Question 1

Settlement of a lawsuit in January for a different amount than was accrued at December 31 always requires a footnote.

Accepted Answer

A) True 
 B)False

Question 2

Rock School,Inc.has a matter of material litigation that is threatened,but that has not gone to trial.The auditor's consideration of such a matter will most likely include all of the following except

Accepted Answer

A) sending a letter to the client's attorneys for more information. 
B) discussions of the matter with the client and their insurance adjuster. 
C) confirmation with the harmed party regarding the amount that will be claimed. 
D) assessment of whether accrual or disclosure by the client may be required in accordance with ASC 450 (SFAS No.5). 
A) sending a letter to the client's attorneys for more information. 
B) discussions of the matter with the client and their insurance adjuster. 
C) confirmation with the harmed party regarding the amount that will be claimed. 
D) assessment of whether accrual or disclosure by the client may be required in accordance with ASC 450 (SFAS No.5).

Question 3

When making a client continuance decision the auditor should evaluate a client based upon its relative risk and audit fee profile.

Accepted Answer

A) True 
 B)False

Question 4

Which one of the following items would be most likely considered a contingent liability for Cannonbar,a grocery store chain?

Accepted Answer

A) A patron slipped on a grape and broke her neck during the period under audit,no claim has been made against Cannonbar. 
B) The IRS has disagreed with deductions claimed on Cannonbar's previous period return. 
C) Management believes that a lawsuit that was filed during the period under audit against Cannonbar will be settled. 
D) Cannonbar has a note payable with a bank that was collateralized by all of the company's receivables in the period under audit. 
A) A patron slipped on a grape and broke her neck during the period under audit,no claim has been made against Cannonbar. 
B) The IRS has disagreed with deductions claimed on Cannonbar's previous period return. 
C) Management believes that a lawsuit that was filed during the period under audit against Cannonbar will be settled. 
D) Cannonbar has a note payable with a bank that was collateralized by all of the company's receivables in the period under audit.

Question 5

A response from the client's attorney concerning litigation,claims,and assessments represents material that is protected under the attorney-CPA privilege.

Accepted Answer

A) True 
 B)False

Question 6

The GAO defines a high quality audit as one that is performed in accordance with generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 7

If the auditor concludes that there may be a going concern problem,the auditor should do which of the following?

Accepted Answer

A) withdraw from the engagement. 
B) issue a qualified or adverse opinion. 
C) identify and assess management's plan to overcome the problem. 
D) communicate this fact with management one level above the controller. 
A) withdraw from the engagement. 
B) issue a qualified or adverse opinion. 
C) identify and assess management's plan to overcome the problem. 
D) communicate this fact with management one level above the controller.

Question 8

ASC 450 (previously SFAS No.5,"Accounting for Contingencies")requires the accrual and disclosure of remote contingent losses that can be reasonably estimated.

Accepted Answer

A) True 
 B)False

Question 9

If subsequent to the issuance of an audit report and financial statements facts comes to the auditor's attention that would have materially affected the audit report and the financial statements had those facts been known at the time,then the auditor should ask the client to inform regulatory agencies and users not to rely on the financial statements and to reissue those financial statements.

Accepted Answer

A) True 
 B)False

Question 10

An additional partner review of the audit and its findings is typically performed by an experienced member of the firm.Which of the following individuals is qualified to perform this concurring partner review?

Accepted Answer

A) The engagement partner who has worked on the client for three years. 
B) An employee of the enforcement division of the SEC. 
C) An experienced partner of the firm who did not actively participate on the audit. 
D) A partner of another firm or office who knows the client well and who was a vital member of the audit team. 
A) The engagement partner who has worked on the client for three years. 
B) An employee of the enforcement division of the SEC. 
C) An experienced partner of the firm who did not actively participate on the audit. 
D) A partner of another firm or office who knows the client well and who was a vital member of the audit team.

Question 11

The refusal of an attorney who provided significant litigation counsel to a client to furnish information requested in an audit is considered by the auditor to be which of the following?

Accepted Answer

A) departure from GAAP. 
B) scope limitation. 
C) a violation of the attorney-client privilege. 
D) contingent liability. 
A) departure from GAAP. 
B) scope limitation. 
C) a violation of the attorney-client privilege. 
D) contingent liability.

Question 12

During the course of an audit,immaterial misstatements may be detected.The auditor should do which of the following?

Accepted Answer

A) permanently pass on these immaterial misstatements as they do not individually impact the financial statements. 
B) request that management footnote the immaterial misstatements in the financial statements for fair presentation. 
C) accumulate all of the known and projected misstatements to determine if the impact is material in the aggregate. 
D) roll them forward for three years when they will become material enough to adjust. 
A) permanently pass on these immaterial misstatements as they do not individually impact the financial statements. 
B) request that management footnote the immaterial misstatements in the financial statements for fair presentation. 
C) accumulate all of the known and projected misstatements to determine if the impact is material in the aggregate. 
D) roll them forward for three years when they will become material enough to adjust.

Question 13

Which of the following is the best example of a Type I subsequent event?

Accepted Answer

A) A related-party transaction occurs during fieldwork. 
B) The company defaults on its line-of-credit with the bank subsequent to year end but previous to the release of the audit opinion. 
C) Litigation that was accrued as a liability in the year under audit is settled subsequent to year-end for an amount materially in excess of estimates. 
D) The company initiates an initial public offering subsequent to year-end. 
A) A related-party transaction occurs during fieldwork. 
B) The company defaults on its line-of-credit with the bank subsequent to year end but previous to the release of the audit opinion. 
C) Litigation that was accrued as a liability in the year under audit is settled subsequent to year-end for an amount materially in excess of estimates. 
D) The company initiates an initial public offering subsequent to year-end.

Question 14

Threatened litigation is an example of a contingent liability that must be considered in the concluding stages of the audit.

Accepted Answer

A) True 
 B)False

Question 15

If the auditor concludes that the client may have a going-concern problem then the auditor should identify and assess management's plans to overcome this problem.

Accepted Answer

A) True 
 B)False

Question 16

Analytical procedures conducted at the end of an audit are performed not only to examine trends and changes,but to

Accepted Answer

A) document planning in accordance with GAAS. 
B) provide the client with a value added service in conjunction with audit activities. 
C) ask "hard questions" about the company's results and its relationship to external factors. 
D) determine how much the client can afford to be charged for future audit fees. 
A) document planning in accordance with GAAS. 
B) provide the client with a value added service in conjunction with audit activities. 
C) ask "hard questions" about the company's results and its relationship to external factors. 
D) determine how much the client can afford to be charged for future audit fees.

Question 17

The management representation letter should be typed on the client's letterhead,addressed to the auditor and signed by the audit partner.

Accepted Answer

A) True 
 B)False

Question 18

Which one of the following would the auditor consider to be an indication of a potential going-concern problem?

Accepted Answer

A) Loss of the controller to a competitor. 
B) Improper reporting of internal controls by management. 
C) Adverse key financial ratios. 
D) Large increase to sales in the month previous to year-end. 
A) Loss of the controller to a competitor. 
B) Improper reporting of internal controls by management. 
C) Adverse key financial ratios. 
D) Large increase to sales in the month previous to year-end.

Question 19

During the audit of Brooklyn Oil Company,the engagement team discovers that Brooklyn has illegally buried 40,000 gallons of sludge in the field behind its factory.The auditors will assess Brooklyn's treatment of the illegality in the financial statements and related disclosures and possibly draw attention to it in the audit report.

Accepted Answer

A) True 
 B)False

Question 20

The use of common-size percentages is a useful analytical tool in the final review stages of the audit.

Accepted Answer

A) True 
 B)False

Settlement of a lawsuit in January for a different amount than was accrued at December 31 always requires a footnote.

Rock School,Inc.has a matter of material litigation that is threatened,but that has not gone to trial.The auditor's consideration of such a matter will most likely include all of the following except

When making a client continuance decision the auditor should evaluate a client based upon its relative risk and audit fee profile.

Which one of the following items would be most likely considered a contingent liability for Cannonbar,a grocery store chain?

A response from the client's attorney concerning litigation,claims,and assessments represents material that is protected under the attorney-CPA privilege.

The GAO defines a high quality audit as one that is performed in accordance with generally accepted accounting principles.

If the auditor concludes that there may be a going concern problem,the auditor should do which of the following?

ASC 450 (previously SFAS No.5,"Accounting for Contingencies")requires the accrual and disclosure of remote contingent losses that can be reasonably estimated.

An additional partner review of the audit and its findings is typically performed by an experienced member of the firm.Which of the following individuals is qualified to perform this concurring partner review?

The refusal of an attorney who provided significant litigation counsel to a client to furnish information requested in an audit is considered by the auditor to be which of the following?

During the course of an audit,immaterial misstatements may be detected.The auditor should do which of the following?

Which of the following is the best example of a Type I subsequent event?

Threatened litigation is an example of a contingent liability that must be considered in the concluding stages of the audit.

If the auditor concludes that the client may have a going-concern problem then the auditor should identify and assess management's plans to overcome this problem.

Analytical procedures conducted at the end of an audit are performed not only to examine trends and changes,but to

The management representation letter should be typed on the client's letterhead,addressed to the auditor and signed by the audit partner.

Which one of the following would the auditor consider to be an indication of a potential going-concern problem?

The use of common-size percentages is a useful analytical tool in the final review stages of the audit.

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Auditing Revenue and Related Accounts

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters

Exam 15: Ensuring Audit Quality in Completing the Audit

Settlement of a lawsuit in January for a different amount than was accrued at December 31 always requires a footnote.

Rock School,Inc.has a matter of material litigation that is threatened,but that has not gone to trial.The auditor's consideration of such a matter will most likely include all of the following except

When making a client continuance decision the auditor should evaluate a client based upon its relative risk and audit fee profile.

Which one of the following items would be most likely considered a contingent liability for Cannonbar,a grocery store chain?

A response from the client's attorney concerning litigation,claims,and assessments represents material that is protected under the attorney-CPA privilege.

The GAO defines a high quality audit as one that is performed in accordance with generally accepted accounting principles.

If the auditor concludes that there may be a going concern problem,the auditor should do which of the following?

ASC 450 (previously SFAS No.5,"Accounting for Contingencies")requires the accrual and disclosure of remote contingent losses that can be reasonably estimated.

An additional partner review of the audit and its findings is typically performed by an experienced member of the firm.Which of the following individuals is qualified to perform this concurring partner review?

The refusal of an attorney who provided significant litigation counsel to a client to furnish information requested in an audit is considered by the auditor to be which of the following?

During the course of an audit,immaterial misstatements may be detected.The auditor should do which of the following?

Which of the following is the best example of a Type I subsequent event?

Threatened litigation is an example of a contingent liability that must be considered in the concluding stages of the audit.

If the auditor concludes that the client may have a going-concern problem then the auditor should identify and assess management's plans to overcome this problem.

Analytical procedures conducted at the end of an audit are performed not only to examine trends and changes,but to

The management representation letter should be typed on the client's letterhead,addressed to the auditor and signed by the audit partner.

Which one of the following would the auditor consider to be an indication of a potential going-concern problem?

The use of common-size percentages is a useful analytical tool in the final review stages of the audit.

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Auditing Revenue and Related Accounts

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters