Question 1

Which of the following subsequent events might require an adjustment to the client's financial statements?

Accepted Answer

A) A business combination with another company. 
B) Loss on the sale of a closely-held investment. 
C) Loss of plant and equipment due to a fire. 
D) Retirement of bonds payable at a loss. 
A) A business combination with another company. 
B) Loss on the sale of a closely-held investment. 
C) Loss of plant and equipment due to a fire. 
D) Retirement of bonds payable at a loss.

Question 2

To minimize the opportunities for fraud,unclaimed cash payroll should be:

Accepted Answer

A) Deposited in a safe deposit box. 
B) Held by the payroll custodian. 
C) Deposited in a special bank account. 
D) Held by the controller. 
A) Deposited in a safe deposit box. 
B) Held by the payroll custodian. 
C) Deposited in a special bank account. 
D) Held by the controller.

Question 3

The audit of which of the following balance sheet accounts does not normally result in verification of an income statement account?

Accepted Answer

A) Cash. 
B) Accounts receivable. 
C) Property, plant and equipment. 
D) Intangible assets. 
A) Cash. 
B) Accounts receivable. 
C) Property, plant and equipment. 
D) Intangible assets.

Question 4

Shortly after year-end Zero Corporation was informed of the bankruptcy of Bingo.Zero Corporation showed a receivable of $10,000 due from Bingo as of year-end-none of which seems recoverable.The receivable had been questionable for some time as Bingo had been experiencing financial difficulties for the past several years.Yet,Bingo's bankruptcy did not occur until after Zero Corporation's year-end.Under these circumstances: $\begin{array}{c}
&\text{The financial}& \text{The event requires financial}& \text{The auditor's report should}\ &\text{statements should be} & \text{statement disclosure, but no}& \text{be modified for a lack of}\ &\text{adjusted}&
\text{adjustment}& \text{consistency}\
\text { A) } & \text { Yes } & \text { No } & \text { No } \
\text { B) } & \text { Yes } & \text { No } & \text { Yes } \
\text { C) } & \text { No } & \text { Yes } & \text { Yes } \
\text { D) } & \text { No } & \text { Yes } & \text { No }
\end{array}$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 5

Analytical procedures are often used for verification of income statement accounts.

Accepted Answer

A) True 
 B)False

Question 6

An example of an internal control weakness is to assign the payroll department the responsibility for:

Accepted Answer

A) Preparing the payroll expense distribution. 
B) Preparing the payroll checks. 
C) Authorizing increases in pay. 
D) Preparing journal entries for payroll expense. 
A) Preparing the payroll expense distribution. 
B) Preparing the payroll checks. 
C) Authorizing increases in pay. 
D) Preparing journal entries for payroll expense.

Question 7

The auditor's primary means of obtaining corroboration of management's information concerning litigation is a:

Accepted Answer

A) Letter of audit inquiry to the client's lawyer. 
B) Letter of corroboration from the auditor's lawyer upon review of the legal documentation. 
C) Confirmation of claims and assessments from the other parties to the litigation. 
D) Confirmation of claims and assessments from an officer of the court presiding over the litigation. 
A) Letter of audit inquiry to the client's lawyer. 
B) Letter of corroboration from the auditor's lawyer upon review of the legal documentation. 
C) Confirmation of claims and assessments from the other parties to the litigation. 
D) Confirmation of claims and assessments from an officer of the court presiding over the litigation.

Question 8

Common to future purchase commitments is the fact that they should be recorded as liabilities at discounted values as of year-end.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following types of matters do not generally require disclosure in the financial statements?

Accepted Answer

A) General risk contingencies. 
B) Commitments. 
C) Loss contingencies. 
D) Liabilities to related parties. 
A) General risk contingencies. 
B) Commitments. 
C) Loss contingencies. 
D) Liabilities to related parties.

Question 10

It would be appropriate for the payroll accounting department to be responsible for which of the following functions?

Accepted Answer

A) Approval of employee time records. 
B) Maintenance of records of employment, discharges, and pay increases. 
C) Preparation of periodic governmental reports as to employees' earnings and withholding taxes. 
D) Distribution of paychecks to employees. 
A) Approval of employee time records. 
B) Maintenance of records of employment, discharges, and pay increases. 
C) Preparation of periodic governmental reports as to employees' earnings and withholding taxes. 
D) Distribution of paychecks to employees.

