Question 1

The FASB define related parties as

Accepted Answer

A) affiliates of the company 
B) investments accounted for using the cost method of accounting for investment securities 
C) trusts for the benefit of employees,such as,pension and profit sharing trusts that are managed by union representatives 
D) principal debtors of the company and their immediate families 
E) management of the company and their immediate families
F)both A and E
G)both B and C
H)both D and E 
A) affiliates of the company 
B) investments accounted for using the cost method of accounting for investment securities 
C) trusts for the benefit of employees,such as,pension and profit sharing trusts that are managed by union representatives 
D) principal debtors of the company and their immediate families 
E) management of the company and their immediate families
F)both A and E
G)both B and C
H)both D and E

Question 2

Financial statements are prepared with the assumption that the company will continue in business for a reasonable period of time in the future (not to exceed one year from the date of the financial statements).

Accepted Answer

A) True 
 B)False

Question 3

The auditor is provided with the evidence needed to determine whether the contingent liability should be recorded,disclosed or ignored from

Accepted Answer

A) attorneys hired by the auditor 
B) attorneys hired by the claimant 
C) professional judgment 
D) attorneys hired by the client 
A) attorneys hired by the auditor 
B) attorneys hired by the claimant 
C) professional judgment 
D) attorneys hired by the client

Question 4

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 a loss into income 
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 quantitative levels 
D) misstatements that have the effect of increasing employees compensation 
E) misstatements that involve fraud,illegal acts,violations of contracts,and conflicts of interest
F)both A and E
G)both B and C
H)both D and E 
A) misstatements that change a loss into income 
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 quantitative levels 
D) misstatements that have the effect of increasing employees compensation 
E) misstatements that involve fraud,illegal acts,violations of contracts,and conflicts of interest
F)both A and E
G)both B and C
H)both D and E

Question 5

The auditor's responsibility related to related party relationships and transactions is

Accepted Answer

A) to obtain an understanding of related party relationships and transactions sufficient to determine if fraud is present 
B) to obtain an understanding of related party relationships and transactions sufficient to determine if misstatements are present 
C) to obtain an understanding of related party relationships and transactions sufficient to determine if fraud risk factors are present 
D) to obtain sufficient appropriate audit evidence about whether related party relationships and transactions have been properly classified in the financial statements 
E) to obtain sufficient appropriate audit evidence about whether related party relationships and transactions have been appropriately identified,accounted for,and disclosed in the financial statements
F)both A and B
G)both C and E
H)both D and E 
A) to obtain an understanding of related party relationships and transactions sufficient to determine if fraud is present 
B) to obtain an understanding of related party relationships and transactions sufficient to determine if misstatements are present 
C) to obtain an understanding of related party relationships and transactions sufficient to determine if fraud risk factors are present 
D) to obtain sufficient appropriate audit evidence about whether related party relationships and transactions have been properly classified in the financial statements 
E) to obtain sufficient appropriate audit evidence about whether related party relationships and transactions have been appropriately identified,accounted for,and disclosed in the financial statements
F)both A and B
G)both C and E
H)both D and E

Question 6

Normally,the auditor's work does not extend into the following year.However,the auditing standards require the auditor to consider certain events that occur in the year following the year under audit,referred to as

Accepted Answer

A) following events 
B) substantive tests of transactions 
C) subsequent events 
D) disclosure events 
A) following events 
B) substantive tests of transactions 
C) subsequent events 
D) disclosure events

Question 7

If the management representation letter is not obtained,

Accepted Answer

A) issue the audit report and request that management send the letter as soon as possible 
B) issue the report with an adverse opinion 
C) issue the report with an "except for" opinion 
D) the audit evidence should not be considered complete 
A) issue the audit report and request that management send the letter as soon as possible 
B) issue the report with an adverse opinion 
C) issue the report with an "except for" opinion 
D) the audit evidence should not be considered complete

Question 8

Noncompliance with laws and regulations usually does not result in fines,litigation,or other consequences for the company that may have a material effect on the financial statements.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) evaluate the possibility that the company could go bankrupt 
B) 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 audit report 
E) estimate the net income that the company expects to earn during the current year
F)both A and B
G)both C and D
H)both D and E 
A) evaluate the possibility that the company could go bankrupt 
B) 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 audit report 
E) estimate the net income that the company expects to earn during the current year
F)both A and B
G)both C and D
H)both D and E

Question 10

Examples of contingent liabilities include

Accepted Answer

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

Question 11

What should the auditor do if a subsequently discovered fact becomes known to the auditor before the report release date?

