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Which is the least useful source of information for the auditor during the preliminary planning stage, when the auditor is trying to obtain a general understanding of audit problems that might be encountered? a. Textbooks and periodicals related to the industry. b. Industry audit and Accounting Guides. c. Financial statements of other entities in the industry. d. Results of performing substantive tests. 2. Audit working papers are indexed by means of reference numbers. The primary purpose of indexing is to a. Permit cross-referencing and simplify supervisory review. b. Support the audit report. c. Eliminate the need for follow-up reviews. d. Determine that working papers adequately support findings, conclusions, and reports. 3. The following statements relate to assurance engagements. Choose the incorrect statements. 1. The objective of an assurance engagement is for a professional accountant to evaluate or measure a subject matter that is the responsibility of another party against suitable criteria, and to express a conclusion that provides the intended user with a level of assurance about the subject matter. 2. Assurance engagements performed by professional accountants are intended to enhance the credibility of information about a subject matter. 3. Assurance engagements involve two parties: a professional accountant and an intended user. 4. The subject matter of an assurance engagement is limited to historical or prospective financial information. 5. The intended user in an assurance engagement is the person or class of persons for whom the professional accountant prepares the report for a specific use or purpose. a. 2, 3, 4, and 5. c. 3 and 4. b. 2, 4 and 5. d. 1, 2, 3, and 4. 2. The following statements relate to the audit preparation of audit engagement letters. Which is correct? a. It is in the interest of both client and auditor that the auditor obtains an engagement letter, preferably before the commencement of the engagement, to help in avoiding misunderstandings with respect to the engagement.
Assistants to whom work is delegated need appropriate direction. b. Fraud may involve 1. 6. b. On recurring audits. d. d. Misapplication of accounting policies. The extent of working papers is a matter of professional judgment since it is neither necessary nor practical to document every matter the auditor considers. employees or third parties. The nature and complexity of the business of the audit client may affect the form and content of working papers. which results in a misrepresentation of financial statements while error refers to unintentional mistakes in financial statements. Recording of transactions without substance. Informing assistants of their responsibilities and the objectives of the procedures they are to perform. Manipulation. 7. 3. the auditor may decide not to send a new engagement letter each period. 4. timing. Fraud refers to an intentional act by one or more individuals among management. or obtained and retained by the auditor in connection with the performance of the audit. Informing assistants of matters.b. c. d. Mathematical or clerical mistakes in the underlying records and accounting data. The following statements relate to audit working papers. analyses and other documentation prepared by the entity. The term “documentation” in PSA 230 means the material (working papers) prepared by and for. Audit engagement letters confirm the oral representations given by management during the course of the auditor’s examination of the entity’s financial statements. Direction involves a. 5. 2. When the auditor of a parent entity is also the auditor of its subsidiary. Both A and B. The auditor is prohibited from utilizing schedules. falsification or alteration of records or documents. or division (component). 3. Which statement is incorrect? a. Oversight or misinterpretation of facts. Suppression or omission of the effects of transactions from records or documents. branch. c. 4. 5. Neither A nor B. and extent of auditing procedures with which they are involved. . Misappropriation of assets. c. such as the nature of the entity’s business and possible accounting or auditing problems that may affect the nature. a separate engagement letter should be sent to the component.
