Question 1

The title of the PCAOB auditor's report is:

Accepted Answer

A) Independent Auditor's Report 
B) Report of the Independent Registered Audit Firm 
C) Auditor's Report on Management's Financial Statements 
D) Auditor's Report on Internal Controls 
A) Independent Auditor's Report 
B) Report of the Independent Registered Audit Firm 
C) Auditor's Report on Management's Financial Statements 
D) Auditor's Report on Internal Controls

Question 2

Explain the link between the opportunity to commit fraud and corporate governance systems.

Accepted Answer

An important factor in whether the oppor

Question 3

On July 1,2015,the Public Company Accounting Oversight Board issued a concept release to seek public comment on the content and possible uses of a group of potential "audit quality indicators." The indicators are a potential portfolio of quantitative measures that may provide new insights about how to evaluate the quality of audits and how high quality audits are achieved.Taken together with qualitative context,the indicators may inform discussions among those concerned with the financial reporting and auditing process,for example among audit committees and audit firms.Enhanced discussions,in turn,may strengthen audit planning,execution,and communication.The Board sought advice on these subjects through the comment process and were to convene a public roundtable about the concept release,on a date to be determined during the fourth quarter of 2015.The proposed indicators are in the exhibit below.
Required:
Comment on the need for audit quality indicators and any limitations of providing such information in the public domain.
The 28 potential indicators are:

Accepted Answer

The following is taken from a response i

Question 4

Which of the following is NOT one of the communications that should be made by external auditors to the audit committee?

Accepted Answer

A) Accounting estimates 
B) Threats to auditor independence and related safeguards to mitigate those threats 
C) Significant deficiencies in audit procedures 
D) The nature and scope of significant assumptions 
A) Accounting estimates 
B) Threats to auditor independence and related safeguards to mitigate those threats 
C) Significant deficiencies in audit procedures 
D) The nature and scope of significant assumptions

Question 5

Which of the following audit deficiencies was identified most often in a study by the Center for Audit Quality of SEC imposed sanctions?

Accepted Answer

A) Failure to gather sufficient competent evidence 
B) Failure to exercise due care 
C) Insufficient level of professional skepticism 
D) Failure to obtain adequate evidence related to management representations 
A) Failure to gather sufficient competent evidence 
B) Failure to exercise due care 
C) Insufficient level of professional skepticism 
D) Failure to obtain adequate evidence related to management representations

Question 6

The main reason the PCAOB has charged Chinese affiliates of U.S.audit firms with failing to provide sufficient documentary evidence of audits of Chinese companies listed on U.S.exchanges is:

Accepted Answer

A) Audit firms are unable to gather sufficient competent evidential matter 
B) Audit firms are not knowledgeable enough about Chinese accounting standards 
C) Chinese regulatory agencies can be uncooperative in providing access to PCAOB regarding their inspections of audit documents 
D) Chinese regulatory agencies conduct inspections of the audit documents of the firms 
A) Audit firms are unable to gather sufficient competent evidential matter 
B) Audit firms are not knowledgeable enough about Chinese accounting standards 
C) Chinese regulatory agencies can be uncooperative in providing access to PCAOB regarding their inspections of audit documents 
D) Chinese regulatory agencies conduct inspections of the audit documents of the firms

Question 7

Audit procedures are different than audit evidence because:

Accepted Answer

A) Audit procedures address the competency and sufficiency of audit evidence 
B) Audit procedures are specific acts performed by the auditor to gather evidence about whether specific assertions are being met 
C) Audit procedures are specific acts to assess whether the financial statements "present fairly" 
D) Audit procedures do not have to be determined based on risk assessment 
A) Audit procedures address the competency and sufficiency of audit evidence 
B) Audit procedures are specific acts performed by the auditor to gather evidence about whether specific assertions are being met 
C) Audit procedures are specific acts to assess whether the financial statements "present fairly" 
D) Audit procedures do not have to be determined based on risk assessment

Question 8

Which of the following is not a consideration in determining a measure of materiality?

Accepted Answer

A) Risks of material misstatements due to fraud 
B) Quantitative assessment of the importance of the difference of opinion with client management on an accounting issues 
C) Qualitative assessment of the importance of the difference of opinion with client management on an accounting issues 
D) Importance of audit committee in the organization 
A) Risks of material misstatements due to fraud 
B) Quantitative assessment of the importance of the difference of opinion with client management on an accounting issues 
C) Qualitative assessment of the importance of the difference of opinion with client management on an accounting issues 
D) Importance of audit committee in the organization

Question 9

Which of the following is the most likely reason for an auditor to issue a modified opinion with a qualification?

Accepted Answer

A) Inability to gather any sufficient relevant information to form the basis for the opinion 
B) Misstatements that are material and pervasive 
C) Going concern issue 
D) Misstatements that are material but not pervasive 
A) Inability to gather any sufficient relevant information to form the basis for the opinion 
B) Misstatements that are material and pervasive 
C) Going concern issue 
D) Misstatements that are material but not pervasive

Question 10

Which of the following is not one of the evaluations of the control environment of an organization?

Accepted Answer

A) Whether management's philosophy and operating style promote effective internal control over financial reporting 
B) Whether sound integrity and ethical values,particularly of top management,are developed and understood 
C) Whether the Board or audit committee understands and exercises oversight responsibility over financial reporting and internal control 
D) Whether the company has an anonymous hot line 
A) Whether management's philosophy and operating style promote effective internal control over financial reporting 
B) Whether sound integrity and ethical values,particularly of top management,are developed and understood 
C) Whether the Board or audit committee understands and exercises oversight responsibility over financial reporting and internal control 
D) Whether the company has an anonymous hot line

Question 11

Section 302 of the Sarbanes-Oxley Act requires:

Accepted Answer

A) Management's report on internal controls 
B) Auditor's independent report 
C) Auditor's assessment of management's report on internal controls 
D) Management's certification of the financial statements 
A) Management's report on internal controls 
B) Auditor's independent report 
C) Auditor's assessment of management's report on internal controls 
D) Management's certification of the financial statements

Question 12

PCAOB Standard 14 addresses audit results and requires:

Accepted Answer

A) Auditor's evaluation of internal controls 
B) Auditor's determination of whether the auditor has obtained sufficient appropriate evidence 
C) Auditor's evaluation of the applicable financial reporting framework 
D) Auditor's independence 
A) Auditor's evaluation of internal controls 
B) Auditor's determination of whether the auditor has obtained sufficient appropriate evidence 
C) Auditor's evaluation of the applicable financial reporting framework 
D) Auditor's independence

Question 13

The difference between errors in the financial statements as compared to fraud is:

Accepted Answer

A) An error is always an intentional act designed to deceive another party 
B) Fraud is always an intentional act designed to deceive another party 
C) An error always leads to a qualification of the auditors' opinion 
D) Fraudulent financial reporting is always material in amount 
A) An error is always an intentional act designed to deceive another party 
B) Fraud is always an intentional act designed to deceive another party 
C) An error always leads to a qualification of the auditors' opinion 
D) Fraudulent financial reporting is always material in amount

Question 14

All of the following tend to be rationalizations for fraud except:

Accepted Answer

A) We need to protect the shareholders and keep the stock price high 
B) All companies use aggressive accounting techniques 
C) The employee will be fired unless s/he goes along with the fraud 
D) We are correcting a temporary problem that will not exist in the future 
A) We need to protect the shareholders and keep the stock price high 
B) All companies use aggressive accounting techniques 
C) The employee will be fired unless s/he goes along with the fraud 
D) We are correcting a temporary problem that will not exist in the future

Question 15

In an audit,the auditor has a requirement to address risk assessment with respect to:

Accepted Answer

A) The design and performance of audit procedures to respond to assessed risks 
B) Whether the standards close the expectation gap 
C) The role and responsibilities of the audit committee in preventing fraud 
D) All of the above 
A) The design and performance of audit procedures to respond to assessed risks 
B) Whether the standards close the expectation gap 
C) The role and responsibilities of the audit committee in preventing fraud 
D) All of the above

Question 16

Which of the following is not one of the reporting standards of GAAS that guides auditors in formulating the audit opinion?

Accepted Answer

A) The financial statements have followed GAAP 
B) Consistency in the application of GAAP 
C) Adequate disclosures exist in the statements 
D) Gathering sufficient audit evidence to warrant an opinion 
A) The financial statements have followed GAAP 
B) Consistency in the application of GAAP 
C) Adequate disclosures exist in the statements 
D) Gathering sufficient audit evidence to warrant an opinion

Question 17

Which of the following is not an element of COSO Enterprise Risk Management?

Accepted Answer

A) Enhancing risk response decisions 
B) Reducing operating surprises and losses 
C) Seizing opportunities 
D) Improving deployment of information technology 
A) Enhancing risk response decisions 
B) Reducing operating surprises and losses 
C) Seizing opportunities 
D) Improving deployment of information technology

Question 18

Which of the following is not true of "reasonable assurance"?

Accepted Answer

A) The auditors have exercised due care 
B) The audit opinion is a guarantee that material misstatements have been identified 
C) The audit has been properly planned and supervised 
D) The auditors have followed GAAS 
A) The auditors have exercised due care 
B) The audit opinion is a guarantee that material misstatements have been identified 
C) The audit has been properly planned and supervised 
D) The auditors have followed GAAS

Question 19

Differentiate between the auditors' responsibilities to detect errors,fraud,and illegal acts.How would you assess the ethics of a company that has experienced each event with respect to motivation and the integrity of those who go along with such events?

Accepted Answer

An error can occur due to unintentional

Question 20

Some critics claim the usefulness of the audit report is limited because:

Accepted Answer

A) Auditors do not examine management's estimates and judgments 
B) Language in the audit report relies on subjective evaluations such as what is meant by "reasonable" 
C) Transactions examined are based on sampling and other techniques to limit choices of which transactions to audit 
D) All of the above may create doubts about usefulness 
A) Auditors do not examine management's estimates and judgments 
B) Language in the audit report relies on subjective evaluations such as what is meant by "reasonable" 
C) Transactions examined are based on sampling and other techniques to limit choices of which transactions to audit 
D) All of the above may create doubts about usefulness

The title of the PCAOB auditor's report is:

Explain the link between the opportunity to commit fraud and corporate governance systems.

Which of the following is NOT one of the communications that should be made by external auditors to the audit committee?

Which of the following audit deficiencies was identified most often in a study by the Center for Audit Quality of SEC imposed sanctions?

The main reason the PCAOB has charged Chinese affiliates of U.S.audit firms with failing to provide sufficient documentary evidence of audits of Chinese companies listed on U.S.exchanges is:

Audit procedures are different than audit evidence because:

Which of the following is not a consideration in determining a measure of materiality?

Which of the following is the most likely reason for an auditor to issue a modified opinion with a qualification?

Which of the following is not one of the evaluations of the control environment of an organization?

Section 302 of the Sarbanes-Oxley Act requires:

PCAOB Standard 14 addresses audit results and requires:

The difference between errors in the financial statements as compared to fraud is:

All of the following tend to be rationalizations for fraud except:

In an audit,the auditor has a requirement to address risk assessment with respect to:

Which of the following is not one of the reporting standards of GAAS that guides auditors in formulating the audit opinion?

Which of the following is not an element of COSO Enterprise Risk Management?

Which of the following is not true of "reasonable assurance"?

Differentiate between the auditors' responsibilities to detect errors,fraud,and illegal acts.How would you assess the ethics of a company that has experienced each event with respect to motivation and the integrity of those who go along with such events?

Some critics claim the usefulness of the audit report is limited because:

Ethical Reasoning: Implications for Accounting

Cognitive Processes and Ethical Decision Making in Accounting

Organizational Ethics and Corporate Governance

Ethics and Professional Judgment in Accounting

Legal, Regulatory, and Professional Obligations of Auditors

Earnings Management

Ethical Leadership and Decision-Making in Accounting

Filters

Exam 5: Fraud in Financial Statements and Auditor Responsibilities

The title of the PCAOB auditor's report is:

Explain the link between the opportunity to commit fraud and corporate governance systems.

Which of the following is NOT one of the communications that should be made by external auditors to the audit committee?

Which of the following audit deficiencies was identified most often in a study by the Center for Audit Quality of SEC imposed sanctions?

The main reason the PCAOB has charged Chinese affiliates of U.S.audit firms with failing to provide sufficient documentary evidence of audits of Chinese companies listed on U.S.exchanges is:

Audit procedures are different than audit evidence because:

Which of the following is not a consideration in determining a measure of materiality?

Which of the following is the most likely reason for an auditor to issue a modified opinion with a qualification?

Which of the following is not one of the evaluations of the control environment of an organization?

Section 302 of the Sarbanes-Oxley Act requires:

PCAOB Standard 14 addresses audit results and requires:

The difference between errors in the financial statements as compared to fraud is:

All of the following tend to be rationalizations for fraud except:

In an audit,the auditor has a requirement to address risk assessment with respect to:

Which of the following is not one of the reporting standards of GAAS that guides auditors in formulating the audit opinion?

Which of the following is not an element of COSO Enterprise Risk Management?

Which of the following is not true of "reasonable assurance"?

Differentiate between the auditors' responsibilities to detect errors,fraud,and illegal acts.How would you assess the ethics of a company that has experienced each event with respect to motivation and the integrity of those who go along with such events?

Some critics claim the usefulness of the audit report is limited because:

Ethical Reasoning: Implications for Accounting

Cognitive Processes and Ethical Decision Making in Accounting

Organizational Ethics and Corporate Governance

Ethics and Professional Judgment in Accounting

Legal, Regulatory, and Professional Obligations of Auditors

Earnings Management

Ethical Leadership and Decision-Making in Accounting

Filters