Question 1

Internal control over payroll is enhanced when the personnel department distributes payroll checks.

Accepted Answer

A) True 
 B)False

Question 2

If management fails to list an unasserted claim in the letter of inquiry to a lawyer,the lawyer is not required to inform the auditors of the omission.

Accepted Answer

A) True 
 B)False

Question 3

Auditors have a responsibility to report on all FASB-required supplementary information for publicly-traded companies.

Accepted Answer

A) True 
 B)False

Question 4

During the course of the year 2 audit of Smithsone Company,the auditor discovered the following situations that may or may not require an adjusting journal entry.Each audit finding is independent of any of the other findings.Select the account or accounts that would comprise the adjusting journal entry,if required,to correct the audit finding.Accounts may be used once,more than once,or not at all.

Accepted Answer

The answer of During the course of the year 2...

Question 5

Auditors often request that the audit client send a letter of inquiry to those attorneys who have been consulted with respect to litigation,claims,or assessments.The primary reason for this request is to provide the auditors with:

Accepted Answer

A) An estimate of the dollar amount of the probable loss. 
B) An expert opinion as to whether a loss is possible,probable,or remote. 
C) Information concerning the progress of cases to date. 
D) Corroborative audit evidence. 
A) An estimate of the dollar amount of the probable loss. 
B) An expert opinion as to whether a loss is possible,probable,or remote. 
C) Information concerning the progress of cases to date. 
D) Corroborative audit evidence.

Question 6

Which of the following is the best reason why the auditors should consider observing a client's distribution of regular payroll checks?

Accepted Answer

A) Separation of payroll duties is less than adequate for effective internal control. 
B) Total payroll costs are a significant part of total operating costs. 
C) The auditors did not observe the distribution of the entire regular payroll during the audit in the prior year. 
D) Employee turnover is excessive. 
A) Separation of payroll duties is less than adequate for effective internal control. 
B) Total payroll costs are a significant part of total operating costs. 
C) The auditors did not observe the distribution of the entire regular payroll during the audit in the prior year. 
D) Employee turnover is excessive.

Question 7

Management estimates the company's allowance for doubtful accounts as $200,000,and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000,with all points in that interval equally likely.The judgmental misstatement in this situation is:

Accepted Answer

A) $0. 
B) $30,000. 
C) $40,000. 
D) $50,000. 
A) $0. 
B) $30,000. 
C) $40,000. 
D) $50,000.

Question 8

An example of an internal control weakness is to assign the payroll department the responsibility for:

Accepted Answer

A) Preparing the payroll expense distribution. 
B) Preparing the payroll checks. 
C) Authorizing increases in pay. 
D) Preparing journal entries for payroll expense. 
A) Preparing the payroll expense distribution. 
B) Preparing the payroll checks. 
C) Authorizing increases in pay. 
D) Preparing journal entries for payroll expense.

Question 9

The auditor's primary means of obtaining corroboration of management's information concerning litigation is a:

Accepted Answer

A) Letter of audit inquiry to the client's lawyer. 
B) Letter of corroboration from the auditor's lawyer upon review of the legal documentation. 
C) Confirmation of claims and assessments from the other parties to the litigation. 
D) Confirmation of claims and assessments from an officer of the court presiding over the litigation. 
A) Letter of audit inquiry to the client's lawyer. 
B) Letter of corroboration from the auditor's lawyer upon review of the legal documentation. 
C) Confirmation of claims and assessments from the other parties to the litigation. 
D) Confirmation of claims and assessments from an officer of the court presiding over the litigation.

Question 10

If,after issuing an audit report,the auditors find that they have failed to perform certain significant audit procedures they should first:

Accepted Answer

A) Attempt to determine whether their report is still being relied upon by third parties. 
B) Notify regulatory agencies. 
C) Notify legal counsel. 
D) Wait until the beginning of the next year's audit to determine whether misstatements have occurred. 
A) Attempt to determine whether their report is still being relied upon by third parties. 
B) Notify regulatory agencies. 
C) Notify legal counsel. 
D) Wait until the beginning of the next year's audit to determine whether misstatements have occurred.

Question 11

If not adjusted,a situation in which the total of uncorrected misstatements in the financial statements exceeds a material amount is likely to lead to an audit report modification.

Accepted Answer

A) True 
 B)False

Question 12

The date the auditor grants the client permission to use the audit report in connection with the financial statements is the:

Accepted Answer

A) Last day of significant field work. 
B) Report cutoff date. 
C) Report release date. 
D) Representation date. 
A) Last day of significant field work. 
B) Report cutoff date. 
C) Report release date. 
D) Representation date.

Question 13

Dual-dating of an audit report extends the auditors' liability for disclosure through the later date for all areas of the financial statements.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following subsequent events might require an adjustment to the client's financial statements?

Accepted Answer

A) A business combination with another company. 
B) A major customer declares bankruptcy causing a material receivable to be uncollectible. 
C) Loss of plant and equipment due to a fire.The loss in insured. 
D) Plant employees could possibly go on strike. 
A) A business combination with another company. 
B) A major customer declares bankruptcy causing a material receivable to be uncollectible. 
C) Loss of plant and equipment due to a fire.The loss in insured. 
D) Plant employees could possibly go on strike.

Question 15

A refusal by a lawyer to furnish information related to litigation included in the letter of inquiry is likely to result in:

Accepted Answer

A) Confirmation of related lawsuits with the claimants. 
B) Qualification of the audit report. 
C) An assessment that loss of the litigation is probable. 
D) An adverse opinion. 
A) Confirmation of related lawsuits with the claimants. 
B) Qualification of the audit report. 
C) An assessment that loss of the litigation is probable. 
D) An adverse opinion.

Question 16

Which of the following procedures would an auditor most likely perform prior to the balance sheet date?

Accepted Answer

A) Review subsequent events. 
B) Perform search for unrecorded liabilities. 
C) Send inquiry letter to client's legal counsel. 
D) Review detail and test significant travel and entertainment expenses. 
A) Review subsequent events. 
B) Perform search for unrecorded liabilities. 
C) Send inquiry letter to client's legal counsel. 
D) Review detail and test significant travel and entertainment expenses.

Question 17

Auditors are concerned with the existence of loss contingencies that may affect the client's financial statements.One way that the auditors obtain evidence about existing loss contingencies is through the lawyer's letter.
a.Describe the information that the auditors wish to obtain about the litigation being handled by a lawyer.
b.Describe three other procedures that are used by auditors to discover existing loss contingencies.

Accepted Answer

a.The auditors wish to obtain the follow

Question 18

In auditing the balance sheet,most revenue and expense accounts are also audited.Which accounts are most likely to be audited when auditing Accounts Receivable?

Accepted Answer

A) Sales and Cost of Goods Sold. 
B) Interest and Bad Debt Expense. 
C) Sales and Bad Debt Expense. 
D) Interest and Cost of Goods Sold. 
A) Sales and Cost of Goods Sold. 
B) Interest and Bad Debt Expense. 
C) Sales and Bad Debt Expense. 
D) Interest and Cost of Goods Sold.

Question 19

Which of the following information need not be reported in the auditors' report of a nonpublic company if the information is considered to be properly stated after performing appropriate procedures?

Accepted Answer

A) FASB-required supplementary information. 
B) Other information in documents containing audited financial statements. 
C) Supplementary information in relation to the financial statements as a whole. 
D) GASB-required supplementary information. 
A) FASB-required supplementary information. 
B) Other information in documents containing audited financial statements. 
C) Supplementary information in relation to the financial statements as a whole. 
D) GASB-required supplementary information.

Question 20

Which of the following summarizes the threshold at which auditors are required to request management to record any identified factual misstatements that are:

Accepted Answer

A) Material. 
B) Material or immaterial. 
C) Significant deficiencies. 
D) Other than trivial. 
A) Material. 
B) Material or immaterial. 
C) Significant deficiencies. 
D) Other than trivial.