Accepted Answer

He should discuss the matter with manage

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 quantitative levels 
D) misstatements that have the effect of increasing management's compensation 
E) misstatements that involve fraud,illegal acts,violations of contracts,and conflicts of interest
F)both A and B
G)both C and E
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 quantitative levels 
D) misstatements that have the effect of increasing management's compensation 
E) misstatements that involve fraud,illegal acts,violations of contracts,and conflicts of interest
F)both A and B
G)both C and E
H)Both D and E

Question 13

Management's responsibility when considering the company's compliance with laws and regulations during an audit of financial statements is

Accepted Answer

A) to ensure that the company complies with the laws and regulations that affect the company 
B) to identify material misstatements that might occur in the financial statements due to noncompliance with laws and regulations 
C) to ensure that the company complies with the laws and regulations that might affect the company 
D) to identify material misstatements that have occurred in the financial statements due to noncompliance with laws and regulations 
A) to ensure that the company complies with the laws and regulations that affect the company 
B) to identify material misstatements that might occur in the financial statements due to noncompliance with laws and regulations 
C) to ensure that the company complies with the laws and regulations that might affect the company 
D) to identify material misstatements that have occurred in the financial statements due to noncompliance with laws and regulations

Question 14

Subsequently discovered facts are facts 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 15

An arm's length transaction is a transaction between a willing buyer and a willing seller;who are unrelated and are acting independently of each other.

Accepted Answer

A) True 
 B)False

Question 16

Type I 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 17

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 directly affect the financial statements 
D) noncompliance may involve conduct designed to conceal 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 directly affect the financial statements 
D) noncompliance may involve conduct designed to conceal 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 18

When a contingent liability exists the likelihood for loss can be evaluated as probable,reasonably possible,or remote.A probable loss is

Accepted Answer

A) a loss where the chance of occurrence is slight 
B) a loss that is likely to occur 
C) a loss where the chance of occurrence is moderate 
D) falls between the chance of occurrence is slight and a loss is likely to occur 
A) a loss where the chance of occurrence is slight 
B) a loss that is likely to occur 
C) a loss where the chance of occurrence is moderate 
D) falls between the chance of occurrence is slight and a loss is likely to occur

Question 19

The FASB define related parties as

Accepted Answer

A) customers of the company 
B) investments accounted for using the equity method of accounting for investment securities 
C) trusts for the benefit of employees,such as,pension and profit sharing trusts that are managed by union representatives 
D) principal owners of the company and their immediate families 
E) employees of the company and their immediate families
F)both A and B
G)both B and D
H)both C and E 
A) customers of the company 
B) investments accounted for using the equity method of accounting for investment securities 
C) trusts for the benefit of employees,such as,pension and profit sharing trusts that are managed by union representatives 
D) principal owners of the company and their immediate families 
E) employees of the company and their immediate families
F)both A and B
G)both B and D
H)both C and E

Question 20

The management representation letter is to be dated

Accepted Answer

A) as of the last day of fieldwork;the date of the audit report 
B) as of the date of the financials statements 
C) the date the financial report is issued 
D) as of the date that management completes the letter 
A) as of the last day of fieldwork;the date of the audit report 
B) as of the date of the financials statements 
C) the date the financial report is issued 
D) as of the date that management completes the letter

The FASB define related parties as

Financial statements are prepared with the assumption that the company will continue in business for a reasonable period of time in the future (not to exceed one year from the date of the financial statements).

The auditor is provided with the evidence needed to determine whether the contingent liability should be recorded,disclosed or ignored from

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

The auditor's responsibility related to related party relationships and transactions is

Normally,the auditor's work does not extend into the following year.However,the auditing standards require the auditor to consider certain events that occur in the year following the year under audit,referred to as

If the management representation letter is not obtained,

Noncompliance with laws and regulations usually does not result in fines,litigation,or other consequences for the company that may have a material effect on the financial statements.

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

Examples of contingent liabilities include

What should the auditor do if a subsequently discovered fact becomes known to the auditor before the report release date?

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

Management's responsibility when considering the company's compliance with laws and regulations during an audit of financial statements is

Subsequently discovered facts are facts that

An arm's length transaction is a transaction between a willing buyer and a willing seller;who are unrelated and are acting independently of each other.

Type I subsequent events

When a contingent liability exists the likelihood for loss can be evaluated as probable,reasonably possible,or remote.A probable loss is

The FASB define related parties as

The management representation letter is to be dated

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 FASB define related parties as

Financial statements are prepared with the assumption that the company will continue in business for a reasonable period of time in the future (not to exceed one year from the date of the financial statements).

The auditor is provided with the evidence needed to determine whether the contingent liability should be recorded,disclosed or ignored from

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

The auditor's responsibility related to related party relationships and transactions is

Normally,the auditor's work does not extend into the following year.However,the auditing standards require the auditor to consider certain events that occur in the year following the year under audit,referred to as

If the management representation letter is not obtained,

Noncompliance with laws and regulations usually does not result in fines,litigation,or other consequences for the company that may have a material effect on the financial statements.

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

Examples of contingent liabilities include

What should the auditor do if a subsequently discovered fact becomes known to the auditor before the report release date?

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

Management's responsibility when considering the company's compliance with laws and regulations during an audit of financial statements is

Subsequently discovered facts are facts that

An arm's length transaction is a transaction between a willing buyer and a willing seller;who are unrelated and are acting independently of each other.

Type I subsequent events

When a contingent liability exists the likelihood for loss can be evaluated as probable,reasonably possible,or remote.A probable loss is

The FASB define related parties as

The management representation letter is to be dated

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