Question 1

When a subsequent event provides evidence about conditions that existed at the balance sheet date,what is the best course of action for the auditor to follow?

Accepted Answer

A) Assign a specialist. 
B) Ensure that the financial statements are adjusted to reflect the information,including any necessary footnote disclosures. 
C) Shop for an opinion that fits the desired type of event. 
D) Provide management with a new engagement letter to document the terms of the revised arrangement. 
A) Assign a specialist. 
B) Ensure that the financial statements are adjusted to reflect the information,including any necessary footnote disclosures. 
C) Shop for an opinion that fits the desired type of event. 
D) Provide management with a new engagement letter to document the terms of the revised arrangement.

Question 2

Which of the following is not a typical communication between the auditor and the audit committee?

Accepted Answer

A) The auditor should clearly communicate the auditor's responsibility under Generally Accepted Auditing Standards (GAAS). 
B) The auditor should clearly communicate the planned scope of the audit engagement with the audit committee and discuss its adequacy. 
C) The auditor and management should discuss issues related to the retention of both client staff and audit firm staff during the period of audit. 
D) All major accounting disagreements with management,even if eventually resolved,should be discussed with the audit committee. 
A) The auditor should clearly communicate the auditor's responsibility under Generally Accepted Auditing Standards (GAAS). 
B) The auditor should clearly communicate the planned scope of the audit engagement with the audit committee and discuss its adequacy. 
C) The auditor and management should discuss issues related to the retention of both client staff and audit firm staff during the period of audit. 
D) All major accounting disagreements with management,even if eventually resolved,should be discussed with the audit committee.

Question 3

What should an auditor do when becoming aware of violations of the FCPA?

Accepted Answer

A) Contact foreign officials in the country where the client has business operations. 
B) Notify the audit committee about the violations,their circumstance,and the effect on the financial statements. 
C) Contact the U.S.marshals. 
D) Design internal controls to deter improper payments. 
A) Contact foreign officials in the country where the client has business operations. 
B) Notify the audit committee about the violations,their circumstance,and the effect on the financial statements. 
C) Contact the U.S.marshals. 
D) Design internal controls to deter improper payments.

Question 4

Which of the following procedures is not performed as part of an engagement quality review?

Accepted Answer

A) Evaluate judgments about materiality and the disposition of corrected and uncorrected identified misstatements. 
B) Call each board member to discuss the potential for fraud. 
C) Confirm with the lead audit partner that there are no significant unresolved matters. 
D) Evaluate whether appropriate levels of supervision and reviews of individual audit tasks were completed adequately during the audit. 
A) Evaluate judgments about materiality and the disposition of corrected and uncorrected identified misstatements. 
B) Call each board member to discuss the potential for fraud. 
C) Confirm with the lead audit partner that there are no significant unresolved matters. 
D) Evaluate whether appropriate levels of supervision and reviews of individual audit tasks were completed adequately during the audit.

Question 5

The auditor is responsible for evaluating the likelihood of a client not being a going concern for the next 12 months. What basis will the auditor use to assess this issue?

Accepted Answer

A) Management integrity. 
B) Control environment. 
C) Absolute assurance. 
D) Substantial doubt. 
A) Management integrity. 
B) Control environment. 
C) Absolute assurance. 
D) Substantial doubt.

Question 6

Which of the following procedures is the least useful analytical procedure to indicate that further audit work needs to be performed before rendering the audit opinion?

Accepted Answer

A) Developing a common-size analysis. 
B) Analyzing the dollar and percentage changes in each income statement item over the previous year. 
C) Comparing current earnings per share with earnings per share of the client's primary competitor. 
D) Developing a ratio analysis. 
A) Developing a common-size analysis. 
B) Analyzing the dollar and percentage changes in each income statement item over the previous year. 
C) Comparing current earnings per share with earnings per share of the client's primary competitor. 
D) Developing a ratio analysis.

Question 7

Subsequent events What are the two types of subsequent events identified in the accounting literature and what is required when each occurs? Provide an example of each type of subsequent event.

Accepted Answer

The two types of subsequent events are T

Question 8

When the auditor becomes aware of an event that occurs after the audit report date,but before the issuance of the audit report to the client and the event is disclosed in the footnotes,the auditor would date the report as if this fact had been known at year-end.

Accepted Answer

A) True 
 B)False

Question 9

If substantial doubt remains about going concern for a client at the end of the audit,then which of the following reports should the auditor typically issue?

Accepted Answer

A) Issue an unqualified audit report. 
B) Issue an unqualified audit report with an explanatory paragraph. 
C) Issue a qualified report. 
D) Issue an adverse report. 
A) Issue an unqualified audit report. 
B) Issue an unqualified audit report with an explanatory paragraph. 
C) Issue a qualified report. 
D) Issue an adverse report.

Question 10

Auditors should obtain a management representation letter at the end of each audit.

Accepted Answer

A) True 
 B)False

Question 11

In the letter of audit inquiry concerning a description and evaluation of litigation,claims and assessment provided by management to the auditor,which of the following is the client's lawyer not requested to provide?

Accepted Answer

A) Information on the completeness of management's list. 
B) Information on the compliance of the disclosures with GAAP. 
C) Information on the likelihood and range of possible losses. 
D) Information on any limitations on the lawyer's response. 
A) Information on the completeness of management's list. 
B) Information on the compliance of the disclosures with GAAP. 
C) Information on the likelihood and range of possible losses. 
D) Information on any limitations on the lawyer's response.

Question 12

The audit documentation when performing an engagement quality review should include information such as how much the firm paid for the review.

Accepted Answer

A) True 
 B)False

Question 13

Management of AllTech,Inc.refuses to sign the management representation letter given to them in the course of the audit on the grounds that it invades the company's privacy.What does this refusal constitute?

Accepted Answer

A) A violation of full and fair disclosure. 
B) A securities law violation. 
C) A scope limitation. 
D) A breakdown in internal controls. 
A) A violation of full and fair disclosure. 
B) A securities law violation. 
C) A scope limitation. 
D) A breakdown in internal controls.

Question 14

The auditor is responsible for evaluating the likelihood of a client continuing as a going concern for a reasonable period of time.What is considered to be a reasonable time period?

Accepted Answer

A) One year from the audit report date. 
B) One year from the last day of field work. 
C) One year from the balance sheet date. 
D) Two years from the balance sheet date. 
A) One year from the audit report date. 
B) One year from the last day of field work. 
C) One year from the balance sheet date. 
D) Two years from the balance sheet date.

Question 15

As part of a quality audit,the audit firm must have policies and procedures in place for conducting an engagement quality review of each audit before issuing the audit opinion for public companies.

Accepted Answer

A) True 
 B)False

Question 16

An additional procedure related to subsequent events is the reading of the meeting minutes for the board of directors meeting.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not a required communication with the audit committee?

Accepted Answer

A) Auditor's responsibility under GAAS. 
B) Analytical review. 
C) Audit adjustments. 
D) Uncorrected misstatements. 
A) Auditor's responsibility under GAAS. 
B) Analytical review. 
C) Audit adjustments. 
D) Uncorrected misstatements.

Question 18

Regarding loss contingencies,legal counsel should be instructed by the client to respond directly to the auditors.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is explicitly required by the Sarbanes-Oxley Act of 2002 for audits of public companies?

Accepted Answer

A) Subsequent event review. 
B) Engagement quality review. 
C) Disclosure of all contingent liabilities. 
D) Seven-year client rotation. 
A) Subsequent event review. 
B) Engagement quality review. 
C) Disclosure of all contingent liabilities. 
D) Seven-year client rotation.

Question 20

The auditor should consider matters for disclosure only while gathering evidence during the course of the audit.

Accepted Answer

A) True 
 B)False

When a subsequent event provides evidence about conditions that existed at the balance sheet date,what is the best course of action for the auditor to follow?

Which of the following is not a typical communication between the auditor and the audit committee?

What should an auditor do when becoming aware of violations of the FCPA?

Which of the following procedures is not performed as part of an engagement quality review?

The auditor is responsible for evaluating the likelihood of a client not being a going concern for the next 12 months. What basis will the auditor use to assess this issue?

Which of the following procedures is the least useful analytical procedure to indicate that further audit work needs to be performed before rendering the audit opinion?

Subsequent events What are the two types of subsequent events identified in the accounting literature and what is required when each occurs? Provide an example of each type of subsequent event.

When the auditor becomes aware of an event that occurs after the audit report date,but before the issuance of the audit report to the client and the event is disclosed in the footnotes,the auditor would date the report as if this fact had been known at year-end.

If substantial doubt remains about going concern for a client at the end of the audit,then which of the following reports should the auditor typically issue?

Auditors should obtain a management representation letter at the end of each audit.

In the letter of audit inquiry concerning a description and evaluation of litigation,claims and assessment provided by management to the auditor,which of the following is the client's lawyer not requested to provide?

The audit documentation when performing an engagement quality review should include information such as how much the firm paid for the review.

Management of AllTech,Inc.refuses to sign the management representation letter given to them in the course of the audit on the grounds that it invades the company's privacy.What does this refusal constitute?

The auditor is responsible for evaluating the likelihood of a client continuing as a going concern for a reasonable period of time.What is considered to be a reasonable time period?

As part of a quality audit,the audit firm must have policies and procedures in place for conducting an engagement quality review of each audit before issuing the audit opinion for public companies.

An additional procedure related to subsequent events is the reading of the meeting minutes for the board of directors meeting.

Which of the following is not a required communication with the audit committee?

Regarding loss contingencies,legal counsel should be instructed by the client to respond directly to the auditors.

Which of the following is explicitly required by the Sarbanes-Oxley Act of 2002 for audits of public companies?

The auditor should consider matters for disclosure only while gathering evidence during the course of the audit.

Quality Auditing: Why It Matters

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Long-Term Liabilities and Stockholders Equity Transactions

Audit Reports

Filters

Exam 14: Completing a Quality Audit

When a subsequent event provides evidence about conditions that existed at the balance sheet date,what is the best course of action for the auditor to follow?

Which of the following is not a typical communication between the auditor and the audit committee?

What should an auditor do when becoming aware of violations of the FCPA?

Which of the following procedures is not performed as part of an engagement quality review?

The auditor is responsible for evaluating the likelihood of a client not being a going concern for the next 12 months. What basis will the auditor use to assess this issue?

Which of the following procedures is the least useful analytical procedure to indicate that further audit work needs to be performed before rendering the audit opinion?

Subsequent events What are the two types of subsequent events identified in the accounting literature and what is required when each occurs? Provide an example of each type of subsequent event.

When the auditor becomes aware of an event that occurs after the audit report date,but before the issuance of the audit report to the client and the event is disclosed in the footnotes,the auditor would date the report as if this fact had been known at year-end.

If substantial doubt remains about going concern for a client at the end of the audit,then which of the following reports should the auditor typically issue?

Auditors should obtain a management representation letter at the end of each audit.

In the letter of audit inquiry concerning a description and evaluation of litigation,claims and assessment provided by management to the auditor,which of the following is the client's lawyer not requested to provide?

The audit documentation when performing an engagement quality review should include information such as how much the firm paid for the review.

Management of AllTech,Inc.refuses to sign the management representation letter given to them in the course of the audit on the grounds that it invades the company's privacy.What does this refusal constitute?

The auditor is responsible for evaluating the likelihood of a client continuing as a going concern for a reasonable period of time.What is considered to be a reasonable time period?

As part of a quality audit,the audit firm must have policies and procedures in place for conducting an engagement quality review of each audit before issuing the audit opinion for public companies.

An additional procedure related to subsequent events is the reading of the meeting minutes for the board of directors meeting.

Which of the following is not a required communication with the audit committee?

Regarding loss contingencies,legal counsel should be instructed by the client to respond directly to the auditors.

Which of the following is explicitly required by the Sarbanes-Oxley Act of 2002 for audits of public companies?

The auditor should consider matters for disclosure only while gathering evidence during the course of the audit.

Quality Auditing: Why It Matters

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Long-Term Liabilities and Stockholders Equity Transactions

Audit Reports

Filters