Question 1

Which of the following is not a type of opinion?

Accepted Answer

A)  qualified opinion 
B)  modified opinion 
C)  adverse opinion 
D)  disclaimer of opinion 
A)  qualified opinion 
B)  modified opinion 
C)  adverse opinion 
D)  disclaimer of opinion

Question 2

A reasonable level of assurance is the highest level of assurance that an auditor can provide.

Accepted Answer

A) True 
 B)False

Question 3

Professional scepticism does not involve:

Accepted Answer

A)  the professional requirement that all management representations be substantiated with supporting documentation. 
B)  seeking independent evidence to corroborate information provided by their client 
C)  being suspicious when evidence contradicts documents held by their client or enquiries made of client personnel 
D)  none of the above. 
A)  the professional requirement that all management representations be substantiated with supporting documentation. 
B)  seeking independent evidence to corroborate information provided by their client 
C)  being suspicious when evidence contradicts documents held by their client or enquiries made of client personnel 
D)  none of the above.

Question 4

As users of the financial statements, suppliers would least consider which of the following aspects of the financial statements:

Accepted Answer

A)  solvency of the entity 
B)  profitability of the entity 
C)  return on investment of the entity 
D)  corporate social responsibility of the entity 
A)  solvency of the entity 
B)  profitability of the entity 
C)  return on investment of the entity 
D)  corporate social responsibility of the entity

Question 5

In a review engagement, which of the following is least likely to occur during the engagement?

Accepted Answer

A)  analytical procedures 
B)  enquiries with management and other personnel 
C)  substantive audit procedures 
D)  review of the internal controls of the entity. 
A)  analytical procedures 
B)  enquiries with management and other personnel 
C)  substantive audit procedures 
D)  review of the internal controls of the entity.

Question 6

James Brown, the senior auditor at Yanzhou Coal Mining and Minerals, performed the following tasks: he used analytical procedures and he had discussions with management. These activities were a basis for a negative form of opinion. What did James Brown perform?

Accepted Answer

A)  a qualified report 
B)  an unmodified opinion 
C)  a compilation 
D)  a review engagement 
A)  a qualified report 
B)  an unmodified opinion 
C)  a compilation 
D)  a review engagement

Question 7

Mary Moras was reviewing the previous year's audited financial statements of a clothing manufacturer. Her manager explained to her that for a financial statement audit, the clothing company was the accountable party, its shareholders were the users, and the subject matter was the financial statements. What kind of audit engagement was her manager describing?

Accepted Answer

A)  consulting engagement 
B)  assurance engagement 
C)  review engagement 
D)  compliance engagement 
A)  consulting engagement 
B)  assurance engagement 
C)  review engagement 
D)  compliance engagement

Question 8

What does pervasive mean? When would an auditor use an audit report that was material and pervasive?

Accepted Answer

'Pervasive' refers to misstatements that

Question 9

An example of the three parties in an assurance engagement would be:

Accepted Answer

A)  audit client, employee, customer 
B)  audit client, supplier, auditor 
C)  auditor, shareholder, general public 
D)  auditor, general public, employees. 
A)  audit client, employee, customer 
B)  audit client, supplier, auditor 
C)  auditor, shareholder, general public 
D)  auditor, general public, employees.

