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eu/
Test Bank for Auditing The Art and Science of Assurance Engagements, Canadian Eleventh Edition 11th Edition Arens,
Elder, Beasley, Splettstoesser Hogeterp
Complete downloadable file at:
https://TestBanksCafe.eu/Test-Bank-for-Auditing-The-Art-and-Science-of-Assurance-Engagements,-Canadian-
Eleventh-Edition-11th-Edition-Arens,-Elder,-Beasley,-Splettstoesser-Hogeterp
1)
One of the main advantages of a "big" public accounting firm is

1)

_______
A)
the ability to share knowledge and experience of similar companies they audit with the client.
B)
the lower professional fees due to economies of scale.
C)
the ability to serve all major international cities as globalization of businesses increases.
D)
the increased reliance that can be placed on the audit report by financial statement users.
C

2
The most common organizational form used by public accounting firms is

2)

_______
A)
co-operative.

B)

sole proprietorship or partnership.

C)
professional corporation.

D)

corporation.
B

3
The professional accounting organization for Canadian Chartered Accountant is the

3)

_______
A)
CICA

B)
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SMAC

C)

ISACA

D)

CA
A

4
When the criteria to be used in the financial statement audit is established, the auditor's responsibility is to

4)

_______
A)
evaluate the framework.
B)
creating and documenting the framework.
C)
select the acceptable financial reporting framework.
D)
make a recommendation to management for selecting the framework.

5
Starting December 15, 2009, audits will be conducted using the CAS. The reason for adopting the CAS is to

5)

_______
A)
comply with the requirement from the Canada Business Corporations Act.
B)
be consistent with the international standards of auditing.
C)
respond to the increased litigation risks faced by the auditors.
D)
to simplify the auditing process.
B

6
The implementation of the Sarbanes-Oxley requirements in the US resulted in increased independence requirements for
the auditors. The impact of this requirement in Canada was

6)
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_______
A)
creation of the CPAB to oversee Canadian audit professionals.
B)
revisions of the rules of professional conduct for CAs and CGAs.
C)
modification of the type of opinion provided in an assurance engagement by the auditor.
D)
additional training requirements to become an auditor.
B

7
The implementation of the Sarbanes-Oxley requirements in the US resulted in the creation of the PCAOB to oversee listed
companies' auditors and develop audit standards. The impact of this requirement in Canada was the

7)

_______
A)
additional training requirements to become an auditor.
B)
creation of the CPAB to oversee Canadian audit professionals.
C)
creation of new auditing standards to ensure better quality control of the audit.
D)
revisions of the rules of professional conduct for CAs.

8
ISAs and Canadian auditing standards require that the audit be conducted using

8)

_______
A)
a risk assessment approach.

B)

an independent approach.
C)
a substantive approach.

D)

a standard approach.
A

9
The first step in the financial statement audit using a risk assessment approach is to
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9)

_______
A)
assess the auditor's independence.
B)
gather evidence to assess the likelihood of material misstatement.
C)
identify risks of material misstatement.
D)
evaluate the framework.
C

1
The codes of professional conduct of the various accounting bodies are meant to

10)

______
A)
provide the rules underlying the audits and related service activities carried on by the accountants.
B)
interpret the assurance recommendations and views of the AASB.
C)
provide a standard of conduct for members who are in public practice.
D)
establish the norms for quality control of an audit.

1
The general standard indicated that performance of all aspects of auditing should be performed with due care. This
means that the auditor must fulfill his duties

11)

______
A)
diligently and carefully.

B)

to the satisfaction of the client.

C)
carefully and in a timely manner.

D)

in accordance with the CAS.

A
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12)
Adequate technical training and proficiency in auditing is a requirement of which generally accepted auditing standard?

12)

______
A)
Reporting

B)

General

C)

Examination

D)

Quality
B

1
Identifying management's responsibility for the financial statements is a requirement of which generally accepted
auditing standard?

13)

______
A)
Reporting

B)

Quality

C)

General

D)

Examination
A

1
Adequate planning and execution to reduce risk to an acceptable level is a requirement of which generally accepted
auditing standard?

