Question 1

When evaluating accounting estimates, the auditor would not concentrate on which of the following key factors and assumptions?

Accepted Answer

A)  Those that are within budgetary expectations. 
B)  Those that are subjective and susceptible to misstatement and bias. 
C)  Those that are inconsistent with current economic trends. 
D)  Those that are sensitive to variations. 
A)  Those that are within budgetary expectations. 
B)  Those that are subjective and susceptible to misstatement and bias. 
C)  Those that are inconsistent with current economic trends. 
D)  Those that are sensitive to variations.

Question 2

Estimates are based on both subjective and objective factors.

Accepted Answer

A) True 
 B)False

Question 3

An audit firm culture that emphasizes "doing the right thing," encourages auditors to deal with difficult issues in a short period of time.

Accepted Answer

A) True 
 B)False

Question 4

Which one of the following is not a key condition indicating doubt about a client's ability to continue as a going-concern?

Accepted Answer

A)  Adverse key financial ratios. 
B)  Employee strike that halts operations for several months. 
C)  Company has not paid dividends to date. 
D)  Default on bank debt. 
A)  Adverse key financial ratios. 
B)  Employee strike that halts operations for several months. 
C)  Company has not paid dividends to date. 
D)  Default on bank debt.

Question 5

Subsequent events.
What are the two types of subsequent events identified in the accounting literature and what is required when each occurs? Provide an example of each type of subsequent event.

Accepted Answer

The two types of subsequent events are T

Question 6

Which of the following is explicitly required by the Sarbanes-Oxley Act of 2002 for audits of public companies?

Accepted Answer

A)  Subsequent event review. 
B)  Engagement quality review. 
C)  Disclosure of all contingent liabilities. 
D)  Seven year client rotation. 
A)  Subsequent event review. 
B)  Engagement quality review. 
C)  Disclosure of all contingent liabilities. 
D)  Seven year client rotation.

Question 7

The signing officers for the certifications under the Sarbanes-Oxley Act are typically the controller and the treasurer of the company.

Accepted Answer

A) True 
 B)False

Question 8

During which of the following phases of the audit are analytical review procedures required by the auditing standards?

Accepted Answer

A)  The planning phase of the audit. 
B)  The final review phase of the audit. 
C)  Both the planning and final review phases of the audit. 
D)  Performance of tests of controls. 
A)  The planning phase of the audit. 
B)  The final review phase of the audit. 
C)  Both the planning and final review phases of the audit. 
D)  Performance of tests of controls.

Question 9

Which of the following statements is false regarding partner rotation and audit firm rotation?

Accepted Answer

A)  During a cooling off period, the individual or audit firm may not engage in any meaningful audit-related interactions with the client. 
B)  Rules are the same internationally regarding the terms of mandatory partner rotation and mandatory audit firm rotation. 
C)  The issue associated with mandatory partner or audit firm rotation is the familiarity threat. 
D)  Having a longstanding relationship with the client could aid audit quality because of the knowledge that the partner and members of the engagement team gain through time. 
A)  During a cooling off period, the individual or audit firm may not engage in any meaningful audit-related interactions with the client. 
B)  Rules are the same internationally regarding the terms of mandatory partner rotation and mandatory audit firm rotation. 
C)  The issue associated with mandatory partner or audit firm rotation is the familiarity threat. 
D)  Having a longstanding relationship with the client could aid audit quality because of the knowledge that the partner and members of the engagement team gain through time.

Question 10

Which of the following is not true regarding accounting estimates?

Accepted Answer

A)  Accounting estimates are based on management's knowledge and experience of past and current events. 
B)  Accounting estimates are based on management's assumptions about conditions that are expected to exist and courses of action the company expects to take. 
C)  Accounting estimates are based on both subjective and objective factors 
D)  Because accounting estimates are based, in part, on management's knowledge and experience, they are not biased. 
A)  Accounting estimates are based on management's knowledge and experience of past and current events. 
B)  Accounting estimates are based on management's assumptions about conditions that are expected to exist and courses of action the company expects to take. 
C)  Accounting estimates are based on both subjective and objective factors 
D)  Because accounting estimates are based, in part, on management's knowledge and experience, they are not biased.

Question 11

Which of the following is one of the most important drivers of audit quality in cases where an auditor may feel some pressure to acquiesce to management's demands to not require that misstatements be corrected in order to preserve a harmonious working relationship?

Accepted Answer

A)  Firm culture. 
B)  Ethics training. 
C)  Annual income of the CPA firm. 
D)  PCAOB guidance. 
A)  Firm culture. 
B)  Ethics training. 
C)  Annual income of the CPA firm. 
D)  PCAOB guidance.

Question 12

Auditors should have heightened skepticism regarding period-end adjusting journal entries that relate to accounts with significant estimates.

Accepted Answer

A) True 
 B)False

Question 13

During the course of an audit, misstatements that are individually immaterial may be detected. What should the auditor do with these?

Accepted Answer

A)  Permanently pass on these immaterial misstatements as they do not individually impact the financial statements. 
B)  Request that management footnote the immaterial misstatements in the financial statements for fair presentation. 
C)  Accumulate all of the known and projected misstatements to determine if the impact is material in the aggregate. 
D)  Roll them forward for three years when they will become material enough to adjust. 
A)  Permanently pass on these immaterial misstatements as they do not individually impact the financial statements. 
B)  Request that management footnote the immaterial misstatements in the financial statements for fair presentation. 
C)  Accumulate all of the known and projected misstatements to determine if the impact is material in the aggregate. 
D)  Roll them forward for three years when they will become material enough to adjust.

Question 14

Most audit firms use a schedule to accumulate the known and projected misstatements and the carryover effects of prior-year uncorrected misstatements. Which of the following statements regarding this process is false?

Accepted Answer

A)  Adjustments made to correct the financial statements are referred to as booked. 
B)  Possible adjustments to the financial statements that are left uncorrected are referred to as waived. 
C)  Tax effects are not shown on schedules of correcting errors. 
D)  The nature of the misstatement, as well as the quantitative amount, is considered in the judgment of materiality. 
A)  Adjustments made to correct the financial statements are referred to as booked. 
B)  Possible adjustments to the financial statements that are left uncorrected are referred to as waived. 
C)  Tax effects are not shown on schedules of correcting errors. 
D)  The nature of the misstatement, as well as the quantitative amount, is considered in the judgment of materiality.

Question 15

A cooling off period is the number of years after which the individual auditor or audit firm may resume its prior role with the audit client.

Accepted Answer

A) True 
 B)False

Question 16

Adjustments.
In your audit of Lomar Company for the calendar year 2014, you find a number of items that you believe represent possible adjustments to the company's books. Management does not want to make any adjustments.
REQUIRED:
Assuming that Lomar is a public company describe how the adjustments might impact your audit report on internal control over financial reporting.

Accepted Answer

auditors of public companies must evalua

Question 17

Which of the following statement is false regarding analytical procedures that help auditors assess the overall final presentation of the financial statements?

Accepted Answer

A)  By performing a final analytical review, the audit firm will identify any unusual, unexpected, or unexplained relationships that should be resolved before the issuance of the audit report. 
B)  A basic five step process for using analytical procedures applies. 
C)  Analytical procedures provide evidence on whether certain relationships make sense in light of the knowledge obtained during the audit. 
D)  Auditing standards require the use of analytical procedures in the final review phase of the audit to assist in identifying ending account relationships that are unusual. 
A)  By performing a final analytical review, the audit firm will identify any unusual, unexpected, or unexplained relationships that should be resolved before the issuance of the audit report. 
B)  A basic five step process for using analytical procedures applies. 
C)  Analytical procedures provide evidence on whether certain relationships make sense in light of the knowledge obtained during the audit. 
D)  Auditing standards require the use of analytical procedures in the final review phase of the audit to assist in identifying ending account relationships that are unusual.

Question 18

Which one of the following is not a purpose of the management representation letter?

Accepted Answer

A)  It clearly documents the audit procedures that were performed by the auditors. 
B)  It further acknowledges management's responsibility for the financial statements. 
C)  It confirms oral responses obtained by the auditor earlier in the audit and the continuing appropriateness of those responses. 
D)  It reduces the possibility of misunderstanding concerning the matters that are the subject of the representations. 
A)  It clearly documents the audit procedures that were performed by the auditors. 
B)  It further acknowledges management's responsibility for the financial statements. 
C)  It confirms oral responses obtained by the auditor earlier in the audit and the continuing appropriateness of those responses. 
D)  It reduces the possibility of misunderstanding concerning the matters that are the subject of the representations.

Question 19

Which of the following individuals should sign the management representation letter?