as appropriate. When litigation or claims have been identified or when the auditor believes they may exist. 1. b. If the current period’s accounting policies have not been consistently applied in relation to opening balances and if the change has not been properly accounted for and adequately disclosed. 1. The auditor considers the status of legal matters up to the balance sheet date. “analytical procedures” means the analysis of significant ratios and trends including the resulting investigation of fluctuations and relationships that are inconsistent with other relevant information or deviate from predicted amounts. b. 5. d. c. c. and 7. The letter of audit inquiry. b. Management’s control system including the internal audit function. The following statements relate to the auditor’s inquiry regarding litigation and claims. d. Which is correct? a. d. Analytical Procedures. 3. 2. 4. except a. except a. the auditor should seek direct communication with entity’s lawyers. which should be prepared by the auditor and sent by management. c. should request the lawyer to communicate directly with the auditor. . and 6. 1. 3. and 7. Limiting direct physical access to assets and records. 1. Unqualified opinion.a. 2. 2. 2. The following are control environment factors. If management refuses to give the auditor permission to communicate with the entity’s lawyers. 4. 3. c. Qualified opinion or an adverse opinion. the auditor should express a/an a. These procedures are used for the following purposes. 6. As tests of control to determine the effectiveness of the design and operation of the entity’s accounting and internal controls. Qualified opinion. and 6. 5. As substantive procedures when their use can be more effective or efficient than tests of details in reducing detection risk for specific financial statement assertions. this would be a scope limitation and should ordinarily lead to a qualified or adverse opinion. According to PSA 520. 4. d. personnel policies and procedures and segregation of duties. b. Disclaimer of opinion. Management’s philosophy and operating cycle. The function of the board of directors and its committees. 4. 2. b. 6.
The external auditor should obtain a sufficient understanding of internal audit activities to assist in planning the audit and developing an effective audit approach. c. 7. the external auditor should perform a preliminary assessment of the internal audit function when it appears that internal auditing is relevant to the external audit of the financial statements in specific audit areas. Statement 1 Statement 2 Statement 3 a. To assist the auditor in planning the nature. d. When issuing an unmodified auditor’s report. Assure management that the financial statements are unbiased and free from material error. Comply with regulatory requirements. and its objectives differ from those of the external auditor who is appointed to report independently on the financial statements. 6. and effectiveness of the entity’s operations. Which is incorrect? a. False False True 2. 3. If the results of the expert’s work do not provide sufficient appropriate audit evidence or if the results are not consistent with other audit evidence. the auditor should resolve the matter. Provide a basis for assessing management’s performance. As an overall review of the financial statements in the final review stage of the audit. False True False d. the auditor should not refer to the work of an expert. timing and extent of other audit procedures. d. c. True True True b. The following statements relate to the auditor’s use of the work of an expert: 1. The role of internal auditing is determined by management. The auditor should assess the appropriateness of the expert’s work as audit evidence regarding the financial statement assertion being considered. An operational audit is designed to . efficiency. True False True c. 3. b. Internal auditing activities do not include review of the economy. 2. b. During the course of planning the audit. d. The following statements to relate to the auditor’s consideration of the work of internal auditing. The primary purpose of an independent financial statement audit is to a. Provide users with an unbiased opinion about the fairness of information reported in the financial statements.c.
direct tests of financial balances. Are designed to discover significant subsequent events. 7. c. audit risk represents the probability that a. b. Detect errors and irregularities. Gather evidence. The auditor is not retained to conduct a financial statement audit in the succeeding year. Have the knowledge required to enable them to fulfill responsibilities assigned. b. c. Prepare working papers that are standardized in form and content. Determine whether the audit committee of the board of directors is effectively discharging its responsibility to oversee management’s operations. . d. b. Develop specialties in specific areas of public accounting. Determine whether management has compiled with applicable laws and regulations. May be either tests of transactions. c. In a financial statement audit. Test internal control system. 4. d. or analytical tests. c. In the context of an audit of financial statements. Will advance within the organization. c. The auditor unknowingly fails to modify an opinion on materially misstated financial statements. Protect the auditor in the event of litigation. Assess the efficiency and effectiveness of management’s operating procedures. d. Will increase proportionately with the auditor’s assessment of control risk. d. 5. Internal control fails and the failure is not detected by the auditor’s procedures. Assess the presentation of management’s financial statements in accordance with generally accepted accounting principles. substantive tests are audit procedures that a. Inherent and control risk cause errors that could be material to the financial statements. The procedures specifically outlined in an audit program are primarily designed to a. 6.a. b. d. May be eliminated under certain conditions. b. The objective quality control mandates that a public accounting firm should establish policies and procedures for professional development that provide reasonable assurance that all entry-level personnel a.
