Final Exam practice 2
Auditing standards require that the independent auditor's report shall contain either an expression of opinion regarding the financial statements, taken as a whole, or an assertion to the effect that an opinion cannot be expressed. Which of the following
None of the other actions are prohibited
Which of the following is true about quality control standards?
A firm that does not have an adequate system of quality control may still have complied with professional standards on a specific engagement.
Which of the following would not be considered an attest engagement subject to attestation standards?
An engagement to review the financial statements of a nonpublic company
Which of the following are sanctions that my be imposed by the PCAOB?Financial penaltiesSuspention or revocation of PCAOB registration Required continuing professional education courses
I,II, and III
Kent industries acticipates that its sales revenue will grow by 5% during the coming year based on historical returns but also believes there is a lisght chance for 20% growth if a new product that is currently being developed is launched during the year.
Both the report on the 10% growth financial statement and the report on the 5% growth financial statements are appropriate for limited use
Which of the following best describes a difference between a complication of prospective financial statements and a examination of prospective financial statements?
A compilation does not contemplate the auditor providing any form of assurance whereas an examination does include assurance.
An auditor has been asked to assess a client's website to measure transaction integrity, information projection and disclosure of business practices. This engagement is most likely a
Webtrust engagementA webtrust engagement is one in which an auditor is asked to assess a client's website to measure transaction integrity, information protection, and disclosure of business practices. A systrust engagement is an assurance service relati
Which of the following is not true about the fie components of internal control?
A auditor is required to classify relevant controls into one of the five component categories
Which of the following correctly matches a factor with the related internal control component?
The internal audit function is part of monitoring
Which of the following represents an inappropriate segregation of duties?
The cash receipts clerk credits customer accounts when payment is received
Which of the following is the most likely sequence of events an auditor might follow in considering internal control?
An audit performs tests of controls at the same time that he or she is obtaining an understanding of internal control, because it may be more efficient to do so.
Which of the following is not true about the international COde of Ethics for assurance engagements?
It includes a set of specific rules designed to encourage compliance with the fundamental principles
Adam, CPA, is a staff accountant assigned to audit both the cash account and the fixed asset account for one of his clients. The cash account had many transactions that occurred during the year, while fixed asset account had very few transactions during t
Adam would likely focus on the ending balance for cash but would focus more on the transactions that occurred during the year for fixed assets
Which of the following is not true about audit documentation?
Audit documentation should include a seprate page for each material account balance or transaction class
WHich of the following is not true about an audit of inventory?
Obtaining confirmation of inventory held at outside locations provide evidence about both the existence assertion and the valuation and allocation assertion
An auditor provides positive assurance in all of the following reports except:
A report on compliance with contractual or regulatory requirements related to audited financial statements
A special report on financial statements prepared on the cash basis of accounting should include:
A statement that the audit was conducted in accordance with generally accepted auditing standards
Management's written representation to the audito in connection with a governmental audit would most likely include:
A statement that management has disclosed any communications from grantos concerning possible non compliance.
In which case would an unmodified opinion not be appropriate?
A material related party transaction has occurred and has been accounted for appropriately, but it has not been adequately disclosed in the financial statements.
An uncertainty may result in
An unmodified opinion, a qualified opinion, An adverse opinion, and disclaimer of opinion.
Which of the following is true about modifications to the independent auditor's unmodified opinion report?
An auditor would modify the same paragraphs when rendering either a qualified opinion due to a departure from GAAP or a qualified opinion due to a scope limitation.
Cyrus, CPA is the continuing auditor of TOpaz, Inc. During the current year's audit. Cyrus becomes aware of evidence that affects the previous year's statements as well as the opinion that was expressed. TOpaz is planning to present comparative financial
Report on both set of financial statements, updating the previous opinion of any changes that have occurred.
Which of the following is true about the timing of predecessor/successor communications?
They can occur both before and after the auditor accepts the engagement.
Which of the following is not a circumstance that may impair independence, as described in the International Code of Ethics for assurance engagements?
payment of fees for assurance services.
Which of the following could be used to assess control risk sorrounding the purchase of fixed assets?
Select a sample of fixed asset requisitions and inspect them for proper approval
An audit committee should pre approve all of the following services except?
Non audit services that do not exceed five percent of total revenues
In an engagement related to a nonissuer, an auditor discovers several significant deficiencies in internal control, one of which is deemed to be a material weakness which of the following is true.
If internal control was evaluated as part of an audit, the audiot must restrict use of the report on internal control
An auditor concerned with the completeness of dividend income would most likely
Review dividend record books produced by outside service companies
Which of the following procedures in an auditor most likely to use to test the completeness assertion for fixed assets?
Review of large items charged to repairs and maintenance
An auditor notes that retained earniong includes an amount appropriate in accordance with a loan covenant. Which procedures would the auditor use to audit retained earnings?
Analyze the retained earnings account since the last auditThe auditor should analyze the retained earnings account since the last audit. Generally this is fairly easy to do, since there are not very many direct entries to retained earnings. (appropriatio
Which should be the auditors primary focus when considering related party transactions?
The adequacy of the client's disclosure of such transactions
Hannah, CPA, has been engageed to compile the financial statemetns of Skippity Industries, a nonpublic company, for the YEar 4, Hannah reviewed Skippity's year 3 financial statemtns. Kippity has decided to present comparative fianncial statemetns includin
Issue a compilation report with an extra paragraph describing the responsibility assumed for the prior period statements and including statement that no review procedures er performed after the date of the review report
Which of the following procedures generally would not be performed in a review of a public entity's interim financial statements?
Inquire of the client's attorney is generally not required.
Dante, CPA, is auditing the financial statements of Crest Computing. During the previous year, Kratzke and Kratzke, CPA, audited Crest's financial statements. Crest had decided to present comparative financial statements for the current year. Which statem
Kratzke & Kratzke may reissue their report on the previous statements only after performing limited procedures to evaluate to continuing appropriateness of the report.
After submitting the audit report, an auditor realizes that a critical step in the audit program was not completed. No other audit procedures already performed compensated for this omission. Which of the following would be the best response?
Perform the audit steps (or suitable alternative procedures) in an attempt to determine whether the results would have affected the previously issued opinion
Procedures performed by an internal auditor can be used to:Help the external auditor understand internal controlProvide direct assistance to external auditor by performing substantive tests Provide direct assitance to the external auditor by performing
All of the above
A report on a nonissuer's internal control based on a separate examination of internal control should include a statement indicating that1) Because there are inherent limitations in internal control, misstatemetns may occur and not be detected 2) Project
I and II
Which of the following constitutes a weakness in control related to the revenue cycle?
The cash receipts clerk prepares a credit memo
Which of the following documents should be sent to the accounts payable department?
Purchase Order yes) Sales order (no) Signed check (no)
Which of the following would least likely be part of an auditor's procedures with respect to fair values?
Events occurring after the balance sheet date may provide audit evidence regarding year end fair value measurements, but the auditor is only responsible for eavluating such events if they occur prior to the date of the audiotrs report. The auditor would n
Which of the following would least likely be part of an auditor's procedures with respect to fai values?
Review subsequent events occurring after completion of the audit for evidence regarding fair value measurements as the balance sheet date
in which situations should disagreements with management and significant audit adjustments be communicated to those charged with governance
the auditor should discuss with those charged with governance any significant disagreements with management, whether or not satisfactorily resolved. The auditor should also inform those charged with governance about significant adjustments arising from th
There is a direct relationship between population variability and sample size, so an increase in variability results in an increase in sample size. There is an inverse relationship between desired risk of incorrect acceptance and sample size so a decrease
Which of the following ratios would most likely be used to evaluate an entity's profitability?
net income/net sales
Which is not true about major programs?
Determination of major programs is based on management selection
Task based simulation
If there is a question asked about a review of interim financial statements (where the annual financial statements are audited) the review would include all the required that apply to a review of annual financial statements and would include:
Jacob informs you that improper revenue recognition has also been identified as a fraud risk for this engagement. Which of the following would not be an appropriate response.
Confirm deposit cash received from material sales transactions with the appropriate bank
Pembroke has always had a strong system of internal control in the past, and there is no evidence during the current year of management override of controls. Which of the following statements is true?
The auditor should always address the risk of management override regardless of whether evidence of such override exists
karen the partner assigned to the Pembroke engagement, conducts a thorough review of the audit documentation and signs off on the audit opinion. Mark is also a partner in the firm. Which of the following best describes marks responsibility with respect to
Mark should review the audit documentation during the final review stage of the audit, to focus on the fair presentation of the financial statements. |