Question 1

Which of the following is not among the characteristics of the procedures performed in completing the audit?

Accepted Answer

A)  They are optional since they have only an indirect impact on the opinion to be expressed. 
B)  They involve many subjective judgments by the auditor. 
C)  They are performed after the balance sheet date. 
D)  They are usually performed by audit managers or other senior members of the audit team who have extensive audit experience with the client. 
E)  They do not pertain to specific transaction cycles or accounts. 
A)  They are optional since they have only an indirect impact on the opinion to be expressed. 
B)  They involve many subjective judgments by the auditor. 
C)  They are performed after the balance sheet date. 
D)  They are usually performed by audit managers or other senior members of the audit team who have extensive audit experience with the client. 
E)  They do not pertain to specific transaction cycles or accounts.

Question 2

Listed below are material events that pertain to the financial statements of the Henry Corporation as of December 31, 20X5. Your field work on this audit ended on January 31, 20X6, and your report was issued February 10, 20X6. Indicate the nature of each event by using the following code letters:
-Obsolescence losses on inventory on January 12 due to extended downturn in product line sales
_____

Accepted Answer

A) Postaudit discovery of existing facts 
B) None of the above 
C) None of the above. 
D) Sale of a subsidiary on January 20 
A) Postaudit discovery of existing facts 
B) None of the above 
C) None of the above. 
D) Sale of a subsidiary on January 20

Question 3

The ultimate responsibility for summarizing and evaluating the separate audit findings in formulating the audit opinion rests with the in-charge senior.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)  guarantees of obligations of others 
B)  income tax disputes under appeal 
C)  the client's claim against another for patent infringement 
D)  secondary endorsements 
E)  product warranties 
A)  guarantees of obligations of others 
B)  income tax disputes under appeal 
C)  the client's claim against another for patent infringement 
D)  secondary endorsements 
E)  product warranties

Question 5

Which of the following subsequent events is least likely to be discovered by reading the minutes of meetings?

Accepted Answer

A)  a new bond issue authorization 
B)  the payment of a cash dividend. 
C)  a treasury stock purchase. 
D)  the discontinuance of a product line. 
E)  a major increase in the writeoff of receivables. 
A)  a new bond issue authorization 
B)  the payment of a cash dividend. 
C)  a treasury stock purchase. 
D)  the discontinuance of a product line. 
E)  a major increase in the writeoff of receivables.

Question 6

Professional standards state that the auditor is not required to search for reportable conditions.

Accepted Answer

A) True 
 B)False

Question 7

Distinguish between the terms:
1.known misstatement,
2.likely misstatement, and
3.aggregate likely misstatement.

Accepted Answer

1. Known misstatement is an uncorrected

Question 8

Listed below are examples of matters that may be reportable conditions. Indicate the nature of each event by using the following code letters:
Deficiencies in Internal Control Design
Failures in the Operation of Internal Control
-Absence of appropriate segregation of duties consistent with appropriate
control objectives.
_____

Accepted Answer

A) Failures in the Operation of Internal Control 
B) A system fails to provide complete and accurate output consistent with the 
A) Failures in the Operation of Internal Control 
B) A system fails to provide complete and accurate output consistent with the

Question 9

Because of the potential for misinterpretation, the auditor should not state in the report that no reportable conditions were noted.

Accepted Answer

A) True 
 B)False

Question 10

As aggregate likely misstatement increases, the risk that the financial statements may be materially misstated also increases.

Accepted Answer

A) True 
 B)False

Question 11

Listed below are examples of matters that may be reportable conditions. Indicate the nature of each event by using the following code letters:
Deficiencies in Internal Control Design
Failures in the Operation of Internal Control
-Misrepresentation by client personnel to the auditor.
_____

Accepted Answer

A) Failures in the Operation of Internal Control 
B) A system fails to provide complete and accurate output consistent with the 
A) Failures in the Operation of Internal Control 
B) A system fails to provide complete and accurate output consistent with the

Question 12

Listed below are examples of matters that may be reportable conditions. Indicate the nature of each event by using the following code letters:
Deficiencies in Internal Control Design
Failures in the Operation of Internal Control
-Absence of other control techniques considered appropriate for the type and level of transaction activity.
_____

Accepted Answer

A) Failures in the Operation of Internal Control 
B) A system fails to provide complete and accurate output consistent with the 
A) Failures in the Operation of Internal Control 
B) A system fails to provide complete and accurate output consistent with the

Question 13

Listed below are material events that pertain to the financial statements of the Henry Corporation as of December 31, 20X5. Your field work on this audit ended on January 31, 20X6, and your report was issued February 10, 20X6. Indicate the nature of each event by using the following code letters:
-Resignation of chief executive officer on January 31
_____

Accepted Answer

A) Postaudit discovery of existing facts 
B) None of the above 
C) None of the above. 
D) Sale of a subsidiary on January 20 
A) Postaudit discovery of existing facts 
B) None of the above 
C) None of the above. 
D) Sale of a subsidiary on January 20

Question 14

Listed below are examples of matters that may be reportable conditions. Indicate the nature of each event by using the following code letters:
Deficiencies in Internal Control Design
Failures in the Operation of Internal Control
-Inadequate procedures for appropriately assessing and applying accounting
principles.
_____

Accepted Answer

A) Failures in the Operation of Internal Control 
B) A system fails to provide complete and accurate output consistent with the 
A) Failures in the Operation of Internal Control 
B) A system fails to provide complete and accurate output consistent with the

Question 15

Uncorrected misstatements specifically identified through substantive tests of details of transactions and balances are referred to as known misstatement.