Make inquiries of previous auditors. Access to assets is permitted only in accordance with management’s authorization. c. a CPA firm is not likely to a. Irregularities will be eliminated.In connection with the audit of financial statements by an independent auditor.When considering internal control an auditor must be aware of the concept of reasonable assurances. The recorded accountability for assets is compared with the existing assets at reasonable intervals. 9. Review the personnel practices of the proposed client. Dual-purpose test b. b. Substantive test d. Transactions are executed in accordance with management’s authorization. c. Selection of accounts receivable for confirmation. In pursuing its quality control objectives with respect to acceptance of a client. d. . d. which recognizes that a. Employment of competent personnel provides assurance that the objectives of internal control will be achieved. c. 11. Preparation of schedules for negative accounts receivable responses. Cost of internal control procedures should not exceed the benefits expected to be derived from the control. c. the client suggests that members of the internal audit staff be utilized to minimize audit costs. Segregation of incompatible functions is necessary to attain that the control procedures are effective. Test of controls c. d. b. based on the internal auditor’s judgment as to how many accounts and which accounts will provide sufficient coverage. Internal control procedures are not designed to provide reasonable assurance that a. Which of the following tasks could most appropriately be delegated to the internal audit staff? a.8. b. This is an example of a. Review financial statements of the proposed client. Evaluation of the internal control for accounts receivable and sales. Make inquiries of the proposed client’s legal counsel. 10. Test of balances 12. Establishment and maintenance of internal control is an important responsibility of the management and not of the auditor.The auditor is examining copies of sales invoices only for the initials of the person responsible for checking the extensions. b.
b. Increase the extent of tests of controls and substantive tests in areas where internal control is strong. Express a conclusion about an assertion. Agreed-upon procedures b. Reduce the extent of both substantive tests and tests of controls in areas where internal control is strong. a CPA typically a. The auditors performing important parts of the work failed to discover a personal relationship between the treasurer and the cashier. a. observation.In connection with the audit of financial statements.d. who circumvented existing internal control. it does not ordinarily involve an assessment of accounting and internal control systems. c. c. and of responses to inquiries by obtaining corroborating evidence through inspection. 16. Assesses control risk at a low level. b. Supplies litigation support services.Analytical procedures performed in the overall review stage of an audit suggest that several accounts have unexpected relationships. b. 13. b. an auditor might decide to a. and computation. The results of these procedures most likely indicate that a. Additional tests of details are required. . Internal control procedures are not operating effectively. The fraud was perpetrated by one of the client’s employees. d. Compilation c. Consultancy 15. Reduce the extent of tests of controls in areas where internal control is strong. c. c. tests of records. 17. 14.In performing an attestation engagement. confirmation. an independent auditor could be responsible for failure to detect a material fraud if a. Determination of the adequacy of the allowance for doubtful accounts. The communication with the audit committee should be revised. Irregularities exist among the relevant account balances. Increase the extent of substantive tests in areas where internal control is weak. Review d. Statistical sampling techniques were not used on the audit engagement.After considering internal control. d. d. The auditor planned to work in a hasty and inefficient manner.While this type of engagement involves the application of audit skills and techniques and the gathering of evidence.
Provides management consulting advice.The establishment of an overall audit strategy or plan involves I.An auditor obtains knowledge about a new client’s business and its industry to a.d. Examination of data to determine that a proper cutoff has been made. Operating and financing decisions are dominated by several persons. b. Tests of the details of transactions. Understand the events and transactions that may have an effect on the client’s financial statements. 18. Reading of the minutes of the board of directors’ meetings. c. Any revised or special terms of the engagement. c. Tests of the details of balances. Management places little emphasis on meeting earnings projections. Evaluate whether the aggregation of known misstatements causes the financial statements taken as a whole to be materially misstated. except a. b. d. the following factors may take it appropriate to send a new engagement letter. Whether a separate auditor’s report is to be issued to the entity’s subsidiary. c. Any indication that a client misunderstands the objective and scope of the audit. c. Transactions selected for testing are not supported by proper documentation. Develop an attitude of professional skepticism concerning management’s financial statement assertions. 19. b. . 20. Make constructive suggestions concerning improvements to the client’s internal control system. The turnover of senior management is low. 21. 22. A recent change of senior management or those charged with governance.Which of the following circumstances is most likely to cause an auditor to consider whether a material misstatement exists? a.Which of the following procedures can be performed only in the subsequent period? a. Determining the characteristics of the engagement that define its scope.On recurring audits. b. d. d. d.
