Question 1

An engagement checklist is prepared to assist the auditor in drawing final conclusions about the adequacy of the audit evidence.

Accepted Answer

A) True 
 B)False

Question 2

If an auditor discovers that previously issued financial statements are misleading, the most desirable approach to follow is to request that the client issue an immediate revision of the financial statements containing an explanation of the reasons for the revision.

Accepted Answer

A) True 
 B)False

Question 3

An important part of evaluating whether the financial statements are fairly stated is summarising the misstatements uncovered in the audit.Whenever the auditor uncovers misstatements that are in themselves material:

Accepted Answer

A)  it is necessary to combine individually immaterial misstatements with the material misstatements and make entries to correct the statements. 
B)  it is necessary to combine individually immaterial misstatements with the material misstatements and make full disclosure in the footnotes. 
C)  the trial balance should be adjusted to correct the statements. 
D)  no entries need be made, but footnote disclosure is required. 
A)  it is necessary to combine individually immaterial misstatements with the material misstatements and make entries to correct the statements. 
B)  it is necessary to combine individually immaterial misstatements with the material misstatements and make full disclosure in the footnotes. 
C)  the trial balance should be adjusted to correct the statements. 
D)  no entries need be made, but footnote disclosure is required.

Question 4

If, during the completion phase of the audit, the auditor determines that he or she has not obtained sufficient evidence to draw a conclusion about the fairness of the client's financial statements, there are two choices: either additional evidence must be obtained or a disclaimer of opinion must be issued.

Accepted Answer

A) True 
 B)False

Question 5

Auditors do not need to design and perform procedures in every audit to review for contingent liabilities and subsequent events as part of their phase IV testing.

Accepted Answer

A) True 
 B)False

Question 6

The auditor's responsibility for 'reviewing the subsequent events' of a client is normally limited to the period of time beginning with the:

Accepted Answer

A)  start of the financial year under audit and ending with the balance sheet date. 
B)  balance sheet date and ending with the date of the annual general meeting. 
C)  start of the financial year under audit and ending with the date of the auditor's report. 
D)  balance sheet date and ending with the date of the auditor's report. 
A)  start of the financial year under audit and ending with the balance sheet date. 
B)  balance sheet date and ending with the date of the annual general meeting. 
C)  start of the financial year under audit and ending with the date of the auditor's report. 
D)  balance sheet date and ending with the date of the auditor's report.

Question 7

Although the management representation letter is typed on the client's letterhead and signed by the client, it is common for the auditor to prepare the letter.

Accepted Answer

A) True 
 B)False

Question 8

ASA 240 requires the auditor to communicate all errors, fraud, and illegal acts discovered during the audit to the client's audit committee.

Accepted Answer

A) True 
 B)False

Question 9

Which type of subsequent event requires consideration by management and evaluation by the auditor?

Accepted Answer

A)  subsequent events that have no direct effect on the financial statements but for which disclosure is advisable 
B)  subsequent events that have a direct effect on the financial statements and require adjustment 
C)  both A and B 
D)  none of the above 
A)  subsequent events that have no direct effect on the financial statements but for which disclosure is advisable 
B)  subsequent events that have a direct effect on the financial statements and require adjustment 
C)  both A and B 
D)  none of the above

Question 10

The entire working papers are reviewed by a staff member who has no experience on the engagement.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is NOT required to be communicated to the audit committee or similarly designed body under ASA 260?

Accepted Answer

A)  difficulties encountered in performing the audit, such as lack of availability of client personnel and failure to provide necessary information 
B)  all material irregularities and illegal acts of a material nature 
C)  the auditor's responsibilities under generally accepted auditing standards, including responsibility for evaluating internal control and the concept of reasonable rather than absolute assurance 
D)  disagreements with management about the scope of the audit, applicability of accounting principles, or wording of the audit report 
A)  difficulties encountered in performing the audit, such as lack of availability of client personnel and failure to provide necessary information 
B)  all material irregularities and illegal acts of a material nature 
C)  the auditor's responsibilities under generally accepted auditing standards, including responsibility for evaluating internal control and the concept of reasonable rather than absolute assurance 
D)  disagreements with management about the scope of the audit, applicability of accounting principles, or wording of the audit report

Question 12

When testing for contingent liabilities, the primary objective at the initial stage of the tests is to determine the existence of contingencies.

Accepted Answer

A) True 
 B)False

Question 13

Management furnishes the independent auditor with information concerning litigation, claims, and assessments.Which of the following is the auditor's primary means of initiating action to corroborate such information?

