Question 1

An audit opinion is a guarantee that the business is a going concern.

Accepted Answer

A) True 
 B)False

Question 2

Review activities that are completed towards the end of the audit are quite varied.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is required by the dual approach for assessing uncorrected misstatements?

Accepted Answer

A) The application of the rollover method. 
B) The application of the iron curtain method. 
C) Simultaneous application of both the rollover and iron curtain methods. 
D) Sequential application of both the rollover and iron curtain methods. 
A) The application of the rollover method. 
B) The application of the iron curtain method. 
C) Simultaneous application of both the rollover and iron curtain methods. 
D) Sequential application of both the rollover and iron curtain methods.

Question 4

Assume that a major customer of the company that you are auditing files for bankruptcy during the subsequent period because of a deteriorating financial condition.Neither you nor the client becomes aware of the event until the bankruptcy filing is reported.What type of subsequent event would this be?

Accepted Answer

A) Type I subsequent event 
B) Type II subsequent event 
C) Neither Type I or Type II 
D) Both Type I and Type II 
A) Type I subsequent event 
B) Type II subsequent event 
C) Neither Type I or Type II 
D) Both Type I and Type II

Question 5

Which of the following activities is not a step in the process for using analytical procedures?

Accepted Answer

A) Define when the difference between the auditor's expectation and the client's balance would be considered significant. 
B) Compute the difference between the auditor's expectation and the client's balance. 
C) Perform appropriate follow-up on all material and immaterial differences. 
D) Develop an expectation. 
A) Define when the difference between the auditor's expectation and the client's balance would be considered significant. 
B) Compute the difference between the auditor's expectation and the client's balance. 
C) Perform appropriate follow-up on all material and immaterial differences. 
D) Develop an expectation.

Question 6

Disclosures can be made either on the face of the financial statements in the form of classifications or parenthetical notations,or they can be made in the notes to the statements.

Accepted Answer

A) True 
 B)False

Question 7

Two paragraphs should be added to the auditor's report when the auditor concludes that substantial doubt remains about the client's ability to continue as a going concern for a reasonable period of time.

Accepted Answer

A) True 
 B)False

Question 8

Which one of the following subsequent events will least likely result in an adjustment to the financial statements?

Accepted Answer

A) Material change in the amount of settlement of a lawsuit which had been estimated at year end. 
B) Bankruptcy of a customer who owes your client a material amount on open account at year end for which there is an inadequate allowance estimate. 
C) Sale of a large block of inventory at a price materially below carrying value. 
D) Signing of a letter-of-intent by the client to acquire 55% of another entity for stock. 
A) Material change in the amount of settlement of a lawsuit which had been estimated at year end. 
B) Bankruptcy of a customer who owes your client a material amount on open account at year end for which there is an inadequate allowance estimate. 
C) Sale of a large block of inventory at a price materially below carrying value. 
D) Signing of a letter-of-intent by the client to acquire 55% of another entity for stock.

Question 9

A management letter is not required.

Accepted Answer

A) True 
 B)False

Question 10

The auditor's expectation when performing review analytical procedures will be more precise than if the auditor were performing substantive analytical procedures.

Accepted Answer

A) True 
 B)False

Question 11

Fulton Educational Company,Inc.has a matter of material litigation that is threatened,but that has not gone to trial. The auditor's consideration of such a matter will not include which of the following?

Accepted Answer

A) Sending a letter to the client's attorneys for more information. 
B) Discussing the matter with the client and their insurance adjuster. 
C) Confirming with the harmed party regarding the amount that will be claimed. 
D) Assessing whether accrual or disclosure by the client was reported in accordance with GAAP. 
A) Sending a letter to the client's attorneys for more information. 
B) Discussing the matter with the client and their insurance adjuster. 
C) Confirming with the harmed party regarding the amount that will be claimed. 
D) Assessing whether accrual or disclosure by the client was reported in accordance with GAAP.

Question 12

Which of the following is false regarding the management letter?

Accepted Answer

A) The management letter is not required 
B) The management letter is the same as the management representation letter. 
C) The management letter helps to provide management comfort that the auditor has done a quality job. 
D) The management letter helps provide management with information that the auditor knows and understands the client's business. 
A) The management letter is not required 
B) The management letter is the same as the management representation letter. 
C) The management letter helps to provide management comfort that the auditor has done a quality job. 
D) The management letter helps provide management with information that the auditor knows and understands the client's business.

Question 13

Analytical procedures may indicate that new controls need to be designed before completing the audit.

Accepted Answer

A) True 
 B)False

Question 14

If an experienced reviewer who was not a part of the audit team,but who has appropriate competence,independence,integrity,and objectivity,performs an independent quality review,this is referred to as a reoccurring partner review.

Accepted Answer

A) True 
 B)False

Question 15

An additional partner review of the audit and its findings is typically performed by an experienced member of the firm.Which of the following individuals is most qualified to perform this concurring partner review?

Accepted Answer

A) The engagement partner who has worked on the client for three years. 
B) An employee of the enforcement division of the SEC. 
C) An experienced partner of the firm who did not actively participate on the audit. 
D) A partner of another firm or office who knows the client well and who was a vital member of the audit team. 
A) The engagement partner who has worked on the client for three years. 
B) An employee of the enforcement division of the SEC. 
C) An experienced partner of the firm who did not actively participate on the audit. 
D) A partner of another firm or office who knows the client well and who was a vital member of the audit team.

