Question 1

Match between columns
                        Premises: transactions that occurred after the balance sheet date which affect the fair presentation or disclosure of the statements being audited
a review of the financial statements and the entire set of audit files by an independent reviewer to whom the audit team must justify the evidence accumulated and the conclusions reached
the use of one audit report date for normal subsequent events and a later date for one or more subsequent events
agreements that the entity will hold to a fixed set of conditions such as the purchase or sale of merchandise at a stated price
a potential future obligation to an outside party for an unknown amount resulting from activities that have already taken place
a potential legal claim against a client where the condition for a claim exists but no claim has been filed
a written communication from the client to the auditor formalizing statements that the client has made about matters pertinent to the audit

Accepted Answer

The Answer of completing the engagement checklist and unasserted claim is...

Question 2

What two steps must an auditor take if they have reservations about the audit client continuing as a going concern?

Accepted Answer

1. Evaluate management's plan

Question 3

Although the letter of representation 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 4

Auditors will generally send a standard inquiry to the client's attorney letter to

Accepted Answer

A) only those attorneys who have devoted substantial time to client matters during the year. 
B) every attorney that the client has been involved with in the current or preceding year,plus any attorney the client engages on occasion. 
C) every attorney whose legal fees for the year exceed a materiality threshold. 
D) only the attorney who represents the client in proceeding where the client is defendant. 
A) only those attorneys who have devoted substantial time to client matters during the year. 
B) every attorney that the client has been involved with in the current or preceding year,plus any attorney the client engages on occasion. 
C) every attorney whose legal fees for the year exceed a materiality threshold. 
D) only the attorney who represents the client in proceeding where the client is defendant.

Question 5

While there is no professional requirement to do so on audit engagements,CPAs frequently issue a formal "management" letter to clients.The primary purpose of this letter is to provide

Accepted Answer

A) evidence indicating whether the auditor is reasonably certain that internal accounting control is operating as prescribed. 
B) a permanent record of the internal accounting control work performed by the auditor during the course of the engagement. 
C) the client with the CPA's recommendations for improving any part of the client's business. 
D) a summary of the auditor's observations that resulted from the auditor's special study of internal control. 
A) evidence indicating whether the auditor is reasonably certain that internal accounting control is operating as prescribed. 
B) a permanent record of the internal accounting control work performed by the auditor during the course of the engagement. 
C) the client with the CPA's recommendations for improving any part of the client's business. 
D) a summary of the auditor's observations that resulted from the auditor's special study of internal control.

Question 6

Which of the following procedures and methods are important in assessing a company's ability to continue as a going concern?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 7

If the auditor concludes that there are contingent liabilities,he or she must evaluate the significance of the potential liability and the nature of the disclosure needed in the financial statements.Which of the following statements is not True?

Accepted Answer

A) The potential liability is sufficiently well known in some instances to be included in the financial statements as an actual liability. 
B) Disclosure may be unnecessary if the contingency is highly remote or immaterial. 
C) A CPA firm often obtains a separate evaluation of the potential liability from its own legal counsel rather than relying on management or management's attorneys. 
D) The client's attorneys must remain independent when evaluating the likelihood of losing the lawsuit. 
A) The potential liability is sufficiently well known in some instances to be included in the financial statements as an actual liability. 
B) Disclosure may be unnecessary if the contingency is highly remote or immaterial. 
C) A CPA firm often obtains a separate evaluation of the potential liability from its own legal counsel rather than relying on management or management's attorneys. 
D) The client's attorneys must remain independent when evaluating the likelihood of losing the lawsuit.

Question 8

The first stop in the audit of contingencies is to determine the amount of the contingency.

Accepted Answer

A) True 
 B)False

Question 9

A management representation letter is

Accepted Answer

A) prepared on the CPA's letterhead. 
B) addressed to the client. 
C) signed by high-level corporate officials. 
D) dated as of the balance sheet date. 
A) prepared on the CPA's letterhead. 
B) addressed to the client. 
C) signed by high-level corporate officials. 
D) dated as of the balance sheet date.

Question 10

Three conditions are required for a contingent liability to exist.Which of the following is not one of those conditions?

Accepted Answer

A) There is a potential future payment to an outside party or the impairment of an asset that resulted from an existing condition. 
B) The outcome must be resolved by a third-party. 
C) There is uncertainty about the amount of the future payment or impairment. 
D) The outcome will be resolved by some future event or events. 
A) There is a potential future payment to an outside party or the impairment of an asset that resulted from an existing condition. 
B) The outcome must be resolved by a third-party. 
C) There is uncertainty about the amount of the future payment or impairment. 
D) The outcome will be resolved by some future event or events.

Question 11

When preparing a standard inquiry to the client's attorney letter,the client's letterhead should be used,and the letter should be signed by the client company's officials.

Accepted Answer

A) True 
 B)False

Question 12

The auditor has completed her assessment of subsequent events.The proper accounting for subsequent events that have a direct effect on the financial statements is to

Accepted Answer

A) adjust the financial statements for the year under audit. 
B) disclose in the notes to financial statement the amount of the adjustment. 
C) duly note in the audit workpapers that next year's financial statements need to be adjusted. 
D) make no adjustment of the financial statements for the year under audit. 
A) adjust the financial statements for the year under audit. 
B) disclose in the notes to financial statement the amount of the adjustment. 
C) duly note in the audit workpapers that next year's financial statements need to be adjusted. 
D) make no adjustment of the financial statements for the year under audit.

Question 13

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

Accepted Answer

A) sale of a bond or capital stock issue 
B) loss of plant or inventories as a result of fire or flood 
C) a significant decline in the market price of the corporation's stock 
D) a merger or acquisition 
A) sale of a bond or capital stock issue 
B) loss of plant or inventories as a result of fire or flood 
C) a significant decline in the market price of the corporation's stock 
D) a merger or acquisition

Question 14

Subsequent events which require adjustment to the financial statements provide additional information about significant conditions/events which did not exist at the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following would the auditor expect to find in the client's management representation letter?

Accepted Answer

A) management's recommendations for internal control effectiveness improvements 
B) management's plans for improving product quality 
C) management's compliance with contractual arrangements that impact the financial statements 
D) management's goals for improving earnings per share 
A) management's recommendations for internal control effectiveness improvements 
B) management's plans for improving product quality 
C) management's compliance with contractual arrangements that impact the financial statements 
D) management's goals for improving earnings per share

Question 16

The letter of representation obtained from an audit client should be

Accepted Answer

A) dated as of the end of the period under audit. 
B) dated as of the audit report date. 
C) dated as of any date decided upon by the client and auditor. 
D) dated as of the issuance of the financial statement. 
A) dated as of the end of the period under audit. 
B) dated as of the audit report date. 
C) dated as of any date decided upon by the client and auditor. 
D) dated as of the issuance of the financial statement.

Question 17

State three items that should be included in a standard inquiry to the client's attorney letter.

Accepted Answer

•A list including (1)pending threatened

Question 18

What is one of the main reasons an attorney may refuse to provide auditors with complete information about contingent liabilities?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 19

The audit firm issues an audit report for its client.The auditors have no obligation to make further inquiries with respect to the client's audited financial statements unless

Accepted Answer

A) a development occurs that may affect the company's long term viability as a company. 
B) final resolution was made on disclosed contingency for which no liability needed to be accrued. 
C) new information comes to the auditor's attention concerning an event that occurred prior to the date of the audit report that,if known,would have impacted the audit opinion. 
D) a lawsuit,in which the risk of loss was considered remote,was resolved in the company's favor. 
A) a development occurs that may affect the company's long term viability as a company. 
B) final resolution was made on disclosed contingency for which no liability needed to be accrued. 
C) new information comes to the auditor's attention concerning an event that occurred prior to the date of the audit report that,if known,would have impacted the audit opinion. 
D) a lawsuit,in which the risk of loss was considered remote,was resolved in the company's favor.

Question 20

A lawsuit has been filed against your client.If,in the opinion of legal counsel,the likelihood your client will lose the lawsuit is remote,no financial statement accrual or disclosure of the potential loss would generally be required.

Accepted Answer

A) True 
 B)False

Exam 24: Completing the Audit

What two steps must an auditor take if they have reservations about the audit client continuing as a going concern?

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

Auditors will generally send a standard inquiry to the client's attorney letter to

While there is no professional requirement to do so on audit engagements,CPAs frequently issue a formal "management" letter to clients.The primary purpose of this letter is to provide

Which of the following procedures and methods are important in assessing a company's ability to continue as a going concern?

If the auditor concludes that there are contingent liabilities,he or she must evaluate the significance of the potential liability and the nature of the disclosure needed in the financial statements.Which of the following statements is not True?

The first stop in the audit of contingencies is to determine the amount of the contingency.

A management representation letter is

Three conditions are required for a contingent liability to exist.Which of the following is not one of those conditions?

When preparing a standard inquiry to the client's attorney letter,the client's letterhead should be used,and the letter should be signed by the client company's officials.

The auditor has completed her assessment of subsequent events.The proper accounting for subsequent events that have a direct effect on the financial statements is to

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

Subsequent events which require adjustment to the financial statements provide additional information about significant conditions/events which did not exist at the balance sheet date.

Which of the following would the auditor expect to find in the client's management representation letter?

The letter of representation obtained from an audit client should be

State three items that should be included in a standard inquiry to the client's attorney letter.

What is one of the main reasons an attorney may refuse to provide auditors with complete information about contingent liabilities?

The audit firm issues an audit report for its client.The auditors have no obligation to make further inquiries with respect to the client's audited financial statements unless

A lawsuit has been filed against your client.If,in the opinion of legal counsel,the likelihood your client will lose the lawsuit is remote,no financial statement accrual or disclosure of the potential loss would generally be required.

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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