Deck 2: Auditors Professional Roles and Responsibilities

Question 1

Auditors try to achieve independence in appearance in order to ________.

A)maintain public confidence in the profession
B)become independent in appearance and in fact
C)comply with the generally accepted auditing standards
D)maintain an unbiased mental attitude

Answer 1

A

Question 2

Which of the following has been established to oversee the auditors of public companies?

A)Canadian Coalition for Good Governance.
B)Canadian Public Accountability Board.
C)The SOX Board.
D)The Canadian Securities Commission.

Answer 2

B

Question 3

Three-Party Accountability includes all of the following parties except ________.

A)users
B)practitioners
C)Audit Committee
D)management

Answer 3

C

Question 4

Which of the following is the first task that the auditor must accomplish to demonstrate proficiency in auditing?

A)Identify the evidence relevant for the audit of assertions that are made by management in its unaudited financial statements and notes.
B)Design an audit program to obtain sufficient appropriate evidence about assertions management makes in financial statements and notes.
C)Recognize the underlying assertions made by management in the financial statements and notes.
D)Evaluate the evidence gathered in the performance of the audit program and decide whether management's assertions conform to generally accepted accounting principles and reality.

Question 5

According to GAAS,the overall objective of a financial statement audit is ________.

A)to enable the auditor to express an opinion as to whether the financial statements are prepared in accordance with generally accepted accounting principles
B)to reduce audit risk to an acceptably low level
C)to determine whether the financial principles adopted by management in preparing the financial statements are acceptable
D)to obtain reasonable assurance that the financial statements taken as a whole are free from misstatement,whether due to fraud or error

Question 6

Which of the following statements best explains an unmodified report opinion?

A)The financial statements contain a departure from GAAP.
B)The auditor was unable to complete the work necessary to form a complete opinion.
C)The auditor was not aware of any reasons not to believe the statements are correct.
D)Based on the evidence obtained,the auditor believes the statements are free of material error.

Question 7

Control risk is ________.

A)the probability that a material misstatement could occur and not be prevented or detected by the company's internal control policies and procedures
B)the probability that a material misstatement could occur and not be detected by the auditor's audit procedures
C)the risk that the auditor will not be able to complete the audit on a timely basis
D)the risk that the auditor will not properly control the staff on the audit engagement

Question 8

The primary purpose of obtaining an understanding of the company's internal controls in the financial statement audit is ________.

A)to help the auditors develop the audit program
B)to make suggestions to management to improve internal controls
C)to obtain direct sufficient appropriate audit evidence to afford a reasonable basis for an opinion on the financial statements
D)to determine whether the company has changed any accounting principles

Question 9

A standard unmodified audit report should be dated ________.

A)no later than the date when the auditor obtained sufficient appropriate audit evidence supporting the auditor's opinion
B)no earlier than the date when the auditor obtained sufficient appropriate audit evidence supporting the auditor's opinion
C)as at the end of the year being reported on
D)as at the end of the year the audit work was done

Question 10

According to IFAC,which of the following is not one of the elements of quality control?

A)Independence.
B)Supervision.
C)Acceptance and continuance of clients.
D)Due professional care.

Question 11

In establishing a quality control system,which area should be of a secondary nature?

A)Creating an independence and objectivity checklist.
B)Creating a program for continuing professional education.
C)Creating an internal review process.
D)Controlling access to client files.

Question 12

All of the following are examples of assurance engagements except ________.

A)tax planning
B)financial statements audit
C)internal controls statement
D)financial statements review

Question 13

An external auditor is conducting an audit of the financial statements of Camden Corporation.The external auditor is expected to ________.

A)certify the correctness of Camden's financial statements
B)make a 100% examination of Camden's records
C)give an opinion on whether Camden's financial statements are fairly presented in all material respects
D)give an opinion on the attractiveness of Camden for investment purposes and critique the wisdom and legality of its business decisions

Question 14

Several sources of GAAP consulted by an auditor are in conflict as to the application of an accounting principle.Which of the following should the auditor consider to be the most authoritative?

A)CICA Handbook.
B)CICA Exposure Drafts.
C)Industry practice.
D)Federal legislation.

Question 15

An assurance engagement is one in which a CA is engaged to ________.

A)issue a written communication expressing a conclusion concerning a subject matter for which an accountable party is responsible
B)provide tax advice or prepare a tax return based on financial information the CA has not audited or reviewed
C)testify as an expert witness in accounting,auditing,or tax matters,given certain stipulated facts
D)assemble prospective financial statements based on the assumptions of the entity's management without expressing any assurance

Question 16

Key features of SOX include all of the following except ________.

A)increased penalties for corporate wrongdoers
B)more timely and extensive financial disclosures
C)fewer options of recourse for aggrieved shareholders
D)increased oversight of auditors

Question 17

The GAAS general standard relating to the audit of financial statements focuses on all of the following except ________.

A)competence
B)independence
C)due professional care
D)planning

Question 18

Because of the risk of material misstatement,an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of ________.

A)objective judgment
B)independent integrity
C)professional skepticism
D)impartial conservatism

Question 19

Williams & Co. ,a large international CA firm,will be subject to an external peer review.The peer review will most likely be performed by ________.

A)employees and partners of Williams & Co.who are not associated with the particular audits being reviewed
B)employees and partners of another CA firm
C)peer review staff of the Ontario Securities Commission
D)peer review staff of the CICA

Question 20

The reporting standards require that the auditor explicitly report on whether the financial statements ________.

A)contain adequate disclosure of all material matters
B)are in accordance with GAAP
C)used principles that are appropriate for the circumstances
D)were prepared on a consistent basis with the comparative year

Question 21

Practice inspection is something a new auditor does as part of his or her training program.

Question 22

Audit committees monitor management's financial reporting responsibilities.

Question 23

A report giving conclusions about a firm's compliance with quality control standards is typical of which of the following?

A)Practice inspection.
B)Quality inspection.
C)Peer review.
D)Quality review.

Question 24

The fourth reporting standard requires the audit report to comment on the consistency of the accounting principles used in preparing the financial statements.

Question 25

The CICA Handbook recommendations are a step-by-step list of procedures auditors have to complete for each engagement.

Question 26

Practice standards are a general set of standards intended to guide the audits of financial statements.

Question 27

A prospectus is the information,usually including financial information,about a firm that accompanies any new issuance of shares in a regulated securities market.

Question 28

The assessment of materiality has a pervasive impact on the audit.

Question 29

The general standard of GAAS relates primarily to the personal integrity and professional qualifications of auditors.

Question 30

Appropriate audit evidence,to be reliable and relevant,must be quantitative,objective,and absolutely compelling.

Question 31

What is the difference between audit procedures and audit standards?

Question 32

What is a quality inspection?

Question 33

Control risk is the risk that an accounting firm's quality control standards will not be adequate.

Question 34

Reliance on self-regulation of the accounting profession has changed as a result of its perceived failure to detect the problems leading to the corporate scandals of 2002/2003.

Question 35

Audit risk is the risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.