Question 1

Which of the following substantive tests would the auditor conduct as a search for contingent liabilities?

Accepted Answer

A)  select an attribute sample of legal expenses for matching to invoices 
B)  select a dollar unit sample of legal expenses for matching to invoices 
C)  inspect legal expense invoices and perform a census test of legal expenses 
D)  review a sample of legal invoices, looking for appropriate authorization for payment 
A)  select an attribute sample of legal expenses for matching to invoices 
B)  select a dollar unit sample of legal expenses for matching to invoices 
C)  inspect legal expense invoices and perform a census test of legal expenses 
D)  review a sample of legal invoices, looking for appropriate authorization for payment

Question 2

Besides the search for contingent liabilities and the review for subsequent events, the auditor has four important final evidence accumulation responsibilities, all of which are required by current professional auditing standards. Discuss each of these four responsibilities.

Accepted Answer

•final analytical procedures performed a

Question 3

If a lawyer refuses to provide the auditor with information that is within the lawyer's jurisdiction and may directly affect the fair presentation of financial statements about material existing lawsuits (asserted claims) or unasserted claims, the audit report would have to be

Accepted Answer

A)  an adverse opinion. 
B)  a qualified opinion. 
C)  an unqualified opinion with an explanatory paragraph. 
D)  modified to reflect the lack of available evidence (i.e., scope limitation). 
A)  an adverse opinion. 
B)  a qualified opinion. 
C)  an unqualified opinion with an explanatory paragraph. 
D)  modified to reflect the lack of available evidence (i.e., scope limitation).

Question 4

When auditing contingent liabilities, the primary objective at the initial stage of the tests is to determine

Accepted Answer

A)  the materiality of any liability. 
B)  what constitutes adequate disclosure of the liability. 
C)  the likelihood of the liability. 
D)  the existence of the liability. 
A)  the materiality of any liability. 
B)  what constitutes adequate disclosure of the liability. 
C)  the likelihood of the liability. 
D)  the existence of the liability.

Question 5

One of the purposes of a client representation letter is to

Accepted Answer

A)  reduce the amount of audit procedures performed by the auditor. 
B)  document the responses from management to inquiries about various aspects of the audit. 
C)  serve as audit evidence for the accuracy of the contingent liabilities. 
D)  reduce the detection risk. 
A)  reduce the amount of audit procedures performed by the auditor. 
B)  document the responses from management to inquiries about various aspects of the audit. 
C)  serve as audit evidence for the accuracy of the contingent liabilities. 
D)  reduce the detection risk.

Question 6

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

Accepted Answer

A)  sale of long-term debt or capital stock 
B)  loss of a plant as a result of a flood 
C)  major purchase of a business that is expected to double the sales volume 
D)  settlement of litigation in excess of the recorded liability 
A)  sale of long-term debt or capital stock 
B)  loss of a plant as a result of a flood 
C)  major purchase of a business that is expected to double the sales volume 
D)  settlement of litigation in excess of the recorded liability

Question 7

The management letter

Accepted Answer

A)  is required by CAS whenever there are "reportable conditions." 
B)  must follow the format prescribed by the CPA. 
C)  spells out to the audit committee the auditor's responsibilities under generally accepted auditing standards. 
D)  is optional and is intended to help the client operate its business more effectively. 
A)  is required by CAS whenever there are "reportable conditions." 
B)  must follow the format prescribed by the CPA. 
C)  spells out to the audit committee the auditor's responsibilities under generally accepted auditing standards. 
D)  is optional and is intended to help the client operate its business more effectively.

Question 8

The audit procedures for the subsequent events review can be divided into two categories: 1) procedures normally integrated as a part of the verification of year-end account balances, and 2) those performed specifically for the purpose of discovering subsequent events. Which of the following procedures would be in the second category?

Accepted Answer

A)  Examine subsequent-period sales and purchases transactions to determine whether the cutoff is accurate. 
B)  Correspond with lawyers. 
C)  Test the collectability of accounts receivable by reviewing subsequent period cash receipts. 
D)  Compare the subsequent period purchase price of inventory with the recorded cost as a test of lower-of-cost-or-market valuation. 
A)  Examine subsequent-period sales and purchases transactions to determine whether the cutoff is accurate. 
B)  Correspond with lawyers. 
C)  Test the collectability of accounts receivable by reviewing subsequent period cash receipts. 
D)  Compare the subsequent period purchase price of inventory with the recorded cost as a test of lower-of-cost-or-market valuation.

Question 9

List four specific matters that should be included in a client representation letter.

Accepted Answer

•management's acknowledgment of its resp

Question 10

There are two categories of lawsuits: outstanding (or asserted) claims, and

Accepted Answer

A)  possible or unasserted claims. 
B)  disputed claims among several parties. 
C)  settled claims. 
D)  claims that could result in material misstatements. 
A)  possible or unasserted claims. 
B)  disputed claims among several parties. 
C)  settled claims. 
D)  claims that could result in material misstatements.

Question 11

When several staff are working together on an audit engagement, what type of quality control review is conducted on a daily basis?

Accepted Answer

A)  the partner reviews the electronic files 
B)  team review by interview 
C)  second partner review 
D)  manager review of sections 
A)  the partner reviews the electronic files 
B)  team review by interview 
C)  second partner review 
D)  manager review of sections

Question 12

Which of the following auditing procedures is ordinarily performed last?

Accepted Answer

A)  reading of the minutes of the directors' meetings 
B)  confirming accounts payable 
C)  obtaining a client representation letter 
D)  testing of the purchasing function 
A)  reading of the minutes of the directors' meetings 
B)  confirming accounts payable 
C)  obtaining a client representation letter 
D)  testing of the purchasing function

Question 13

Inquiries of management are used to help identify subsequent events. To help obtain meaningful answers

Accepted Answer

A)  the standard firm checklist should be followed. 
B)  these inquiries must be conducted with the proper client personnel. 
C)  the inquiries should be conducted by senior audit personnel. 
D)  they should be asked after the effective date of the audit report. 
A)  the standard firm checklist should be followed. 
B)  these inquiries must be conducted with the proper client personnel. 
C)  the inquiries should be conducted by senior audit personnel. 
D)  they should be asked after the effective date of the audit report.

Question 14

A client representation letter is a written statement from a non-independent source and therefore

Accepted Answer

A)  cannot be regarded as reliable evidence on its own. 
B)  can be regarded as reliable evidence only if the auditor finds strong internal controls. 
C)  can be regarded as reliable evidence if the high-level corporate officials who sign it are trustworthy. 
D)  needs to be confirmed by an outside, independent source such as a financial institution or law firm. 
A)  cannot be regarded as reliable evidence on its own. 
B)  can be regarded as reliable evidence only if the auditor finds strong internal controls. 
C)  can be regarded as reliable evidence if the high-level corporate officials who sign it are trustworthy. 
D)  needs to be confirmed by an outside, independent source such as a financial institution or law firm.

Question 15

If the amount of a probable loss on a contingent liability is not determinable, the liability should be

Accepted Answer

A)  accrued and indicated in the body of the financial statements. 
B)  disclosed in footnotes but not accrued. 
C)  neither accrued nor disclosed in footnotes. 
D)  disclosed in the auditor's report but not disclosed on the financial statements. 
A)  accrued and indicated in the body of the financial statements. 
B)  disclosed in footnotes but not accrued. 
C)  neither accrued nor disclosed in footnotes. 
D)  disclosed in the auditor's report but not disclosed on the financial statements.

Question 16

As part of the review for subsequent events, the auditor will review financial statements prepared after the balance sheet date. The purpose of this review is to examine changes after year end and to look for

Accepted Answer

A)  errors in capital versus maintenance charge allocations that occurred after the year end. 
B)  subsequent payments to accounts payable and long term debt. 
C)  subsequent receipts in accounts receivable, especially for the larger customers. 
D)  changes in the business relative to results for the same period in the year under audit. 
A)  errors in capital versus maintenance charge allocations that occurred after the year end. 
B)  subsequent payments to accounts payable and long term debt. 
C)  subsequent receipts in accounts receivable, especially for the larger customers. 
D)  changes in the business relative to results for the same period in the year under audit.

Question 17

CAS 570 - Going Concern, requires that the auditor evaluate management's assessment of the ability of the entity to continue as a going concern based on

Accepted Answer

A)  inquiry with management. 
B)  the opinion of the legal counsel of the company. 
C)  the liquidity and solvency ratios of the firm. 
D)  the evidence collected throughout the audit. 
A)  inquiry with management. 
B)  the opinion of the legal counsel of the company. 
C)  the liquidity and solvency ratios of the firm. 
D)  the evidence collected throughout the audit.

Question 18

CAS 250 requires the auditor to communicate illegal acts to the audit committee

Accepted Answer

A)  if the illegal acts are slightly material. 
B)  if the illegal acts are material. 
C)  if the illegal acts are other than trivial. 
D)  regardless of materiality. 
A)  if the illegal acts are slightly material. 
B)  if the illegal acts are material. 
C)  if the illegal acts are other than trivial. 
D)  regardless of materiality.

Question 19

IFRS uses specific terminology to refer to the likelihood of the occurrence of an organizational event. Which of the following would require note disclosure in the financial statements adjusted?

Accepted Answer

A)  likely to occur and the amount can be estimated 
B)  possible that an outflow of resources is not required 
C)  likelihood is remote 
D)  amount is yet to be confirmed 
A)  likely to occur and the amount can be estimated 
B)  possible that an outflow of resources is not required 
C)  likelihood is remote 
D)  amount is yet to be confirmed

Question 20

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)  balance sheet date and ending with the date of the auditor's report. 
B)  start of the fiscal year under audit and ending with the balance sheet date. 
C)  start of the fiscal year under audit and ending with the date of the auditor's report 
D)  balance sheet date and ending with the date the registration statement becomes effective. 
A)  balance sheet date and ending with the date of the auditor's report. 
B)  start of the fiscal year under audit and ending with the balance sheet date. 
C)  start of the fiscal year under audit and ending with the date of the auditor's report 
D)  balance sheet date and ending with the date the registration statement becomes effective.

Which of the following substantive tests would the auditor conduct as a search for contingent liabilities?

Besides the search for contingent liabilities and the review for subsequent events, the auditor has four important final evidence accumulation responsibilities, all of which are required by current professional auditing standards. Discuss each of these four responsibilities.

If a lawyer refuses to provide the auditor with information that is within the lawyer's jurisdiction and may directly affect the fair presentation of financial statements about material existing lawsuits (asserted claims) or unasserted claims, the audit report would have to be

When auditing contingent liabilities, the primary objective at the initial stage of the tests is to determine

One of the purposes of a client representation letter is to

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

The management letter

List four specific matters that should be included in a client representation letter.

There are two categories of lawsuits: outstanding (or asserted) claims, and

When several staff are working together on an audit engagement, what type of quality control review is conducted on a daily basis?

Which of the following auditing procedures is ordinarily performed last?

Inquiries of management are used to help identify subsequent events. To help obtain meaningful answers

A client representation letter is a written statement from a non-independent source and therefore

If the amount of a probable loss on a contingent liability is not determinable, the liability should be

As part of the review for subsequent events, the auditor will review financial statements prepared after the balance sheet date. The purpose of this review is to examine changes after year end and to look for

CAS 570 - Going Concern, requires that the auditor evaluate management's assessment of the ability of the entity to continue as a going concern based on

CAS 250 requires the auditor to communicate illegal acts to the audit committee

IFRS uses specific terminology to refer to the likelihood of the occurrence of an organizational event. Which of the following would require note disclosure in the financial statements adjusted?

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

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters

Exam 18: Completing the Audit

Which of the following substantive tests would the auditor conduct as a search for contingent liabilities?

Besides the search for contingent liabilities and the review for subsequent events, the auditor has four important final evidence accumulation responsibilities, all of which are required by current professional auditing standards. Discuss each of these four responsibilities.

If a lawyer refuses to provide the auditor with information that is within the lawyer's jurisdiction and may directly affect the fair presentation of financial statements about material existing lawsuits (asserted claims) or unasserted claims, the audit report would have to be

When auditing contingent liabilities, the primary objective at the initial stage of the tests is to determine

One of the purposes of a client representation letter is to

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

The management letter

List four specific matters that should be included in a client representation letter.

There are two categories of lawsuits: outstanding (or asserted) claims, and

When several staff are working together on an audit engagement, what type of quality control review is conducted on a daily basis?

Which of the following auditing procedures is ordinarily performed last?

Inquiries of management are used to help identify subsequent events. To help obtain meaningful answers

A client representation letter is a written statement from a non-independent source and therefore

If the amount of a probable loss on a contingent liability is not determinable, the liability should be

As part of the review for subsequent events, the auditor will review financial statements prepared after the balance sheet date. The purpose of this review is to examine changes after year end and to look for

CAS 570 - Going Concern, requires that the auditor evaluate management's assessment of the ability of the entity to continue as a going concern based on

CAS 250 requires the auditor to communicate illegal acts to the audit committee

IFRS uses specific terminology to refer to the likelihood of the occurrence of an organizational event. Which of the following would require note disclosure in the financial statements adjusted?

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

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters