Question 1

During the professional judgment process, the analysis may identify only one appropriate response to the issue.

Accepted Answer

A) True 
 B)False

Question 2

Relevant assertions have a meaningful bearing on whether the account is fairly stated and are used to assess the risk of material misstatement and the design and performance of audit procedures.

Accepted Answer

A) True 
 B)False

Question 3

________ is the self-confidence to resist persuasion and to challenge assumptions or conclusions.

Accepted Answer

A)  Self-esteem 
B)  Interpersonal understanding 
C)  Suspension of judgment 
D)  Autonomy 
A)  Self-esteem 
B)  Interpersonal understanding 
C)  Suspension of judgment 
D)  Autonomy

Question 4

In certifying their annual financial statements, the CEO and CFO of a public company certify that the financial statements comply with the requirements of

Accepted Answer

A)  GAAP. 
B)  the Sarbanes-Oxley Act. 
C)  the Securities Exchange Act of 1934. 
D)  GAAS. 
A)  GAAP. 
B)  the Sarbanes-Oxley Act. 
C)  the Securities Exchange Act of 1934. 
D)  GAAS.

Question 5

The overall objectives of the auditor including reporting on the financial statements and communicating, as required by accounting standards, must be in accordance with the auditor's findings.

Accepted Answer

A) True 
 B)False

Question 6

If the auditor believes that the financial statements are not fairly stated or is unable to reach a conclusion because of insufficient evidence, the auditor

Accepted Answer

A)  should withdraw from the engagement. 
B)  should request an increase in audit fees so that more resources can be used to conduct the audit. 
C)  has the responsibility of notifying financial statement users through the auditor's report. 
D)  should notify regulators of the circumstances. 
A)  should withdraw from the engagement. 
B)  should request an increase in audit fees so that more resources can be used to conduct the audit. 
C)  has the responsibility of notifying financial statement users through the auditor's report. 
D)  should notify regulators of the circumstances.

Question 7

When the auditor identifies or suspects noncompliance with laws and regulations, the auditor

Accepted Answer

A)  should discuss the matter with those whom they believe committed the illegal act. 
B)  should begin communication with the FASB in accordance with regulations. 
C)  may disclaim an opinion on the basis of scope limitations if he or she is precluded by management from obtaining sufficient appropriate evidence. 
D)  should withdraw from the engagement. 
A)  should discuss the matter with those whom they believe committed the illegal act. 
B)  should begin communication with the FASB in accordance with regulations. 
C)  may disclaim an opinion on the basis of scope limitations if he or she is precluded by management from obtaining sufficient appropriate evidence. 
D)  should withdraw from the engagement.

Question 8

One of the characteristics of professional skepticism is ________, which is the conviction to decide for oneself, rather than accepting the claims of others.

Accepted Answer

A)  interpersonal understanding 
B)  autonomy 
C)  suspension of judgment 
D)  self-esteem 
A)  interpersonal understanding 
B)  autonomy 
C)  suspension of judgment 
D)  self-esteem

Question 9

If there is collusion among management, the chance a normal audit would uncover such acts is

Accepted Answer

A)  very low. 
B)  very high. 
C)  zero. 
D)  none of the above. 
A)  very low. 
B)  very high. 
C)  zero. 
D)  none of the above.

Question 10

Balance-related audit objectives are usually applied to the ending balance in income statement accounts; transaction-related audit objectives are usually applied to transactions reflected in balance sheet accounts.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements best describes the auditor's responsibility with respect to illegal acts that do not have a material effect on the client's financial statements?

Accepted Answer

A)  Generally, the auditor is under no obligation to notify parties other than personnel within the client's organization. 
B)  Generally, the auditor is under an obligation to inform the PCAOB. 
C)  Generally, the auditor is obligated to disclose the relevant facts in the auditor's report. 
D)  Generally, the auditor is expected to compel the client to adhere to requirements of the Foreign Corrupt Practices Act. 
A)  Generally, the auditor is under no obligation to notify parties other than personnel within the client's organization. 
B)  Generally, the auditor is under an obligation to inform the PCAOB. 
C)  Generally, the auditor is obligated to disclose the relevant facts in the auditor's report. 
D)  Generally, the auditor is expected to compel the client to adhere to requirements of the Foreign Corrupt Practices Act.

Question 12

Obtaining an understanding of the entity and its environment is part of the analytical procedures phase of the audit.

Accepted Answer

A) True 
 B)False

Question 13

The detail tie-in objective is not concerned that the details in the account balance

Accepted Answer

A)  agree with related subsidiary ledger amounts. 
B)  are properly disclosed in accordance with GAAP. 
C)  foot to the total in the account balance. 
D)  agree with the total in the general ledger. 
A)  agree with related subsidiary ledger amounts. 
B)  are properly disclosed in accordance with GAAP. 
C)  foot to the total in the account balance. 
D)  agree with the total in the general ledger.

Question 14

The procedures used to test the effectiveness of the internal controls are known as

Accepted Answer

A)  tests of transactions. 
B)  tests of controls. 
C)  substantive analytical procedures. 
D)  control risk. 
A)  tests of transactions. 
B)  tests of controls. 
C)  substantive analytical procedures. 
D)  control risk.

Question 15

Which of the following statements is usually true?

Accepted Answer

A)  Materiality is easy to quantify. 
B)  Fraudulent financial statements are often easy for the auditor to detect, especially when there is collusion among management. 
C)  Reasonable assurance is a low level of assurance that the financial statements are free from material misstatement. 
D)  An item is considered material if it would likely have changed or influenced the decisions of a reasonable person using the statements. 
A)  Materiality is easy to quantify. 
B)  Fraudulent financial statements are often easy for the auditor to detect, especially when there is collusion among management. 
C)  Reasonable assurance is a low level of assurance that the financial statements are free from material misstatement. 
D)  An item is considered material if it would likely have changed or influenced the decisions of a reasonable person using the statements.

Question 16

When an auditor believes that an illegal act may have occurred, the first step he or she should take is to gather additional evidence to determine the extent of the illegality and if there is a direct impact on the financial statements.

Accepted Answer

A) True 
 B)False

Question 17

An auditor has a duty to

Accepted Answer

A)  provide reasonable assurance that material misstatements will be detected. 
B)  be a guarantor of the fairness in the statements. 
C)  be equally responsible with management for the preparation of the financial statements. 
D)  be an insurer of the fairness in the statements. 
A)  provide reasonable assurance that material misstatements will be detected. 
B)  be a guarantor of the fairness in the statements. 
C)  be equally responsible with management for the preparation of the financial statements. 
D)  be an insurer of the fairness in the statements.

Question 18

Under the cycle approach, the capital acquisition and repayment cycle is closely related to the acquisition and payment cycle.

Accepted Answer

A) True 
 B)False

Question 19

Misappropriation of assets

Accepted Answer

A)  is generally committed by company management. 
B)  harms the users of the financial statements by providing them incorrect financial data for their decision making. 
C)  causes harm to stockholders because the assets are no longer available to their rightful owners. 
D)  causes the financial statements to be misstated since the misappropriation usually involves material amounts. 
A)  is generally committed by company management. 
B)  harms the users of the financial statements by providing them incorrect financial data for their decision making. 
C)  causes harm to stockholders because the assets are no longer available to their rightful owners. 
D)  causes the financial statements to be misstated since the misappropriation usually involves material amounts.

Question 20

The auditors determine which disclosures must be presented in the financial statements.

Accepted Answer

A) True 
 B)False

Exam 6: Audit Responsibilities and Objectives

During the professional judgment process, the analysis may identify only one appropriate response to the issue.

Relevant assertions have a meaningful bearing on whether the account is fairly stated and are used to assess the risk of material misstatement and the design and performance of audit procedures.

________ is the self-confidence to resist persuasion and to challenge assumptions or conclusions.

In certifying their annual financial statements, the CEO and CFO of a public company certify that the financial statements comply with the requirements of

The overall objectives of the auditor including reporting on the financial statements and communicating, as required by accounting standards, must be in accordance with the auditor's findings.

If the auditor believes that the financial statements are not fairly stated or is unable to reach a conclusion because of insufficient evidence, the auditor

When the auditor identifies or suspects noncompliance with laws and regulations, the auditor

One of the characteristics of professional skepticism is ________, which is the conviction to decide for oneself, rather than accepting the claims of others.

If there is collusion among management, the chance a normal audit would uncover such acts is

Balance-related audit objectives are usually applied to the ending balance in income statement accounts; transaction-related audit objectives are usually applied to transactions reflected in balance sheet accounts.

Which of the following statements best describes the auditor's responsibility with respect to illegal acts that do not have a material effect on the client's financial statements?

Obtaining an understanding of the entity and its environment is part of the analytical procedures phase of the audit.

The detail tie-in objective is not concerned that the details in the account balance

The procedures used to test the effectiveness of the internal controls are known as

Which of the following statements is usually true?

When an auditor believes that an illegal act may have occurred, the first step he or she should take is to gather additional evidence to determine the extent of the illegality and if there is a direct impact on the financial statements.

An auditor has a duty to

Under the cycle approach, the capital acquisition and repayment cycle is closely related to the acquisition and payment cycle.

Misappropriation of assets

The auditors determine which disclosures must be presented in the financial statements.

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Evidence

Audit Planning and Materiality

Assessing the Risk of Material Misstatement

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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