Payment to unauthorized vendors. Are all issuances of raw materials to production based on approved requisition forms? d. Are details of individual disbursements for raw materials compared to the total for posting to the general ledger? b. Determine the effectiveness of internal control. Detect fraud. A possible error that this system could allow is a. b. including how the transactions interface with any service organizations whose services are part of the entity’s information system.II. I. Payment for unauthorized purchases. II and III 1. The primary objective of this procedure is to a. Ascertaining to the reporting objectives of the engagement to plan the timing of the audit and the nature of the communications required. b. II and III only d. In obtaining an understanding of internal control relevant to the audit. c. Evaluate the design of internal control and determine whether it has been implemented. c. 4. c. Replace substantive tests. Which of the following is a reason to establish internal control? a. To ensure the accuracy. b. d. I and III only b. III. d. As part of its purchasing system. 2. 3. To provide reasonable assurance that the entity’s objectives are achieved. To safeguard the resources of the organization. Overpayment of partial deliveries. the auditor may trace several transactions through the system. a. and timeliness of information. Which of the following questions would an auditor most likely include in the production cycle internal control questionnaire? a. d. To encourage compliance with organizational objectives. an entity’s receiving department receives copies of purchase orders for use in identifying and recording goods received. The purchase orders list the name of the vendor and the quantities of the materials ordered. Are signed checks for the purchase of raw materials sent directly to intended payees after signing. Considering the important factors that will determine the focus of the engagement team’s efforts. Delay in recording purchases. Are vendor invoices for raw materials approved before payment? c. I and II only c. without being returned to the person who authorized the invoice processing? . reliability.
Acceptance and continuance of client relationships and specific audit engagements include considering: I. I. When inherent and control risks are high.5. Which is false? a. II and III only b. d. III. d. There is an inverse relationship between detection risks and the combined level of inherent and control risks. Financial statement assertions. 2. Cost-benefit of gathering audit evidence. Whether the firm and the engagement team can comply with ethical requirements. c. c. The assessed level of inherent and control risks can be sufficiently low to eliminate the need for the auditor to perform any substantive procedures. c. key managements. Independent verification of invoices for disbursements recorded as equipment acquisitions. and those charged with governance of the entity. I and II only d. 3. The engagement partner should be satisfied that appropriate procedures regarding the acceptance and continuance of client relationships and specific audit engagements have been followed and that conclusions reached in this regard are appropriate and have been documented. 6. a. When inherent and control risks are low. an auditor should establish specific audit objectives that relate primarily to the a. . In designing written audit programs. Investigation of variances within a formal budgeting system. The statements below describe the interrelationship of audit risk components. the acceptable level of detection risk needs to be low to reduce audit risk to an acceptably low level. Whether engagement team is competent to perform the audit engagement and has the necessary time and resources. The integrity of the principal owners. b. b. Timing of audit procedures. Segregation of duties of employees in the accounts payable department. II. b. I only c. Selected audit techniques. Which of the following controls would most likely detect equipment acquisitions that are misclassified as maintenance expense? a. an auditor can accept a higher detection risk and still reduce audit risk to an acceptably low level. Authorization by the board of directors of significant equipment acquisitions. d. II and III.
