Question 1

The cutoff objective, "transactions near the balance sheet date are recorded in the proper period," is a balance-related audit objective.

Accepted Answer

A) True 
 B)False

Question 2

When performing the review and completing the documentation and rationale for the conclusion step of the professional judgment process, auditors will

Accepted Answer

A)  consider the accounting and auditing standards relevant to the issues. 
B)  articulate in written form the rationale of their judgment. 
C)  identify the issue. 
D)  gather the facts. 
A)  consider the accounting and auditing standards relevant to the issues. 
B)  articulate in written form the rationale of their judgment. 
C)  identify the issue. 
D)  gather the facts.

Question 3

In a situation where the auditor is evaluating a decision made with regards to the recording of an unusual revenue transaction, the auditor should step back and determine if the recording of the revenue is in accordance with accounting standards.

Accepted Answer

A) True 
 B)False

Question 4

Determining that the footnote disclosures related to long-term debt are accurate is an example of the ________ audit objective.

Accepted Answer

A)  occurrence 
B)  completeness 
C)  presentation and disclosure 
D)  classification and understandability 
A)  occurrence 
B)  completeness 
C)  presentation and disclosure 
D)  classification and understandability

Question 5

Management's disclosure of the amount of unfunded pension obligations and the assumptions underlying these amounts is an example of the ________ assertion.

Accepted Answer

A)  completeness 
B)  existence 
C)  accuracy and valuation 
D)  rights and obligations 
A)  completeness 
B)  existence 
C)  accuracy and valuation 
D)  rights and obligations

Question 6

In testing for cutoff, the objective is to determine

Accepted Answer

A)  whether all of the current period's transactions are recorded. 
B)  whether transactions are recorded in the correct accounting period. 
C)  the proper cutoff between capitalizing and expensing expenditures. 
D)  the proper cutoff between disclosing items in footnotes or in account balances. 
A)  whether all of the current period's transactions are recorded. 
B)  whether transactions are recorded in the correct accounting period. 
C)  the proper cutoff between capitalizing and expensing expenditures. 
D)  the proper cutoff between disclosing items in footnotes or in account balances.

Question 7

The auditor's best defense when material misstatements are not uncovered is to have conducted the audit

Accepted Answer

A)  in accordance with generally accepted auditing standards. 
B)  as effectively as reasonably possible. 
C)  in a timely manner. 
D)  only after an adequate investigation of the management team. 
A)  in accordance with generally accepted auditing standards. 
B)  as effectively as reasonably possible. 
C)  in a timely manner. 
D)  only after an adequate investigation of the management team.

Question 8

An auditor discovers that the company's bookkeeper unintentionally made a mistake in calculating the amount of the quarterly sales. This is an example of

Accepted Answer

A)  employee fraud. 
B)  an error. 
C)  misappropriation of assets. 
D)  a defalcation. 
A)  employee fraud. 
B)  an error. 
C)  misappropriation of assets. 
D)  a defalcation.

Question 9

Which of the following statements is true regarding the distinction between general audit objectives and specific audit objectives for each class of transactions?

Accepted Answer

A)  The specific audit objectives are applicable to every class of transactions. 
B)  The general audit objectives are applicable to every class of transactions. 
C)  Once the specific transaction-related audit objectives are established, they can be used to develop the general transaction-related objectives. 
D)  For any given class of transactions, usually only one audit objective must be met to conclude the transactions are properly recorded. 
A)  The specific audit objectives are applicable to every class of transactions. 
B)  The general audit objectives are applicable to every class of transactions. 
C)  Once the specific transaction-related audit objectives are established, they can be used to develop the general transaction-related objectives. 
D)  For any given class of transactions, usually only one audit objective must be met to conclude the transactions are properly recorded.

Question 10

Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements?

Accepted Answer

A)  The auditor commonly examines a sample, rather than the entire population of transactions. 
B)  Accounting presentations contain complex estimates which involve uncertainty. 
C)  Fraudulently prepared financial statements are often difficult to detect. 
D)  Auditors believe that reasonable assurance is sufficient in the vast majority of cases. 
A)  The auditor commonly examines a sample, rather than the entire population of transactions. 
B)  Accounting presentations contain complex estimates which involve uncertainty. 
C)  Fraudulently prepared financial statements are often difficult to detect. 
D)  Auditors believe that reasonable assurance is sufficient in the vast majority of cases.

Question 11

Recent academic research on the topic of professional skepticism suggests that there are six characteristics to skepticism. List and briefly describe each of these characteristics.

Accepted Answer

The six characteristics of skepticism ar

Question 12

Auditors often convince themselves that they only accept clients they can trust and who have high integrity.

Accepted Answer

A) True 
 B)False

Question 13

During the professional judgment process, it is not important that the auditor consider other financial reporting framework requirements outside of generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 14

In describing the cycle approach to segmenting an audit, which of the following statements is not true?

Accepted Answer

A)  All general ledger accounts and journals are included at least once. 
B)  Some journals and general ledger accounts are included in more than one cycle. 
C)  The "capital acquisition and repayment" cycle is closely related to the "acquisition of goods and services and payment" cycle. 
D)  The "inventory and warehousing" cycle may be audited at any time during the engagement since it is unrelated to the other cycles. 
A)  All general ledger accounts and journals are included at least once. 
B)  Some journals and general ledger accounts are included in more than one cycle. 
C)  The "capital acquisition and repayment" cycle is closely related to the "acquisition of goods and services and payment" cycle. 
D)  The "inventory and warehousing" cycle may be audited at any time during the engagement since it is unrelated to the other cycles.

Question 15

An auditor embracing the responsibility during the audit of maintaining a questioning mind and critically evaluating evidence significantly reduces the likelihood of audit failure throughout the audit.

Accepted Answer

A) True 
 B)False

Question 16

Auditors have found that generally the most efficient and effective way to conduct audits is to

Accepted Answer

A)  obtain complete assurance about the correctness of each class of transactions affecting the account. 
B)  obtain some combination of assurance for each class of transactions and for the ending balance in the related accounts. 
C)  obtain assurance about the ending balance of the account only. 
D)  verify each entry that was made into an account. 
A)  obtain complete assurance about the correctness of each class of transactions affecting the account. 
B)  obtain some combination of assurance for each class of transactions and for the ending balance in the related accounts. 
C)  obtain assurance about the ending balance of the account only. 
D)  verify each entry that was made into an account.

Question 17

An audit client is notified that the client is not in compliance with a number of pension laws and regulations. In this situation, the auditor is not required to obtain sufficient appropriate evidence of the impact of this noncompliance on the financial statements.

Accepted Answer

A) True 
 B)False

Question 18

Briefly explain each management assertion related to account balances at period end.

Accepted Answer

• Existence. Assets, liabilities, and eq

Question 19

The concept of reasonable assurance indicates that the auditor is

Accepted Answer

A)  not a guarantor of the correctness of the financial statements. 
B)  not responsible for the fairness of the financial statements. 
C)  responsible only for issuing an opinion on the financial statements. 
D)  responsible for finding all misstatements. 
A)  not a guarantor of the correctness of the financial statements. 
B)  not responsible for the fairness of the financial statements. 
C)  responsible only for issuing an opinion on the financial statements. 
D)  responsible for finding all misstatements.

Question 20

Tests of details of balances typically involve the use of comparisons and relationships to assess the overall reasonableness of account balances.

Accepted Answer

A) True 
 B)False

Exam 6: Audit Responsibilities and Objectives

The cutoff objective, "transactions near the balance sheet date are recorded in the proper period," is a balance-related audit objective.

When performing the review and completing the documentation and rationale for the conclusion step of the professional judgment process, auditors will

In a situation where the auditor is evaluating a decision made with regards to the recording of an unusual revenue transaction, the auditor should step back and determine if the recording of the revenue is in accordance with accounting standards.

Determining that the footnote disclosures related to long-term debt are accurate is an example of the ________ audit objective.

Management's disclosure of the amount of unfunded pension obligations and the assumptions underlying these amounts is an example of the ________ assertion.

In testing for cutoff, the objective is to determine

The auditor's best defense when material misstatements are not uncovered is to have conducted the audit

An auditor discovers that the company's bookkeeper unintentionally made a mistake in calculating the amount of the quarterly sales. This is an example of

Which of the following statements is true regarding the distinction between general audit objectives and specific audit objectives for each class of transactions?

Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements?

Recent academic research on the topic of professional skepticism suggests that there are six characteristics to skepticism. List and briefly describe each of these characteristics.

Auditors often convince themselves that they only accept clients they can trust and who have high integrity.

During the professional judgment process, it is not important that the auditor consider other financial reporting framework requirements outside of generally accepted accounting principles.

In describing the cycle approach to segmenting an audit, which of the following statements is not true?

An auditor embracing the responsibility during the audit of maintaining a questioning mind and critically evaluating evidence significantly reduces the likelihood of audit failure throughout the audit.

Auditors have found that generally the most efficient and effective way to conduct audits is to

An audit client is notified that the client is not in compliance with a number of pension laws and regulations. In this situation, the auditor is not required to obtain sufficient appropriate evidence of the impact of this noncompliance on the financial statements.

Briefly explain each management assertion related to account balances at period end.

The concept of reasonable assurance indicates that the auditor is

Tests of details of balances typically involve the use of comparisons and relationships to assess the overall reasonableness of account balances.

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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