Question 1

The total likely misstatements found during the audit are equal to the sum of known and projected misstatements.

Accepted Answer

A) True 
 B)False

Question 2

During which of the following phases of the audit are analytical review procedures required by the auditing standards?

Accepted Answer

A) The planning phase of the audit. 
B) The final review phase of the audit. 
C) Both the planning and final review phases of the audit. 
D) Performance of tests of controls. 
A) The planning phase of the audit. 
B) The final review phase of the audit. 
C) Both the planning and final review phases of the audit. 
D) Performance of tests of controls.

Question 3

An example of a Type I subsequent event would be a significant lawsuit that is initiated relating to an incident that occurred after the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 4

Management of AllTech,Inc.refuses to sign the management representation letter given to them in the course of the audit on the grounds that it invades the company's privacy.What does this refusal constitute?

Accepted Answer

A) A violation of full and fair disclosure. 
B) A securities law violation. 
C) A scope limitation. 
D) A breakdown in internal controls. 
A) A violation of full and fair disclosure. 
B) A securities law violation. 
C) A scope limitation. 
D) A breakdown in internal controls.

Question 5

If conclusion is drawn that there may be a going concern problem,which of the following should the auditor do?

Accepted Answer

A) Withdraw from the engagement. 
B) Issue a qualified or adverse opinion. 
C) Identify and assess management's plan to overcome the problem. 
D) Communicate this fact with management that is one level above the controller. 
A) Withdraw from the engagement. 
B) Issue a qualified or adverse opinion. 
C) Identify and assess management's plan to overcome the problem. 
D) Communicate this fact with management that is one level above the controller.

Question 6

The client makes estimates relative to recorded amounts in the financial statements.Which of the following assumptions best represents the auditor's primary focus regarding the reasonableness of such estimates?

Accepted Answer

A) That historical trends are followed. 
B) That income is managed. 
C) That there is an adequate cushion. 
D) That management reverses estimates when opportune. 
A) That historical trends are followed. 
B) That income is managed. 
C) That there is an adequate cushion. 
D) That management reverses estimates when opportune.

Question 7

Contingencies Define what a contingency is,describe the auditor's main concerns about them,and indicate how contingencies should be dealt with by management and the auditor.Besides litigation,claims and assessments,what are some other types of contingencies?

Accepted Answer

Contingencies are potential gain or loss

Question 8

Which of the following statement is false regarding analytical procedures that help auditors assess the overall final presentation of the financial statements?

Accepted Answer

A) By performing a final analytical review,the audit firm will identify any unusual,unexpected,or unexplained relationships that should be resolved before the issuance of the audit report. 
B) A basic five step process for using analytical procedures applies. 
C) Analytical procedures provide evidence on whether certain relationships make sense in light of the knowledge obtained during the audit. 
D) Auditing standards require the use of analytical procedures in the final review phase of the audit to assist in identifying ending account relationships that are unusual. 
A) By performing a final analytical review,the audit firm will identify any unusual,unexpected,or unexplained relationships that should be resolved before the issuance of the audit report. 
B) A basic five step process for using analytical procedures applies. 
C) Analytical procedures provide evidence on whether certain relationships make sense in light of the knowledge obtained during the audit. 
D) Auditing standards require the use of analytical procedures in the final review phase of the audit to assist in identifying ending account relationships that are unusual.

Question 9

The auditor is responsible for evaluating the likelihood of a client continuing as a going concern for a reasonable period of time.What is considered to be a reasonable time period?

Accepted Answer

A) One year from the audit report date. 
B) One year from the last day of field work. 
C) One year from the balance sheet date. 
D) Two years from the balance sheet date. 
A) One year from the audit report date. 
B) One year from the last day of field work. 
C) One year from the balance sheet date. 
D) Two years from the balance sheet date.

Question 10

Auditors routinely review the MD&A to provide reasonable assurance that it does not contain information that is factually inaccurate or inconsistent with the audited portion of the financial statements and accompanying footnotes.

Accepted Answer

A) True 
 B)False

Question 11

Management will often resist a going-concern modification because investors,lenders,and customers may lose faith in the business.

Accepted Answer

A) True 
 B)False

Question 12

The AICPA Auditing Standards Board (ASB)requires a 5-year mandatory cooling off period for partner rotation.

Accepted Answer

A) True 
 B)False

Question 13

Management representation letters Describe the purpose of the management representation letter.

Accepted Answer

The purposes of the management represent

Question 14

At the end of an audit,adjustments that are "waived" will remain uncorrected.

Accepted Answer

A) True 
 B)False

Question 15

A cooling off period is the number of years after which the individual auditor or audit firm may resume its prior role with the audit client.

Accepted Answer

A) True 
 B)False

Question 16

If omitted audit procedures cannot be performed,the auditor should extend previous work done and modify the report,if necessary.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following would be considered "the nature of a misstatement" that might make it material?

Accepted Answer

A) Comparing the sum of known and projected misstatements to total current assets. 
B) Comparing the sum of known and projected misstatements to total current liabilities. 
C) Comparing the sum of known and projected misstatements to pretax income. 
D) Having the effect of changing a positive earnings trend to a negative earnings trend. 
A) Comparing the sum of known and projected misstatements to total current assets. 
B) Comparing the sum of known and projected misstatements to total current liabilities. 
C) Comparing the sum of known and projected misstatements to pretax income. 
D) Having the effect of changing a positive earnings trend to a negative earnings trend.

