Question 1

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 2

Analytical procedures are required as a part of the:

Accepted Answer

A)  Detailed tests of balances. 
B)  Internal control assessment. 
C)  Procedures performed near the end of the audit. 
D)  Substantive testing. 
A)  Detailed tests of balances. 
B)  Internal control assessment. 
C)  Procedures performed near the end of the audit. 
D)  Substantive testing.

Question 3

Which of the following ledger accounts would be least likely to be analyzed in detail by auditors?

Accepted Answer

A)  Miscellaneous revenue. 
B)  Professional fees. 
C)  Travel expense. 
D)  Repairs and maintenance. 
A)  Miscellaneous revenue. 
B)  Professional fees. 
C)  Travel expense. 
D)  Repairs and maintenance.

Question 4

Material loss contingencies should be recorded in the financial statements if available information indicates it is probable that a loss had been sustained prior to the balance sheet date and the amount of such loss can be reasonably estimated. These considerations will affect the audit report as follows:

Accepted Answer

A)  If a loss has been recorded in accordance with these criteria, the auditor may issue an unqualified opinion but is required to point out the contingency in an explanatory paragraph of the report. 
B)  If a loss meets these criteria but is disclosed in the financial statement notes rather than being recorded therein, the auditor may issue an unqualified opinion, but is required to point out the contingency in an explanatory paragraph of the report. 
C)  If a loss meets these criteria but is disclosed in the financial statement notes rather than being recorded therein, the auditor may issue an unqualified opinion, but should consider adding an explanatory paragraph as a means of emphasizing the disclosure. 
D)  If a loss is probable but the amount cannot be reasonably estimated and is disclosed in the notes to the financial statements rather than being recorded therein, the auditor may issue an unqualified opinion. 
A)  If a loss has been recorded in accordance with these criteria, the auditor may issue an unqualified opinion but is required to point out the contingency in an explanatory paragraph of the report. 
B)  If a loss meets these criteria but is disclosed in the financial statement notes rather than being recorded therein, the auditor may issue an unqualified opinion, but is required to point out the contingency in an explanatory paragraph of the report. 
C)  If a loss meets these criteria but is disclosed in the financial statement notes rather than being recorded therein, the auditor may issue an unqualified opinion, but should consider adding an explanatory paragraph as a means of emphasizing the disclosure. 
D)  If a loss is probable but the amount cannot be reasonably estimated and is disclosed in the notes to the financial statements rather than being recorded therein, the auditor may issue an unqualified opinion.

Question 5

With respect to issuance of an audit report which is dual-dated for a subsequent event occurring after the completion of fieldwork but before issuance of the auditors' report, the auditors' responsibility for events occurring subsequent to the date of the audit report is:

Accepted Answer

A)  Extended to include all events occurring until the date of the last subsequent event referred to. 
B)  Limited to the specific event referred to. 
C)  Limited to all events occurring through the date of issuance of the report. 
D)  Extended to include all events occurring through the date of submission of the report to the client. 
A)  Extended to include all events occurring until the date of the last subsequent event referred to. 
B)  Limited to the specific event referred to. 
C)  Limited to all events occurring through the date of issuance of the report. 
D)  Extended to include all events occurring through the date of submission of the report to the client.

Question 6

If, after issuing an audit report, the auditors find that they have failed to perform certain significant audit procedures they should first:

Accepted Answer

A)  Attempt to determine whether their report is still being relied upon by third parties. 
B)  Notify regulatory agencies. 
C)  Notify legal counsel. 
D)  Wait until the beginning of the next year's audit to determine whether misstatements have occurred. 
A)  Attempt to determine whether their report is still being relied upon by third parties. 
B)  Notify regulatory agencies. 
C)  Notify legal counsel. 
D)  Wait until the beginning of the next year's audit to determine whether misstatements have occurred.

Question 7

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 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

A CPA reviews a client's payroll procedures. The CPA would consider internal control to be less than effective if a payroll department supervisor was assigned the responsibility for:

Accepted Answer

A)  Reviewing and approving time reports for subordinate employees. 
B)  Distributing payroll checks to employees. 
C)  Hiring subordinate employees. 
D)  Initiating requests for salary adjustments for subordinate employees. 
A)  Reviewing and approving time reports for subordinate employees. 
B)  Distributing payroll checks to employees. 
C)  Hiring subordinate employees. 
D)  Initiating requests for salary adjustments for subordinate employees.

Question 10

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 11

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 12

Management estimates the company's allowance for doubtful accounts as $200,000, and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000. The known misstatement in this situation is:

Accepted Answer

A)  $0. 
B)  $30,000. 
C)  $40,000. 
D)  $50,000. 
A)  $0. 
B)  $30,000. 
C)  $40,000. 
D)  $50,000.

Question 13

Which of the following is not a procedure normally performed while completing the audit of a public company?

Accepted Answer

A)  Obtain a lawyer's letter. 
B)  Obtain a representations letter. 
C)  Perform an overall review using analytical procedures. 
D)  Confirm directly with shareholders the total capital stock held by each. 
A)  Obtain a lawyer's letter. 
B)  Obtain a representations letter. 
C)  Perform an overall review using analytical procedures. 
D)  Confirm directly with shareholders the total capital stock held by each.