Question 16

Which method focuses on assuring that the year-end balance sheet is correct and does not consider the impact of prior-year uncorrected misstatements reversing in later years?

Accepted Answer

A) Rollover. 
B) Iron curtain. 
C) Dual. 
D) Percentage. 
A) Rollover. 
B) Iron curtain. 
C) Dual. 
D) Percentage.

Question 17

If the auditor determines that informative disclosures are not reasonably adequate,the auditor must identify that fact in the auditor's report.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would be considered "the nature of a misstatement" that might make it material?

Accepted Answer

A) Comparing the sum of known and projected misstatements to total current assets. 
B) Comparing the sum of known and projected misstatements to total current liabilities. 
C) Comparing the sum of known and projected misstatements to pretax income. 
D) Having the effect of changing a positive earnings trend to a negative earnings trend. 
A) Comparing the sum of known and projected misstatements to total current assets. 
B) Comparing the sum of known and projected misstatements to total current liabilities. 
C) Comparing the sum of known and projected misstatements to pretax income. 
D) Having the effect of changing a positive earnings trend to a negative earnings trend.

Question 19

Before releasing the audit report,which of the following would the auditor most likely do?

Accepted Answer

A) Issue a management letter. 
B) Perform an analytical review. 
C) Check on a schedule of partner rotation. 
D) Estimate client fee for subsequent services to be performed. 
A) Issue a management letter. 
B) Perform an analytical review. 
C) Check on a schedule of partner rotation. 
D) Estimate client fee for subsequent services to be performed.

Question 20

Management's refusal to sign the management representation letter is considered a scope limitation sufficient to preclude the issuance of an unqualified opinion.

Accepted Answer

A) True 
 B)False

An audit opinion is a guarantee that the business is a going concern.

Review activities that are completed towards the end of the audit are quite varied.

Which of the following is required by the dual approach for assessing uncorrected misstatements?

Which of the following activities is not a step in the process for using analytical procedures?

Disclosures can be made either on the face of the financial statements in the form of classifications or parenthetical notations,or they can be made in the notes to the statements.

Two paragraphs should be added to the auditor's report when the auditor concludes that substantial doubt remains about the client's ability to continue as a going concern for a reasonable period of time.

Which one of the following subsequent events will least likely result in an adjustment to the financial statements?

A management letter is not required.

The auditor's expectation when performing review analytical procedures will be more precise than if the auditor were performing substantive analytical procedures.

Fulton Educational Company,Inc.has a matter of material litigation that is threatened,but that has not gone to trial. The auditor's consideration of such a matter will not include which of the following?

Which of the following is false regarding the management letter?

Analytical procedures may indicate that new controls need to be designed before completing the audit.

If an experienced reviewer who was not a part of the audit team,but who has appropriate competence,independence,integrity,and objectivity,performs an independent quality review,this is referred to as a reoccurring partner review.

An additional partner review of the audit and its findings is typically performed by an experienced member of the firm.Which of the following individuals is most qualified to perform this concurring partner review?

Which method focuses on assuring that the year-end balance sheet is correct and does not consider the impact of prior-year uncorrected misstatements reversing in later years?

If the auditor determines that informative disclosures are not reasonably adequate,the auditor must identify that fact in the auditor's report.

Which of the following would be considered "the nature of a misstatement" that might make it material?

Before releasing the audit report,which of the following would the auditor most likely do?

Management's refusal to sign the management representation letter is considered a scope limitation sufficient to preclude the issuance of an unqualified opinion.

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

An audit opinion is a guarantee that the business is a going concern.

Review activities that are completed towards the end of the audit are quite varied.

Which of the following is required by the dual approach for assessing uncorrected misstatements?

Which of the following activities is not a step in the process for using analytical procedures?

Disclosures can be made either on the face of the financial statements in the form of classifications or parenthetical notations,or they can be made in the notes to the statements.

Two paragraphs should be added to the auditor's report when the auditor concludes that substantial doubt remains about the client's ability to continue as a going concern for a reasonable period of time.

Which one of the following subsequent events will least likely result in an adjustment to the financial statements?

A management letter is not required.

The auditor's expectation when performing review analytical procedures will be more precise than if the auditor were performing substantive analytical procedures.

Fulton Educational Company,Inc.has a matter of material litigation that is threatened,but that has not gone to trial. The auditor's consideration of such a matter will not include which of the following?

Which of the following is false regarding the management letter?

Analytical procedures may indicate that new controls need to be designed before completing the audit.

If an experienced reviewer who was not a part of the audit team,but who has appropriate competence,independence,integrity,and objectivity,performs an independent quality review,this is referred to as a reoccurring partner review.

An additional partner review of the audit and its findings is typically performed by an experienced member of the firm.Which of the following individuals is most qualified to perform this concurring partner review?

Which method focuses on assuring that the year-end balance sheet is correct and does not consider the impact of prior-year uncorrected misstatements reversing in later years?

If the auditor determines that informative disclosures are not reasonably adequate,the auditor must identify that fact in the auditor's report.

Which of the following would be considered "the nature of a misstatement" that might make it material?

Before releasing the audit report,which of the following would the auditor most likely do?

Management's refusal to sign the management representation letter is considered a scope limitation sufficient to preclude the issuance of an unqualified opinion.

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