Question 1

The standard inquiry to the client's attorney should be prepared on

Accepted Answer

A) plain paper (no letterhead)and be unsigned. 
B) lawyer's stationery and signed by the lawyer. 
C) auditor's stationery and signed by an audit partner. 
D) client's letterhead and signed by a company official. 
A) plain paper (no letterhead)and be unsigned. 
B) lawyer's stationery and signed by the lawyer. 
C) auditor's stationery and signed by an audit partner. 
D) client's letterhead and signed by a company official.

Question 2

An attorney is aware of a violation of a patent agreement that could result in a significant loss to the client if it were known.This is an example of a(n)

Accepted Answer

A) commitment. 
B) unasserted claim. 
C) pending litigation. 
D) subsequent event. 
A) commitment. 
B) unasserted claim. 
C) pending litigation. 
D) subsequent event.

Question 3

Contingent liability disclosure in the footnotes of the financial statements would normally be made when

Accepted Answer

A) the outcome of the accounting event is deemed probable,but a reasonable estimation as to the amount cannot be made by the client or auditor. 
B) a reasonable estimation of the loss can be made,but the outcome is not probable. 
C) the outcome of the accounting event is deemed probable,and a reasonable estimation as to the amount can be made. 
D) the outcome of the accounting event as well as a reasonable estimation of the loss cannot be made. 
A) the outcome of the accounting event is deemed probable,but a reasonable estimation as to the amount cannot be made by the client or auditor. 
B) a reasonable estimation of the loss can be made,but the outcome is not probable. 
C) the outcome of the accounting event is deemed probable,and a reasonable estimation as to the amount can be made. 
D) the outcome of the accounting event as well as a reasonable estimation of the loss cannot be made.

Question 4

Which of the following is not considered a commitment?

Accepted Answer

A) agreements to purchase raw materials 
B) pension plans 
C) agreements to lease facilities at set prices 
D) Each of the above is a commitment. 
A) agreements to purchase raw materials 
B) pension plans 
C) agreements to lease facilities at set prices 
D) Each of the above is a commitment.

Question 5

List the three reasons why an experienced member of the audit firm must thoroughly review audit documentation at the completion of the audit.

Accepted Answer

1. To evaluate the performance of inexpe

Question 6

The auditor's primary concern relative to presentation and disclosure-related objectives is

Accepted Answer

A) accuracy. 
B) existence. 
C) completeness. 
D) occurrence. 
A) accuracy. 
B) existence. 
C) completeness. 
D) occurrence.

Question 7

Auditing standards require the auditor to communicate all management frauds and illegal acts to the audit committee

Accepted Answer

A) only if the act is immaterial. 
B) only if the act is material. 
C) only if the act is highly material. 
D) regardless of materiality. 
A) only if the act is immaterial. 
B) only if the act is material. 
C) only if the act is highly material. 
D) regardless of materiality.

Question 8

The fieldwork for the December 31,2016 audit of Schmidt Corporation ended on March 17,2017.The financial statements and auditor's report were issued on March 29,2017.In each of the material situations (1 through 5)below,indicate the appropriate action (a,b,c).The possible actions are as follows
a. Adjust the December 31,2016 financial statements.
b. Disclose the information in a footnote in the December 31,2016 financial statements.
c. No action is required.
The situations are as follows:
________ 1.On March 1,2017,one of Schmidt Corporation's major customers declared bankruptcy.The customer's financial condition in 2016 was deteriorating and they owed Schmidt Corporation a large sum of money as of the balance sheet date.
________ 2.On February 17,2017,Schmidt Corporation sold some machinery for its book value.
________ 3.On February 20,2017 a flood destroyed the entire uninsured inventory in one of Schmidt's warehouses.
________ 4.On January 5,2017,there was a significant decline in the market value of the securities held for resale from their value as of the balance sheet date.
________ 5.On March 10,2017,the company settled a lawsuit at an amount significantly higher than the amount recorded as a liability on the books as of the balance sheet date.

Accepted Answer

The answer of The fieldwork for the December 31,2016 audit...

Question 9

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 10

Which of the following would be a subsequent discovery of facts which would not require a response by the auditor?

Accepted Answer

A) discovery of the inclusion of material nonexistent sales 
B) discovery of the failure to write off material obsolete inventory 
C) discovery of the omission of a material footnote 
D) discovery of management's intent to increase selling prices in the future 
A) discovery of the inclusion of material nonexistent sales 
B) discovery of the failure to write off material obsolete inventory 
C) discovery of the omission of a material footnote 
D) discovery of management's intent to increase selling prices in the future

Question 11

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 12

Current professional auditing standards make it clear that management,not the auditor,is responsible for identifying and deciding the appropriate accounting treatment for contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 13

The issuance of bonds by the client subsequent to the balance sheet date would require a footnote disclosure in,but no adjustment to,the financial statements under audit.

Accepted Answer

A) True 
 B)False

Question 14

When reviewing the summary of misstatements found in the audit

Accepted Answer

A) an adjusting journal entry must be made by the auditor for all material misstatements. 
B) auditors must combine individually immaterial misstatements to evaluate whether the combined amount is material. 
C) the auditor is not required to consider the impact on the current financial statements of misstatements in the prior year that were not corrected. 
D) auditors only need to consider the misstatements that impact the income statement. 
A) an adjusting journal entry must be made by the auditor for all material misstatements. 
B) auditors must combine individually immaterial misstatements to evaluate whether the combined amount is material. 
C) the auditor is not required to consider the impact on the current financial statements of misstatements in the prior year that were not corrected. 
D) auditors only need to consider the misstatements that impact the income statement.

Question 15

When using the probability threshold for contingencies,the likelihood of the occurrence of the event is classified as

Accepted Answer

A) not likely,likely,or highly likely. 
B) remote,reasonably possible,or probable. 
C) slight,moderate,great. 
D) remote,likely,possible. 
A) not likely,likely,or highly likely. 
B) remote,reasonably possible,or probable. 
C) slight,moderate,great. 
D) remote,likely,possible.

Question 16

The letter of representation is prepared on the CPA firm's letterhead,addressed to the client's chief executive officer,and signed by the audit engagement partner.

Accepted Answer

A) True 
 B)False

Question 17

An auditor's decision concerning whether or not to dual date an audit report is primarily based on the auditor's decision to

Accepted Answer

A) extend appropriate audit procedures. 
B) assume responsibility for events after the date of the auditor's report. 
C) assume responsibility for event from fiscal year-end to the date of the audit report. 
D) roll the dice and hope for a successful outcome. 
A) extend appropriate audit procedures. 
B) assume responsibility for events after the date of the auditor's report. 
C) assume responsibility for event from fiscal year-end to the date of the audit report. 
D) roll the dice and hope for a successful outcome.

Question 18

The Sarbanes-Oxley Act includes additional communication requirements for auditors of public companies.

Accepted Answer

A) True 
 B)False

Question 19

The date of the management representation letter received from the client should

Accepted Answer

A) be the date of latest subsequent event disclosed in the notes to the financial statements. 
B) be dated no earlier than the date of the audit report. 
C) have the same date as the date of the balance sheet. 
D) have the same date as the date of the engagement letter. 
A) be the date of latest subsequent event disclosed in the notes to the financial statements. 
B) be dated no earlier than the date of the audit report. 
C) have the same date as the date of the balance sheet. 
D) have the same date as the date of the engagement letter.

Question 20

Auditors are required to obtain a letter of representation that describes management's planned solutions to all internal control weaknesses identified during an audit.

Accepted Answer

A) True 
 B)False

Exam 24: Completing the Audit

The standard inquiry to the client's attorney should be prepared on

An attorney is aware of a violation of a patent agreement that could result in a significant loss to the client if it were known.This is an example of a(n)

Contingent liability disclosure in the footnotes of the financial statements would normally be made when

Which of the following is not considered a commitment?

List the three reasons why an experienced member of the audit firm must thoroughly review audit documentation at the completion of the audit.

The auditor's primary concern relative to presentation and disclosure-related objectives is

Auditing standards require the auditor to communicate all management frauds and illegal acts to the audit committee

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.

Which of the following would be a subsequent discovery of facts which would not require a response by the auditor?

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.

Current professional auditing standards make it clear that management,not the auditor,is responsible for identifying and deciding the appropriate accounting treatment for contingent liabilities.

The issuance of bonds by the client subsequent to the balance sheet date would require a footnote disclosure in,but no adjustment to,the financial statements under audit.

When reviewing the summary of misstatements found in the audit

When using the probability threshold for contingencies,the likelihood of the occurrence of the event is classified as

The letter of representation is prepared on the CPA firm's letterhead,addressed to the client's chief executive officer,and signed by the audit engagement partner.

An auditor's decision concerning whether or not to dual date an audit report is primarily based on the auditor's decision to

The Sarbanes-Oxley Act includes additional communication requirements for auditors of public companies.

The date of the management representation letter received from the client should

Auditors are required to obtain a letter of representation that describes management's planned solutions to all internal control weaknesses identified during an audit.

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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