Question 1

FASB has set forth four categories of potential losses that can be reasonably estimated.

Accepted Answer

A) True 
 B)False

Question 2

If conclusion is drawn that there may be a going concern problem, which of the following should the auditor do?

Accepted Answer

A)  Withdraw from the engagement. 
B)  Issue a qualified or adverse opinion. 
C)  Identify and assess management's plan to overcome the problem. 
D)  Communicate this fact with management that is one level above the controller. 
A)  Withdraw from the engagement. 
B)  Issue a qualified or adverse opinion. 
C)  Identify and assess management's plan to overcome the problem. 
D)  Communicate this fact with management that is one level above the controller.

Question 3

A number of studies of bankruptcies have shown that certain combinations of ratios, like the Altman Z-score, have good predictive power in indicating the likelihood of bankruptcy.

Accepted Answer

A) True 
 B)False

Question 4

The auditor should consider the historical experience of the client in making past estimates.

Accepted Answer

A) True 
 B)False

Question 5

Auditors are required to evaluate the likelihood of each client continuing as a going concern for a reasonable period into the foreseeable future.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following procedurea is not performed as part of an engagement quality review?

Accepted Answer

A)  Evaluate judgments about materiality and the disposition of corrected and uncorrected identified misstatements. 
B)  Call each board member to discuss the potential for fraud. 
C)  Confirm with the lead audit partner that there are no significant unresolved matters. 
D)  Evaluate whether appropriate levels of supervision and reviews of individual audit tasks were completed adequately during the audit. 
A)  Evaluate judgments about materiality and the disposition of corrected and uncorrected identified misstatements. 
B)  Call each board member to discuss the potential for fraud. 
C)  Confirm with the lead audit partner that there are no significant unresolved matters. 
D)  Evaluate whether appropriate levels of supervision and reviews of individual audit tasks were completed adequately during the audit.

Question 7

If an auditor becomes aware of violations of the Foreign Corrupt Practices Act of 1977 (FCPA), the auditor should notify the CFO about the violations, their circumstance, and the effect on the financial statements.

Accepted Answer

A) True 
 B)False

Question 8

If management or those charged with governance do not demonstrate a commitment to internal control over noncompliance with laws and regulations, then the auditor should withdraw from the engagement.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would be considered "the nature of a misstatement" that might make it material?

Accepted Answer

A)  Comparing the sum of known and projected misstatements to total current assets. 
B)  Comparing the sum of known and projected misstatements to total current liabilities. 
C)  Comparing the sum of known and projected misstatements to pretax income. 
D)  Having the effect of changing a positive earnings trend to a negative earnings trend. 
A)  Comparing the sum of known and projected misstatements to total current assets. 
B)  Comparing the sum of known and projected misstatements to total current liabilities. 
C)  Comparing the sum of known and projected misstatements to pretax income. 
D)  Having the effect of changing a positive earnings trend to a negative earnings trend.

Question 10

Assume that a major customer of the company that you are auditing files for bankruptcy during the subsequent period because of a deteriorating financial condition. Neither you nor the client becomes aware of the event until the bankruptcy filing is reported. What type of subsequent event would this be?

Accepted Answer

A)  Type I subsequent event 
B)  Type II subsequent event 
C)  Neither Type I or Type II 
D)  Both Type I and Type II 
A)  Type I subsequent event 
B)  Type II subsequent event 
C)  Neither Type I or Type II 
D)  Both Type I and Type II

Question 11

Which one of the following is the best example of a Type II subsequent event?

Accepted Answer

A)  Election of new board members. 
B)  Change in auditors. 
C)  Inability to collect from a significant customer. 
D)  Acquisition of a subsidiary. 
A)  Election of new board members. 
B)  Change in auditors. 
C)  Inability to collect from a significant customer. 
D)  Acquisition of a subsidiary.

Question 12

The auditor should consider matters for disclosure only while gathering evidence during the course of the audit.

Accepted Answer

A) True 
 B)False

Question 13

The primary source of evidence concerning contingencies is the client's external attorney.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following are categories that do not reflect the contingent nature of losses and the guiding criteria organized around probability of outcomes as provided by the FASB?

Accepted Answer

A)  Guaranteed. 
B)  Reasonably possible. 
C)  Remote. 
D)  Probable. 
A)  Guaranteed. 
B)  Reasonably possible. 
C)  Remote. 
D)  Probable.

Question 15

Assume a situation in which an attorney who provided significant litigation counsel to a client to refuses to furnish information requested in an audit. Which of the following descriptions best describes this situation from the auditor's perspective?

Accepted Answer

A)  A departure from GAAP. 
B)  A scope limitation. 
C)  A violation of the attorney-client privilege. 
D)  A contingent liability. 
A)  A departure from GAAP. 
B)  A scope limitation. 
C)  A violation of the attorney-client privilege. 
D)  A contingent liability.

Question 16

It is important that the external auditor have a constructive and detailed dialogue with the audit committee on important aspects of the audit.

Accepted Answer

A) True 
 B)False

Question 17

Dual-dating opinions.
Describe the concept and the purpose of dual-dating an audit report.

Accepted Answer

dual-dating the audit report reduces the

Question 18

Auditing standards recognize that there are inherent limitations in an auditor's ability to detect material misstatements relating to the entity's compliance with laws and regulations.

Accepted Answer

A) True 
 B)False

Question 19

An audit opinion is a guarantee that the business is a going concern.

Accepted Answer

A) True 
 B)False

Question 20

A management letter is not required.

Accepted Answer

A) True 
 B)False

FASB has set forth four categories of potential losses that can be reasonably estimated.

If conclusion is drawn that there may be a going concern problem, which of the following should the auditor do?

A number of studies of bankruptcies have shown that certain combinations of ratios, like the Altman Z-score, have good predictive power in indicating the likelihood of bankruptcy.

The auditor should consider the historical experience of the client in making past estimates.

Auditors are required to evaluate the likelihood of each client continuing as a going concern for a reasonable period into the foreseeable future.

Which of the following procedurea is not performed as part of an engagement quality review?

If an auditor becomes aware of violations of the Foreign Corrupt Practices Act of 1977 (FCPA), the auditor should notify the CFO about the violations, their circumstance, and the effect on the financial statements.

If management or those charged with governance do not demonstrate a commitment to internal control over noncompliance with laws and regulations, then the auditor should withdraw from the engagement.

Which of the following would be considered "the nature of a misstatement" that might make it material?

Which one of the following is the best example of a Type II subsequent event?

The auditor should consider matters for disclosure only while gathering evidence during the course of the audit.

The primary source of evidence concerning contingencies is the client's external attorney.

Which of the following are categories that do not reflect the contingent nature of losses and the guiding criteria organized around probability of outcomes as provided by the FASB?

Assume a situation in which an attorney who provided significant litigation counsel to a client to refuses to furnish information requested in an audit. Which of the following descriptions best describes this situation from the auditor's perspective?

It is important that the external auditor have a constructive and detailed dialogue with the audit committee on important aspects of the audit.

Dual-dating opinions. Describe the concept and the purpose of dual-dating an audit report.

Auditing standards recognize that there are inherent limitations in an auditor's ability to detect material misstatements relating to the entity's compliance with laws and regulations.

An audit opinion is a guarantee that the business is a going concern.

A management letter is not required.

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

FASB has set forth four categories of potential losses that can be reasonably estimated.

If conclusion is drawn that there may be a going concern problem, which of the following should the auditor do?

A number of studies of bankruptcies have shown that certain combinations of ratios, like the Altman Z-score, have good predictive power in indicating the likelihood of bankruptcy.

The auditor should consider the historical experience of the client in making past estimates.

Auditors are required to evaluate the likelihood of each client continuing as a going concern for a reasonable period into the foreseeable future.

Which of the following procedurea is not performed as part of an engagement quality review?

If an auditor becomes aware of violations of the Foreign Corrupt Practices Act of 1977 (FCPA), the auditor should notify the CFO about the violations, their circumstance, and the effect on the financial statements.

If management or those charged with governance do not demonstrate a commitment to internal control over noncompliance with laws and regulations, then the auditor should withdraw from the engagement.

Which of the following would be considered "the nature of a misstatement" that might make it material?

Which one of the following is the best example of a Type II subsequent event?

The auditor should consider matters for disclosure only while gathering evidence during the course of the audit.

The primary source of evidence concerning contingencies is the client's external attorney.

Which of the following are categories that do not reflect the contingent nature of losses and the guiding criteria organized around probability of outcomes as provided by the FASB?

Assume a situation in which an attorney who provided significant litigation counsel to a client to refuses to furnish information requested in an audit. Which of the following descriptions best describes this situation from the auditor's perspective?

It is important that the external auditor have a constructive and detailed dialogue with the audit committee on important aspects of the audit.

Dual-dating opinions. Describe the concept and the purpose of dual-dating an audit report.

Auditing standards recognize that there are inherent limitations in an auditor's ability to detect material misstatements relating to the entity's compliance with laws and regulations.

An audit opinion is a guarantee that the business is a going concern.

A management letter is not required.

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