales price rather than at replacement cost violates GAAP.

Contingent liabilities The auditor will discuss contingencies with the appropriate executives and management of the company.Identify at least five sources of evidence to corroborate management's representations regarding contingencies.

Which one of the following is not an example of an additional procedure that typically relates to the discovery of subsequent events?

If management or those charged with governance do not demonstrate a commitment to internal control over noncompliance with laws and regulations,then the auditor should withdraw from the engagement.

PCAOB AS 14 provides important insight that auditors must consider as they decide whether management's refusal to correct a detected misstatement is indicative of intentional bias.

A deviation from historical patterns is one of the factors that an auditor focuses on when evaluating the reasonableness of an estimate.

Multiple internal control deficiencies in the same cycle may actually decrease the likelihood of misstatement in that cycle.

Which of the following is explicitly required by the Sarbanes-Oxley Act of 2002 for audits of public companies?

Before releasing the audit report,which of the following would the auditor most likely do?

Which of the following items is not typically requested from the lawyer of a company regarding contingencies?

If the auditor failed to confirm receivables when that should have been done and it may be too late to confirm now,what should the auditor do?

Which of the following is not an indicator of a potential going-concern problem?

After an audit report is issued,the auditor discovers through a peer review that an important audit procedure has been omitted.In this case,what should the auditor do?

As part of a quality audit,the audit firm must have policies and procedures in place for conducting an engagement quality review of each audit before issuing the audit opinion for public companies.

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