Question 1

Which of the following is typically not included in the inquiry letter sent to the client's attorneys?

Accepted Answer

A) A disclaimer regarding the likelihood of settlement of pending litigation. 
B) A listing of pending or threatened litigation,claims,or assessments. 
C) An evaluation of the likelihood of an unfavorable outcome. 
D) An estimate of the range of potential loss. 
A) A disclaimer regarding the likelihood of settlement of pending litigation. 
B) A listing of pending or threatened litigation,claims,or assessments. 
C) An evaluation of the likelihood of an unfavorable outcome. 
D) An estimate of the range of potential loss.

Question 2

Which of the following procedures would auditors most likely perform in obtaining evidence about subsequent events?

Accepted Answer

A) Determine that changes in employee pay rates after year end were properly authorized. 
B) Recompute depreciation charges for plant assets sold after year end. 
C) Inquire about payroll checks that were recorded before year end but cashed after year end. 
D) Investigate changes in long-term debt occurring after year end. 
A) Determine that changes in employee pay rates after year end were properly authorized. 
B) Recompute depreciation charges for plant assets sold after year end. 
C) Inquire about payroll checks that were recorded before year end but cashed after year end. 
D) Investigate changes in long-term debt occurring after year end.

Question 3

An entity's income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts.Auditors most likely could have detected this irregularity by

Accepted Answer

A) Tracing a sample of journal entries to the general ledger. 
B) Evaluating the effectiveness of the internal control policies and procedures. 
C) Investigating the reconciliations between controlling accounts and subsidiary records. 
D) Performing analytical procedures designed to disclose differences from expectations. 
A) Tracing a sample of journal entries to the general ledger. 
B) Evaluating the effectiveness of the internal control policies and procedures. 
C) Investigating the reconciliations between controlling accounts and subsidiary records. 
D) Performing analytical procedures designed to disclose differences from expectations.

Question 4

Define what is meant by the term "subsequent event".In addition,identify the two types of subsequent events and indicate how auditors should modify the engagement for the discovery of subsequent events.

Accepted Answer

A subsequent event is an event that occu

Question 5

Which of the following would not ordinarily be considered when using analytical procedures to verify the overall reasonableness of revenue and expense accounts?

Accepted Answer

A) Current-year recorded (unaudited)balances. 
B) Expected balances using a statistical analysis or relationships among accounts. 
C) Internal budgets and reports. 
D) Prior-year balances. 
A) Current-year recorded (unaudited)balances. 
B) Expected balances using a statistical analysis or relationships among accounts. 
C) Internal budgets and reports. 
D) Prior-year balances.

Question 6

Which of the following procedures is not used in auditors' examination of litigation,claims,and assessments?

Accepted Answer

A) Obtaining a description and evaluation of litigation,claims,and assessments from management. 
B) Examining documentary evidence regarding litigation,claims,and assessments. 
C) Reading minutes of meetings of stockholders,directors,and appropriate committees. 
D) Performing analytical procedures. 
A) Obtaining a description and evaluation of litigation,claims,and assessments from management. 
B) Examining documentary evidence regarding litigation,claims,and assessments. 
C) Reading minutes of meetings of stockholders,directors,and appropriate committees. 
D) Performing analytical procedures.

Question 7

Why should auditors be particularly concerned with "miscellaneous","other",and "clearing" accounts classified as revenues or expenses?

Accepted Answer

A) These accounts are likely to relate to going-concern matters. 
B) These accounts are often more difficult to audit using normal substantive procedures. 
C) These accounts may represent attempts of earnings management. 
D) These accounts are likely to require the assistance of a specialist. 
A) These accounts are likely to relate to going-concern matters. 
B) These accounts are often more difficult to audit using normal substantive procedures. 
C) These accounts may represent attempts of earnings management. 
D) These accounts are likely to require the assistance of a specialist.

Question 8

Which of the following best describes auditors' responsibilities with respect to evaluating the going-concern status of the entity?

Accepted Answer

A) Auditors are required to specifically gather evidence with respect to going-concern status and separately report on the entity's ability to continue as a going concern. 
B) Auditors are required to specifically gather evidence with respect to going-concern status and modify their report on the financial statements if substantial doubts exist. 
C) Auditors are required to consider evidence obtained during the audit that may provide information with respect to going-concern status and separately report on the entity's ability to continue as a going concern. 
D) Auditors are required to consider evidence obtained during the audit that may provide information with respect to going-concern status and modify their report on the financial statements if substantial doubts exist. 
A) Auditors are required to specifically gather evidence with respect to going-concern status and separately report on the entity's ability to continue as a going concern. 
B) Auditors are required to specifically gather evidence with respect to going-concern status and modify their report on the financial statements if substantial doubts exist. 
C) Auditors are required to consider evidence obtained during the audit that may provide information with respect to going-concern status and separately report on the entity's ability to continue as a going concern. 
D) Auditors are required to consider evidence obtained during the audit that may provide information with respect to going-concern status and modify their report on the financial statements if substantial doubts exist.