Accepted Answer

A) True 
 B)False

Question 16

Listed below are material events that pertain to the financial statements of the Henry Corporation as of December 31, 20X5. Your field work on this audit ended on January 31, 20X6, and your report was issued February 10, 20X6. Indicate the nature of each event by using the following code letters:
-Additional assessment on March 1 pertaining to the 20X4 income tax return

Accepted Answer

A) Postaudit discovery of existing facts 
B) None of the above 
C) None of the above. 
D) Sale of a subsidiary on January 20 
A) Postaudit discovery of existing facts 
B) None of the above 
C) None of the above. 
D) Sale of a subsidiary on January 20

Question 17

Pro forma data attached to the financial statements are only required with:

Accepted Answer

A)  a material type 1 subsequent event. 
B)  a very material type 1 subsequent event. 
C)  a material type 2 subsequent event. 
D)  a very material type 2 subsequent event. 
E)  either a material type 1 or a very material type 2 subsequent event. 
A)  a material type 1 subsequent event. 
B)  a very material type 1 subsequent event. 
C)  a material type 2 subsequent event. 
D)  a very material type 2 subsequent event. 
E)  either a material type 1 or a very material type 2 subsequent event.

Question 18

The client representation letter will not normally be:

Accepted Answer

A)  prepared on the client's stationery. 
B)  addressed to the auditor. 
C)  sent to the audit committee. 
D)  dated as of the date of the auditor's report. 
E)  signed by the CEO and the CFO. 
A)  prepared on the client's stationery. 
B)  addressed to the auditor. 
C)  sent to the audit committee. 
D)  dated as of the date of the auditor's report. 
E)  signed by the CEO and the CFO.

Question 19

Listed below are material events that pertain to the financial statements of the Henry Corporation as of December 31, 20X5. Your field work on this audit ended on January 31, 20X6, and your report was issued February 10, 20X6. Indicate the nature of each event by using the following code letters:
-Adverse court decision on February 15 pertaining to legality of ownership of

Accepted Answer

A) Postaudit discovery of existing facts 
B) None of the above 
C) None of the above. 
D) Sale of a subsidiary on January 20 
A) Postaudit discovery of existing facts 
B) None of the above 
C) None of the above. 
D) Sale of a subsidiary on January 20

Question 20

The primary source of information about litigation, claims, and assessments is:

Accepted Answer

A)  the board of directors. 
B)  the client's attorneys. 
C)  management. 
D)  direct confirmation with the other party involved. 
E)  the audit committee. 
A)  the board of directors. 
B)  the client's attorneys. 
C)  management. 
D)  direct confirmation with the other party involved. 
E)  the audit committee.

Which of the following is not among the characteristics of the procedures performed in completing the audit?

The ultimate responsibility for summarizing and evaluating the separate audit findings in formulating the audit opinion rests with the in-charge senior.

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

Which of the following subsequent events is least likely to be discovered by reading the minutes of meetings?

Professional standards state that the auditor is not required to search for reportable conditions.

Distinguish between the terms: 1.known misstatement, 2.likely misstatement, and 3.aggregate likely misstatement.

Because of the potential for misinterpretation, the auditor should not state in the report that no reportable conditions were noted.

As aggregate likely misstatement increases, the risk that the financial statements may be materially misstated also increases.

Listed below are examples of matters that may be reportable conditions. Indicate the nature of each event by using the following code letters: Deficiencies in Internal Control Design Failures in the Operation of Internal Control -Misrepresentation by client personnel to the auditor. _____

Uncorrected misstatements specifically identified through substantive tests of details of transactions and balances are referred to as known misstatement.

Pro forma data attached to the financial statements are only required with:

The client representation letter will not normally be:

The primary source of information about litigation, claims, and assessments is:

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters

Exam 19: Completing the Audit and Postaudit

Which of the following is not among the characteristics of the procedures performed in completing the audit?

The ultimate responsibility for summarizing and evaluating the separate audit findings in formulating the audit opinion rests with the in-charge senior.

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

Which of the following subsequent events is least likely to be discovered by reading the minutes of meetings?

Professional standards state that the auditor is not required to search for reportable conditions.

Distinguish between the terms: 1.known misstatement, 2.likely misstatement, and 3.aggregate likely misstatement.

Because of the potential for misinterpretation, the auditor should not state in the report that no reportable conditions were noted.

As aggregate likely misstatement increases, the risk that the financial statements may be materially misstated also increases.

Listed below are examples of matters that may be reportable conditions. Indicate the nature of each event by using the following code letters: Deficiencies in Internal Control Design Failures in the Operation of Internal Control -Misrepresentation by client personnel to the auditor. _____

Uncorrected misstatements specifically identified through substantive tests of details of transactions and balances are referred to as known misstatement.

Pro forma data attached to the financial statements are only required with:

The client representation letter will not normally be:

The primary source of information about litigation, claims, and assessments is:

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters