Question 1

A compensating control would not be considered as a factor that could mitigate a potential material weakness.

Accepted Answer

A) True 
 B)False

Question 2

Audits of Level 3 assets are the most straightforward as they involve an observable, active market.

Accepted Answer

A) True 
 B)False

Question 3

When there is a ready market for financial instruments, the audit procedures related to valuation and disclosures are more straightforward than when the instrument is not readily marketable.

Accepted Answer

A) True 
 B)False

Question 4

Auditors can choose to test the client's warranty reserves using primarily tests of controls and substantive analytical procedures.

Accepted Answer

A) True 
 B)False

Question 5

Existing professional guidance notes that auditors must make materiality assessments for purposes of (1) audit planning and (2) evidence evaluation after audit procedures are completed.

Accepted Answer

A) True 
 B)False

Question 6

Which method focuses on the materiality of current year misstatements and the reversing effect of prior-year misstatements on the income statement?

Accepted Answer

A)  Rollover method. 
B)  Iron curtain method. 
C)  Percentage approach. 
D)  Judgmental method. 
A)  Rollover method. 
B)  Iron curtain method. 
C)  Percentage approach. 
D)  Judgmental method.

Question 7

Which of the following is not included in the scope of services performed in internal auditing by a CIA?

Accepted Answer

A)  Assurance and consulting. 
B)  Operations analysis. 
C)  Operational efficiency reviews. 
D)  Internal control analysis. 
E)  They are all included in the scope of services. 
A)  Assurance and consulting. 
B)  Operations analysis. 
C)  Operational efficiency reviews. 
D)  Internal control analysis. 
E)  They are all included in the scope of services.

Question 8

Which of the following is the IIA's stated position regarding the internal auditing activity?

Accepted Answer

A)  All responsibilities for internal auditing activity can be outsourced. 
B)  An in-house liaison, such as an executive or senior management member, should be assigned the responsibility for internally managing the internal auditing activity. 
C)  All internal auditors involved in the internal auditing activity must be CIAs. 
D)  Internal auditors for the internal auditing activity should be supervised by CPAs. 
A)  All responsibilities for internal auditing activity can be outsourced. 
B)  An in-house liaison, such as an executive or senior management member, should be assigned the responsibility for internally managing the internal auditing activity. 
C)  All internal auditors involved in the internal auditing activity must be CIAs. 
D)  Internal auditors for the internal auditing activity should be supervised by CPAs.

Question 9

Independence of the internal audit function is obtained by giving the Chief Audit Executive (CAE) unrestricted access to the board and senior management.

Accepted Answer

A) True 
 B)False

Question 10

The SEC issued SAB 108 in 2006, which mandates what is termed a dual approach to assessing uncorrected misstatements.

Accepted Answer

A) True 
 B)False

Question 11

If a company's net income varies significantly from year to year, the auditor might consider using an average of the net income from the prior three to five years as the materiality benchmark.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not a long-term liability account with a high risk of material misstatement?

Accepted Answer

A)  Warranty reserves. 
B)  Pension obligations. 
C)  Other postemployment benefits. 
D)  Marketable securities. 
A)  Warranty reserves. 
B)  Pension obligations. 
C)  Other postemployment benefits. 
D)  Marketable securities.

Question 13

The purpose of making materiality judgments is to make sure that financial statements are free of any material misstatement.

Accepted Answer

A) True 
 B)False

Question 14

Misstatements detected during the audit that were initially deemed to be immaterial must be summarized to determine which of the following?

Accepted Answer

A)  Materiality. 
B)  Quantitative effect. 
C)  Aggregate effects. 
D)  Nature of misstatement. 
A)  Materiality. 
B)  Quantitative effect. 
C)  Aggregate effects. 
D)  Nature of misstatement.

Question 15

Determining materiality is based solely on quantitative factors.

Accepted Answer

A) True 
 B)False

Question 16

When auditing financial hedges, the auditor should understand the product, identify relevant risks and controls, and understand the appropriate accounting.

Accepted Answer

A) True 
 B)False

Question 17

Goodwill has to be evaluated for impairment once a year, as well as on an interim basis as the time events and circumstances warrant.

Accepted Answer

A) True 
 B)False

Question 18

A misstatement that is intentional is not assessed any differently by the auditor than a misstatement that is unintentional.

Accepted Answer

A) True 
 B)False

Question 19

Which one of the following is not an audit procedure used when testing restructuring charges?

Accepted Answer

A)  Review current and proposed financial accounting standards to determine if changes have occurred in accounting for restructuring. 
B)  Evaluate the qualifications of management. 
C)  Mathematically test the estimates. 
D)  Review and independently test the estimates by reviewing (a) contracts, (b) appraisals for property or estimates from investment bankers, and (c) severance contracts. 
A)  Review current and proposed financial accounting standards to determine if changes have occurred in accounting for restructuring. 
B)  Evaluate the qualifications of management. 
C)  Mathematically test the estimates. 
D)  Review and independently test the estimates by reviewing (a) contracts, (b) appraisals for property or estimates from investment bankers, and (c) severance contracts.

Question 20

The FASB has set a hierarchy of inputs to consider in assessing fair value. Price taken from a recent trade on the NIKKEI of an index stock would fall under which level?

Accepted Answer

A)  Level 0. 
B)  Level 1. 
C)  Level 2. 
D)  Level 3. 
A)  Level 0. 
B)  Level 1. 
C)  Level 2. 
D)  Level 3.

A compensating control would not be considered as a factor that could mitigate a potential material weakness.

Audits of Level 3 assets are the most straightforward as they involve an observable, active market.

When there is a ready market for financial instruments, the audit procedures related to valuation and disclosures are more straightforward than when the instrument is not readily marketable.

Auditors can choose to test the client's warranty reserves using primarily tests of controls and substantive analytical procedures.

Existing professional guidance notes that auditors must make materiality assessments for purposes of (1) audit planning and (2) evidence evaluation after audit procedures are completed.

Which method focuses on the materiality of current year misstatements and the reversing effect of prior-year misstatements on the income statement?

Which of the following is not included in the scope of services performed in internal auditing by a CIA?

Which of the following is the IIA's stated position regarding the internal auditing activity?

Independence of the internal audit function is obtained by giving the Chief Audit Executive (CAE) unrestricted access to the board and senior management.

The SEC issued SAB 108 in 2006, which mandates what is termed a dual approach to assessing uncorrected misstatements.

If a company's net income varies significantly from year to year, the auditor might consider using an average of the net income from the prior three to five years as the materiality benchmark.

Which of the following is not a long-term liability account with a high risk of material misstatement?

The purpose of making materiality judgments is to make sure that financial statements are free of any material misstatement.

Misstatements detected during the audit that were initially deemed to be immaterial must be summarized to determine which of the following?

Determining materiality is based solely on quantitative factors.

When auditing financial hedges, the auditor should understand the product, identify relevant risks and controls, and understand the appropriate accounting.

Goodwill has to be evaluated for impairment once a year, as well as on an interim basis as the time events and circumstances warrant.

A misstatement that is intentional is not assessed any differently by the auditor than a misstatement that is unintentional.

Which one of the following is not an audit procedure used when testing restructuring charges?

The FASB has set a hierarchy of inputs to consider in assessing fair value. Price taken from a recent trade on the NIKKEI of an index stock would fall under which level?

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

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Other Services Provided by Audit Firms

Filters

Exam 16: Advanced Topics Concerning Complex Auditing Judgments

A compensating control would not be considered as a factor that could mitigate a potential material weakness.

Audits of Level 3 assets are the most straightforward as they involve an observable, active market.

When there is a ready market for financial instruments, the audit procedures related to valuation and disclosures are more straightforward than when the instrument is not readily marketable.

Auditors can choose to test the client's warranty reserves using primarily tests of controls and substantive analytical procedures.

Existing professional guidance notes that auditors must make materiality assessments for purposes of (1) audit planning and (2) evidence evaluation after audit procedures are completed.

Which method focuses on the materiality of current year misstatements and the reversing effect of prior-year misstatements on the income statement?

Which of the following is not included in the scope of services performed in internal auditing by a CIA?

Which of the following is the IIA's stated position regarding the internal auditing activity?

Independence of the internal audit function is obtained by giving the Chief Audit Executive (CAE) unrestricted access to the board and senior management.

The SEC issued SAB 108 in 2006, which mandates what is termed a dual approach to assessing uncorrected misstatements.

If a company's net income varies significantly from year to year, the auditor might consider using an average of the net income from the prior three to five years as the materiality benchmark.

Which of the following is not a long-term liability account with a high risk of material misstatement?

The purpose of making materiality judgments is to make sure that financial statements are free of any material misstatement.

Misstatements detected during the audit that were initially deemed to be immaterial must be summarized to determine which of the following?

Determining materiality is based solely on quantitative factors.

When auditing financial hedges, the auditor should understand the product, identify relevant risks and controls, and understand the appropriate accounting.

Goodwill has to be evaluated for impairment once a year, as well as on an interim basis as the time events and circumstances warrant.

A misstatement that is intentional is not assessed any differently by the auditor than a misstatement that is unintentional.

Which one of the following is not an audit procedure used when testing restructuring charges?

The FASB has set a hierarchy of inputs to consider in assessing fair value. Price taken from a recent trade on the NIKKEI of an index stock would fall under which level?

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

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Other Services Provided by Audit Firms

Filters