Auditing Chapter 2 MC

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Seifer
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145965
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Auditing Chapter 2 MC
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2012-04-06 12:31:55
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Auditing Assurance Louwers 4e
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Auditing Chapter 2 Professional Standards
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  1. Which of the following categories of principles is most closely related to gathering audit evidence?

    A. Performance
    B. Reporting
    C. Responsibilities
    D. Reasonable assurance
    A. Gathering audit evidence is a component of the performacne principle
    (this multiple choice question has been scrambled)
  2. To exercise due care, an accountant should

    A. Take continuing professional education classes
    B. Report whether the financial statements are in accordance with GAAP
    C. Gather enough audit evidence to have complete assurance that there is enough support for the accountant's opinion on the financial statements
    D. Conduct the engagement in accordance with GAAS and ensure that the engagement is completed on a timely basis
    D. These practices are a part of due care
    (this multiple choice question has been scrambled)
  3. One of the accounting firm's basic objectives is to provide professional services that conform to professional standards. Reasonable assurance of achieving this objective can be obtained by following

    A. International auditing standards
    B. Generally accepted accounting practices (GAAP)
    C. Generally accepted auditing standards (GAAS)
    D. Standards within a system of quality control
    D. Standards within a system of quality control are firm - (rather than auditor) - related
    (this multiple choice question has been scrambled)
  4. Which of the following best demonstrates the concept of professional skepticism?

    A. Relying more extensively on external evidence rather than internal evidence.
    B. Focusing on items that have a more significant quantitative effect on the entity's financial statements
    C. Critically assessing verbal evidence received from the entity's management
    D. Evaluating potential financial interests held by auditors in the client.
    C. Professional skepticism is characterized by appropriate questioning and a critical assessment of audit evidence
    (this multiple choice question has been scrambled)
  5. The primary purpose for obtaining an understanding of the entity's environment (including its internal control) in a financial statement audit is

    A. To obtain direct sufficient appropriate audit evidence to afford a reasonable basis for an opinion on the financial statements
    B. To determine the nature, timing, and extent of further audit procedures to be performed
    C. To make consulting suggestions to the management
    D. To determine whether the entity has changed any accounting principles
    B. Auditors study internal control to determine the nature, timing, and extent of substantive tests
    (this multiple choice question has been scrambled)
  6. Oridinarily, what sourc of evidence should least affect audit conclusions?

    A. Inquiry of management
    B. Inquiry of entity legal counsel
    C. External
    D. Auditor prepared
    A. Management representations should least affect auditors' conclusions, as they have not been validated or corroborated by external parties
    (this multiple choice question has been scrambled)
  7. The most persuasive evidence regarding the existence of newley acquired computer equipment is

    A. Observation of auditee's procedures
    B. Inquiry of managament
    C. Documentation prepared externally
    D. Physical observation
    D. Auditors' personal knowledge provides the most persuasive evidence
    (this multiple choice question has been scrambled)
  8. Which of the following procedures would provide the most reliable audit evidence?

    A. Inspection of bank statements obtained directly from the client's financial institution
    B. Inspection of vendor sales invoices received from client personnel
    C. Inquiries of the client's internal audit staff
    D. Inspection of prenumbered client purchase orders filed in the vouchers payable department
    A. Because the statements were received directly from outisde parties, this is a more reliable form of evidence than choice (c)
    (this multiple choice question has been scrambled)
  9. Breaux & co, CPAs require that all audit documentation contain the initials of the preparer and the reviewer in the top right-hand corner. This procedure provides evidence of Breaux and Co, CPA's professional concern regarding which of the following?

    A. Adequate comptence and capabilities
    B. Independence
    C. Gather sufficient appropriate evidence
    D. Adequate planning and supervision
    D. Initials of the preparer and reviewer provide evidence that the documentation was reviewed, which relates to planning and supervision
    (this multiple choice question has been scrambled)
  10. The attestation standards do no contain a requirement that auditors obtain

    A. Adequate knowledge n the subject matter of the assertions being examined
    B. Sufficient evidence for the conclusions expressed in an attestation report
    C. An understanding of the audittee's internal controls
    D. Independence in mental attitude
    C. An understanding of the client's environment (including internal control) is not required under attestation standards, because internal control may not always be relevant to the subject matter of the attestation
    (this multiple choice question has been scrambled)
  11. Which of the following concepts is least related to the standard of due care?

    A. Reasonable assurance
    B. Professional skepticism
    C. Independence in fact
    D. Prudent auditor
    A. Due care recognizes that mistakes and misrepresentations may occuring during the audit
    (this multiple choice question has been scrambled)
  12. The evidence considered most appropriate by auditors is best described as

    A. Written representations made by the president of the entity
    B. Internal documents such as sales invoice copies produced uner conditions of strong internal control
    C. Documentary evidence obtained directly from independent external sources
    D. Direct personal knowledge obtained through physical observation and mathematical recalculation
    D. Direct, personal knowledge of auditors is the most appropriate form of evidence
    (this multiple choice question has been scrambled)
  13. Auditor's understanding of the internal control in an entity contributes information for

    A. Determining whether members of the audit team have the required competence and capabilities to perform the audit
    B. Planning the professional development courses the audit staff needs to keep up to date with new auditing standards.
    C. Ascertaining the independence in mental attitude of members of the audit team
    D. Planning the nature, timing, and extent of further audit procedures on an audit
    D. The primary purpose of obtaining an understanding of a client's internal contro is to plan the nature, timing, and extent of substantive audit procedures on an engagement
    (this multiple choice question has been scrambled)
  14. Which of the following elements of a system of quality control is related to firms receiving independence confirmations from its professionals with respect to clients?

    A. Relevant ethical requirements
    B. Monitoring
    C. Acceptance and continuance of clients
    D. Engagement performance
    A. Relevant ethical requirements - Independence confirmations would ensure that all firm personnel are independent with respect to that firm's clients, which is related to the "Relevant Ethical Requirements" element of a system of quality control. It would not related to acceptance and continuance of clients (a), engagement performance (b), or monitoring (c)
    (this multiple choice question has been scrambled)
  15. Which of the following standards is not correctly associated with its rule-making body?

    a. Public Company Accounting Oversight Board, Auditing Standards
    b. Governmental Accounting Standards Board, Government Auditing Standards
    c. Auditing Standards Board, Statements on Auditing Standards
    d. International Auditing and Assurance Standards Board, International Statements on Auditing
    b. Government auditing standards are issued by the government Accountability Office (GAO). Governmental accounting standards are issued by the Government Accounting Standards Board.
  16. Kramer, CPA consulted with an independent appraiser regarding the valuation of fine art for a not-for-profit musuem. Consultation with a specialist in this case would

    A. Be considered proper due care
    B. Be considered a failure to follow GAAS because Kramer should have known how to value fine art before accepting the engagement
    C. Not be considered a violation of GAAS because GAAS does not apply to not-for-profit entities
    d. None of the above
    A. Consultation with a specialist domonstrates due care if auditors do not have expertise in the area in question
    (this multiple choice question has been scrambled)
  17. Which of the following topics is not addressed in the auditors' report for a public entity?

    A. A summary of the auditors' opinion on the effectiveness of the entity's internal control over financial reporting
    B. Responsibilities of the auditor and management in the financial reporting process
    C. Absolute assurance regarding the fairness of the entity's financial statements in accorandance with GAAP
    D. A description of an audit engagement
    C. Auditors provide reasonable (but not absolute) assurance in an audit engagement (this is noted in teh scope paragraph of the auditors' report).
    (this multiple choice question has been scrambled)
  18. Which of the following is a conceptual difference between attestation standards and generally accepted auditing standards?

    A. The requirement tha the practictioner be independent is not required under attestation standards
    B. The attestation standards provide a framework for the attest function beyond historical financial statements
    C. Requirements related to evidence are not included in the attestation standards.
    D. The attestation standards do not permit an attestation engagement to examine prospective "what-if" financial statements
    B. Attestation standards differ from gernally accepted auditiing standards in that they apply to engagements other than those on historical audited financial statements
    (this multiple choice question has been scrambled)

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