Question 1

Explain the difference between management's and the auditor's responsibility for the financial statements.

Accepted Answer

Management's responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
The auditor must state that the responsibility of the auditor is to express an opinion on the financial statements based on the audit, state that the audit was conducted in accordance with auditing standards (including compliance with relevant ethical requirements), describe the audit and state that the auditor believes that the audit evidence obtained is sufficient and appropriate to provide a basis for the auditor's opinion.

Question 2

Which of the following are areas normally covered during the wrap-up of an audit engagement?

Accepted Answer

A)  Perform subsequent events procedures. 
B)  Consider the amount used for materiality. 
C)  Reconsider the assessments of internal control at the entity level and the risk of fraud. 
D)  All of the above. 
A)  Perform subsequent events procedures. 
B)  Consider the amount used for materiality. 
C)  Reconsider the assessments of internal control at the entity level and the risk of fraud. 
D)  All of the above. C

Question 3

The final phase of an audit includes which of the following?

Accepted Answer

A)  performing substantive tests of account balances 
B)  gaining an understanding of the client's internal control system 
C)  confirming the terms of the audit engagement with the auditor 
D)  determining whether the audit evidence obtained is sufficient and appropriate to reduce the risk of material misstatements in the financial statements to an acceptably low level 
A)  performing substantive tests of account balances 
B)  gaining an understanding of the client's internal control system 
C)  confirming the terms of the audit engagement with the auditor 
D)  determining whether the audit evidence obtained is sufficient and appropriate to reduce the risk of material misstatements in the financial statements to an acceptably low level B

Question 4

When Eddie Okulicz released the audit report of C Corp. he did not anticipate that there would follow an announcement two days later that several days after year-end his client's foreign subsidiary had been nationalized by Libya for non-compliance to environmental laws of the country. What type of subsequent event was this?

Accepted Answer

A)  Type 1 
B)  Type 2 
C)  Type 1 and 2 
D)  this was not a subsequent event 
A)  Type 1 
B)  Type 2 
C)  Type 1 and 2 
D)  this was not a subsequent event

Question 5

Material disagreements with management will result in either:

Accepted Answer

A)  a qualified opinion or adverse opinion. 
B)  an emphasis of matter or adverse opinion. 
C)  an adverse opinion or an unqualified opinion. 
D)  an unqualified opinion or a qualified opinion. 
A)  a qualified opinion or adverse opinion. 
B)  an emphasis of matter or adverse opinion. 
C)  an adverse opinion or an unqualified opinion. 
D)  an unqualified opinion or a qualified opinion.

Question 6

As soon as practicable, the auditor should communicate weaknesses in internal controls to management or those charged with governance.

Accepted Answer

A) True 
 B)False

Question 7

A subsequent event occurs:

Accepted Answer

A)  before the end of the financial year. 
B)  between the client's financial year-end and the date of the auditor's report. 
C)  after the auditor completes the tests of controls. 
D)  after the auditor signs the audit engagement letter. 
A)  before the end of the financial year. 
B)  between the client's financial year-end and the date of the auditor's report. 
C)  after the auditor completes the tests of controls. 
D)  after the auditor signs the audit engagement letter.

Question 8

Explain the difference between type 1 and type 2 subsequent events and provide examples of each type of event.

Accepted Answer

Type 1 subsequent events are events that

Question 9

The client's compliance with contractual requirements of operating agreements is an example of a qualitative factor that may cause misstatements of quantitatively immaterial amounts to be considered material.

Accepted Answer

A) True 
 B)False

Question 10

An error is an intentional misstatement in the client's financial statements.

Accepted Answer

A) True 
 B)False

Question 11

When Paul Sliz was reviewing existing or possible obligations on the balance sheet, he was told that the outcome for these obligations was uncertain and that the company was awaiting a future event. Paul Sliz was reviewing

Accepted Answer

A)  accruals. 
B)  going concern. 
C)  materiality. 
D)  contingent liabilities. 
A)  accruals. 
B)  going concern. 
C)  materiality. 
D)  contingent liabilities.

Question 12

Which of the following is not an area of disagreement with those charged with governance that may result in a modified audit opinion?

Accepted Answer

A)  the acceptability of accounting policies selected 
B)  the terms of the audit engagement 
C)  the method of application of accounting policies 
D)  the adequacy of disclosures in the financial statements 
A)  the acceptability of accounting policies selected 
B)  the terms of the audit engagement 
C)  the method of application of accounting policies 
D)  the adequacy of disclosures in the financial statements

Question 13

Identify quantitative and qualitative considerations that are taken into account when the auditor evaluates whether misstatements either cause financial statements to be materially misstated or require additional disclosure.

Accepted Answer

Examples of quantitative and qualitative

Question 14

The uninsured loss of inventory as a result of fire subsequent to year-end is an example of a type 2 subsequent event.

Accepted Answer

A) True 
 B)False

Question 15

When Olena Vardon mentioned that the financial statements were materially misstated, what kind of opinion was this?

Accepted Answer

A)  disclaimer 
B)  emphasis of matter 
C)  adverse 
D)  limitation of scope 
A)  disclaimer 
B)  emphasis of matter 
C)  adverse 
D)  limitation of scope

Question 16

When Sydney Burns was unable to perform work on inventory because of a client's insistence that she not perform an inventory taking, what kind of audit opinion would she most likely consider?

Accepted Answer

A)  adverse opinion 
B)  emphasis of matter 
C)  limitation of scope 
D)  disclaimer of opinion 
A)  adverse opinion 
B)  emphasis of matter 
C)  limitation of scope 
D)  disclaimer of opinion

Question 17

When an error or exception is identified during substantive testing, the first response is to:

Accepted Answer

A)  qualify the audit report. 
B)  understand why the error or exception has arisen. 
C)  increase the sample size. 
D)  report the error or exception to the audit committee. 
A)  qualify the audit report. 
B)  understand why the error or exception has arisen. 
C)  increase the sample size. 
D)  report the error or exception to the audit committee.

Question 18

Those charged with governance are accountable for ensuring that the entity achieves its objectives with regard to which of the following?

Accepted Answer

A)  compliance with applicable laws 
B)  the reliability of financial reporting 
C)  both a and b 
D)  none of the above 
A)  compliance with applicable laws 
B)  the reliability of financial reporting 
C)  both a and b 
D)  none of the above

Question 19

An unqualified audit report with an emphasis of matter should be issued if a subsequent event has occurred that has resulted in a new audit report being prepared on a revised financial statement.

Accepted Answer

A) True 
 B)False

Question 20

When Greg Hill was preparing the audit report of his client, he did not include one of the following items in the report. Which item did he exclude?

Accepted Answer

A)  report date 
B)  introductory paragraph 
C)  management's responsibility for the financial statements 
D)  compliance with CICA Handbook 
A)  report date 
B)  introductory paragraph 
C)  management's responsibility for the financial statements 
D)  compliance with CICA Handbook

Explain the difference between management's and the auditor's responsibility for the financial statements.

Which of the following are areas normally covered during the wrap-up of an audit engagement?

The final phase of an audit includes which of the following?

Material disagreements with management will result in either:

As soon as practicable, the auditor should communicate weaknesses in internal controls to management or those charged with governance.

A subsequent event occurs:

Explain the difference between type 1 and type 2 subsequent events and provide examples of each type of event.

The client's compliance with contractual requirements of operating agreements is an example of a qualitative factor that may cause misstatements of quantitatively immaterial amounts to be considered material.

An error is an intentional misstatement in the client's financial statements.

When Paul Sliz was reviewing existing or possible obligations on the balance sheet, he was told that the outcome for these obligations was uncertain and that the company was awaiting a future event. Paul Sliz was reviewing

Which of the following is not an area of disagreement with those charged with governance that may result in a modified audit opinion?

Identify quantitative and qualitative considerations that are taken into account when the auditor evaluates whether misstatements either cause financial statements to be materially misstated or require additional disclosure.

The uninsured loss of inventory as a result of fire subsequent to year-end is an example of a type 2 subsequent event.

When Olena Vardon mentioned that the financial statements were materially misstated, what kind of opinion was this?

When Sydney Burns was unable to perform work on inventory because of a client's insistence that she not perform an inventory taking, what kind of audit opinion would she most likely consider?

When an error or exception is identified during substantive testing, the first response is to:

Those charged with governance are accountable for ensuring that the entity achieves its objectives with regard to which of the following?

An unqualified audit report with an emphasis of matter should be issued if a subsequent event has occurred that has resulted in a new audit report being prepared on a revised financial statement.

When Greg Hill was preparing the audit report of his client, he did not include one of the following items in the report. Which item did he exclude?

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Risk Assessment I

Risk Assessment II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Testing of Controls

Execution of the Audit Performing Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Substantive Testing and Income Statement Accounts

Filters

Exam 12: Completing and Reporting on the Audit

Explain the difference between management's and the auditor's responsibility for the financial statements.

Which of the following are areas normally covered during the wrap-up of an audit engagement?

The final phase of an audit includes which of the following?

Material disagreements with management will result in either:

As soon as practicable, the auditor should communicate weaknesses in internal controls to management or those charged with governance.

A subsequent event occurs:

Explain the difference between type 1 and type 2 subsequent events and provide examples of each type of event.

The client's compliance with contractual requirements of operating agreements is an example of a qualitative factor that may cause misstatements of quantitatively immaterial amounts to be considered material.

An error is an intentional misstatement in the client's financial statements.

When Paul Sliz was reviewing existing or possible obligations on the balance sheet, he was told that the outcome for these obligations was uncertain and that the company was awaiting a future event. Paul Sliz was reviewing

Which of the following is not an area of disagreement with those charged with governance that may result in a modified audit opinion?

Identify quantitative and qualitative considerations that are taken into account when the auditor evaluates whether misstatements either cause financial statements to be materially misstated or require additional disclosure.

The uninsured loss of inventory as a result of fire subsequent to year-end is an example of a type 2 subsequent event.

When Olena Vardon mentioned that the financial statements were materially misstated, what kind of opinion was this?

When Sydney Burns was unable to perform work on inventory because of a client's insistence that she not perform an inventory taking, what kind of audit opinion would she most likely consider?

When an error or exception is identified during substantive testing, the first response is to:

Those charged with governance are accountable for ensuring that the entity achieves its objectives with regard to which of the following?

An unqualified audit report with an emphasis of matter should be issued if a subsequent event has occurred that has resulted in a new audit report being prepared on a revised financial statement.

When Greg Hill was preparing the audit report of his client, he did not include one of the following items in the report. Which item did he exclude?

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Risk Assessment I

Risk Assessment II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Testing of Controls

Execution of the Audit Performing Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Substantive Testing and Income Statement Accounts

Filters