Accepted Answer

A)  Request that client lawyers provide a legal opinion concerning the policies and procedures adopted by management to identify, evaluate, and account for litigation, claims, and assessments. 
B)  Request that client management engage outside legal counsel to suggest wording for the text of a footnote explaining the nature and probable outcome of existing litigation, claims, and assessments. 
C)  Request that client lawyers undertake a reconsideration of matters of litigation, claims, and assessments with which they were consulted during the period under examination. 
D)  Request that client management send a letter of general inquiry to those lawyers with whom management consulted concerning litigation, claims, and assessments. 
A)  Request that client lawyers provide a legal opinion concerning the policies and procedures adopted by management to identify, evaluate, and account for litigation, claims, and assessments. 
B)  Request that client management engage outside legal counsel to suggest wording for the text of a footnote explaining the nature and probable outcome of existing litigation, claims, and assessments. 
C)  Request that client lawyers undertake a reconsideration of matters of litigation, claims, and assessments with which they were consulted during the period under examination. 
D)  Request that client management send a letter of general inquiry to those lawyers with whom management consulted concerning litigation, claims, and assessments.

Question 14

If a contingency will probably occur and can be reasonably estimated, the financial statement amounts would need to be adjusted.

Accepted Answer

A) True 
 B)False

Question 15

One of the auditor's primary concerns related to presentation- and disclosure-related objectives is the ________ assertion.

Accepted Answer

A)  cutoff 
B)  classification 
C)  completeness 
D)  both B and C 
A)  cutoff 
B)  classification 
C)  completeness 
D)  both B and C

Question 16

What are the three conditions required for the existence of a contingent liability?

Accepted Answer

1.There is a potential future payment to

Question 17

The following events all occurred after the balance sheet date of 30 June 2012, but prior to the date of the audit report, 15 August 2012.Which one would require an adjustment to the account balances as at 30 June 2012?

Accepted Answer

A)  Unused equipment recorded at $100 000 at 30 June, 2012 was disposed of on 3 July 2012 for $60 000. 
B)  Inventory valued at $100 000 on 30 June 2012 was destroyed by a fire on 1 August 2012. 
C)  The client disposed of a major subsidiary on 30 July 2012. 
D)  The auditee will market $2 million of preference shares on 31 July 2012. 
A)  Unused equipment recorded at $100 000 at 30 June, 2012 was disposed of on 3 July 2012 for $60 000. 
B)  Inventory valued at $100 000 on 30 June 2012 was destroyed by a fire on 1 August 2012. 
C)  The client disposed of a major subsidiary on 30 July 2012. 
D)  The auditee will market $2 million of preference shares on 31 July 2012.

Question 18

Which event that occurred after the end of the financial year under audit but prior to issuance of the auditor's report would NOT require disclosure in the financial statements?

Accepted Answer

A)  a major drop in the quoted market price of the shares of the corporation 
B)  loss of plant or inventories as a result of fire or flood 
C)  settlement of litigation when the event giving rise to the claim took place after the balance sheet date 
D)  sale of a bond or share issue 
A)  a major drop in the quoted market price of the shares of the corporation 
B)  loss of plant or inventories as a result of fire or flood 
C)  settlement of litigation when the event giving rise to the claim took place after the balance sheet date 
D)  sale of a bond or share issue

Question 19

The process of 'final evidence accumulation' is always done late in the engagement.Which one of the following would be done the earliest in the engagement?

Accepted Answer

A)  Perform final analytical procedures. 
B)  Search for contingent liabilities. 
C)  Acquire the management representation letter. 
D)  Evaluate the going concern assumption. 
A)  Perform final analytical procedures. 
B)  Search for contingent liabilities. 
C)  Acquire the management representation letter. 
D)  Evaluate the going concern assumption.

Question 20

The auditor needs to perform procedures to satisfy the three categories of audit objectives: transaction-related objectives, balance-related objectives, and ________ -related objectives

Accepted Answer

A)  balance-day 
B)  sufficient-appropriate 
C)  presentation- and disclosure 
D)  financial-statement 
A)  balance-day 
B)  sufficient-appropriate 
C)  presentation- and disclosure 
D)  financial-statement

An engagement checklist is prepared to assist the auditor in drawing final conclusions about the adequacy of the audit evidence.

If an auditor discovers that previously issued financial statements are misleading, the most desirable approach to follow is to request that the client issue an immediate revision of the financial statements containing an explanation of the reasons for the revision.

An important part of evaluating whether the financial statements are fairly stated is summarising the misstatements uncovered in the audit.Whenever the auditor uncovers misstatements that are in themselves material:

Auditors do not need to design and perform procedures in every audit to review for contingent liabilities and subsequent events as part of their phase IV testing.

