Question 1

Why should auditors be particularly concerned with "miscellaneous," "other," and "clearing" accounts classified as revenues or expenses?

Accepted Answer

A) These accounts are likely to relate to going-concern matters. 
B) These accounts are often more difficult to audit using normal substantive procedures. 
C) These accounts may represent attempts of earnings management. 
D) These accounts are likely to require the assistance of a specialist. 
A) These accounts are likely to relate to going-concern matters. 
B) These accounts are often more difficult to audit using normal substantive procedures. 
C) These accounts may represent attempts of earnings management. 
D) These accounts are likely to require the assistance of a specialist. C

Question 2

Auditors must complete various phases of an audit after the date of the financial statements. The auditors' responsibility for matters affecting the client extends from the date of the financial statements to the

Accepted Answer

A) date of the auditors' report. 
B) final review of the audit documentation. 
C) audit report release date. 
D) delivery of the auditors' reports to the client. 
A) date of the auditors' report. 
B) final review of the audit documentation. 
C) audit report release date. 
D) delivery of the auditors' reports to the client. C

Question 3

Roll-forward work normally occurs between the __________ and the __________.

Accepted Answer

A) beginning of the year under audit; audit report release date 
B) date of the financial statements; audit report release date 
C) beginning of the year under audit; date of the financial statements 
D) date of interim work; date of the auditors' report 
A) beginning of the year under audit; audit report release date 
B) date of the financial statements; audit report release date 
C) beginning of the year under audit; date of the financial statements 
D) date of interim work; date of the auditors' report D

Question 4

Small and Tall, CPAs, completed the December 31, 2020 audit of Big Company on February 10, 2021. After the audit report release date, an outstanding lawsuit against Big Company was settled for materially more than recorded in the December 31, 2020 financial statements. The amount recorded in the financial statements represented the best estimate of management and the company's attorneys at the time the audit was completed. Based on this new information, Small and Tall, CPAs should

Accepted Answer

A) determine whether persons are currently relying on the auditors' reports. 
B) advise the client to make appropriate changes in the financial statements and reissue them. 
C) notify each member of the board of directors of Big Company. 
D) take no action since the event took place after the audit report release date. 
A) determine whether persons are currently relying on the auditors' reports. 
B) advise the client to make appropriate changes in the financial statements and reissue them. 
C) notify each member of the board of directors of Big Company. 
D) take no action since the event took place after the audit report release date.

Question 5

Which of the following events or activities may occur following the audit report release date?

Accepted Answer

A) Interim testing 
B) Roll-forward work 
C) Subsequent events 
D) Subsequently discovered facts 
A) Interim testing 
B) Roll-forward work 
C) Subsequent events 
D) Subsequently discovered facts

Question 6

Which of the following is an audit procedure that auditors most likely would perform concerning litigation, claims, and assessments?

Accepted Answer

A) Request the client's attorney to evaluate whether the client's pending litigation claims, and assessments indicate a going concern problem. 
B) Examine the legal documents in the client's attorney's possession concerning litigation, claims, and assessments to which the attorney has devoted substantive attention. 
C) Discuss with management its policies and procedures adopted for evaluating and accounting for litigation, claims, and assessments. 
D) Confirm directly with the client's attorney that all litigation, claims, and assessments have been recorded or disclosed in the financial statements. 
A) Request the client's attorney to evaluate whether the client's pending litigation claims, and assessments indicate a going concern problem. 
B) Examine the legal documents in the client's attorney's possession concerning litigation, claims, and assessments to which the attorney has devoted substantive attention. 
C) Discuss with management its policies and procedures adopted for evaluating and accounting for litigation, claims, and assessments. 
D) Confirm directly with the client's attorney that all litigation, claims, and assessments have been recorded or disclosed in the financial statements.

Question 7

Which of the following best describes the auditors' responsibility with respect to management's estimates?

