Question 1

Which of the following is the most likely reason for an auditor to issue a modified opinion with a qualification?

Accepted Answer

A)  Inability to gather any sufficient relevant information to form the basis for the opinion 
B)  Misstatements that are material and pervasive 
C)  Going concern issue 
D)  Misstatements that are material but not pervasive 
A)  Inability to gather any sufficient relevant information to form the basis for the opinion 
B)  Misstatements that are material and pervasive 
C)  Going concern issue 
D)  Misstatements that are material but not pervasive

Question 2

Which of the following is an element of ERM?

Accepted Answer

A)  Reducing operational surprises and losses 
B)  Aligning risk appetite and whether fraud has occurred 
C)  Control environment 
D)  Audit risk assessment 
A)  Reducing operational surprises and losses 
B)  Aligning risk appetite and whether fraud has occurred 
C)  Control environment 
D)  Audit risk assessment

Question 3

Which of the following summarizes the essence of general responsibilities of GAAS?

Accepted Answer

A)  Quality of professionals that perform an audit 
B)  Criteria used to judge whether the audit has met quality requirements 
C)  The standards that guide auditors in issuing the audit report 
D)  Whether the auditor obtained sufficient competent evidential matter to render an opinion 
A)  Quality of professionals that perform an audit 
B)  Criteria used to judge whether the audit has met quality requirements 
C)  The standards that guide auditors in issuing the audit report 
D)  Whether the auditor obtained sufficient competent evidential matter to render an opinion

Question 4

Because of the risk of material misstatement due to improper management representations, an audit of financial statements in accordance with GAAS should be performed with:

Accepted Answer

A)  Objective judgment 
B)  Professional skepticism 
C)  Internal controls 
D)  Due diligence 
A)  Objective judgment 
B)  Professional skepticism 
C)  Internal controls 
D)  Due diligence

Question 5

The Tax Inversion case deals with:

Accepted Answer

A)  Whether IFRS should be used for all subsidiaries following an acquisition 
B)  Whether IFRS should replace U.S. GAAP 
C)  Whether a quality reviewer should be chosen from outside the company 
D)  Whether a tax inversion should occur 
A)  Whether IFRS should be used for all subsidiaries following an acquisition 
B)  Whether IFRS should replace U.S. GAAP 
C)  Whether a quality reviewer should be chosen from outside the company 
D)  Whether a tax inversion should occur

Question 6

In the Medicis audit, the auditors failed to complete all of the following except:

Accepted Answer

A)  Failed to issue an unqualified opinion 
B)  Failed to follow GAAS 
C)  Failed to correct control deficiencies 
D)  Failed to obtain adequate evidence related to management representations 
A)  Failed to issue an unqualified opinion 
B)  Failed to follow GAAS 
C)  Failed to correct control deficiencies 
D)  Failed to obtain adequate evidence related to management representations

Question 7

Explain the circumstances under which an auditor should give each of the following opinions:
(a) Unmodified opinion
(b) Unmodified opinion with an emphasis-of-matter paragraph
(c) Qualified opinion
(d) Adverse opinion

Accepted Answer

Unmodified Opinion
Unmodified opinions a

Question 8

One difference between the AICPA auditor's report and that of the PCAOB is:

Accepted Answer

A)  The PCAOB report is not signed by the auditor 
B)  The AICPA report is not signed by the auditor 
C)  The PCAOB report does not have section headings 
D)  Both reports are the same 
A)  The PCAOB report is not signed by the auditor 
B)  The AICPA report is not signed by the auditor 
C)  The PCAOB report does not have section headings 
D)  Both reports are the same

Question 9

Audit documentation is critical to evidence gathering because:

Accepted Answer

A)  It demonstrates that an audit has been conducted 
B)  It demonstrates professional skepticism 
C)  It substitutes for making audit judgments and estimates 
D)  All of the above 
A)  It demonstrates that an audit has been conducted 
B)  It demonstrates professional skepticism 
C)  It substitutes for making audit judgments and estimates 
D)  All of the above

Question 10

The SEC is concerned that auditors don't pay enough attention to qualitative factors affecting materiality because:

Accepted Answer

A)  Qualitative factors may cause quantitatively small misstatements to become material 
B)  Quantitative factors are not always useful 
C)  Quantitative factors cannot be accumulated to assess overall materiality 
D)  All are of concern to the SEC 
A)  Qualitative factors may cause quantitatively small misstatements to become material 
B)  Quantitative factors are not always useful 
C)  Quantitative factors cannot be accumulated to assess overall materiality 
D)  All are of concern to the SEC

Question 11

Under which of the following set of circumstances might the auditors disclaim an opinion?

