Question 1

The auditor's responsibility according to the auditing standards is to

Accepted Answer

A) respond to subsequent events 
B) prepare adjusting entries for subsequently discovered facts if they come to the auditor's attention 
C) ensure the client discloses subsequently discovered facts if they come to the auditor's attention 
D) search for subsequent events 
E) respond to subsequently discovered facts if they come to the auditor's attention
F)both A and B
G)both C and E
H)Both D and E 
A) respond to subsequent events 
B) prepare adjusting entries for subsequently discovered facts if they come to the auditor's attention 
C) ensure the client discloses subsequently discovered facts if they come to the auditor's attention 
D) search for subsequent events 
E) respond to subsequently discovered facts if they come to the auditor's attention
F)both A and B
G)both C and E
H)Both D and E H

Question 2

Examples of contingent liabilities include

Accepted Answer

A) lawsuits requesting the company to pay damages for patent liability or product infringement 
B) product warranty expenses 
C) guarantees of obligations of other parties 
D) liabilities for discounted notes receivable 
E) income tax extensions
F)both A and B
G)both B and C
H)Both C and D 
A) lawsuits requesting the company to pay damages for patent liability or product infringement 
B) product warranty expenses 
C) guarantees of obligations of other parties 
D) liabilities for discounted notes receivable 
E) income tax extensions
F)both A and B
G)both B and C
H)Both C and D H

Question 3

According to the U.S.accounting standards,estimated losses from loss contingencies should be recorded (by a charge to income and liabilities)if two conditions are met

Accepted Answer

A) the loss must be probable 
B) the loss must be possible 
C) the amount of the loss can be reasonably documented 
D) the amount of the loss can be reasonably estimated 
E) the amount of the loss can be accurately estimated
F)both A and B
G)both A and D
H)both C and E 
A) the loss must be probable 
B) the loss must be possible 
C) the amount of the loss can be reasonably documented 
D) the amount of the loss can be reasonably estimated 
E) the amount of the loss can be accurately estimated
F)both A and B
G)both A and D
H)both C and E G

Question 4

The requirements for Type I and Type II subsequent events are

Accepted Answer

A) Type I events are disclosed in the financial statements 
B) Type II events are disclosed in the financial statements 
C) neither Type I nor Type II events are recorded in the financial statements 
D) Type II events are recorded in the financial statements 
E) Type I events are recorded in the financial statements
F)both A and B
G)both B and E
H)both C and D 
A) Type I events are disclosed in the financial statements 
B) Type II events are disclosed in the financial statements 
C) neither Type I nor Type II events are recorded in the financial statements 
D) Type II events are recorded in the financial statements 
E) Type I events are recorded in the financial statements
F)both A and B
G)both B and E
H)both C and D

Question 5

Examples of contingent liabilities include

Accepted Answer

A) lawsuits requesting the company to pay damages for patent liability or product infringement 
B) product warranty claims 
C) payment of obligations of other parties 
D) liabilities for discounted accounts receivable 
E) income tax disputes
F)both A and C
G)both B and E
H)both D and E 
A) lawsuits requesting the company to pay damages for patent liability or product infringement 
B) product warranty claims 
C) payment of obligations of other parties 
D) liabilities for discounted accounts receivable 
E) income tax disputes
F)both A and C
G)both B and E
H)both D and E

Question 6

The purpose of the management representation letter is to

Accepted Answer

A) clarify all the information provided to the auditor during the audit reducing the possibility of misunderstanding between management and the auditor 
B) obtain additional information to support audit conclusions 
C) clarify assumptions provided to the auditor during the audit 
D) obtain audit evidence that was not available during the normal course of fieldwork 
A) clarify all the information provided to the auditor during the audit reducing the possibility of misunderstanding between management and the auditor 
B) obtain additional information to support audit conclusions 
C) clarify assumptions provided to the auditor during the audit 
D) obtain audit evidence that was not available during the normal course of fieldwork

Question 7

The auditor is concerned about the client's compliance with laws and regulations that have an indirect impact on the financial statements.Because of the inherent limitations of an audit,there is an unavoidable risk that some material misstatements in the financial statements may be undetected.This risk is greater related to potential violations of laws and regulations for which of the following reasons?

Accepted Answer

A) many government contracts refer to a specific set of regulations 
B) many government programs are subject to state and federal laws 
C) many laws and regulations do not affect the financial statements 
D) noncompliance may involve conduct designed to reveal the noncompliance 
E) whether an action constitutes noncompliance is a matter for determination in a court of law
F)both A and B
G)both C and E
H)both D and E 
A) many government contracts refer to a specific set of regulations 
B) many government programs are subject to state and federal laws 
C) many laws and regulations do not affect the financial statements 
D) noncompliance may involve conduct designed to reveal the noncompliance 
E) whether an action constitutes noncompliance is a matter for determination in a court of law
F)both A and B
G)both C and E
H)both D and E

Question 8

The auditor's responsibility regarding the going concern assumption is to

Accepted Answer

A) evaluate the possibility that the company could go bankrupt 
B) obtain sufficient appropriate evidence to evaluate the appropriateness of management's use of the going concern assumption in the preparation and presentation of the financial statements 
C) conclude about whether there is a material uncertainty about the company's ability to continue as a going concern 
D) determine the implications for the work papers 
E) estimate the net income that the company expects to earn during the current year
F)both A and B
G)both B and C
H)both D and E 
A) evaluate the possibility that the company could go bankrupt 
B) obtain sufficient appropriate evidence to evaluate the appropriateness of management's use of the going concern assumption in the preparation and presentation of the financial statements 
C) conclude about whether there is a material uncertainty about the company's ability to continue as a going concern 
D) determine the implications for the work papers 
E) estimate the net income that the company expects to earn during the current year
F)both A and B
G)both B and C
H)both D and E

Question 9

The auditor's responsibility for unaudited information is to

Accepted Answer

A) Review the information 
B) Determine if the information is consistent with the information reported in the financial statements 
C) Determine if the information is consistent with the information in the accounting records 
D) Determine if the information is consistent with the information reported in industry publications 
E) both A and B
F)both C and E
G)both D and E 
A) Review the information 
B) Determine if the information is consistent with the information reported in the financial statements 
C) Determine if the information is consistent with the information in the accounting records 
D) Determine if the information is consistent with the information reported in industry publications 
E) both A and B
F)both C and E
G)both D and E

Question 10

If the auditor does not assess a risk of material misstatement related to a potential contingent liability,

Accepted Answer

A) he is required to contact the external counsel for the audit client and request additional information 
B) he is required to contact the internal counsel for the audit client 
C) he is not required to contact the external counsel for the audit client 
D) he is not required to contact the internal counsel for the audit client and request additional information 
A) he is required to contact the external counsel for the audit client and request additional information 
B) he is required to contact the internal counsel for the audit client 
C) he is not required to contact the external counsel for the audit client 
D) he is not required to contact the internal counsel for the audit client and request additional information

Question 11

As auditors gather evidence to determine whether the financial statements are prepared in accordance with the applicable financial reporting framework,the evidence is documented in the working papers.

Accepted Answer

A) True 
 B)False

Question 12

The auditing standards have listed several circumstances that might cause quantitatively immaterial misstatements to be judged material.These include

Accepted Answer

A) misstatements that change income into a loss 
B) the effect of the misstatement on loan covenants,contractual agreements and regulatory provisions 
C) the existence of statutory or regulatory reporting requirements that might have an impact on materiality levels 
D) misstatements that have the effect of increasing management's compensation 
E) the effect of misclassifying income between operating and nonrecurring
F)both A and B
G)both C and D
H)both D and E 
A) misstatements that change income into a loss 
B) the effect of the misstatement on loan covenants,contractual agreements and regulatory provisions 
C) the existence of statutory or regulatory reporting requirements that might have an impact on materiality levels 
D) misstatements that have the effect of increasing management's compensation 
E) the effect of misclassifying income between operating and nonrecurring
F)both A and B
G)both C and D
H)both D and E

Question 13

Audit documentation is defined as

Accepted Answer

A) the written record of the basis for the auditor's opinions 
B) the written record of the basis for the auditor's evidence 
C) the written record of the basis for the auditor's conclusions 
D) the written record of the basis for the auditor's work 
A) the written record of the basis for the auditor's opinions 
B) the written record of the basis for the auditor's evidence 
C) the written record of the basis for the auditor's conclusions 
D) the written record of the basis for the auditor's work

Question 14

If both required conditions of loss contingencies are not met,then U.S.accounting standards require