Question 18

Disclosures You are a staff auditor on the audit of Cosmo Technologies,Inc.The audit partner asks you to carefully read the new mortgage contract with the Hometown Bank and abstract all pertinent information that might be needed for a financial disclosure. Required: (1)List the information in a mortgage that is likely to be relevant to the auditor. (2)What are the pros and cons of using a disclosure checklist for this task?

Accepted Answer

(1)The information in a mortgage that is

Question 19

If substantial doubt remains about going concern for a client at the end of the audit,then which of the following reports should the auditor typically issue?

Accepted Answer

A) Issue an unqualified audit report. 
B) Issue an unqualified audit report with an explanatory paragraph. 
C) Issue a qualified report. 
D) Issue an adverse report. 
A) Issue an unqualified audit report. 
B) Issue an unqualified audit report with an explanatory paragraph. 
C) Issue a qualified report. 
D) Issue an adverse report.

Question 20

Which one of the following would be the most effective procedure for discovering material Type II subsequent events?

Accepted Answer

A) Updating the search for unrecorded liabilities. 
B) Resending all bank confirmations returned. 
C) Reading of the minutes of board of directors' meetings 
D) Surprise cash count at random locations. 
A) Updating the search for unrecorded liabilities. 
B) Resending all bank confirmations returned. 
C) Reading of the minutes of board of directors' meetings 
D) Surprise cash count at random locations.

The total likely misstatements found during the audit are equal to the sum of known and projected misstatements.

During which of the following phases of the audit are analytical review procedures required by the auditing standards?

An example of a Type I subsequent event would be a significant lawsuit that is initiated relating to an incident that occurred after the balance sheet date.

Management of AllTech,Inc.refuses to sign the management representation letter given to them in the course of the audit on the grounds that it invades the company's privacy.What does this refusal constitute?

If conclusion is drawn that there may be a going concern problem,which of the following should the auditor do?

The client makes estimates relative to recorded amounts in the financial statements.Which of the following assumptions best represents the auditor's primary focus regarding the reasonableness of such estimates?

Contingencies Define what a contingency is,describe the auditor's main concerns about them,and indicate how contingencies should be dealt with by management and the auditor.Besides litigation,claims and assessments,what are some other types of contingencies?

Which of the following statement is false regarding analytical procedures that help auditors assess the overall final presentation of the financial statements?

The auditor is responsible for evaluating the likelihood of a client continuing as a going concern for a reasonable period of time.What is considered to be a reasonable time period?

Auditors routinely review the MD&A to provide reasonable assurance that it does not contain information that is factually inaccurate or inconsistent with the audited portion of the financial statements and accompanying footnotes.

Management will often resist a going-concern modification because investors,lenders,and customers may lose faith in the business.

The AICPA Auditing Standards Board (ASB)requires a 5-year mandatory cooling off period for partner rotation.

Management representation letters Describe the purpose of the management representation letter.

At the end of an audit,adjustments that are "waived" will remain uncorrected.

A cooling off period is the number of years after which the individual auditor or audit firm may resume its prior role with the audit client.

If omitted audit procedures cannot be performed,the auditor should extend previous work done and modify the report,if necessary.

Which of the following would be considered "the nature of a misstatement" that might make it material?

If substantial doubt remains about going concern for a client at the end of the audit,then which of the following reports should the auditor typically issue?

Which one of the following would be the most effective procedure for discovering material Type II subsequent events?

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

The total likely misstatements found during the audit are equal to the sum of known and projected misstatements.

During which of the following phases of the audit are analytical review procedures required by the auditing standards?

An example of a Type I subsequent event would be a significant lawsuit that is initiated relating to an incident that occurred after the balance sheet date.

Management of AllTech,Inc.refuses to sign the management representation letter given to them in the course of the audit on the grounds that it invades the company's privacy.What does this refusal constitute?

If conclusion is drawn that there may be a going concern problem,which of the following should the auditor do?

The client makes estimates relative to recorded amounts in the financial statements.Which of the following assumptions best represents the auditor's primary focus regarding the reasonableness of such estimates?

Contingencies Define what a contingency is,describe the auditor's main concerns about them,and indicate how contingencies should be dealt with by management and the auditor.Besides litigation,claims and assessments,what are some other types of contingencies?

Which of the following statement is false regarding analytical procedures that help auditors assess the overall final presentation of the financial statements?

The auditor is responsible for evaluating the likelihood of a client continuing as a going concern for a reasonable period of time.What is considered to be a reasonable time period?

Auditors routinely review the MD&A to provide reasonable assurance that it does not contain information that is factually inaccurate or inconsistent with the audited portion of the financial statements and accompanying footnotes.

Management will often resist a going-concern modification because investors,lenders,and customers may lose faith in the business.

The AICPA Auditing Standards Board (ASB)requires a 5-year mandatory cooling off period for partner rotation.

Management representation letters Describe the purpose of the management representation letter.

At the end of an audit,adjustments that are "waived" will remain uncorrected.

A cooling off period is the number of years after which the individual auditor or audit firm may resume its prior role with the audit client.

If omitted audit procedures cannot be performed,the auditor should extend previous work done and modify the report,if necessary.

Which of the following would be considered "the nature of a misstatement" that might make it material?

If substantial doubt remains about going concern for a client at the end of the audit,then which of the following reports should the auditor typically issue?

Which one of the following would be the most effective procedure for discovering material Type II subsequent events?

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