Question 1

Which of the following procedures would an auditor most likely include in the initial planning of an examination of financial statements?

Accepted Answer

A)  Assess the need for the use of specialists in the audit. 
B)  Inquiring of the client's attorney as to any claims that are likely to be asserted. 
C)  Perform detailed testing of the individual financial statement accounts. 
D)  Determining whether necessary internal controls procedures are being applied as prescribed. 
A)  Assess the need for the use of specialists in the audit. 
B)  Inquiring of the client's attorney as to any claims that are likely to be asserted. 
C)  Perform detailed testing of the individual financial statement accounts. 
D)  Determining whether necessary internal controls procedures are being applied as prescribed.

Question 2

An independent auditor might consider the procedures performed by the internal auditors because

Accepted Answer

A)  They are employees whose work must be reviewed during substantive testing. 
B)  They are employees whose work might be relied upon. 
C)  Their work impacts the cost/benefit tradeoff in evaluating inherent limitations. 
D)  Their degree of independence may be inferred by the nature of their work. 
A)  They are employees whose work must be reviewed during substantive testing. 
B)  They are employees whose work might be relied upon. 
C)  Their work impacts the cost/benefit tradeoff in evaluating inherent limitations. 
D)  Their degree of independence may be inferred by the nature of their work.

Question 3

Hawkins requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor's working papers.The prospective client's refusal to permit this will bear directly on Hawkins' decision concerning the

Accepted Answer

A)  Adequacy of the preplanned audit program. 
B)  Ability to establish consistency in application of accounting principles between years. 
C)  Apparent scope limitation. 
D)  Integrity of management. 
A)  Adequacy of the preplanned audit program. 
B)  Ability to establish consistency in application of accounting principles between years. 
C)  Apparent scope limitation. 
D)  Integrity of management.

Question 4

Which of the following is a general audit test?

Accepted Answer

A)  Fee assessment procedures. 
B)  Tests of controls. 
C)  Preparation of corporate tax returns. 
D)  Active testing procedures. 
A)  Fee assessment procedures. 
B)  Tests of controls. 
C)  Preparation of corporate tax returns. 
D)  Active testing procedures.

Question 5

The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the

Accepted Answer

A)  Methods of statistical sampling to be used in confirming accounts receivable. 
B)  Pending legal matters to be included in the inquiry of the client's attorney. 
C)  Evidence to be gathered to provide a sufficient basis for the auditor's opinion. 
D)  Timing of the audit. 
A)  Methods of statistical sampling to be used in confirming accounts receivable. 
B)  Pending legal matters to be included in the inquiry of the client's attorney. 
C)  Evidence to be gathered to provide a sufficient basis for the auditor's opinion. 
D)  Timing of the audit.

Question 6

If the internal auditor is competent and objective,the auditor may generally rely on the work of an internal auditor in certain areas to reduce the amount of external audit work in these areas.

Accepted Answer

A) True 
 B)False

Question 7

A successor auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor's

Accepted Answer

A)  Engagement letter. 
B)  Audit working papers. 
C)  Engagement letter and audit working papers. 
D)  It would not be typical to allow a review of either the engagement letter or the audit working papers. 
A)  Engagement letter. 
B)  Audit working papers. 
C)  Engagement letter and audit working papers. 
D)  It would not be typical to allow a review of either the engagement letter or the audit working papers.

Question 8

Which of the following factors most likely would cause a CPA not to accept a new audit engagement?

Accepted Answer

A)  The prospective client's unwillingness to permit inquiry of its legal counsel. 
B)  The inability to review the predecessor auditor's documentation. 
C)  The CPA's lack of understanding of the prospective client's operations and industry. 
D)  Indications that management has not investigated employees in key positions before hiring them. 
A)  The prospective client's unwillingness to permit inquiry of its legal counsel. 
B)  The inability to review the predecessor auditor's documentation. 
C)  The CPA's lack of understanding of the prospective client's operations and industry. 
D)  Indications that management has not investigated employees in key positions before hiring them.

Question 9

The first phase of audit planning is risk assessment.

Accepted Answer

A) True 
 B)False

Question 10

Cart and Blanche,a regional accounting firm is determining whether it wants to accept a new client,Ivy Photos.Ivy Photos is currently a privately held photography studio operating 24 studios in several states,but the company's management is planning an Initial Public Offering in the near future.This is the company's first audit.What steps should Cart and Blanche take in evaluating this new client?

Accepted Answer

To evaluate the client,the auditors shou

Question 11

An independent auditor finds that Holdaway Corporation occupies office space,at no charge,in an office building owned by a shareholder.This finding likely indicates the existence of

Accepted Answer

A)  Management fraud. 
B)  Related party transactions. 
C)  Window dressing. 
D)  Weak internal control. 
A)  Management fraud. 
B)  Related party transactions. 
C)  Window dressing. 
D)  Weak internal control.

Question 12

In the context of an audit of financial statements,substantive procedures are audit procedures that

Accepted Answer

A)  May be eliminated under certain conditions. 
B)  Are primarily designed to discover significant subsequent events. 
C)  May be either tests of details of transactions, tests of details of account balances, or analytical procedures. 
D)  Will increase proportionately with an increase in the auditor's reliance on internal control. 
A)  May be eliminated under certain conditions. 
B)  Are primarily designed to discover significant subsequent events. 
C)  May be either tests of details of transactions, tests of details of account balances, or analytical procedures. 
D)  Will increase proportionately with an increase in the auditor's reliance on internal control.

Question 13

The engagement partner is typically responsible for doing the detailed audit testing.

Accepted Answer

A) True 
 B)False

Question 14

Evaluating a prospective client requires the following step(s):

Accepted Answer

A)  Communicate with the SEC. 
B)  Preplan the audit. 
C)  Determine if the firm is independent of the client. 
D)  Communicate with the AICPA. 
A)  Communicate with the SEC. 
B)  Preplan the audit. 
C)  Determine if the firm is independent of the client. 
D)  Communicate with the AICPA.

Question 15

Name three Sarbanes-Oxley Act requirements of the members and duties of the audit committee of a public company.

Accepted Answer

Students must provide three of the follo

Question 16

A dual-purpose test

Accepted Answer

A)  Simultaneously tests debits and credits. 
B)  Is a procedure completed by both the internal and external auditors. 
C)  Is useful to both the entity and the auditor. 
D)  Is both a substantive test of transactions and a test of controls. 
A)  Simultaneously tests debits and credits. 
B)  Is a procedure completed by both the internal and external auditors. 
C)  Is useful to both the entity and the auditor. 
D)  Is both a substantive test of transactions and a test of controls.

Question 17

Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit?

Accepted Answer

A)  Perform detailed testing of the individual balance sheet accounts. 
B)  Examining documents to detect illegal acts having a material effect on the financial statements. 
C)  Considering whether the client's accounting estimates are reasonable in the circumstances. 
D)  Determining the extent of involvement of the client's internal auditors. 
A)  Perform detailed testing of the individual balance sheet accounts. 
B)  Examining documents to detect illegal acts having a material effect on the financial statements. 
C)  Considering whether the client's accounting estimates are reasonable in the circumstances. 
D)  Determining the extent of involvement of the client's internal auditors.

Question 18

Which element(s)is/are pervasive to the application of generally accepted auditing standards,particularly the standards of fieldwork and reporting?

Accepted Answer

A)  The elements of materiality and audit risk. 
B)  The element of internal control. 
C)  The element of corroborating evidence. 
D)  The element of reasonable assurance. 
A)  The elements of materiality and audit risk. 
B)  The element of internal control. 
C)  The element of corroborating evidence. 
D)  The element of reasonable assurance.

Question 19

Tolerable misstatement is

Accepted Answer

A)  Materiality allocated to an assertion. 
B)  Materiality for the balance sheet as a whole. 
C)  Materiality for the income statement as a whole. 
D)  Materiality allocated to a specific account. 
A)  Materiality allocated to an assertion. 
B)  Materiality for the balance sheet as a whole. 
C)  Materiality for the income statement as a whole. 
D)  Materiality allocated to a specific account.

Question 20

Which of the following statements is not correct about materiality?

Accepted Answer

A)  The concept of materiality recognizes that some matters are important for fair presentation of financial statements in conformity with GAAP, while other matters are not important. 
B)  An auditor considers materiality for the aggregate level of misstatements that could be material to any one of the financial statements individually. 
C)  Materiality judgments are made in light of surrounding circumstances and necessarily involve both quantitative and qualitative judgments. 
D)  An auditor's consideration of materiality is influenced by the auditor's perception of the needs of a reasonable person who will rely on the financial statements. 
A)  The concept of materiality recognizes that some matters are important for fair presentation of financial statements in conformity with GAAP, while other matters are not important. 
B)  An auditor considers materiality for the aggregate level of misstatements that could be material to any one of the financial statements individually. 
C)  Materiality judgments are made in light of surrounding circumstances and necessarily involve both quantitative and qualitative judgments. 
D)  An auditor's consideration of materiality is influenced by the auditor's perception of the needs of a reasonable person who will rely on the financial statements.

Which of the following procedures would an auditor most likely include in the initial planning of an examination of financial statements?

An independent auditor might consider the procedures performed by the internal auditors because

Hawkins requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor's working papers.The prospective client's refusal to permit this will bear directly on Hawkins' decision concerning the

Which of the following is a general audit test?

The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the

If the internal auditor is competent and objective,the auditor may generally rely on the work of an internal auditor in certain areas to reduce the amount of external audit work in these areas.

A successor auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor's

Which of the following factors most likely would cause a CPA not to accept a new audit engagement?

The first phase of audit planning is risk assessment.

An independent auditor finds that Holdaway Corporation occupies office space,at no charge,in an office building owned by a shareholder.This finding likely indicates the existence of

In the context of an audit of financial statements,substantive procedures are audit procedures that

The engagement partner is typically responsible for doing the detailed audit testing.

Evaluating a prospective client requires the following step(s):

Name three Sarbanes-Oxley Act requirements of the members and duties of the audit committee of a public company.

A dual-purpose test

Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit?

Which element(s)is/are pervasive to the application of generally accepted auditing standards,particularly the standards of fieldwork and reporting?

Tolerable misstatement is

Which of the following statements is not correct about materiality?

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,and Internal Auditing Services

Filters

Exam 3: Audit Planning,Types of Audit Tests,and Materiality

Which of the following procedures would an auditor most likely include in the initial planning of an examination of financial statements?

An independent auditor might consider the procedures performed by the internal auditors because

Hawkins requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor's working papers.The prospective client's refusal to permit this will bear directly on Hawkins' decision concerning the

Which of the following is a general audit test?

The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the

If the internal auditor is competent and objective,the auditor may generally rely on the work of an internal auditor in certain areas to reduce the amount of external audit work in these areas.

A successor auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor's

Which of the following factors most likely would cause a CPA not to accept a new audit engagement?

The first phase of audit planning is risk assessment.

An independent auditor finds that Holdaway Corporation occupies office space,at no charge,in an office building owned by a shareholder.This finding likely indicates the existence of

In the context of an audit of financial statements,substantive procedures are audit procedures that

The engagement partner is typically responsible for doing the detailed audit testing.

Evaluating a prospective client requires the following step(s):

Name three Sarbanes-Oxley Act requirements of the members and duties of the audit committee of a public company.

A dual-purpose test

Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit?

Which element(s)is/are pervasive to the application of generally accepted auditing standards,particularly the standards of fieldwork and reporting?

Tolerable misstatement is

Which of the following statements is not correct about materiality?

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,and Internal Auditing Services

Filters