Question 11

Dual dating of an audit report extends the auditors' liability for disclosure through the later date for all areas of the financial statements.

Accepted Answer

A) True 
 B)False

Question 12

A nonpublic client has provided required supplementary information with its audited financial statements.The auditor's proper reporting responsibility includes:

Accepted Answer

A) An emphasis of matter paragraph should be added to the audit report. 
B) A separate report should be issued on the required supplementary information. 
C) An adverse opinion on the required supplementary information. 
D) The required supplementary information should not be referred to. 
A) An emphasis of matter paragraph should be added to the audit report. 
B) A separate report should be issued on the required supplementary information. 
C) An adverse opinion on the required supplementary information. 
D) The required supplementary information should not be referred to.

Question 13

An auditor's decision concerning whether or not to "dual date" the audit report is based upon the auditor's willingness to:

Accepted Answer

A) Extend auditing procedures. 
B) Accept responsibility for year-end adjusting entries. 
C) Permit inclusion of a note captioned: event (unaudited) subsequent to the date of the auditor's report. 
D) Assume responsibility for resolving all events subsequent to the issuance of the auditor's report. 
A) Extend auditing procedures. 
B) Accept responsibility for year-end adjusting entries. 
C) Permit inclusion of a note captioned: event (unaudited) subsequent to the date of the auditor's report. 
D) Assume responsibility for resolving all events subsequent to the issuance of the auditor's report.

Question 14

To which of the following matters would materiality limits not apply when obtaining written client representations?

Accepted Answer

A) Violations of state labor regulations. 
B) Disclosure of line-of-credit arrangements. 
C) Information about related party transactions. 
D) Instances of fraud involving management. 
A) Violations of state labor regulations. 
B) Disclosure of line-of-credit arrangements. 
C) Information about related party transactions. 
D) Instances of fraud involving management.

Question 15

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

Accepted Answer

A) Sale of long-term debt or capital stock. 
B) Loss of a plant as a result of a flood. 
C) Major purchase of a business which is expected to double the sales volume. 
D) Settlement of litigation in excess of the recorded liability. 
A) Sale of long-term debt or capital stock. 
B) Loss of a plant as a result of a flood. 
C) Major purchase of a business which is expected to double the sales volume. 
D) Settlement of litigation in excess of the recorded liability.

Question 16

During the course of the year 2 audit of Smithsone Company,the auditor discovered the following situations that may or may not require an adjusting journal entry.Each audit finding is independent of any of the other findings.Select the account or accounts that would comprise the adjusting journal entry,if required,to correct the audit finding.Accounts may be used once,more than once,or not at all.   $$\begin{array}{l}
\text { Selection list for amount }\
\begin{array} { l l l } 
\text { Cash } & \text { Accrued liabilities } & \text { Interest expense } \
\text { Accounts receivable } & \text { Common stock } & \text { Other income } \
\text { Other current assets } & \text { Revenues } & \text { Accumulated depreciation } \
\text { Property and } & \text { Allowance for doubtful } & \text { Disclosure but no entry } \
\text { equipment } & \text { accounts } & \text { required } \
\text { Accounts payable } & \text { Operating expenses } & \begin{array} { l } 
\text { No entry or disclosure } \
\text { required }
\end{array}
\end{array}
\end{array}$$

Accepted Answer

The answer of During the course of the year 2...

Question 17

Which of the following is not a procedure that is designed to provide evidence about the existence of loss contingencies?

Accepted Answer

A) Obtaining a lawyers' letter. 
B) Confirming accounts payable. 
C) Reviewing the minutes of board of directors' meetings. 
D) Review correspondence with banks. 
A) Obtaining a lawyers' letter. 
B) Confirming accounts payable. 
C) Reviewing the minutes of board of directors' meetings. 
D) Review correspondence with banks.

Question 18

Auditors should perform audit procedures relating to subsequent events?