Accepted Answer

A) Verifying the mathematical accuracy of management estimates. 
B) Assessing the likelihood that actual results will be consistent with management's estimates. 
C) Evaluating the reasonableness of management's estimates. 
D) Identifying how the failure of the entity to achieve management's estimates will influence users' decisions. 
A) Verifying the mathematical accuracy of management estimates. 
B) Assessing the likelihood that actual results will be consistent with management's estimates. 
C) Evaluating the reasonableness of management's estimates. 
D) Identifying how the failure of the entity to achieve management's estimates will influence users' decisions.

Question 8

For each of the communications listed below, select the appropriate time period during which the communication is typically obtained or provided and whether the communication is oral, written, or either oral or written. Engagement letter

Accepted Answer

A) Prior to or at the date of the auditors' report, Written 
B) Following the date of the auditors' report; Either oral or written 
C) Prior to the engagement, Written 
D) Either following the date of the auditors' report or as significant matters are identified, Written 
A) Prior to or at the date of the auditors' report, Written 
B) Following the date of the auditors' report; Either oral or written 
C) Prior to the engagement, Written 
D) Either following the date of the auditors' report or as significant matters are identified, Written

Question 9

What is the primary purpose of obtaining written representations?

Accepted Answer

A) To provide auditors with substantive evidence of important assertions. 
B) To impress upon management its primary responsibility for the financial statements. 
C) To allow auditors to communicate important internal control deficiencies to management. 
D) To allow auditors to communicate important suggestions for improvement to management. 
A) To provide auditors with substantive evidence of important assertions. 
B) To impress upon management its primary responsibility for the financial statements. 
C) To allow auditors to communicate important internal control deficiencies to management. 
D) To allow auditors to communicate important suggestions for improvement to management.

Question 10

If an entity had litigation pending at the date of the financial statements and auditors learn of the outcome of this litigation following the date of their report (but prior to the audit report release date), this is known as a(an):

Accepted Answer

A) omitted procedure. 
B) prior period adjustment. 
C) subsequent event. 
D) subsequently discovered fact. 
A) omitted procedure. 
B) prior period adjustment. 
C) subsequent event. 
D) subsequently discovered fact.

Question 11

An entity's income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts. Auditors most likely could have detected this irregularity by

Accepted Answer

A) tracing a sample of journal entries to the general ledger. 
B) evaluating the effectiveness of the internal control policies and procedures. 
C) investigating the reconciliations between controlling accounts and subsidiary records. 
D) performing analytical procedures designed to disclose differences from expectations. 
A) tracing a sample of journal entries to the general ledger. 
B) evaluating the effectiveness of the internal control policies and procedures. 
C) investigating the reconciliations between controlling accounts and subsidiary records. 
D) performing analytical procedures designed to disclose differences from expectations.

Question 12

Which of the following procedures is not used in auditors' examination of litigation, claims, and assessments?

Accepted Answer

A) Obtaining a description and evaluation of litigation, claims, and assessments from management. 
B) Examining documentary evidence regarding litigation, claims, and assessments. 
C) Reading minutes of meetings of stockholders, directors, and appropriate committees. 
D) Performing analytical procedures. 
A) Obtaining a description and evaluation of litigation, claims, and assessments from management. 
B) Examining documentary evidence regarding litigation, claims, and assessments. 
C) Reading minutes of meetings of stockholders, directors, and appropriate committees. 
D) Performing analytical procedures.

Question 13

If the date of an entity's financial statements is December 31, the date of the auditor's report is February 20, and the audit report release date is February 22, which of the following is considered a subsequent event?

Accepted Answer

A) A significant acquisition that was announced on February 1 and will be finalized on October 1. 
B) A court settlement on March 3 related to a case that was pending on December 31. 
C) Losses from the devaluation of a foreign currency that became finalized on February 21. 
D) The entity's announcement of a major restructuring plan on December 30 that will be implemented during the upcoming year. 
A) A significant acquisition that was announced on February 1 and will be finalized on October 1. 
B) A court settlement on March 3 related to a case that was pending on December 31. 
C) Losses from the devaluation of a foreign currency that became finalized on February 21. 
D) The entity's announcement of a major restructuring plan on December 30 that will be implemented during the upcoming year.

Question 14

Which of the following auditing procedures most likely would assist auditors in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?

Accepted Answer

A) Inspecting title documents to verify whether any assets are pledged as collateral. 
B) Confirming with third parties the details of arrangements to maintain financial support. 
C) Reconciling the client's cash balance with the cut-off bank statement and the bank confirmation. 
D) Comparing the entity's depreciation and asset capitalization policies to other entities in the industry. 
A) Inspecting title documents to verify whether any assets are pledged as collateral. 
B) Confirming with third parties the details of arrangements to maintain financial support. 
C) Reconciling the client's cash balance with the cut-off bank statement and the bank confirmation. 
D) Comparing the entity's depreciation and asset capitalization policies to other entities in the industry.

Question 15

Which of the following conditions or set of circumstances would not ordinarily raise questions about the entity's ability to continue as a going concern:

Accepted Answer

A) Violation of debt covenants. 
B) Failure to meet forecasted earnings per share. 
C) Legal proceedings that may have a significant negative impact on the entity. 
D) Negative cash flow from operations for each of the last three years. 
A) Violation of debt covenants. 
B) Failure to meet forecasted earnings per share. 
C) Legal proceedings that may have a significant negative impact on the entity. 
D) Negative cash flow from operations for each of the last three years.

Question 16

For which of the following objectives would auditors be least likely to use analytical procedures near the end of the audit?

Accepted Answer

A) Obtaining evidence about assertions related to account balances or classes of transactions 
B) Evaluating the adequacy of evidence gathered in response to unexpected account balances 
C) Identifying unusual or unexpected account balances or relationships among account balances that were not previously identified during the audit 
D) Evaluating the adequacy of evidence gathered in response to unexpected relationships among account balances 
A) Obtaining evidence about assertions related to account balances or classes of transactions 
B) Evaluating the adequacy of evidence gathered in response to unexpected account balances 
C) Identifying unusual or unexpected account balances or relationships among account balances that were not previously identified during the audit 
D) Evaluating the adequacy of evidence gathered in response to unexpected relationships among account balances

Question 17

Explain briefly auditors' responsibility for subsequently discovered facts existing at the date of the auditors' reports.

Accepted Answer

If auditors become aware of facts that e

Question 18

Near the end of an audit, the application of analytical procedures is

Accepted Answer

A) recommended by auditing standards. 
B) not mentioned by auditing standards. 
C) not useful, since detailed substantive procedures have already been performed. 
D) required by auditing standards. 
A) recommended by auditing standards. 
B) not mentioned by auditing standards. 
C) not useful, since detailed substantive procedures have already been performed. 
D) required by auditing standards.

Question 19

Which of the following substantive procedures would not ordinarily be used by auditors in evaluating the potential existence of subsequent events?

Accepted Answer

A) Reviewing the latest interim financial statements. 
B) Performing cut-off testing near year end. 
C) Inquiring of officers and other client executives. 
D) Obtaining written representations. 
A) Reviewing the latest interim financial statements. 
B) Performing cut-off testing near year end. 
C) Inquiring of officers and other client executives. 
D) Obtaining written representations.

Question 20

On March 15, 2021, Kent, CPA, issued an unqualified opinion on a client's audited financial statements for the year ended December 31, 2020. On May 4, 2021, Kent's internal inspection program disclosed that engagement personnel failed to observe the client's physical inventory. Omission of this procedure impairs Kent's present ability to support the unqualified opinion. If the stockholders are currently relying on the opinion, Kent should first

Accepted Answer

A) advise management to disclose to the stockholders that Kent's unqualified opinion should not be relied on. 
B) undertake to apply alternative procedures that would provide a satisfactory basis for the opinion. 
C) reissue the auditors' reports and add an explanatory paragraph describing the departure from generally accepted auditing standards. 
D) compensate for the omitted procedure by performing tests of controls to reduce audit risk to a sufficiently low level. 
A) advise management to disclose to the stockholders that Kent's unqualified opinion should not be relied on. 
B) undertake to apply alternative procedures that would provide a satisfactory basis for the opinion. 
C) reissue the auditors' reports and add an explanatory paragraph describing the departure from generally accepted auditing standards. 
D) compensate for the omitted procedure by performing tests of controls to reduce audit risk to a sufficiently low level.

Why should auditors be particularly concerned with "miscellaneous," "other," and "clearing" accounts classified as revenues or expenses?

Auditors must complete various phases of an audit after the date of the financial statements. The auditors' responsibility for matters affecting the client extends from the date of the financial statements to the

Roll-forward work normally occurs between the and the .

Which of the following events or activities may occur following the audit report release date?

Which of the following is an audit procedure that auditors most likely would perform concerning litigation, claims, and assessments?

Which of the following best describes the auditors' responsibility with respect to management's estimates?

For each of the communications listed below, select the appropriate time period during which the communication is typically obtained or provided and whether the communication is oral, written, or either oral or written. Engagement letter

What is the primary purpose of obtaining written representations?

If an entity had litigation pending at the date of the financial statements and auditors learn of the outcome of this litigation following the date of their report (but prior to the audit report release date), this is known as a(an):

An entity's income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts. Auditors most likely could have detected this irregularity by

Which of the following procedures is not used in auditors' examination of litigation, claims, and assessments?

If the date of an entity's financial statements is December 31, the date of the auditor's report is February 20, and the audit report release date is February 22, which of the following is considered a subsequent event?

Which of the following auditing procedures most likely would assist auditors in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?

Which of the following conditions or set of circumstances would not ordinarily raise questions about the entity's ability to continue as a going concern:

For which of the following objectives would auditors be least likely to use analytical procedures near the end of the audit?

Explain briefly auditors' responsibility for subsequently discovered facts existing at the date of the auditors' reports.

Near the end of an audit, the application of analytical procedures is

Which of the following substantive procedures would not ordinarily be used by auditors in evaluating the potential existence of subsequent events?

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Revenue and Collection Cycle 279

Acquisition and Expenditure Cycle 336

Production Cycle 394

Finance and Investment Cycle 443

Reports on Audited Financial Statements

Filters

Exam 11: Completing the Audit 500

Why should auditors be particularly concerned with "miscellaneous," "other," and "clearing" accounts classified as revenues or expenses?

Auditors must complete various phases of an audit after the date of the financial statements. The auditors' responsibility for matters affecting the client extends from the date of the financial statements to the

Roll-forward work normally occurs between the __________ and the __________.

Which of the following events or activities may occur following the audit report release date?

Which of the following is an audit procedure that auditors most likely would perform concerning litigation, claims, and assessments?

Which of the following best describes the auditors' responsibility with respect to management's estimates?

For each of the communications listed below, select the appropriate time period during which the communication is typically obtained or provided and whether the communication is oral, written, or either oral or written. Engagement letter

What is the primary purpose of obtaining written representations?

If an entity had litigation pending at the date of the financial statements and auditors learn of the outcome of this litigation following the date of their report (but prior to the audit report release date), this is known as a(an):

An entity's income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts. Auditors most likely could have detected this irregularity by

Which of the following procedures is not used in auditors' examination of litigation, claims, and assessments?

If the date of an entity's financial statements is December 31, the date of the auditor's report is February 20, and the audit report release date is February 22, which of the following is considered a subsequent event?

Which of the following auditing procedures most likely would assist auditors in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?

Which of the following conditions or set of circumstances would not ordinarily raise questions about the entity's ability to continue as a going concern:

For which of the following objectives would auditors be least likely to use analytical procedures near the end of the audit?

Explain briefly auditors' responsibility for subsequently discovered facts existing at the date of the auditors' reports.

Near the end of an audit, the application of analytical procedures is

Which of the following substantive procedures would not ordinarily be used by auditors in evaluating the potential existence of subsequent events?

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Revenue and Collection Cycle 279

Acquisition and Expenditure Cycle 336

Production Cycle 394

Finance and Investment Cycle 443

Reports on Audited Financial Statements

Filters

Roll-forward work normally occurs between the and the .