The auditor's responsibility for 'reviewing the subsequent events' of a client is normally limited to the period of time beginning with the:

Although the management representation letter is typed on the client's letterhead and signed by the client, it is common for the auditor to prepare the letter.

ASA 240 requires the auditor to communicate all errors, fraud, and illegal acts discovered during the audit to the client's audit committee.

Which type of subsequent event requires consideration by management and evaluation by the auditor?

The entire working papers are reviewed by a staff member who has no experience on the engagement.

Which of the following is NOT required to be communicated to the audit committee or similarly designed body under ASA 260?

When testing for contingent liabilities, the primary objective at the initial stage of the tests is to determine the existence of contingencies.

Management furnishes the independent auditor with information concerning litigation, claims, and assessments.Which of the following is the auditor's primary means of initiating action to corroborate such information?

If a contingency will probably occur and can be reasonably estimated, the financial statement amounts would need to be adjusted.

One of the auditor's primary concerns related to presentation- and disclosure-related objectives is the ________ assertion.

What are the three conditions required for the existence of a contingent liability?

The following events all occurred after the balance sheet date of 30 June 2012, but prior to the date of the audit report, 15 August 2012.Which one would require an adjustment to the account balances as at 30 June 2012?

Which event that occurred after the end of the financial year under audit but prior to issuance of the auditor's report would NOT require disclosure in the financial statements?

The process of 'final evidence accumulation' is always done late in the engagement.Which one of the following would be done the earliest in the engagement?

The auditor needs to perform procedures to satisfy the three categories of audit objectives: transaction-related objectives, balance-related objectives, and ________ -related objectives

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

Audit evidence

Audit planning and documentation

Materiality and risk

Internal control and control risk

Fraud auditing

The impact of information technology on the audit process

Overall audit plan and audit program

Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

Completing tests in the sales and collection cycle: Accounts receivable

Audit sampling

Audit of transaction cycles and financial statement balances I

Audit of transaction cycles and financial statement balances II

Audit reporting

Other auditing and assurance engagements

Filters

Exam 17: Completing the audit

An engagement checklist is prepared to assist the auditor in drawing final conclusions about the adequacy of the audit evidence.

If an auditor discovers that previously issued financial statements are misleading, the most desirable approach to follow is to request that the client issue an immediate revision of the financial statements containing an explanation of the reasons for the revision.

An important part of evaluating whether the financial statements are fairly stated is summarising the misstatements uncovered in the audit.Whenever the auditor uncovers misstatements that are in themselves material:

Auditors do not need to design and perform procedures in every audit to review for contingent liabilities and subsequent events as part of their phase IV testing.

The auditor's responsibility for 'reviewing the subsequent events' of a client is normally limited to the period of time beginning with the:

Although the management representation letter is typed on the client's letterhead and signed by the client, it is common for the auditor to prepare the letter.

ASA 240 requires the auditor to communicate all errors, fraud, and illegal acts discovered during the audit to the client's audit committee.

Which type of subsequent event requires consideration by management and evaluation by the auditor?

The entire working papers are reviewed by a staff member who has no experience on the engagement.

Which of the following is NOT required to be communicated to the audit committee or similarly designed body under ASA 260?

When testing for contingent liabilities, the primary objective at the initial stage of the tests is to determine the existence of contingencies.

Management furnishes the independent auditor with information concerning litigation, claims, and assessments.Which of the following is the auditor's primary means of initiating action to corroborate such information?

If a contingency will probably occur and can be reasonably estimated, the financial statement amounts would need to be adjusted.

One of the auditor's primary concerns related to presentation- and disclosure-related objectives is the ________ assertion.

What are the three conditions required for the existence of a contingent liability?

The following events all occurred after the balance sheet date of 30 June 2012, but prior to the date of the audit report, 15 August 2012.Which one would require an adjustment to the account balances as at 30 June 2012?

Which event that occurred after the end of the financial year under audit but prior to issuance of the auditor's report would NOT require disclosure in the financial statements?

The process of 'final evidence accumulation' is always done late in the engagement.Which one of the following would be done the earliest in the engagement?

The auditor needs to perform procedures to satisfy the three categories of audit objectives: transaction-related objectives, balance-related objectives, and ________ -related objectives

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

Audit evidence

Audit planning and documentation

Materiality and risk

Internal control and control risk

Fraud auditing

The impact of information technology on the audit process

Overall audit plan and audit program

Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

Completing tests in the sales and collection cycle: Accounts receivable

Audit sampling

Audit of transaction cycles and financial statement balances I

Audit of transaction cycles and financial statement balances II

Audit reporting

Other auditing and assurance engagements

Filters