Question 1

A legal letter refers to a letter_______.

Accepted Answer

A) of inquiry sent to the client's legal counsel 
B) of inquiry sent to the prior auditor 
C) sent to the Securities and Exchange Commission to advise of questionable accounting practices 
D) sent to the client's internal audit function, questioning certain legal practices employed by the client 
A) of inquiry sent to the client's legal counsel 
B) of inquiry sent to the prior auditor 
C) sent to the Securities and Exchange Commission to advise of questionable accounting practices 
D) sent to the client's internal audit function, questioning certain legal practices employed by the client A

Question 2

Attorneys and their clients have a _______.

Accepted Answer

A) confidential relationship 
B) fiduciary relationship 
C) privileged relationship 
D) legal relationship 
A) confidential relationship 
B) fiduciary relationship 
C) privileged relationship 
D) legal relationship C

Question 3

The likelihood of loss contingencies is considered reasonably possible when the future event is likely to occur.

Accepted Answer

A) True 
 B)False  False

Question 4

With respect to the going concern assumption, auditors also draw their own conclusions _______.

Accepted Answer

A) about whether there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time 
B) about whether there is substantial doubt about the entity's ability to continue as a going concern for an indefinite period of time 
C) as to whether the client is likely to be a target for an acquisition by another company in the near future 
D) as to whether the client is likely to attempt to acquire another company in the near future 
A) about whether there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time 
B) about whether there is substantial doubt about the entity's ability to continue as a going concern for an indefinite period of time 
C) as to whether the client is likely to be a target for an acquisition by another company in the near future 
D) as to whether the client is likely to attempt to acquire another company in the near future

Question 5

According to Generally Accepted Accounting Principles (GAAP), to meet the "going-concern" standard an entity must be viewed as capable of staying in business for ____________ after the date of the financial statements.

Accepted Answer

A) a reasonable period of time 
B) six months 
C) nine months 
D) two years 
A) a reasonable period of time 
B) six months 
C) nine months 
D) two years

Question 6

Which of the following defines a legal letter?

Accepted Answer

A) An audit inquiry sent to a client's external and in-house legal counsel to obtain information about litigation, assessments, and claims. 
B) A letter comprising the auditor's report that is required by generally accepted auditing standards or is included at the auditor's discretion. 
C) A statement in which a CPA orders inquiry and analytical procedures to provide limited assurance that no material modifications should be made to the financial statements. 
D) An engagement in which a CPA applies accounting and financial expertise to assist management in the presentation of financial statements. 
A) An audit inquiry sent to a client's external and in-house legal counsel to obtain information about litigation, assessments, and claims. 
B) A letter comprising the auditor's report that is required by generally accepted auditing standards or is included at the auditor's discretion. 
C) A statement in which a CPA orders inquiry and analytical procedures to provide limited assurance that no material modifications should be made to the financial statements. 
D) An engagement in which a CPA applies accounting and financial expertise to assist management in the presentation of financial statements.

Question 7

If, in addition to external legal counsel, the client also has in-house legal counsel responsible for litigation, claims, and assessments, a legal letter would NOT be sent to the in-house legal counsel.

Accepted Answer

A) True 
 B)False

Question 8

The going concern assumption _______.

Accepted Answer

A) is not the responsibility of the auditor, and should be left to management to determine 
B) is a fundamental principle in the preparation of the financial statements 
C) is the legal responsibility of the auditor 
D) relates to the comparability and verifiability of a firm's financial statements 
A) is not the responsibility of the auditor, and should be left to management to determine 
B) is a fundamental principle in the preparation of the financial statements 
C) is the legal responsibility of the auditor 
D) relates to the comparability and verifiability of a firm's financial statements

Question 9

A/an _______ is responsible for the audit engagement, its performance, and for the auditor's report that is issued on behalf of the firm.

Accepted Answer

The answer of A/an _______ is responsible for the audit...

Question 10

Analytical procedures may include ratio analysis, trend analysis, and other procedures.

Accepted Answer

A) True 
 B)False

Question 11

Auditors should carefully consider which of the following assertions for loss contingencies?

Accepted Answer

A) Existence 
B) Presentation and disclosure 
C) Completeness 
D) Rights and obligations 
A) Existence 
B) Presentation and disclosure 
C) Completeness 
D) Rights and obligations

Question 12

The Financial Accounting Standards Board (FASB) defines a loss contingency as _______.

Accepted Answer

A) an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur 
B) an existing condition or situation involving certainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur 
C) an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events fail to occur 
D) an existing condition or situation involving uncertainty as to possible gain that will ultimately be resolved when one or more future events occur or fail to occur 
A) an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur 
B) an existing condition or situation involving certainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur 
C) an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events fail to occur 
D) an existing condition or situation involving uncertainty as to possible gain that will ultimately be resolved when one or more future events occur or fail to occur

Question 13

The outcome of litigation _______.

Accepted Answer

A) is usually decided relatively quickly 
B) does not affect the auditor 
C) may be highly uncertain, and the circumstances may change over the course of a long court battle that spans several years 
D) may be highly certain, and the circumstances may change over the course of a long court battle that spans several years 
A) is usually decided relatively quickly 
B) does not affect the auditor 
C) may be highly uncertain, and the circumstances may change over the course of a long court battle that spans several years 
D) may be highly certain, and the circumstances may change over the course of a long court battle that spans several years

Question 14

At the conclusion of the audit, auditors revisit the materiality level determined at the beginning of the audit to ensure it is still appropriate based on the results of audit procedures.

Accepted Answer

A) True 
 B)False

Question 15

AS 1301 specifies that _______.

Accepted Answer

A) critical accounting policies and practices and critical accounting estimates must be communicated to the audit committee 
B) significant and immaterial accounting policies and practices and critical accounting estimates must be communicated to the audit committee 
C) the auditor should bill audit clients at distinct phases of the audit process 
D) auditors should always consult with their own legal counsel before issuing an unmodified opinion 
A) critical accounting policies and practices and critical accounting estimates must be communicated to the audit committee 
B) significant and immaterial accounting policies and practices and critical accounting estimates must be communicated to the audit committee 
C) the auditor should bill audit clients at distinct phases of the audit process 
D) auditors should always consult with their own legal counsel before issuing an unmodified opinion

Question 16

Which of the following is NOT an example of a loss contingency?

Accepted Answer

A) Payment of income taxes 
B) Income tax disputes 
C) Guarantees of debt of others 
D) Threat of expropriation of assets 
A) Payment of income taxes 
B) Income tax disputes 
C) Guarantees of debt of others 
D) Threat of expropriation of assets

Question 17

A _______ is an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur.

Accepted Answer

The answer of A _______ is an existing condition or...

Question 18

AS 1301 specifies that only critical accounting policies and practices must be communicated to the audit committee.

Accepted Answer

A) True 
 B)False

Question 19

Audit standards require auditors to _______.

Accepted Answer

A) conduct specific audit procedures to identify subsequent events that may occur up through the date of the auditor's report 
B) conduct specific audit procedures to identify subsequent events that may occur after the date of the auditor's report. 
C) apply optional use of analytical procedures to increase assurance levels related to subsequent events 
D) delegate auditing of subsequent events to the internal audit function 
A) conduct specific audit procedures to identify subsequent events that may occur up through the date of the auditor's report 
B) conduct specific audit procedures to identify subsequent events that may occur after the date of the auditor's report. 
C) apply optional use of analytical procedures to increase assurance levels related to subsequent events 
D) delegate auditing of subsequent events to the internal audit function

Question 20

The assumption that relates to the entity continuing in business for the foreseeable future is called _______.

Accepted Answer

A) the entity assumption 
B) the going concern assumption 
C) the solvency assumption 
D) the liquidity assumption 
A) the entity assumption 
B) the going concern assumption 
C) the solvency assumption 
D) the liquidity assumption

A legal letter refers to a letter_______.

Attorneys and their clients have a _______.

The likelihood of loss contingencies is considered reasonably possible when the future event is likely to occur.

With respect to the going concern assumption, auditors also draw their own conclusions _______.

According to Generally Accepted Accounting Principles (GAAP), to meet the "going-concern" standard an entity must be viewed as capable of staying in business for ____________ after the date of the financial statements.

Which of the following defines a legal letter?

If, in addition to external legal counsel, the client also has in-house legal counsel responsible for litigation, claims, and assessments, a legal letter would NOT be sent to the in-house legal counsel.

The going concern assumption _______.

A/an _______ is responsible for the audit engagement, its performance, and for the auditor's report that is issued on behalf of the firm.

Analytical procedures may include ratio analysis, trend analysis, and other procedures.

Auditors should carefully consider which of the following assertions for loss contingencies?

The Financial Accounting Standards Board (FASB) defines a loss contingency as _______.

The outcome of litigation _______.

At the conclusion of the audit, auditors revisit the materiality level determined at the beginning of the audit to ensure it is still appropriate based on the results of audit procedures.

AS 1301 specifies that _______.

Which of the following is NOT an example of a loss contingency?

A _______ is an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur.

AS 1301 specifies that only critical accounting policies and practices must be communicated to the audit committee.

Audit standards require auditors to _______.

The assumption that relates to the entity continuing in business for the foreseeable future is called _______.

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

Reporting on the Audit

Filters

Exam 14: Completing the Audit

A legal letter refers to a letter_______.

Attorneys and their clients have a _______.

The likelihood of loss contingencies is considered reasonably possible when the future event is likely to occur.

With respect to the going concern assumption, auditors also draw their own conclusions _______.

According to Generally Accepted Accounting Principles (GAAP), to meet the "going-concern" standard an entity must be viewed as capable of staying in business for ____________ after the date of the financial statements.

Which of the following defines a legal letter?

If, in addition to external legal counsel, the client also has in-house legal counsel responsible for litigation, claims, and assessments, a legal letter would NOT be sent to the in-house legal counsel.

The going concern assumption _______.

A/an _______ is responsible for the audit engagement, its performance, and for the auditor's report that is issued on behalf of the firm.

Analytical procedures may include ratio analysis, trend analysis, and other procedures.

Auditors should carefully consider which of the following assertions for loss contingencies?

The Financial Accounting Standards Board (FASB) defines a loss contingency as _______.

The outcome of litigation _______.

At the conclusion of the audit, auditors revisit the materiality level determined at the beginning of the audit to ensure it is still appropriate based on the results of audit procedures.

AS 1301 specifies that _______.

Which of the following is NOT an example of a loss contingency?

A _______ is an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur.

AS 1301 specifies that only critical accounting policies and practices must be communicated to the audit committee.

Audit standards require auditors to _______.

The assumption that relates to the entity continuing in business for the foreseeable future is called _______.

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

Reporting on the Audit

Filters