Question 9

An important method used by auditors to learn of material contingencies is

Accepted Answer

A) Examining documents in the client's possession concerning contingencies. 
B) Inquiring and discussing them with management. 
C) Obtaining responses to an attorney letter. 
D) Confirming accounts receivable with the client's customers. 
A) Examining documents in the client's possession concerning contingencies. 
B) Inquiring and discussing them with management. 
C) Obtaining responses to an attorney letter. 
D) Confirming accounts receivable with the client's customers.

Question 10

Which of the following events or activities may occur following the audit report release date?

Accepted Answer

A) Interim testing. 
B) Roll-forward work. 
C) Subsequent events. 
D) Subsequently discovered facts. 
A) Interim testing. 
B) Roll-forward work. 
C) Subsequent events. 
D) Subsequently discovered facts.

Question 11

The Orange Corporation was audited for the year ended December 31.The audit was completed on January 25; prior to the release of the report,auditors learned of a two-for-one stock split on February 1.If dual dating is used,what are the proper dates for the auditors' reports?

Accepted Answer

A) December 31 and January 25. 
B) January 25 and February 1. 
C) January 25 and February 15. 
D) February I and February 15. 
A) December 31 and January 25. 
B) January 25 and February 1. 
C) January 25 and February 15. 
D) February I and February 15.

Question 12

If an entity had litigation pending at the date of the financial statements and auditors learn of the outcome of this litigation following the date of their report (but prior to the audit report release date),this is known as a(n):

Accepted Answer

A) Omitted procedure. 
B) Prior period adjustment. 
C) Subsequent event. 
D) Subsequently discovered fact. 
A) Omitted procedure. 
B) Prior period adjustment. 
C) Subsequent event. 
D) Subsequently discovered fact.

Question 13

Auditors try to identify predictable relationships when using analytical procedures.Relationships involving transactions from which of the following accounts most likely would yield the highest level of evidence?

Accepted Answer

A) Accounts receivable. 
B) Interest expense. 
C) Accounts payable. 
D) Travel and entertainment expense. 
A) Accounts receivable. 
B) Interest expense. 
C) Accounts payable. 
D) Travel and entertainment expense.

Question 14

Indicate,using the letters C (client),A (auditors),and AT (attorney)which party is responsible for each of the following duties relating to letters of inquiry of attorneys.Each statement is associated with only one party.
1___.Respond directly to auditors' initial inquiries regarding litigation,claims,and assessments.
2___.Initiate request for attorney letter.
3___.Respond to attorney letter.
4___.Provide initial description and evaluation of litigation,claims,and assessments.
5___.Request attorney letter.
6___.Perform various procedures relating to litigation,claims,and assessments.
7___.Identify whether client's views expressed in the attorney letter are appropriate.
8___.Party the attorney informs if an unasserted claim must be disclosed.

Accepted Answer

1.C,2.A,3.

Question 15

On March 15,2018,Kent,CPA,issued an unqualified opinion on a client's audited financial statements for the year ended December 31,2017.On May 4,2018,Kent's internal inspection program disclosed that engagement personnel failed to observe the client's physical inventory.Omission of this procedure impairs Kent's present ability to support the unqualified opinion.If the stockholders are currently relying on the opinion,Kent should first

Accepted Answer

A) Advise management to disclose to the stockholders that Kent's unqualified opinion should not be relied on. 
B) Undertake to apply alternative procedures that would provide a satisfactory basis for the opinion. 
C) Reissue the auditors' reports and add an explanatory paragraph describing the departure from generally accepted auditing standards. 
D) Compensate for the omitted procedure by performing tests of controls to reduce audit risk to a sufficiently low level. 
A) Advise management to disclose to the stockholders that Kent's unqualified opinion should not be relied on. 
B) Undertake to apply alternative procedures that would provide a satisfactory basis for the opinion. 
C) Reissue the auditors' reports and add an explanatory paragraph describing the departure from generally accepted auditing standards. 
D) Compensate for the omitted procedure by performing tests of controls to reduce audit risk to a sufficiently low level.

Question 16

Why is it the client's decision to record adjustments to the financial statements?

Accepted Answer

A) Having auditors adjust the financial statements would impair independence with respect to the client. 
B) The financial statements are the responsibility of the client's management. 
C) Auditors often do not have sufficient client-specific expertise to record adjustments to the financial statements. 
D) The client will ultimately suffer any losses related to misstated financial statements. 
A) Having auditors adjust the financial statements would impair independence with respect to the client. 
B) The financial statements are the responsibility of the client's management. 
C) Auditors often do not have sufficient client-specific expertise to record adjustments to the financial statements. 
D) The client will ultimately suffer any losses related to misstated financial statements.

Question 17

Which of the following best describes the auditors' responsibility with respect to management's estimates?

Accepted Answer

A) Verifying the mathematical accuracy of management estimates. 
B) Assessing the likelihood that actual results will be consistent with management's estimates. 
C) Evaluating the reasonableness of management's estimates. 
D) Identifying how the failure of the entity to achieve management's estimates will influence users' decisions. 
A) Verifying the mathematical accuracy of management estimates. 
B) Assessing the likelihood that actual results will be consistent with management's estimates. 
C) Evaluating the reasonableness of management's estimates. 
D) Identifying how the failure of the entity to achieve management's estimates will influence users' decisions.

Question 18

You are auditing Green Corporation for the calendar year 2017.Among other items related to the audit,Green Corporation was being sued for personal injury resulting from the malfunction of one of their products.The lawsuit was initiated by Sue Ewe in September,2017.Management and the company's outside legal counsel estimated the loss from the suit to be approximately $250,000.This amount is accrued and properly disclosed in the footnotes of the financial statements.You have no reason to believe that the estimate is inaccurate.You completed your audit and dated your report March 2,2018.The financial statements were issued on March 14,2018.On March 20,2018,you read in a national business periodical that the jury in the trial awarded Sue Ewe $1.5 million.
Required:
Discuss the nature of these events and what responsibility,if any,you have regarding the news of March 20,2018.

Accepted Answer

The outcome of the lawsuit would ordinar

Question 19

Near the end of an audit,the application of analytical procedures is

Accepted Answer

A) Recommended by auditing standards. 
B) Not mentioned by auditing standards. 
C) Not useful,since detailed substantive procedures have already been performed. 
D) Required by auditing standards. 
A) Recommended by auditing standards. 
B) Not mentioned by auditing standards. 
C) Not useful,since detailed substantive procedures have already been performed. 
D) Required by auditing standards.

Question 20

The primary objective of analytical procedures used near the end of an audit is to

Accepted Answer

A) Obtain evidence from details tested to corroborate management assertions. 
B) Obtain evidence on the validity of the assessment of control risk. 
C) Assist auditors in evaluating the overall financial statement presentation. 
D) Identify areas that represent specific risks relevant to the audit. 
A) Obtain evidence from details tested to corroborate management assertions. 
B) Obtain evidence on the validity of the assessment of control risk. 
C) Assist auditors in evaluating the overall financial statement presentation. 
D) Identify areas that represent specific risks relevant to the audit.

Which of the following is typically not included in the inquiry letter sent to the client's attorneys?

Which of the following procedures would auditors most likely perform in obtaining evidence about subsequent events?

An entity's income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts.Auditors most likely could have detected this irregularity by

Define what is meant by the term "subsequent event".In addition,identify the two types of subsequent events and indicate how auditors should modify the engagement for the discovery of subsequent events.

Which of the following would not ordinarily be considered when using analytical procedures to verify the overall reasonableness of revenue and expense accounts?

Which of the following procedures is not used in auditors' examination of litigation,claims,and assessments?

Why should auditors be particularly concerned with "miscellaneous","other",and "clearing" accounts classified as revenues or expenses?

Which of the following best describes auditors' responsibilities with respect to evaluating the going-concern status of the entity?

An important method used by auditors to learn of material contingencies is

Which of the following events or activities may occur following the audit report release date?

The Orange Corporation was audited for the year ended December 31.The audit was completed on January 25; prior to the release of the report,auditors learned of a two-for-one stock split on February 1.If dual dating is used,what are the proper dates for the auditors' reports?

If an entity had litigation pending at the date of the financial statements and auditors learn of the outcome of this litigation following the date of their report (but prior to the audit report release date),this is known as a(n):

Auditors try to identify predictable relationships when using analytical procedures.Relationships involving transactions from which of the following accounts most likely would yield the highest level of evidence?

Why is it the client's decision to record adjustments to the financial statements?

Which of the following best describes the auditors' responsibility with respect to management's estimates?

Near the end of an audit,the application of analytical procedures is

The primary objective of analytical procedures used near the end of an audit is to

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Exam 11: Completing the Audit

Which of the following is typically not included in the inquiry letter sent to the client's attorneys?

Which of the following procedures would auditors most likely perform in obtaining evidence about subsequent events?

An entity's income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts.Auditors most likely could have detected this irregularity by

Define what is meant by the term "subsequent event".In addition,identify the two types of subsequent events and indicate how auditors should modify the engagement for the discovery of subsequent events.

Which of the following would not ordinarily be considered when using analytical procedures to verify the overall reasonableness of revenue and expense accounts?

Which of the following procedures is not used in auditors' examination of litigation,claims,and assessments?

Why should auditors be particularly concerned with "miscellaneous","other",and "clearing" accounts classified as revenues or expenses?

Which of the following best describes auditors' responsibilities with respect to evaluating the going-concern status of the entity?

An important method used by auditors to learn of material contingencies is

Which of the following events or activities may occur following the audit report release date?

The Orange Corporation was audited for the year ended December 31.The audit was completed on January 25; prior to the release of the report,auditors learned of a two-for-one stock split on February 1.If dual dating is used,what are the proper dates for the auditors' reports?

If an entity had litigation pending at the date of the financial statements and auditors learn of the outcome of this litigation following the date of their report (but prior to the audit report release date),this is known as a(n):

Auditors try to identify predictable relationships when using analytical procedures.Relationships involving transactions from which of the following accounts most likely would yield the highest level of evidence?

Why is it the client's decision to record adjustments to the financial statements?

Which of the following best describes the auditors' responsibility with respect to management's estimates?

Near the end of an audit,the application of analytical procedures is

The primary objective of analytical procedures used near the end of an audit is to

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters