Auditing Theory - Post Test

60問 • 2年前

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Competence as a certified public accountant includes all of the following except

Warranting the infallibility of the work performed.

In addition to auditing, CPAs perform other services for their clients. Standards governing the quality of these services are covered in the attestation standards generally, and performance requirements are more explicitly defined in sets of statements relating to each type of service. Which of the following is not such a set?

Statements on Responsibilities in University Audits.

Which of the following statements best describes why the CPA profession has deemed it essential to promulgate ethical standards and to establish means for ensuring their observance?

A distinguishing mark of a profession is its acceptance of responsibility to the public.

A CPA who has never audited a commercial bank

May accept the engagement after attaining a suitable level of understanding of the transactions and accounting practices unique to commercial banking.

Which of the foliowing best describes why publicly traded corporations follow the practice of having the outside auditor appointed by the board of directors or elected by the stockholders?

To emphasize auditor independence from the management of the corporation.

Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate internal control procedures over the invoicing function allow goods to be shipped that are not invoiced. The inadequate controls could cause an

Understatement of revenues and receivables, and an overstatement of inventory.

During the review of a small business client's internal control system, the auditor discovered that the accounts receivabie clerk approves credit memos and has access to cash. Which of the following controls would be most effective in offsetting this weakness?

The owner reviews credit memos after they are recorded.

Competence of personnel is necessary to proper recording of transactions and supports financial statements that are fairly presented. In reviewing the organization for necessary competence, which of the following job types would be of least interest to the auditor?

Vice-president for marketing.

A system of internal control, regardless of how carefully designed and implemented, contains certain inherent limitations. Which of the following errors or irregularities is not caused by an inherent limitation.

A newly-installed electronic data processing system failed to provide for a comparison of sales order amount with prior customer balance and credit limit. This resulted in numerous sales to customers who had already exceeded their credit limits.

A set of control procedures referred to as "periodic inventories and comparisons," provides effective monitoring of accountability. Although the term "inventories" is broadly defined for this purpose, which of the following does not fit the definition of periodic inventories and comparisons?

Perpetual inventory records are maintained for major classes of materials and finished goods and monthly counts and comparisons are made on a test basis.

Internal control is a function of management, and effective control is based upon the concept of charge and discharge of responsibility and duty. Which of the following is an important feature of effective internal control?

Responsibility for accounting activities and duties must be assigned only to employees who are bonded.

Proper segregation of functional responsibilities in an effective system of internal control calls for separation of the functions of

Authorization, recording, and custody.

Effective internal control over the payroll function should include which of the following?

Total time spent on jobs should be compared with total time indicated on time clock cards.

Which of the following best describes a portion of the auditors' responsibility regarding illegal acts by clients?

The auditors' responsibility for the detection of all illegal acts is the same as their responsibility regarding material isstatements due to errors and fraud

A requirement that all professional staff obtain a minimum number of hours of continuing professional education each year is an example of a quality control procedure in the area of:

Personnel management

What is the general character of the three generally accepted auditing standards classified as general standards?

Criteria for competence, independence, and professional care of individuals performing the audit

An investor reading the financial statements of The Sundby Corporation observes that the statements are accompanied by an unqualified auditors' report. From this the investor may conclude that:

Any disputes over significant accounting issues have been settled to the auditors' satisfaction

A CPA firm establishes quality control policies and procedures for deciding whether to accept a new client or continue to perform services for a current client. The primary purpose for establishing such policies and procedures is:

To minimize the likelihood of association with clients whose managements lack integrity

An auditor plans to apply substantive tests to the details of asset and liability accounts as of an interim date rather than as of the balance sheet date. The auditor should be aware that this practice

Potentially increases the risk that errors that exist at the balance sheet date will not be detected

Which of the following best describes the reason that auditors are concerned with the detection of related party transactions?

Material related party transactions must be disclosed in the notes to the financial statements

Which of the following is true about analytical procedures?

Analytical procedures are used in planning, as a substantive procedure for specific accounts, and in the final review of the audited financial statements

The auditors use analytical procedures during the course of an audit. The most important phase of performing these procedures is the:

Investigation of significant variations and unusual relationships

When considering the use of management's written representations as audit evidence about the completeness assertion, an auditor should understand that such representations:

Complement, but do not replace, substantive procedures designed to support the assertion

Which of the following is not a typical analytical procedure?

Comparison of the financial information with similar information regarding the industry in which the entity operates

In general, which of the following statements is correct with respect to ownership, possession, or access to working papers prepared by a CPA firm in connection with an audit?

The working papers are subject to the privileged communication rule which, in a majority of jurisdictions, prevents third-party access to the working papers

An auditor performs analytical procedures that involve comparing the gross margins of various divisional operations with those of other divisions and with the individual division's performance in previous years. The auditor notes a significant increase in the gross margin at one division. The auditor does some preliminary investigation and also notes that there were no changes in products, production methods, or divisional management during the year. Based on the above information, the most likely cause of the increase in gross margin would be:

An overstatement of year-end inventory

Management has centralized purchasing and uses a model based upon previous year's sales with adjustments for trends in the market place, e.g., the trend to more casual shoes. A staff auditor has suggested that the centralized purchasing may be one of the reasons for the lower level of profitability in the Mid-Central Region. Which of the following would be the best single audit procedure to address the staff auditor's assertion?

Perform an inventory count at selected stores in the Mid-Central Region and determine if adjustments are needed to the berpetual records

What type of transactions ordinarily have high inherent risk because they involve management judgments or assumptions in formulating accounting balances?

Estimation

After obtaining an understanding of internal control and arriving at a preliminary assessed level of control risk, an auditor decided to perform tests of controls. The auditor most likely decided that:

It would be efficient to perform tests of controls that would result in a reduction in planned substantive procedures

Which of the following is least likely to be evidence of operating effectiveness of controls?

Confirmations of accounts receivable

In evaluating the reasonableness of an accounting estimate, an auditor most likely would concentrate on key factors and assumptions that are

Deviations from historical patterns.

In testing the existence assertion for an asset, an auditor ordinarily works from the

Accounting records to the supporting evidence.

A client uses a suspense account for unresolved questions whose final accounting has not been determined. If a balance remains in the suspense account at year-end, the auditor would be most concerned about

Suspense credits that management believes should be classified as "Current liability."

An entity's income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts. The auditor most likely could have detected this fraudulent financial reporting by

Performing analytical procedures designed to disclose differences from expectations.

Auditors try to identify predictable relationships when using analytical procedures. Relationships involving transactions from which of the following accounts most likely would yield the highest level of evidence?

Interest expense.

For all audits of financial statements made in accordance with generally accepted auditing standards, the use of analytical procedures is required to some extent

In the planning stage - No As a substantive test - Yes In the review stage - Yes

Which of the following comparisons would an auditor most likely make in evaluating an entity's costs and expenses?

The budgeted current year's warranty expense with the current year's contingent liabilities.

The objective of tests of details of transactions performed as substantive tests is to

Attain assurance about the reliability of the accounting system.

Which statement is correct concerning the deletion of audit documentation?

After the audit file has been completed, the auditor should not delete or discard audit documentation.

An auditor's working papers serve mainly to

Provide the principal support for the auditor's report.

The permanent file of an auditor's working papers generally would not include

Working trial balance.

An auditor ordinarily uses a working trial balance resembling the financial statements without footnotes, but containir columns for

Reclassifications and adjustments.

Which of the following is required documentation in an audit in accordance with generally accepted auditing standards?

An audit program setting forth in detail the procedures necessary to accomplish the engagement's objectives.

Which of the following factors most likely would affect an auditor's judgment about the quantity, type, and content of the auditor's working papers?

The assessed level of control risk.

The existence of audit risk is recognized by the statement in the auditor's standard report that the auditor

Obtains reasonable assurance about whether the financial statements are free of material misstatement.

Which of the following is least likely to be a restricted use report?

A report on financial statements prepared following a comprehensive basis of accounting other than generally accepted accounting principles.

Which of the following statements is correct concerning an auditor's responsibility for controlling the distribution by the client of a restricted-use report?

An auditor must inform the client that a restricted use report is not intended for distribution to nonspecified parties.

Which of the following statements is a basic element of the auditor's standard report?

The disclosures provide reasonable assurance that the financial statements are free of material misstatement.

An auditor expressed a qualified opinion on the prior year's financial statements because of a lack of adequate disclosure. These financial statements are properly restated in the current year and presented in comparative form with the current year's financial statements. The auditor's updated report on the prior year's financial statements should

Express an unqualified opinion on the restated financial statements of the prior year.

An auditor's responsibility to express an opinion on the financial statements is

Explicitly represented in the opinion paragraph of the auditor's standard report.

How does an auditor make the following representations when issuing the standard auditor's report on comparative financial statements?

Examination of evidence on a test basis - Explicitly Consistent application of accounting principles - Implicitly

Which of the following best describes the reference to the expression "taken as a whole" in the fourth generally accepted auditing standard of reporting?

It applies equally to a complete set of financial statements and to each individual financial statement.

A principal auditor decides not to refer to the audit of another CPA who audited a subsidiary of the principal auditor's client. After making inquiries about the other CPA's professional reputation and independence, the principal auditor most likely would

Document in the engagement letter that the principal auditor assumes no responsibility for the other CPA's work and opinion.

The introductory paragraph of an auditor's report contains the following sentences: We did not audit the financial statements of EZ Inc., a wholly owned subsidiary, which statements reflect total assets and revenues constituting 27% and 29%, respectively, of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for EZ Inc., based solely on the report of the other auditors. These sentences

Assume responsibility for the other auditor.

In which of the following situations would an auditor ordinarily issue an unqualified audit opinion without an explanatory paragraph?

The auditor has substantial doubt about the entity's ability to continue as a going concern, but the circumstances are fully disclosed in the financial statements.

An auditor may issue the standard audit report when the

Financial statements are derived and condensed from complete audited financial statements that are filed with a regulatory agency.

When an auditor concludes there is substantial doubt about a continuing audit client's ability to continue as a going concern for a reasonable period of time, the auditor's responsibility is to

Consider the adequacy of disclosure about the client's possible inability to continue as a going concern.

Upon receipt of customers' checks in the mailroom, a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the

Accounts receivable bookkeeper to update the subsidiary accounts receivable records.

Which of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom?

The cashier posts the receipts to the accounts receivable subsidiary ledger.

The use of fidelity bonds protects a company from embezzlement losses and also

Minimizes the possibility of employing persons with dubious records in positions of trust.

FAR Quizzers For Post Test And Term Examination

Mark Anthony Germono · 24問 · 1年前

FAR Quizzers For Post Test And Term Examination