Question 10

Jeff Carboy owns St. LawrenceSt. Lawrence Vineyards, a successful winery in the Thousand Islands region. Annual sales are $3,500,000 and he has a $1,200,000 loan with a local bank.
Sales are split between wine sales (88%) and wine tasting and catering (12%).
Jeff has excellent personal relationships with his suppliers and has been provided with special contractual terms which allow him delays of up to 120 days to make invoice payments. These arrangements run out this year and he will have 30 days to pay after being invoiced.
The bank has made the $1,200,000 loan to St. Lawrence Vineyards based on an understanding that the company will undergo audits of its financial statements.
Jeff is an astute entrepreneur and has set up an advisory board which consists of his bank manager, another wine grower in the region, his old high school ethics instructor and track coach, himself, and his accountant.
The board has discussed certain issues including the following:
The need for assurance service providers to audit his financial statements so that users can be provided with assurance that his statements are relevant and reliable.
Non-audit services that would provide advice on special projects he may be considering in the future.
A proper accounting firm to conduct an audit mandate.
Required:
a) What is the objective of a financial statement audit and how does it relate to St. Lawrence Vineyards?
b) Jeff Carboy's financial statements must be relevant and reliable. What do these two terms mean in the context of this case?
c) What three characteristics should St. Lawrence Vineyards' auditors possess when conducting an audit? Explain them briefly.
d) What are non-audit services? Can you describe possible non-audit services that St. Lawrence Vineyards might employ?

Accepted Answer

a) A financial statement audit provides

Question 11

Which of the following is not true in relation to comparability:

Accepted Answer

A)  able to identify trends, that may influence their perception of how well the entity is doing. 
B)  able to assess performance of the entity over time and with other entities 
C)  able to evaluate 
D)  all of the above are correct. 
A)  able to identify trends, that may influence their perception of how well the entity is doing. 
B)  able to assess performance of the entity over time and with other entities 
C)  able to evaluate 
D)  all of the above are correct.

Question 12

It is the auditor's responsibility to prepare the financial statements.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is incorrect? A government can be considered to be a user of the general purpose financial statements because:

Accepted Answer

A)  it is the basis for the calculation of taxes owed to the government 
B)  it can determine whether certain regulations have been complied with 
C)  to gain a better understanding of the entity's activities 
D)  governments need to assess the entity so that they can provide the entity with grants that will benefit society. 
A)  it is the basis for the calculation of taxes owed to the government 
B)  it can determine whether certain regulations have been complied with 
C)  to gain a better understanding of the entity's activities 
D)  governments need to assess the entity so that they can provide the entity with grants that will benefit society.

Question 14

The following can be said about an emphasis of matter:

Accepted Answer

A)  it is included when the auditor's opinion has changed and the auditor wants to bring the users' attention to a particular matter. 
B)  it is only used in unqualified audit opinions. 
C)  it is included when the auditor's opinion has not changed and the auditor wants to bring the users' attention to a particular matter. 
D)  it can not be used when expressing audit opinion that has pervasive misstatements. 
A)  it is included when the auditor's opinion has changed and the auditor wants to bring the users' attention to a particular matter. 
B)  it is only used in unqualified audit opinions. 
C)  it is included when the auditor's opinion has not changed and the auditor wants to bring the users' attention to a particular matter. 
D)  it can not be used when expressing audit opinion that has pervasive misstatements.

Question 15

Insurance hypothesis tells us that:

Accepted Answer

A)  investors will demand that financial statements be audited as a way of insuring against some of their loss should their investment fail. 
B)  investors can insure themselves against loss by investing in a diverse investment portfolio should an individual investment fail. 
C)  investors cannot insure themselves against loss when investing in an entity. 
D)  the entity can take out insurance to protect itself from such risks as employee or management fraud which can lead to material misstatements in the financial statements. 
A)  investors will demand that financial statements be audited as a way of insuring against some of their loss should their investment fail. 
B)  investors can insure themselves against loss by investing in a diverse investment portfolio should an individual investment fail. 
C)  investors cannot insure themselves against loss when investing in an entity. 
D)  the entity can take out insurance to protect itself from such risks as employee or management fraud which can lead to material misstatements in the financial statements.

Question 16

The largest accounting firms in Canada are known collectively as the

Accepted Answer

A)  'Big-3' 
B)  'Big-4' 
C)  'Big-5' 
D)  'Big-6' 
A)  'Big-3' 
B)  'Big-4' 
C)  'Big-5' 
D)  'Big-6'

Question 17

While awaiting a meeting in his firm's boardroom, the senior partner, Bill Goldsworthy, read the following statement in an article in the Globe & Mail: "The greater the perceived quality of the information contained in the financial statements, the more likely it will be relied upon by the users of that information." This statement best describes

Accepted Answer

A)  the expectations gap 
B)  agency theory 
C)  information hypothesis 
D)  insurance hypothesis 
A)  the expectations gap 
B)  agency theory 
C)  information hypothesis 
D)  insurance hypothesis

Question 18

A limitation of an audit is caused by:

Accepted Answer

A)  the nature of financial reporting 
B)  the nature of audit procedures 
C)  the need for the audit to be conducted within a reasonable period of time and at a reasonable cost 
D)  all of the above. 
A)  the nature of financial reporting 
B)  the nature of audit procedures 
C)  the need for the audit to be conducted within a reasonable period of time and at a reasonable cost 
D)  all of the above.

Question 19

Indicate whether you agree or disagree with the following statements and explain your reasoning.
a) Rejean Tremblay feels that an internal auditor that reports to the chief financial officer of the company can be as independent as an auditor that reports to the audit committee.
b) Angela Pelletier discovered a very material overstatement in the financial statements of McKenzie Growth. She felt that the misstatement would have an impact on the decisions of users of the financial statements, and indicated to her audit senior that she would be including it as an "emphasis of matter" paragraph in the audit report.
c) An auditor is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
d) An assurance engagement involves evaluation or measurement of subject matter against criteria.

Accepted Answer

a) Disagree. The internal auditor's inde

Question 20

How is the expectation gap caused and how can the effects on the expectation gap be reduced?

Accepted Answer

In particular, the gap is caused by unre

Which of the following is not a type of opinion?

A reasonable level of assurance is the highest level of assurance that an auditor can provide.

Professional scepticism does not involve:

As users of the financial statements, suppliers would least consider which of the following aspects of the financial statements:

In a review engagement, which of the following is least likely to occur during the engagement?

James Brown, the senior auditor at Yanzhou Coal Mining and Minerals, performed the following tasks: he used analytical procedures and he had discussions with management. These activities were a basis for a negative form of opinion. What did James Brown perform?

What does pervasive mean? When would an auditor use an audit report that was material and pervasive?

An example of the three parties in an assurance engagement would be:

Which of the following is not true in relation to comparability:

It is the auditor's responsibility to prepare the financial statements.

Which of the following is incorrect? A government can be considered to be a user of the general purpose financial statements because:

The following can be said about an emphasis of matter:

Insurance hypothesis tells us that:

The largest accounting firms in Canada are known collectively as the

A limitation of an audit is caused by:

How is the expectation gap caused and how can the effects on the expectation gap be reduced?

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

Completing and Reporting on the Audit

Filters

Exam 1: Introduction and Overview of Audit and Assurance

Which of the following is not a type of opinion?

A reasonable level of assurance is the highest level of assurance that an auditor can provide.

Professional scepticism does not involve:

As users of the financial statements, suppliers would least consider which of the following aspects of the financial statements:

In a review engagement, which of the following is least likely to occur during the engagement?

James Brown, the senior auditor at Yanzhou Coal Mining and Minerals, performed the following tasks: he used analytical procedures and he had discussions with management. These activities were a basis for a negative form of opinion. What did James Brown perform?

What does pervasive mean? When would an auditor use an audit report that was material and pervasive?

An example of the three parties in an assurance engagement would be:

Which of the following is not true in relation to comparability:

It is the auditor's responsibility to prepare the financial statements.

Which of the following is incorrect? A government can be considered to be a user of the general purpose financial statements because:

The following can be said about an emphasis of matter:

Insurance hypothesis tells us that:

The largest accounting firms in Canada are known collectively as the

A limitation of an audit is caused by:

How is the expectation gap caused and how can the effects on the expectation gap be reduced?

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

Completing and Reporting on the Audit

Filters