Accepted Answer

A)  The members of the audit committee and board of directors. 
B)  The chief executive officer and the chief financial officer. 
C)  The chief financial officer and the treasurer. 
D)  The controller and the auditor. 
A)  The members of the audit committee and board of directors. 
B)  The chief executive officer and the chief financial officer. 
C)  The chief financial officer and the treasurer. 
D)  The controller and the auditor.

Question 20

Two paragraphs should be added to the auditor's report when the auditor concludes that substantial doubt remains about the client's ability to continue as a going concern for a reasonable period of time.

Accepted Answer

A) True 
 B)False

When evaluating accounting estimates, the auditor would not concentrate on which of the following key factors and assumptions?

Estimates are based on both subjective and objective factors.

An audit firm culture that emphasizes "doing the right thing," encourages auditors to deal with difficult issues in a short period of time.

Which one of the following is not a key condition indicating doubt about a client's ability to continue as a going-concern?

Subsequent events. What are the two types of subsequent events identified in the accounting literature and what is required when each occurs? Provide an example of each type of subsequent event.

Which of the following is explicitly required by the Sarbanes-Oxley Act of 2002 for audits of public companies?

The signing officers for the certifications under the Sarbanes-Oxley Act are typically the controller and the treasurer of the company.

During which of the following phases of the audit are analytical review procedures required by the auditing standards?

Which of the following statements is false regarding partner rotation and audit firm rotation?

Which of the following is not true regarding accounting estimates?

Which of the following is one of the most important drivers of audit quality in cases where an auditor may feel some pressure to acquiesce to management's demands to not require that misstatements be corrected in order to preserve a harmonious working relationship?

Auditors should have heightened skepticism regarding period-end adjusting journal entries that relate to accounts with significant estimates.

During the course of an audit, misstatements that are individually immaterial may be detected. What should the auditor do with these?

Most audit firms use a schedule to accumulate the known and projected misstatements and the carryover effects of prior-year uncorrected misstatements. Which of the following statements regarding this process is false?

A cooling off period is the number of years after which the individual auditor or audit firm may resume its prior role with the audit client.

Which of the following statement is false regarding analytical procedures that help auditors assess the overall final presentation of the financial statements?

Which one of the following is not a purpose of the management representation letter?

Which of the following individuals should sign the management representation letter?

Two paragraphs should be added to the auditor's report when the auditor concludes that substantial doubt remains about the client's ability to continue as a going concern for a reasonable period of time.

Auditing: Integral to the Economy

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters

Exam 14: Activities Required in Completing a Quality Audit

When evaluating accounting estimates, the auditor would not concentrate on which of the following key factors and assumptions?

Estimates are based on both subjective and objective factors.

An audit firm culture that emphasizes "doing the right thing," encourages auditors to deal with difficult issues in a short period of time.

Which one of the following is not a key condition indicating doubt about a client's ability to continue as a going-concern?

Subsequent events. What are the two types of subsequent events identified in the accounting literature and what is required when each occurs? Provide an example of each type of subsequent event.

Which of the following is explicitly required by the Sarbanes-Oxley Act of 2002 for audits of public companies?

The signing officers for the certifications under the Sarbanes-Oxley Act are typically the controller and the treasurer of the company.

During which of the following phases of the audit are analytical review procedures required by the auditing standards?

Which of the following statements is false regarding partner rotation and audit firm rotation?

Which of the following is not true regarding accounting estimates?

Which of the following is one of the most important drivers of audit quality in cases where an auditor may feel some pressure to acquiesce to management's demands to not require that misstatements be corrected in order to preserve a harmonious working relationship?

Auditors should have heightened skepticism regarding period-end adjusting journal entries that relate to accounts with significant estimates.

During the course of an audit, misstatements that are individually immaterial may be detected. What should the auditor do with these?

Most audit firms use a schedule to accumulate the known and projected misstatements and the carryover effects of prior-year uncorrected misstatements. Which of the following statements regarding this process is false?

A cooling off period is the number of years after which the individual auditor or audit firm may resume its prior role with the audit client.

Which of the following statement is false regarding analytical procedures that help auditors assess the overall final presentation of the financial statements?

Which one of the following is not a purpose of the management representation letter?

Which of the following individuals should sign the management representation letter?

Two paragraphs should be added to the auditor's report when the auditor concludes that substantial doubt remains about the client's ability to continue as a going concern for a reasonable period of time.

Auditing: Integral to the Economy

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters