Question 1

Control risk is:

Accepted Answer

A)  the risk that inventory will not be sold. 
B)  the risk that the internal controls will not disclose material errors. 
C)  the risk that the economy will sink into recession. 
D)  the risk that accounts receivable will be uncollected. 
A)  the risk that inventory will not be sold. 
B)  the risk that the internal controls will not disclose material errors. 
C)  the risk that the economy will sink into recession. 
D)  the risk that accounts receivable will be uncollected.

Question 2

Audit risk involves:

Accepted Answer

A)  only the financial statements. 
B)  only the ICFR. 
C)  both the financial statements and ICFR. 
D)  only cases where fraud exists. 
A)  only the financial statements. 
B)  only the ICFR. 
C)  both the financial statements and ICFR. 
D)  only cases where fraud exists.

Question 3

All assertions apply to every account.

Accepted Answer

A) True 
 B)False

Question 4

If an auditor concludes the financial statements contain only immaterial errors, then the auditor should:

Accepted Answer

A)  correct the errors. 
B)  have the client correct the errors. 
C)  issue an unqualified ("clean") opinion on the financial statements. 
D)  issue a qualified opinion on the financial statements. 
A)  correct the errors. 
B)  have the client correct the errors. 
C)  issue an unqualified ("clean") opinion on the financial statements. 
D)  issue a qualified opinion on the financial statements.

Question 5

The auditor assesses the internal controls of a non-public client for the purpose of planning.

Accepted Answer

A) True 
 B)False

Question 6

The process of client acceptance or continuance involves:

Accepted Answer

A)  deciding whether the auditor is willing to audit the client. 
B)  wants the firm as a client. 
C)  can do a good job auditing the client. 
D)  All of the above. 
A)  deciding whether the auditor is willing to audit the client. 
B)  wants the firm as a client. 
C)  can do a good job auditing the client. 
D)  All of the above.

Question 7

Evidence must be:

Accepted Answer

A)  sufficient. 
B)  persuasive. 
C)  convincing. 
D)  Both a and b 
A)  sufficient. 
B)  persuasive. 
C)  convincing. 
D)  Both a and b

Question 8

Generally accepted auditing standards refer to those standards that have been adopted by the PCAOB.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following assertions address account balances at the period end:

Accepted Answer

A)  completeness. 
B)  right and obligations. 
C)  existence. 
D)  All of the above. 
A)  completeness. 
B)  right and obligations. 
C)  existence. 
D)  All of the above.

Question 10

The contract between the audit firm and client is called the engagement letter.

Accepted Answer

A) True 
 B)False

Question 11

The balance sheet for a client shows a balance of $5,000. This is an example of which assertion:

Accepted Answer

A)  completeness. 
B)  right and obligations. 
C)  valuation and allocation. 
D)  All of the above. 
A)  completeness. 
B)  right and obligations. 
C)  valuation and allocation. 
D)  All of the above.

Question 12

You are the auditor for a nonpublic company, "A Golden Rule Carpentry." The company has a 12/31 fiscal year end. During your audit, you did not identify any material misstatements in the financial statements.
Required:
(a) Draft the appropriate audit report for the financial statement audit of"A Golden Rule Carpentry."
(b)What assurances are provided in the audit report when the auditor states that the financial statements "present fairly ...in conformity with accounting principles generally accepted in the United States of America"?
(c)How does the audit report refer to materiality, and how does it relate to your response to (b)?
(d)How do you think the auditor should respond upon finding a misstatement that he or she believes is material, and the client disagrees? In other words, client management believes the misstatement is not material?

Accepted Answer

(a)Independent Auditor's Report
We have

Question 13

Why are analytical procedures a required step in audit planning?

Accepted Answer

Analytical procedures can give the audit

Question 14

The three sections or groups of audit standards are:

Accepted Answer

A)  field work, general, and final. 
B)  field work, reporting, and general. 
C)  field work, testing, and internal control review. 
D)  field work, general, and overall. 
A)  field work, general, and final. 
B)  field work, reporting, and general. 
C)  field work, testing, and internal control review. 
D)  field work, general, and overall.

Question 15

Detection risk is:

Accepted Answer

A)  the possibility that a misstatement will be missed when audit steps are performed. 
B)  the possibility that accounts receivable will be uncollected. 
C)  the possibility that inventory will not be sold. 
D)  Both b and c 
A)  the possibility that a misstatement will be missed when audit steps are performed. 
B)  the possibility that accounts receivable will be uncollected. 
C)  the possibility that inventory will not be sold. 
D)  Both b and c

Question 16

Auditors do not provide absolute assurance in an audit due to

Accepted Answer

A)  Financial statement numbers are based on estimates. 
B)  Auditors usually examine a sample rather than all of a company's transactions. 
C)  Those who commit fraud go to great lengths to conceal their actions. 
D)  All of the above. 
A)  Financial statement numbers are based on estimates. 
B)  Auditors usually examine a sample rather than all of a company's transactions. 
C)  Those who commit fraud go to great lengths to conceal their actions. 
D)  All of the above.

Question 17

If the auditor initially considers the internal control environment risky, but later during the audit concludes it to be adequate as a result of substantive procedures, the auditor:

Accepted Answer

A)  should reflect the new assessment in its report on ICFR. 
B)  should increase substantive testing. 
C)  should issue a new opinion on the financial statements. 
D)  should issue a new opinion on the ICFR. 
A)  should reflect the new assessment in its report on ICFR. 
B)  should increase substantive testing. 
C)  should issue a new opinion on the financial statements. 
D)  should issue a new opinion on the ICFR.

Question 18

Assessing the design effectiveness of the internal control system involves:

Accepted Answer

A)  determining if the controls are appropriate. 
B)  determining if the controls operate as designed. 
C)  determining who is responsible for internal control. 
D)  All of the above. 
A)  determining if the controls are appropriate. 
B)  determining if the controls operate as designed. 
C)  determining who is responsible for internal control. 
D)  All of the above.

Question 19

The engagement letter:

Accepted Answer

A)  must be generated before any audit work is performed. 
B)  cannot be generated until the audit firm communicates with the audit committee, in writing, about independence. 
C)  includes the names of staff and managers working on the engagement. 
D)  All of the above. 
A)  must be generated before any audit work is performed. 
B)  cannot be generated until the audit firm communicates with the audit committee, in writing, about independence. 
C)  includes the names of staff and managers working on the engagement. 
D)  All of the above.

Question 20

The integrity of management plays a key role in deciding whether or not to accept a client.

Accepted Answer

A) True 
 B)False

Control risk is:

Audit risk involves:

All assertions apply to every account.

If an auditor concludes the financial statements contain only immaterial errors, then the auditor should:

The auditor assesses the internal controls of a non-public client for the purpose of planning.

The process of client acceptance or continuance involves:

Evidence must be:

Generally accepted auditing standards refer to those standards that have been adopted by the PCAOB.

Which of the following assertions address account balances at the period end:

The contract between the audit firm and client is called the engagement letter.

The balance sheet for a client shows a balance of $5,000. This is an example of which assertion:

Why are analytical procedures a required step in audit planning?

The three sections or groups of audit standards are:

Detection risk is:

Auditors do not provide absolute assurance in an audit due to

If the auditor initially considers the internal control environment risky, but later during the audit concludes it to be adequate as a result of substantive procedures, the auditor:

Assessing the design effectiveness of the internal control system involves:

The engagement letter:

The integrity of management plays a key role in deciding whether or not to accept a client.

An Introduction to Auditing

The Auditors Role in Society

Legal Environment Affecting Audits Pt Iii Executing an Integrated Audit

Client Acceptance and Continuance and Preliminary Engagement Procedures

Audit Planning and Risk Assessment

Internal Control, Understanding the Clients Internal Control Over Financial Reporting and Auditing Design Effectiveness

Planning and Testing Operating Effectiveness of Internal Control Over Financial Reporting

Substantive Procedures and the Financial Statement Audit

Auditing Revenue Process: Sales, Billing and Collection in the Health-Care Provider and Retailing Industries

Completing the Integrated Audit and Reporting

The Acquisition and Payments Cycle and Related Accounts: Purchases, Cash Disbursements and Other Related Activities in the Automotive Industry

Auditing Human Resources Cycle Process: Personnel and Payroll in Service Industries

Auditing Inventory Processes: Tracking and Costing Products in the Land Development and Home Building Industry

Assets, Liabilities and Equity Related to the Financing Cycle

Topics Beyond the Integrated Audit

Filters

Exam 2: Overview of an Integrated Audit

Control risk is:

Audit risk involves:

All assertions apply to every account.

If an auditor concludes the financial statements contain only immaterial errors, then the auditor should:

The auditor assesses the internal controls of a non-public client for the purpose of planning.

The process of client acceptance or continuance involves:

Evidence must be:

Generally accepted auditing standards refer to those standards that have been adopted by the PCAOB.

Which of the following assertions address account balances at the period end:

The contract between the audit firm and client is called the engagement letter.

The balance sheet for a client shows a balance of $5,000. This is an example of which assertion:

Why are analytical procedures a required step in audit planning?

The three sections or groups of audit standards are:

Detection risk is:

Auditors do not provide absolute assurance in an audit due to

If the auditor initially considers the internal control environment risky, but later during the audit concludes it to be adequate as a result of substantive procedures, the auditor:

Assessing the design effectiveness of the internal control system involves:

The engagement letter:

The integrity of management plays a key role in deciding whether or not to accept a client.

An Introduction to Auditing

The Auditors Role in Society

Legal Environment Affecting Audits Pt Iii Executing an Integrated Audit

Client Acceptance and Continuance and Preliminary Engagement Procedures

Audit Planning and Risk Assessment

Internal Control, Understanding the Clients Internal Control Over Financial Reporting and Auditing Design Effectiveness

Planning and Testing Operating Effectiveness of Internal Control Over Financial Reporting

Substantive Procedures and the Financial Statement Audit

Auditing Revenue Process: Sales, Billing and Collection in the Health-Care Provider and Retailing Industries

Completing the Integrated Audit and Reporting

The Acquisition and Payments Cycle and Related Accounts: Purchases, Cash Disbursements and Other Related Activities in the Automotive Industry

Auditing Human Resources Cycle Process: Personnel and Payroll in Service Industries

Auditing Inventory Processes: Tracking and Costing Products in the Land Development and Home Building Industry

Assets, Liabilities and Equity Related to the Financing Cycle

Topics Beyond the Integrated Audit

Filters