The auditor will apply an inappropriate measure of audit materiality. d.4. accounting records b. Authorized by a responsible official 6. Prior to beginning in the field work on a new audit engagement in which a CPA does not possess expertise in the industry in which the client operates. The factors are considered in assessing control risk indicated an increased risk of intentional misstatements but only a low risk of unintentional errors in the financial statements. b. All the information used by the auditor in arriving at the conclusion on which the opinion is based is called a. c. Easily duplicated d. The auditor will reject a correct account balance as correct. Audit information c. d. Audit evidence d. c. The third risk is that a. An audit is planned and performed to provide reasonable assurance of detecting material misstatements caused by errors but not fraud. 7. corroborating information 5. Material misstatements that occur will not be detected by the audit. Which of the following statements describes why a properly planned and performed audit may not detect a material misstatement resulting from fraud? a. 8. The auditor will apply an inappropriate audit procedure. The audit risk against which the auditor and those who rely on his/her opinion require reasonable protection is a combination of three separate risks at the account-balance or class-of-transactions level. b. Audit procedures that are effective for detecting an unintentional misstatement may be ineffective for an intentional misstatement that is concealed through collusion. The first risk is inherent risk. The auditor did not consider factors influencing audit risk for account balances that have effects pervasive to the financial statements as a whole. Internally generated b. Which of the following forms of documentary evidence would be considered the most reliable by an auditor? a. Prenumbered c. the CPA should . The second risk is that material misstatements will not be prevented or detected by internal control.
9. Letters of representations corroborating inventory pricing. c. Confirmations of receivables verifying account balances. Develop evidence to support the assessed level of control risk. d. Client records documenting the use of computer programs. Design special substantive tests to compensate for the lack of industry expertise. As part of understanding the internal control. Should use the test month approach.In gathering evidence in the performance of substantive tests. c.Which of the following questions would not be appropriate for an internal control questionnaire concerning inventory? a. Reduce audit risk by lowering the preliminary levels of materiality. d. b. Consider factors that affect the risk of material misstatement. 11. Engage financial experts familiar with the nature of the industry. c. Assure that management’s procedures to detect fraud are properly functioning. Are disbursement vouchers approved before payment? c. c. d. Identify the types of potential misstatements that can occur. Attorney’s responses to the auditor’s inquiries. b. Are there independent. . Is access to the storeroom limited to authorized personnel? d. 10. Obtain knowledge about the operating effectiveness of internal control. Bring to the auditor’s attention possible significant deficiencies in the design of operation of internal control. the auditor a. and extent of audit tests.a. Obtain a knowledge of matters that relate to the nature of the entity’s business.Which of the following types of evidence would an auditor most likely examine to determine whether controls are operating as designed? a. b. 12. Ascertain whether internal control policies and procedures have been placed in operation. Are goods stored in locked storage areas? b.A secondary result of the auditor’s consideration of internal control is that the consideration may a. b. timing. d. Provide a basis for determining the nature. an auditor is not required to a. periodic comparisons of inventory records with goods on hand? 13.
The higher the assessment of control risk. Would express an adverse opinion if s(he) has as to any assertion of material significance. The understanding of relevant aspects of the accounting and internal control systems. d. by whom they were applied. the auditor considers why they were applied.When would the auditor refer to the work of an appraiser in the auditor’s report? a. The preliminary assessment of control risk for a financial statement assertion should be low unless the auditor is able to .The following statements relate to the performance of tests of control and assessment of control risk. The auditor should obtain audit evidence through tests of control to support any assessment of control risk that is less than high. the more support the auditor should obtain that accounting and internal control systems are suitably designed and operating effectively. 16. and the consistency with which they were applied during the period. the auditor is only concerned with those policies and procedure within the accounting and internal control systems that are relevant to the financial statement assertions. 15. Relies on persuasive rather than convincing majority of cases. Which statement is correct? a. d.b. c. An adverse opinion is expressed based on a difference of opinion between the client and the outside appraiser as to the value of certain assets. c. When obtaining evidence about the effective operation of internal controls. A disclaimer of opinion is expressed because of a scope limitation imposed on the auditor by the appraiser. All of the above. c. d. d. A qualified opinion is expressed because of a matter unrelated to the work of the appraiser. evidence in the evidence more observation and substantial doubt 14.In the audit of financial statements. will enable the auditor to a. Consider factors that affect the risk of material misstatements. An unqualified opinion is expressed an no explanatory paragraph is added. c. but the auditor wishes to disclose the use of an expert. b. Identify the types of potential misstatements that could occur in the financial statements. Design appropriate audit procedures. b. together with the inherent and control risk assessments and other considerations. Would consider the client’s documentary competent than evidence gathered from physical inspection. b.
Schedules that support the current year adjusting entries. Required if the successor auditor is to express an unqualified opinion.identify internal controls relevant to the assertion which are likely to prevent or detect and correct a material misstatement. 18. c. Documentation indicating that the audit work was adequately planned and supervised. b. the auditor should obtain sufficient appropriate audit evidence regarding its existence and condition by attendance at physical inventory counting unless impracticable. the auditor would consider whether an expert’s assistance is needed. c. d. In planning attendance at the physical inventory count. Not permitted because the successor auditor should be independent. Prior years’ accounts receivable confirmations that were classified as exceptions. 20. c. d.An auditor who has accepted an engagement to audit financial statements wishes to review the predecessor’s working papers. c. Such a review is a. the auditor would consider at which locations attendance is appropriate. b. d. taking into account the materiality of the inventory and the assessment of inherent and control risk at different locations. b.When considering internal control over securities. Access to stock certificated by the corporate treasurer. When inventory is situated in several locations. 17. the auditor is especially concerned about a. When inventory is material to the financial statements. Access to stock certificates by the corporate controller. the auditor should consider expressing a qualified opinion or a disclaimer of opinion. b.Which of the following statements is incorrect? a. Where attendance at physical inventory count is impracticable. Preparation of accrual adjustments on bonds by the corporate controller. Permitted if the successor auditor refers in the audit report to the predecessor auditor’s report and work. an auditor’s permanent files most likely include a.Although the quantity and content of audit working papers vary with each particular engagement. Analyses of capital stock and other owners’ equity accounts. . Permitted if the client and predecessor consent. 19.
b. . Document management’s intentions with respect to plans for reversing this trend. d. 21. audit procedures are generic in application. Critique the wisdom and legality of Canton’s business decisions. b. The internal auditors may determine the extent to which audit procedures should be employed by the external auditor. Audit procedures and audit objectives are essentially the same. Consider the possibility of misstatement in the financial statements. b. Evaluate management’s performance in causing this decline. Audit procedures establish broad general goals. if any. and extent of the external auditor’s substantive tests may depend upon the work of the internal auditors. Certify to the correctness of Canton’s financial statements. c. 22. c. The nature.An audit of the financial statements of Canton Corporation is being conducted by an external auditor. The internal auditors may assist the external auditor in performing substantive tests under certain circumstances. Express an opinion as to the attractiveness of Canton for investment purposes. audit objectives specify the detailed work to be performed. Express an opinion as to the fairness of Canton’s financial statements. audit procedures provide the means of achieving audit objectives. d. d. Audit objectives define specific desired accomplishments. b. 24.d. d. The internal auditors may assist the external auditor in performing tests of controls under certain circumstances. timing. Audit objectives are tailor-made for each assignment. Require note disclosure.As a result of analytical procedures. The external auditor is expected to a. c. Approval of temporary stock investment purchases by the corporate treasurer or company president. The auditor should a. 23. the independent auditor determines that the gross profit percentage has declined from 30% in the preceding year to 20% in the current year. c.Which of the following is the best explanation of the difference.Which one of the following statements does not correctly describe the relationship of the internal auditor and the scope of the external audit of a company’s financial statements? a. between audit objectives and audit procedures? a.
Basic to a proper control environment are the quality and integrity of personnel who must perform the prescribed procedures. d. d. Comparing signatures on checks with the signatures of authorized check signers. November purchases with December shipments. November cash receipts with December bank deposits. 26. Which of the following procedures is most likely to give the greatest assurance that securities held as investments are safeguarded? a. Comparing last year’s interest expense with this year’s interest expense. depositing. training programs b. and disbursing of cash. c. Hiring practices d. b. Proceeds from the sale of investments are received by an employee who does not have access to securities. c. 30. Investment acquisitions are authorized by a member of the board of directors before execution. which one of the following procedures would be considered a substantive test? a. b. November sales with November shipping documents. Reviewing procedures followed in receiving. Identify unusual conditions that deserve additional audit effort. an auditor would be most concerned with comparing records of a.25. d. 27. The purpose of analytical procedures is to a. 28.The diamond-shaped symbol is commonly used in flowcharting to show or represent a . b. There is no access to securities between year-end and the date of the auditor’s security count. b. Segregation of duties c. November accounts receivable with November sales. c. Which is not a factor in providing for competent personnel? a. Identify the appropriate schedules to be prepared by the client.In performing an audit. performance evaluations 29. Identify the types of errors or fraud that can occur in transactions.In verifying a November 30 sales cutoff date.Analytical procedures are audit methods of evaluating financial statement accounts by studying and comparing relationships among financial and nonfinancial data. c. Decide on matters to be covered in an engagement letter. Reviewing initials on receiving documents. d. Access to securities requires the signatures and presence of two designated officials.
Terminal output display Decision point. c. c. Process or a single step in a procedure or program. c. b. conditional testing. d. b. b. d. d. b. Coordinating the assistance of entity personnel in data preparation. Maintaining an attitude of independence in its engagements. Examining cash transactions. Selecting a sample of vendors’ invoices for comparison with receiving reports. Having an appropriate system of quality control. Adhering to generally accepted auditing standards. Using statistical sampling techniques. 34. Complying with laws and regulations.Certain management characteristics may heighten the auditor’s concern about the risks of material misstatements. Predefined process. Is interested in inappropriate methods of minimizing earnings for tax purposes.Most of the independent auditor’s work in formulating an opinion in financial statements consists of a. Joining professional societies that enforce ethical conduct. or branching. d. b. Considering internal control. Has an excessive interest in increasing the entity’s stick price through use of unduly aggressive accounting practices.a. Comparing recorded accountability with assets. 31.Which of the following is an auditor least likely to perform in planning a financial statement audit? a. Considering audit risk and materiality. 32. c. Obtaining and examining evidential matter. Commits to unduly aggressive forecasts. Discussing matters that may affect the audit with firm personnel responsible for non-audit services to the entity. 33.A CPA firm is reasonably assured of meeting its responsibility to provide services that conform with professional standards by a. c.Which of the following is an element of a CPA firm’s quality control system that should be considered in establishing its quality control policies and procedures? a. c. b. . Acceptance and retention of clients. 35. Operating and financing decisions are made by numerous individuals. d. The characteristic that is likely to cause concern is that management a.
Which of the following provides the best form of evidence pertaining to the annual valuation of an investment in which the independent auditor’s client owns a 30% voting interest? a. d. Current fair value of the investee company’s assets. c. Client’s schedules were prepared. Determine the extent of property abandoned during the year. Market quotations of the investee company’s stock. . 38. Audited financial statements of the investee company. d. d. of those client supporting documents examined by the auditor. Arrange a preliminary conference with the client to discuss audit objectives. Provide the client with copies of the audit programs to be used during the audit. 40.In the audit of which of the following general ledger accounts will tests of controls be particularly appropriate? a. 37. The accounts represent the complete transaction process. Assess the adequacy of replacement funds. Equipment c. b. Understanding of the client’s internal control was obtained and control risk was assessed.Which of the following is an effective audit planning and control procedure that helps prevent misunderstandings and inefficient use of audit personnel? a. and other information. Reading the current year interim financial statements. Arrange to have the auditor prepare and post any necessary adjusting or reclassification entries prior to final closing. for inclusion in the working papers.An auditor’s working papers will ordinarily be least likely to include documentation showing how the a. c.d. d. plant. Make copies. the auditor tries to do all of the following except to a. b. 36. 39. Engagement was planned. fees. bank charges b. Bonds payable d. c. c. The client has rights in the accounts receivable. b. timing. The accounts are collected by the balance sheet date. and equipment. c. Judge the reasonableness of the depreciation. b.An inappropriate audit objective relative to accounts receivable is to determine that a. b. Historical cost of the investee company’s assets. Obtain an understanding of internal control. sales 41.In the audit of property. The accounts exist and are properly valued.
Unusual matters were resolved.END OF EXAMINATION --- .d. --.
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