14)
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______
A)
Quality

B)

Examination

C)

Reporting

D)

General
B

1
Jessica is a summer junior at Branes & Castle, a PA firm. Jessica has only completed 3 accounting courses in university
and has not yet taken her auditing class. A team of auditors from Branes & Castle are starting the audit and Jessica was
sent to help them. Jessica

15)

______
A)
should not perform any work pertaining to the audit engagement since she doesn't have sufficient knowledge.
B)
should be limited to assisting the audit team with support functions such as photocopies and file assembly.
C)
can perform work for the audit engagement as long as she is supervised and proper review of her work is performed.
D)
can perform work for the audit engagement on cycles where risk was assessed as low.
C

1
The most authoritative requirements for public accountants performing financial statement audits in Canada are the

16)

______
A)
CICA handbook requirements.

B)

standards used by the client.

C)
assurance guildelines.

D)
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industry specific standards.

A

1
When conducting an audit, the auditor should look at GAAS as

17)

______
A)
normal standards of performance.

B)

practical standards of performance.

C)
ultimate standards of performance.

D)

minimum standards of performance.

1
A PA firm has an organizational structure that assures the technical review of every engagement by a partner who has
expertise in the client's industry. This is an example of good

18)

______
A)
adherence to the professional standards.

B)

business risk management.

C)
entity level controls.

D)

quality controls.
D

1
Steve is the partner in charge of the quality control review of the audit file of Xtron. To comply with CSQC-1, Steve
should perform the quality control review

19)
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______
A)
before the financial statements are filed with the securities commission.
B)
at the beginning of the audit.
C)
before the end of the field work.
D)
before the audit opinion is issued.
D

2
CPAB's purpose is to

20)

______
A)
clarify and communicate the role of the auditor to the public.
B)
improve the public's confidence in independent auditing.
C)
provide training and continuing education to auditors.
D)
develop auditing standards.

2
Gary West is a sole practitioner. He has conducted the audit of Reggie's Farm for the past 12 years. In the current year,
Reggie's Farm expanded by acquiring two other farms, installed a new accounting system and also started to export to the
United States. Gary accepted to perform the audit of Reggie's Farm for the upcoming year even if he has no experience
with exportations to the US or companies of the size of Reggie's Farm. Which element of quality control is compromised
for Gary's firm?

21)

______
A)
General ethical requirements

B)

Client acceptance or continuance

C)
Extent of professional development

D)

Independence
B
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2
Farah is currently auditing Software Synx, a public company. After a long day of work, Farah goes for a drink with her
friend John who mentions that he owns shares of Software Synx. Farah indicates that John should hold on to his shares as
they will go up next week when the financial statements are released and show an increase of 12% for revenues. Which
element of quality control is compromised by Farah?

22)

______
A)
General ethical requirements

B)

Independence
C)
Engagement performance

D)

General human resource policies

2
Dimitri works at a large public accounting firm. Dimitri referred one of his friend for a junior auditor position. Dimitri's
friend was hired despite the fact that he had a criminal record dating from 3 years ago. The partner did not perform a
background check on Dimitri's friend since he was recommended by an employee. Which element of quality control is
compromised?

23)

______
A)
Engagement performance

B)

Independence
C)
General ethical requirements

D)

General human resource policies

2
Stafford & Sandiford is a Public Accounting firm with 30 reporting issuers. Stafford & Sandiford can expect to be
inspected by the CPAB
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24)

______
A)
randomly.

B)

once per year.

C)
once every 5 years.

D)

once every 3 years.

D

2
Securities regulations in Canada are ruled by

25)

______
A)
provincial securities commission.
B)
national securities commission.
C)
the professional accounting organizations.
D)
office of the auditor general of Canada.
A

ESSAY. Write your answer in the space provided or on a separate sheet of paper.
26)
What are the three main factors that influence the organizational structure of all Public Accounting firms?

1. The need for independence from clients. Independence permits auditors to remain unbiased in drawing conclusions
about their client's financial statements.
2. The importance of a structure to encourage competence. The ability of the structure to encourage competence permits
auditors to conduct audits and perform other services efficiently and effectively.
3. The increased litigation risk faced by auditors. In the last decade, firms have experienced increases in litigation-related
costs. Some organizational structures afford a degree of protection to individual firm members.

27)
The CICA is the professional accounting organization for Chartered Accountants (CAs). Describe the role and
responsibilities of the organization in serving its members.
Research and Publication: The CICA publishes the CA Magazine along with accounting and auditing research studies.
The CICA also coordinates the UFE exam.
Continuing Education: The order provides courses, seminars and on-line material to update their members on a variety
 Full file at https://TestBanksCafe.eu/
of topics relating to accounting and auditing. The order also established six specific specializations for their members.
Establishing standards and rules: The order sets accounting and auditing standards that must be followed by public
accountants.

28)
For each of the following situation, explain what element of the profession or society encourages the public accountant to
conduct himself at high level.

A) Marco attended a seminar on the topic of business combinations to ensure he was up to date with the new standard.

B) Barbara referred to the standard on hedging to ensure that her client had the appropriate documentation to qualify for
hedge accounting.

C) Gretchen refused to perform the audit of her uncle's restaurant chain.

D) Walid worked overtime all week to ensured that the file was properly documented and met the quality control
requirements.

E) Sarah took the summer off to study for the Uniform Final Examination (UFE) to ensure that she would pass the
entrance exam to become a chartered accountant.
A) Continuing Education
B) CICA Handbook
C) Rules of professional conduct
D) CPAB review and quality control
E) Professional examination.

29)
The generally accepted auditing standards can be divided in three categories of standards. List the three categories.

1. General qualifications and conduct

2. Examination performance of the audit
3. Reporting results

30)
GAAS and the Assurance and Related Services Recommendations are the authoritative auditing pronouncements for
members of the profession.

A) It is said that GAAS and Assurance Related Services Recommendation provide less direction to auditors than might be
assumed. Explain what are some of the areas where direction might not be provided.

B) Explain the positive and negative aspects of having less directed standards and recommendations.

A) Some of the areas where direction is not provided include:

- almost no specific audit procedures are required
- there are no specific requirements for auditor's decisions to
- determine sample size
- select sample items from population
- evaluate the results.
- no clearly defined guidelines for determining the extent of audit evidence to be accumulated.

B) If the standards were more directed, it would eliminate some difficult audit decisions and provide a line of defence for
a public accounting firm charged with conducting an inadequate audit.
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However, highly specific requirements could turn auditing into mechanistic evidence gathering without the auditor's
professional judgement. The audit would be less responsive to the risks identified for a particular client.

1)

C
2)
B
3)
A
4)
A
5)
B
6)
B
7)
B
8)
A
9)
C
10)
C
11)
A
12)
B
13)
A
14)
B
15)
C
16)
A
17)
D
18)
D
19)
D
20)
B
21)
B
22)
A
23)
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D
24)
D
25)
A
26)
1. The need for independence from clients. Independence permits auditors to remain unbiased in drawing conclusions
about their client's financial statements.
2. The importance of a structure to encourage competence. The ability of the structure to encourage competence permits
auditors to conduct audits and perform other services efficiently and effectively.
3. The increased litigation risk faced by auditors. In the last decade, firms have experienced increases in litigation-related
costs. Some organizational structures afford a degree of protection to individual firm members.
27)
Research and Publication: The CICA publishes the CA Magazine along with accounting and auditing research studies.
The CICA also coordinates the UFE exam.
Continuing Education: The order provides courses, seminars and on-line material to update their members on a variety
of topics relating to accounting and auditing. The order also established six specific specializations for their members.
Establishing standards and rules: The order sets accounting and auditing standards that must be followed by public
accountants.
28)
A) Continuing Education
B) CICA Handbook
C) Rules of professional conduct
D) CPAB review and quality control
E) Professional examination.
29)
1. General qualifications and conduct
2. Examination performance of the audit
3. Reporting results
30)
A) Some of the areas where direction is not provided include:
- almost no specific audit procedures are required
- there are no specific requirements for auditor's decisions to
- determine sample size
- select sample items from population
- evaluate the results.
- no clearly defined guidelines for determining the extent of audit evidence to be accumulated.

B) If the standards were more directed, it would eliminate some difficult audit decisions and provide a line of defence for
a public accounting firm charged with conducting an inadequate audit.

However, highly specific requirements could turn auditing into mechanistic evidence gathering without the auditor's
professional judgement. The audit would be less responsive to the risks identified for a particular client.