Question 14

Which of the following information need not be reported in the auditors' report if the information is considered to be properly stated after performing appropriate procedures?

Accepted Answer

A)  FASB-required supplementary information. 
B)  Other information in documents containing audited financial statements. 
C)  Supplementary information in relation to the financial statements as a whole. 
D)  GASB-required supplementary information. 
A)  FASB-required supplementary information. 
B)  Other information in documents containing audited financial statements. 
C)  Supplementary information in relation to the financial statements as a whole. 
D)  GASB-required supplementary information.

Question 15

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 16

Auditors must communicate internal control "significant deficiencies" to:

Accepted Answer

A)  The audit committee. 
B)  The shareholders. 
C)  The SEC. 
D)  The Federal Trade Commission. 
A)  The audit committee. 
B)  The shareholders. 
C)  The SEC. 
D)  The Federal Trade Commission.

Question 17

An auditor will ordinarily examine invoices from lawyers primarily in order to:

Accepted Answer

A)  Substantiate accruals. 
B)  Assess the legal ramifications of litigation in progress. 
C)  Estimate the dollar amount of contingent liabilities. 
D)  Identify possible unasserted litigation, claims, and assessments. 
A)  Substantiate accruals. 
B)  Assess the legal ramifications of litigation in progress. 
C)  Estimate the dollar amount of contingent liabilities. 
D)  Identify possible unasserted litigation, claims, and assessments.

Question 18

Which of the following auditing procedures is ordinarily performed last?

Accepted Answer

A)  Reading of the minutes of the directors' meetings. 
B)  Confirming accounts payable. 
C)  Obtaining a management representation letter. 
D)  Testing of the purchasing function. 
A)  Reading of the minutes of the directors' meetings. 
B)  Confirming accounts payable. 
C)  Obtaining a management representation letter. 
D)  Testing of the purchasing function.

Question 19

The statement that best expresses the auditor's responsibility with respect to events occurring between the balance sheet date and the end of the audit is that:

Accepted Answer

A)  The auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the balance sheet date. 
B)  The auditor's responsibility is to determine that a proper cutoff has been made and that transactions recorded on or before the balance sheet date actually occurred. 
C)  The auditor is fully responsible for events occurring in the subsequent period and should extend all detailed procedures through the last day of field work. 
D)  The auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period. 
A)  The auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the balance sheet date. 
B)  The auditor's responsibility is to determine that a proper cutoff has been made and that transactions recorded on or before the balance sheet date actually occurred. 
C)  The auditor is fully responsible for events occurring in the subsequent period and should extend all detailed procedures through the last day of field work. 
D)  The auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period.

Question 20

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.

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

Analytical procedures are required as a part of the:

Which of the following ledger accounts would be least likely to be analyzed in detail by auditors?

With respect to issuance of an audit report which is dual-dated for a subsequent event occurring after the completion of fieldwork but before issuance of the auditors' report, the auditors' responsibility for events occurring subsequent to the date of the audit report is:

If, after issuing an audit report, the auditors find that they have failed to perform certain significant audit procedures they should first:

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

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

A CPA reviews a client's payroll procedures. The CPA would consider internal control to be less than effective if a payroll department supervisor was assigned the responsibility for:

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

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

Management estimates the company's allowance for doubtful accounts as $200,000, and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000. The known misstatement in this situation is:

Which of the following is not a procedure normally performed while completing the audit of a public company?

Which of the following information need not be reported in the auditors' report if the information is considered to be properly stated after performing appropriate procedures?

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

Auditors must communicate internal control "significant deficiencies" to:

An auditor will ordinarily examine invoices from lawyers primarily in order to:

Which of the following auditing procedures is ordinarily performed last?

The statement that best expresses the auditor's responsibility with respect to events occurring between the balance sheet date and the end of the audit is that:

Auditors should perform audit procedures relating to subsequent events?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

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

Filters

Exam 16: Auditing Operations and Completing the Audit

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

Analytical procedures are required as a part of the:

Which of the following ledger accounts would be least likely to be analyzed in detail by auditors?

With respect to issuance of an audit report which is dual-dated for a subsequent event occurring after the completion of fieldwork but before issuance of the auditors' report, the auditors' responsibility for events occurring subsequent to the date of the audit report is:

If, after issuing an audit report, the auditors find that they have failed to perform certain significant audit procedures they should first:

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

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

A CPA reviews a client's payroll procedures. The CPA would consider internal control to be less than effective if a payroll department supervisor was assigned the responsibility for:

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

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

Management estimates the company's allowance for doubtful accounts as $200,000, and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000. The known misstatement in this situation is:

Which of the following is not a procedure normally performed while completing the audit of a public company?

Which of the following information need not be reported in the auditors' report if the information is considered to be properly stated after performing appropriate procedures?

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

Auditors must communicate internal control "significant deficiencies" to:

An auditor will ordinarily examine invoices from lawyers primarily in order to:

Which of the following auditing procedures is ordinarily performed last?

The statement that best expresses the auditor's responsibility with respect to events occurring between the balance sheet date and the end of the audit is that:

Auditors should perform audit procedures relating to subsequent events?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

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

Filters