Question 1

It is the responsibility of the group engagement partner to_______.

Accepted Answer

A) ensure the work completed by a component auditor meets the group engagement partner's requirements and standards. 
B) ensure the financial statements are free from error 
C) ensure the work completed by a prior auditor meets the group engagement partner's requirements and standards 
D) notify the appropriate supervisor of fraud being committed at the next level of management up from the individual 
A) ensure the work completed by a component auditor meets the group engagement partner's requirements and standards. 
B) ensure the financial statements are free from error 
C) ensure the work completed by a prior auditor meets the group engagement partner's requirements and standards 
D) notify the appropriate supervisor of fraud being committed at the next level of management up from the individual

Question 2

Small Town Bank would like to gain a degree of comfort regarding the financial statements of Home Town Builders, Inc., a company for which Small Town Bank provides a line of credit.The cost of an audit would be prohibitive for Home Town Builders.Compare two other types of services that accounting firms can provide to Home Town Builders that may be acceptable to Small Town Bank.

Accepted Answer

There are other services that accounting

Question 3

Which component of an unqualified opinion defines the concept of internal control over financial reporting (ICFR) and states inherent limitations of ICFR?

Accepted Answer

A) Definition and inherent limitations paragraph 
B) Paragraph referencing the financial statement audit 
C) Scope paragraph 
D) Basis for opinion paragraph 
A) Definition and inherent limitations paragraph 
B) Paragraph referencing the financial statement audit 
C) Scope paragraph 
D) Basis for opinion paragraph

Question 4

With respect to the issuance of an audit report, the level of materiality will determine_______.

Accepted Answer

A) how much the auditor charges for services rendered 
B) which modified opinion should be issued, if any 
C) which unmodified opinion should be issued 
D) which type of adverse opinion should be issued 
A) how much the auditor charges for services rendered 
B) which modified opinion should be issued, if any 
C) which unmodified opinion should be issued 
D) which type of adverse opinion should be issued

Question 5

An immaterial misstatement occurs when the client departs from the applicable financial reporting framework.

Accepted Answer

A) True 
 B)False

Question 6

A material misstatement occurs when _______.

Accepted Answer

A) management incorrectly calculate profitability ratios 
B) the client departs from the applicable financial reporting framework 
C) the client abides with the applicable financial reporting framework 
D) the auditor does not receive the agreed upon compensation from the firm 
A) management incorrectly calculate profitability ratios 
B) the client departs from the applicable financial reporting framework 
C) the client abides with the applicable financial reporting framework 
D) the auditor does not receive the agreed upon compensation from the firm

Question 7

In the paragraph below, there are three errors in the basis for opinion paragraph of the unqualified opinion on the effectiveness of ICFR for public companies.Rewrite the paragraph to correct the errors.
Basis for Opinion
The auditor is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.Our responsibility is to express a certification on the Company's internal control over financial reporting based on our audit.We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the AICPA.

Accepted Answer

The Company's management is responsible

Question 8

The purpose of an audit is to _______.

Accepted Answer

A) provide financial statement users with an opinion by an independent auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework 
B) provide internal auditors with an opinion by the external auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework 
C) provide absolute assurance that the financial statements conform to Generally Accepted Accounting Principles (GAAP) 
D) help management ensure yearly bonuses will be received 
A) provide financial statement users with an opinion by an independent auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework 
B) provide internal auditors with an opinion by the external auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework 
C) provide absolute assurance that the financial statements conform to Generally Accepted Accounting Principles (GAAP) 
D) help management ensure yearly bonuses will be received

Question 9

An emphasis of matter paragraph is mandatory for all audit reports.

Accepted Answer

A) True 
 B)False

Question 10

If a misstatement is considered material, _______.

Accepted Answer

A) it should have no bearing on financial statement users and the decisions they make 
B) it could affect decisions that users make if the users are made aware of the misstatement 
C) it should not affect decisions that users make if the users are made aware of the misstatement 
D) an auditor should immediately issue an adverse opinion 
A) it should have no bearing on financial statement users and the decisions they make 
B) it could affect decisions that users make if the users are made aware of the misstatement 
C) it should not affect decisions that users make if the users are made aware of the misstatement 
D) an auditor should immediately issue an adverse opinion

Question 11

The concept of materiality is NOT an important factor in determining which type of modified report to issue.

Accepted Answer

A) True 
 B)False

Question 12

In which of the following engagements does the CPA provides limited assurance that no material modifications should be made to the financial statements for them to be in accordance with the applicable financial reporting framework?

Accepted Answer

A) Review engagement 
B) Compilation engagement 
C) Audit engagement 
D) Material engagement 
A) Review engagement 
B) Compilation engagement 
C) Audit engagement 
D) Material engagement

Question 13

Characteristics of a pervasive misstatement or scope limitation include that is it not confined to specific elements, accounts, or items of the financial statements.

Accepted Answer

A) True 
 B)False

Question 14

If the auditor's opinion on the revised financial statements is different from the previously issued audit report, _______.

Accepted Answer

A) a disclaimer of opinion should be issued 
B) a scope limitation should be issued 
C) then an emphasis-of-matter paragraph should be added to the revised audit report after the opinion paragraph. 
D) then a management opinion paragraph should be added to the revised audit report after the opinion paragraph 
A) a disclaimer of opinion should be issued 
B) a scope limitation should be issued 
C) then an emphasis-of-matter paragraph should be added to the revised audit report after the opinion paragraph. 
D) then a management opinion paragraph should be added to the revised audit report after the opinion paragraph

Question 15

To provide limited assurance, the CPA must perform procedures to gather evidence that no material modifications are needed for the financial statements to be in accordance with the financial reporting framework.

Accepted Answer

A) True 
 B)False

Question 16

The audit process _______.

Accepted Answer

A) can typically take up to a year 
B) is aimed primarily at creditors 
C) enhances the degree of confidence that intended users place in the financial statements 
D) decreases the degree of confidence that intended users place in the financial statements 
A) can typically take up to a year 
B) is aimed primarily at creditors 
C) enhances the degree of confidence that intended users place in the financial statements 
D) decreases the degree of confidence that intended users place in the financial statements

Question 17

An unmodified auditor's report is _______.

Accepted Answer

A) an indication that a firm is financially successful 
B) an indicator that the firm's stock price may be about to drop 
C) not an indication the company is successful financially, but rather an indication the company has followed accounting standards as dictated by the applicable financial reporting framework 
D) an indication the company is successful financially, but not an indication the company has followed accounting standards as dictated by the applicable financial reporting framework 
A) an indication that a firm is financially successful 
B) an indicator that the firm's stock price may be about to drop 
C) not an indication the company is successful financially, but rather an indication the company has followed accounting standards as dictated by the applicable financial reporting framework 
D) an indication the company is successful financially, but not an indication the company has followed accounting standards as dictated by the applicable financial reporting framework

Question 18

If the group engagement partner wants to name the component audit firm, then_______.

Accepted Answer

A) he/she must receive permission from the component auditor, and the component auditor's report on the subsidiary must be presented together with the auditor's report on the group financial statements 
B) he/she must receive permission from the component auditor, and the prior auditor's report on the subsidiary must be presented together with the auditor's report on the group financial statements 
C) he or she is free to do so 
D) management must provide permission accordingly 
A) he/she must receive permission from the component auditor, and the component auditor's report on the subsidiary must be presented together with the auditor's report on the group financial statements 
B) he/she must receive permission from the component auditor, and the prior auditor's report on the subsidiary must be presented together with the auditor's report on the group financial statements 
C) he or she is free to do so 
D) management must provide permission accordingly

Question 19

In a compilation engagement, _______.

Accepted Answer

A) an internal auditor reviews the client firm's filings with the Securities and Exchange Commission (SE
C)  for compliance and accuracy 
B) the CPA will assist management in the presentation of financial statements and will provide assurance as to whether the financial statements are presented fairly in accordance with the applicable financial reporting framework 
C) the CPA will assist management in the presentation of financial statements but will not provide assurance as to whether the financial statements are presented fairly in accordance with the applicable financial reporting framework 
D) the current and prior auditors will jointly determine the fairness and conformity of a client's financial statements 
A) an internal auditor reviews the client firm's filings with the Securities and Exchange Commission (SE
C)  for compliance and accuracy 
B) the CPA will assist management in the presentation of financial statements and will provide assurance as to whether the financial statements are presented fairly in accordance with the applicable financial reporting framework 
C) the CPA will assist management in the presentation of financial statements but will not provide assurance as to whether the financial statements are presented fairly in accordance with the applicable financial reporting framework 
D) the current and prior auditors will jointly determine the fairness and conformity of a client's financial statements

Question 20

A component auditor, which is a different accounting firm, may audit a component or subsidiary of the parent company.

Accepted Answer

A) True 
 B)False

It is the responsibility of the group engagement partner to_______.

Which component of an unqualified opinion defines the concept of internal control over financial reporting (ICFR) and states inherent limitations of ICFR?

With respect to the issuance of an audit report, the level of materiality will determine_______.

An immaterial misstatement occurs when the client departs from the applicable financial reporting framework.

A material misstatement occurs when _______.

The purpose of an audit is to _______.

An emphasis of matter paragraph is mandatory for all audit reports.

If a misstatement is considered material, _______.

The concept of materiality is NOT an important factor in determining which type of modified report to issue.

In which of the following engagements does the CPA provides limited assurance that no material modifications should be made to the financial statements for them to be in accordance with the applicable financial reporting framework?

Characteristics of a pervasive misstatement or scope limitation include that is it not confined to specific elements, accounts, or items of the financial statements.

If the auditor's opinion on the revised financial statements is different from the previously issued audit report, _______.

To provide limited assurance, the CPA must perform procedures to gather evidence that no material modifications are needed for the financial statements to be in accordance with the financial reporting framework.

The audit process _______.

An unmodified auditor's report is _______.

If the group engagement partner wants to name the component audit firm, then_______.

In a compilation engagement, _______.

A component auditor, which is a different accounting firm, may audit a component or subsidiary of the parent company.

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iaudit Risk and Audit Strategy

Risk Assessment Part Iiunderstanding the Client

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Tests of Controls

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing the Purchases Cycle and Payroll Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Filters

Exam 15: Reporting on the Audit

It is the responsibility of the group engagement partner to_______.

Which component of an unqualified opinion defines the concept of internal control over financial reporting (ICFR) and states inherent limitations of ICFR?

With respect to the issuance of an audit report, the level of materiality will determine_______.

An immaterial misstatement occurs when the client departs from the applicable financial reporting framework.

A material misstatement occurs when _______.

The purpose of an audit is to _______.

An emphasis of matter paragraph is mandatory for all audit reports.

If a misstatement is considered material, _______.

The concept of materiality is NOT an important factor in determining which type of modified report to issue.

In which of the following engagements does the CPA provides limited assurance that no material modifications should be made to the financial statements for them to be in accordance with the applicable financial reporting framework?

Characteristics of a pervasive misstatement or scope limitation include that is it not confined to specific elements, accounts, or items of the financial statements.

If the auditor's opinion on the revised financial statements is different from the previously issued audit report, _______.

To provide limited assurance, the CPA must perform procedures to gather evidence that no material modifications are needed for the financial statements to be in accordance with the financial reporting framework.

The audit process _______.

An unmodified auditor's report is _______.

If the group engagement partner wants to name the component audit firm, then_______.

In a compilation engagement, _______.

A component auditor, which is a different accounting firm, may audit a component or subsidiary of the parent company.

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iaudit Risk and Audit Strategy

Risk Assessment Part Iiunderstanding the Client

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Tests of Controls

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing the Purchases Cycle and Payroll Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Filters