Accepted Answer

A) recording of loss contingencies if the loss is reasonably possible 
B) disclosure of loss contingencies if the loss is possible 
C) disclosure of loss contingencies if the loss is reasonably possible 
D) disclosure of loss contingencies if the loss is probable 
A) recording of loss contingencies if the loss is reasonably possible 
B) disclosure of loss contingencies if the loss is possible 
C) disclosure of loss contingencies if the loss is reasonably possible 
D) disclosure of loss contingencies if the loss is probable

Question 15

Type II subsequent events

Accepted Answer

A) provide evidence for conditions that existed at the date of the auditor's report 
B) provide evidence of conditions that arose after the date of the auditor's report 
C) provide evidence for conditions that arose at the date of the financial statements 
D) provide evidence of conditions that arose after the date of the financial statements 
E) provide evidence for conditions that existed at the date of the financial statements 
A) provide evidence for conditions that existed at the date of the auditor's report 
B) provide evidence of conditions that arose after the date of the auditor's report 
C) provide evidence for conditions that arose at the date of the financial statements 
D) provide evidence of conditions that arose after the date of the financial statements 
E) provide evidence for conditions that existed at the date of the financial statements

Question 16

Subsequent events are events that

Accepted Answer

A) occur between the date of the financial statements and the date of the auditor's report,that do not require disclosure or adjustment in the financial statements 
B) become known to the auditor after the date of the auditor's report that may have caused the auditor to amend his report had he known of them before the report was written 
C) become known to the auditor after the issuance of the auditor's report that may have caused the auditor to amend his report had he known of them before the report was written 
D) occur between the date of the financial statements and the date of the auditor's report,that require disclosure or adjustment in the financial statements 
A) occur between the date of the financial statements and the date of the auditor's report,that do not require disclosure or adjustment in the financial statements 
B) become known to the auditor after the date of the auditor's report that may have caused the auditor to amend his report had he known of them before the report was written 
C) become known to the auditor after the issuance of the auditor's report that may have caused the auditor to amend his report had he known of them before the report was written 
D) occur between the date of the financial statements and the date of the auditor's report,that require disclosure or adjustment in the financial statements

Question 17

The auditing standards have listed several circumstances that might cause quantitatively immaterial misstatements to be judged material.These include

Accepted Answer

A) misstatements that change income into a loss 
B) the effect of the misstatement on compliance with loan covenants,contractual agreements and regulatory provisions 
C) the existence of statutory or regulatory reporting requirements that might have an impact on materiality levels 
D) misstatements that have the effect of increasing employees compensation 
E) the effect of misclassifying income between operating and nonrecurring
F)both A and B
G)both B and C
H)both D and E 
A) misstatements that change income into a loss 
B) the effect of the misstatement on compliance with loan covenants,contractual agreements and regulatory provisions 
C) the existence of statutory or regulatory reporting requirements that might have an impact on materiality levels 
D) misstatements that have the effect of increasing employees compensation 
E) the effect of misclassifying income between operating and nonrecurring
F)both A and B
G)both B and C
H)both D and E

Question 18

The auditor should obtain sufficient appropriate evidence for material amounts and disclosures in the financial statements that are determined by laws and regulations that have a direct impact on the financial statements.Examples include

Accepted Answer

A) SEC reporting requirements for private companies 
B) FASB reporting requirements for public companies 
C) industry specific financial reporting issues 
D) accounting for transactions under government contracts,including the amount of revenue to be accrued 
E) the accrual and recognition of sales tax expense
F)both A and B
G)both B and E
H)Both C and D 
A) SEC reporting requirements for private companies 
B) FASB reporting requirements for public companies 
C) industry specific financial reporting issues 
D) accounting for transactions under government contracts,including the amount of revenue to be accrued 
E) the accrual and recognition of sales tax expense
F)both A and B
G)both B and E
H)Both C and D

Question 19

The auditing standards require the auditor to consider the possible effect of events occurring

Accepted Answer

A) after year-end but before the financial statements are issued to the public 
B) after year-end but before the completion of fieldwork 
C) during the year but before the financial statements are issued to the public 
D) during the year but before the completion of fieldwork 
A) after year-end but before the financial statements are issued to the public 
B) after year-end but before the completion of fieldwork 
C) during the year but before the financial statements are issued to the public 
D) during the year but before the completion of fieldwork

Question 20

If during the process of identifying litigation,claims,and assessments involving the company that may increase the risk of material misstatement,the auditor assesses a risk of material misstatement due to a potential contingent liability,the auditor should

Accepted Answer

A) seek direct communication with the company's internal legal counsel 
B) seek direct communication with the company's external legal counsel 
C) seek direct communication with the company's management 
D) seek direct communication with the company's board of directors 
A) seek direct communication with the company's internal legal counsel 
B) seek direct communication with the company's external legal counsel 
C) seek direct communication with the company's management 
D) seek direct communication with the company's board of directors

The auditor's responsibility according to the auditing standards is to

Examples of contingent liabilities include

According to the U.S.accounting standards,estimated losses from loss contingencies should be recorded (by a charge to income and liabilities)if two conditions are met

The requirements for Type I and Type II subsequent events are

Examples of contingent liabilities include

The purpose of the management representation letter is to

The auditor's responsibility regarding the going concern assumption is to

The auditor's responsibility for unaudited information is to

If the auditor does not assess a risk of material misstatement related to a potential contingent liability,

As auditors gather evidence to determine whether the financial statements are prepared in accordance with the applicable financial reporting framework,the evidence is documented in the working papers.

The auditing standards have listed several circumstances that might cause quantitatively immaterial misstatements to be judged material.These include

Audit documentation is defined as

If both required conditions of loss contingencies are not met,then U.S.accounting standards require

Type II subsequent events

Subsequent events are events that

The auditing standards have listed several circumstances that might cause quantitatively immaterial misstatements to be judged material.These include

The auditor should obtain sufficient appropriate evidence for material amounts and disclosures in the financial statements that are determined by laws and regulations that have a direct impact on the financial statements.Examples include

The auditing standards require the auditor to consider the possible effect of events occurring

If during the process of identifying litigation,claims,and assessments involving the company that may increase the risk of material misstatement,the auditor assesses a risk of material misstatement due to a potential contingent liability,the auditor should

What Is Auditing

The Audit Planning Process: Understanding the Risk of Material Misstatement

Internal Controls

Auditing the Revenue Business Process

Audit Evidence and the Auditors Responsibility for Fraud Detection

Auditing the Acquisition and Expenditure Business Process

Auditing the Inventory Business Process

Audit Sampling: Tests of Internal Controls

Audit Sampling: Substantive Tests of Details

Cash and Investment Business Processes

Long-Term Debt and Owners Equity Business Process

Audit Reports

The Auditing Profession Glossary

Filters

Exam 12: Completing the Audit

The auditor's responsibility according to the auditing standards is to

Examples of contingent liabilities include

According to the U.S.accounting standards,estimated losses from loss contingencies should be recorded (by a charge to income and liabilities)if two conditions are met

The requirements for Type I and Type II subsequent events are

Examples of contingent liabilities include

The purpose of the management representation letter is to

The auditor's responsibility regarding the going concern assumption is to

The auditor's responsibility for unaudited information is to

If the auditor does not assess a risk of material misstatement related to a potential contingent liability,

As auditors gather evidence to determine whether the financial statements are prepared in accordance with the applicable financial reporting framework,the evidence is documented in the working papers.

The auditing standards have listed several circumstances that might cause quantitatively immaterial misstatements to be judged material.These include

Audit documentation is defined as

If both required conditions of loss contingencies are not met,then U.S.accounting standards require

Type II subsequent events

Subsequent events are events that

The auditing standards have listed several circumstances that might cause quantitatively immaterial misstatements to be judged material.These include

The auditor should obtain sufficient appropriate evidence for material amounts and disclosures in the financial statements that are determined by laws and regulations that have a direct impact on the financial statements.Examples include

The auditing standards require the auditor to consider the possible effect of events occurring

If during the process of identifying litigation,claims,and assessments involving the company that may increase the risk of material misstatement,the auditor assesses a risk of material misstatement due to a potential contingent liability,the auditor should

What Is Auditing

The Audit Planning Process: Understanding the Risk of Material Misstatement

Internal Controls

Auditing the Revenue Business Process

Audit Evidence and the Auditors Responsibility for Fraud Detection

Auditing the Acquisition and Expenditure Business Process

Auditing the Inventory Business Process

Audit Sampling: Tests of Internal Controls

Audit Sampling: Substantive Tests of Details

Cash and Investment Business Processes

Long-Term Debt and Owners Equity Business Process

Audit Reports

The Auditing Profession Glossary

Filters