Accepted Answer

A)  The financial statements contain a departure from generally accepted accounting principles, the effect of which is material 
B)  The auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion 
C)  There has been a material change between periods in the method of the application of accounting principles 
D)  Differences with management that lead to trust issues on the part of the auditor 
A)  The financial statements contain a departure from generally accepted accounting principles, the effect of which is material 
B)  The auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion 
C)  There has been a material change between periods in the method of the application of accounting principles 
D)  Differences with management that lead to trust issues on the part of the auditor

Question 12

Explain each of the three sides of the fraud triangle with respect to how it contributes toward the possibility that fraud in the financial statements may be present. Are there differences with respect to how each element might influence occupational fraud and fraudulent financial statements? Explain.

Accepted Answer

One of the older and more basic concepts

Question 13

Which of the following is not an element of COSO Enterprise Risk Management?

Accepted Answer

A)  Enhancing risk response decisions 
B)  Reducing operating surprises and losses 
C)  Identification of risks and opportunities affecting achievement of an entity's objectives 
D)  Improving deployment of information technology 
A)  Enhancing risk response decisions 
B)  Reducing operating surprises and losses 
C)  Identification of risks and opportunities affecting achievement of an entity's objectives 
D)  Improving deployment of information technology

Question 14

Which of the following is NOT an element of the auditor's responsibility of the AICPA's auditor's report for nonpublic companies?

Accepted Answer

A)  States the auditor's responsibility to express an opinion on the financial statements 
B)  States the audit provides reasonable assurance that the statements are free of material misstatement 
C)  States audit provides reasonable basis for the opinion 
D)  States the audit evaluates the overall financial statement presentation 
A)  States the auditor's responsibility to express an opinion on the financial statements 
B)  States the audit provides reasonable assurance that the statements are free of material misstatement 
C)  States audit provides reasonable basis for the opinion 
D)  States the audit evaluates the overall financial statement presentation

Question 15

On July 1, 2015, the Public Company Accounting Oversight Board issued a concept release to seek public comment on the content and possible uses of a group of potential "audit quality indicators." The indicators are a potential portfolio of quantitative measures that may provide new insights about how to evaluate the quality of audits and how high quality audits are achieved. Taken together with qualitative context, the indicators may inform discussions among those concerned with the financial reporting and auditing process, for example among audit committees and audit firms. Enhanced discussions, in turn, may strengthen audit planning, execution, and communication. The Board sought advice on these subjects through the comment process and were to convene a public roundtable about the concept release, on a date to be determined during the fourth quarter of 2015. The proposed indicators are in the exhibit below.
Required:
Comment on the need for audit quality indicators and any limitations of providing such information in the public domain.
The 28 potential indicators are:

Accepted Answer

The following is taken from a response i

Question 16

Explain the link between the opportunity to commit fraud and corporate governance systems.

Accepted Answer

An important factor in whether the oppor

Question 17

The first step for an auditor who concludes an illegal act exists is to:

Accepted Answer

A)  Bring the matter to the attention of the audit committee 
B)  Bring the matter to the attention of the SEC 
C)  Assess the impact of the illegal act on the financial statements 
D)  Assess the impact of the illegal act on the auditor's opinion 
A)  Bring the matter to the attention of the audit committee 
B)  Bring the matter to the attention of the SEC 
C)  Assess the impact of the illegal act on the financial statements 
D)  Assess the impact of the illegal act on the auditor's opinion

Question 18

The auditors' responsibility to communicate findings with respect to fraud can best be summarized as:

Accepted Answer

A)  Communicate to the audit committee the existence of fraud but not the amount involved 
B)  Communicate to the appropriate level of management both material and immaterial amounts of fraud that are detected 
C)  Communicate to the SEC the existence of fraud but not the amount involved 
D)  Communicate to the SEC both material and immaterial amounts of fraud that are detected 
A)  Communicate to the audit committee the existence of fraud but not the amount involved 
B)  Communicate to the appropriate level of management both material and immaterial amounts of fraud that are detected 
C)  Communicate to the SEC the existence of fraud but not the amount involved 
D)  Communicate to the SEC both material and immaterial amounts of fraud that are detected

Question 19

Confidential client information can be disclosed outside the entity without violating the AICPA Code of Professional Conduct in each of the following situations except when:

Accepted Answer

A)  It is reported to the SEC under Section 10A of the Securities Exchange Act 
B)  It is to comply with the Private Securities Litigation Reform Act 
C)  It protects the auditor's accounting for fraud and illegal acts 
D)  It is allowed for under the Dodd-Frank Financial Reform Act 
A)  It is reported to the SEC under Section 10A of the Securities Exchange Act 
B)  It is to comply with the Private Securities Litigation Reform Act 
C)  It protects the auditor's accounting for fraud and illegal acts 
D)  It is allowed for under the Dodd-Frank Financial Reform Act

Which of the following is the most likely reason for an auditor to issue a modified opinion with a qualification?

Which of the following is an element of ERM?

Which of the following summarizes the essence of general responsibilities of GAAS?

Because of the risk of material misstatement due to improper management representations, an audit of financial statements in accordance with GAAS should be performed with:

The Tax Inversion case deals with:

In the Medicis audit, the auditors failed to complete all of the following except:

Explain the circumstances under which an auditor should give each of the following opinions: (a) Unmodified opinion (b) Unmodified opinion with an emphasis-of-matter paragraph (c) Qualified opinion (d) Adverse opinion

One difference between the AICPA auditor's report and that of the PCAOB is:

Audit documentation is critical to evidence gathering because:

The SEC is concerned that auditors don't pay enough attention to qualitative factors affecting materiality because:

Under which of the following set of circumstances might the auditors disclaim an opinion?

Which of the following is not an element of COSO Enterprise Risk Management?

Which of the following is NOT an element of the auditor's responsibility of the AICPA's auditor's report for nonpublic companies?

Explain the link between the opportunity to commit fraud and corporate governance systems.

The first step for an auditor who concludes an illegal act exists is to:

The auditors' responsibility to communicate findings with respect to fraud can best be summarized as:

Confidential client information can be disclosed outside the entity without violating the AICPA Code of Professional Conduct in each of the following situations except when:

Ethical Reasoning: Implications for Accounting

Cognitive Processes and Ethical Decision Making in Accounting

Organizational Ethics and Corporate Governance

Ethics and Professional Judgment in Accounting

Legal, Regulatory, and Professional Obligations of Auditors

Earnings Management

Ethical Leadership and Decision-Making in Accounting

Filters

Exam 5: Fraud in Financial Statements and Auditor Responsibilities

Which of the following is the most likely reason for an auditor to issue a modified opinion with a qualification?

Which of the following is an element of ERM?

Which of the following summarizes the essence of general responsibilities of GAAS?

Because of the risk of material misstatement due to improper management representations, an audit of financial statements in accordance with GAAS should be performed with:

The Tax Inversion case deals with:

In the Medicis audit, the auditors failed to complete all of the following except:

Explain the circumstances under which an auditor should give each of the following opinions: (a) Unmodified opinion (b) Unmodified opinion with an emphasis-of-matter paragraph (c) Qualified opinion (d) Adverse opinion

One difference between the AICPA auditor's report and that of the PCAOB is:

Audit documentation is critical to evidence gathering because:

The SEC is concerned that auditors don't pay enough attention to qualitative factors affecting materiality because:

Under which of the following set of circumstances might the auditors disclaim an opinion?

Which of the following is not an element of COSO Enterprise Risk Management?

Which of the following is NOT an element of the auditor's responsibility of the AICPA's auditor's report for nonpublic companies?

Explain the link between the opportunity to commit fraud and corporate governance systems.

The first step for an auditor who concludes an illegal act exists is to:

The auditors' responsibility to communicate findings with respect to fraud can best be summarized as:

Confidential client information can be disclosed outside the entity without violating the AICPA Code of Professional Conduct in each of the following situations except when:

Ethical Reasoning: Implications for Accounting

Cognitive Processes and Ethical Decision Making in Accounting

Organizational Ethics and Corporate Governance

Ethics and Professional Judgment in Accounting

Legal, Regulatory, and Professional Obligations of Auditors

Earnings Management

Ethical Leadership and Decision-Making in Accounting

Filters