Internal control over payroll is enhanced when the personnel department distributes payroll checks.

If management fails to list an unasserted claim in the letter of inquiry to a lawyer,the lawyer is not required to inform the auditors of the omission.

Auditors have a responsibility to report on all FASB-required supplementary information for publicly-traded companies.

Auditors often request that the audit client send a letter of inquiry to those attorneys who have been consulted with respect to litigation,claims,or assessments.The primary reason for this request is to provide the auditors with:

Which of the following is the best reason why the auditors should consider observing a client's distribution of regular payroll checks?

Management estimates the company's allowance for doubtful accounts as $200,000,and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000,with all points in that interval equally likely.The judgmental misstatement in this situation is:

An example of an internal control weakness is to assign the payroll department the responsibility for:

The auditor's primary means of obtaining corroboration of management's information concerning litigation is a:

If,after issuing an audit report,the auditors find that they have failed to perform certain significant audit procedures they should first:

If not adjusted,a situation in which the total of uncorrected misstatements in the financial statements exceeds a material amount is likely to lead to an audit report modification.

The date the auditor grants the client permission to use the audit report in connection with the financial statements is the:

Dual-dating of an audit report extends the auditors' liability for disclosure through the later date for all areas of the financial statements.

Which of the following subsequent events might require an adjustment to the client's financial statements?

A refusal by a lawyer to furnish information related to litigation included in the letter of inquiry is likely to result in:

Which of the following procedures would an auditor most likely perform prior to the balance sheet date?

In auditing the balance sheet,most revenue and expense accounts are also audited.Which accounts are most likely to be audited when auditing Accounts Receivable?

Which of the following information need not be reported in the auditors' report of a nonpublic company if the information is considered to be properly stated after performing appropriate procedures?

Which of the following summarizes the threshold at which auditors are required to request management to record any identified factual misstatements that are:

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property,plant,and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

Filters

Exam 16: Auditing Operations and Completing the Audit

Internal control over payroll is enhanced when the personnel department distributes payroll checks.

If management fails to list an unasserted claim in the letter of inquiry to a lawyer,the lawyer is not required to inform the auditors of the omission.

Auditors have a responsibility to report on all FASB-required supplementary information for publicly-traded companies.

Auditors often request that the audit client send a letter of inquiry to those attorneys who have been consulted with respect to litigation,claims,or assessments.The primary reason for this request is to provide the auditors with:

Which of the following is the best reason why the auditors should consider observing a client's distribution of regular payroll checks?

Management estimates the company's allowance for doubtful accounts as $200,000,and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000,with all points in that interval equally likely.The judgmental misstatement in this situation is:

An example of an internal control weakness is to assign the payroll department the responsibility for:

The auditor's primary means of obtaining corroboration of management's information concerning litigation is a:

If,after issuing an audit report,the auditors find that they have failed to perform certain significant audit procedures they should first:

If not adjusted,a situation in which the total of uncorrected misstatements in the financial statements exceeds a material amount is likely to lead to an audit report modification.

The date the auditor grants the client permission to use the audit report in connection with the financial statements is the:

Dual-dating of an audit report extends the auditors' liability for disclosure through the later date for all areas of the financial statements.

Which of the following subsequent events might require an adjustment to the client's financial statements?

A refusal by a lawyer to furnish information related to litigation included in the letter of inquiry is likely to result in:

Which of the following procedures would an auditor most likely perform prior to the balance sheet date?

In auditing the balance sheet,most revenue and expense accounts are also audited.Which accounts are most likely to be audited when auditing Accounts Receivable?

Which of the following information need not be reported in the auditors' report of a nonpublic company if the information is considered to be properly stated after performing appropriate procedures?

Which of the following summarizes the threshold at which auditors are required to request management to record any identified factual misstatements that are:

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property,plant,and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

Filters