Accepted Answer

A) Through year end. 
B) Through issuance of the audit report. 
C) Through the date of the audit report. 
D) For a reasonable period after year end. 
A) Through year end. 
B) Through issuance of the audit report. 
C) Through the date of the audit report. 
D) For a reasonable period after year end.

Question 19

Normally,general risk contingencies need not be disclosed in the financial statements.

Accepted Answer

A) True 
 B)False

Question 20

In the course of the audit of financial statements for the purpose of expressing an opinion thereon,the auditors will normally prepare a schedule of unadjusted differences for which the auditors did not propose adjustment when they were identified.What is the primary purpose served by this schedule?

Accepted Answer

A) To point out to the responsible client officials the errors made by various company personnel. 
B) To summarize the adjustments that must be made before the company can prepare and submit its federal tax return. 
C) To identify the potential financial statement effects of misstatement or disputed items that were considered immaterial when discovered. 
D) To summarize the misstatements made by the company so that corrections can be made after the audited financial statements are released. 
A) To point out to the responsible client officials the errors made by various company personnel. 
B) To summarize the adjustments that must be made before the company can prepare and submit its federal tax return. 
C) To identify the potential financial statement effects of misstatement or disputed items that were considered immaterial when discovered. 
D) To summarize the misstatements made by the company so that corrections can be made after the audited financial statements are released.

Which of the following subsequent events might require an adjustment to the client's financial statements?

To minimize the opportunities for fraud,unclaimed cash payroll should be:

The audit of which of the following balance sheet accounts does not normally result in verification of an income statement account?

Analytical procedures are often used for verification of income statement accounts.

An example of an internal control weakness is to assign the payroll department the responsibility for:

The auditor's primary means of obtaining corroboration of management's information concerning litigation is a:

Common to future purchase commitments is the fact that they should be recorded as liabilities at discounted values as of year-end.

Which of the following types of matters do not generally require disclosure in the financial statements?

It would be appropriate for the payroll accounting department to be responsible for which of the following functions?

Dual dating of an audit report extends the auditors' liability for disclosure through the later date for all areas of the financial statements.

A nonpublic client has provided required supplementary information with its audited financial statements.The auditor's proper reporting responsibility includes:

An auditor's decision concerning whether or not to "dual date" the audit report is based upon the auditor's willingness to:

To which of the following matters would materiality limits not apply when obtaining written client representations?

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

Which of the following is not a procedure that is designed to provide evidence about the existence of loss contingencies?

Auditors should perform audit procedures relating to subsequent events?

Normally,general risk contingencies need not be disclosed in the financial statements.

In the course of the audit of financial statements for the purpose of expressing an opinion thereon,the auditors will normally prepare a schedule of unadjusted differences for which the auditors did not propose adjustment when they were identified.What is the primary purpose served by this schedule?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of CPAS

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property Plant and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Probability-Proportion-To-Size Sampling

Filters

Exam 16: Auditing Operations and Completing the Audit

Which of the following subsequent events might require an adjustment to the client's financial statements?

To minimize the opportunities for fraud,unclaimed cash payroll should be:

The audit of which of the following balance sheet accounts does not normally result in verification of an income statement account?

Analytical procedures are often used for verification of income statement accounts.

An example of an internal control weakness is to assign the payroll department the responsibility for:

The auditor's primary means of obtaining corroboration of management's information concerning litigation is a:

Common to future purchase commitments is the fact that they should be recorded as liabilities at discounted values as of year-end.

Which of the following types of matters do not generally require disclosure in the financial statements?

It would be appropriate for the payroll accounting department to be responsible for which of the following functions?

Dual dating of an audit report extends the auditors' liability for disclosure through the later date for all areas of the financial statements.

A nonpublic client has provided required supplementary information with its audited financial statements.The auditor's proper reporting responsibility includes:

An auditor's decision concerning whether or not to "dual date" the audit report is based upon the auditor's willingness to:

To which of the following matters would materiality limits not apply when obtaining written client representations?

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

Which of the following is not a procedure that is designed to provide evidence about the existence of loss contingencies?

Auditors should perform audit procedures relating to subsequent events?

Normally,general risk contingencies need not be disclosed in the financial statements.

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of CPAS

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property Plant and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Probability-Proportion-To-Size Sampling

Filters