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2011-02-23 18:33:08

Module II Wiley
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  1. Which of the following is a conceptual difference between the attestation standards and generally accepted auditing standards?
    a. the attestation standards do not apply to audits of historical financial statements, while the generally accepted auditing standards do.
  2. which of the following is not an attestation standard?
    A sufficient understanding of internal control shall be obtained to plan the engagement.
  3. which of the following is most likely to be unique to the audit work of CPA's as compared to work performed by practitioners of other professions
  4. the third general standard states that due care is to be exercised in the performance of an audit. This standard is ordinarily interpreted to require
    critical review of the judgment exercised every level of supervision
  5. after fieldwork I see you, a partner of the CPA firm was not involved in the audit forms a second or wrap up working paper review. This second review usually focuses on
    fair presentation of the financial statements for meeting with gaap
  6. financial statement assertions are established for account balances,
    for both classes of transactions, and disclosures
  7. which of the following is not financial statement assertion relating to account balances?
    valuation and competence
  8. as the acceptable level of detection risk decreases, auditor may
    postponed the plan timing substantive tests from interim dates to the year-end
  9. the risk that an auditor will conclude, based on substantive tests, and material misstatement does not exist an account balance when, in fact, such misstatement does exist is referred to as
    detection risk
  10. as the acceptable level of detection risk decreases the assurance directly provided from
    substantive tests should increase
  11. which of the following audit risk components may be assessed in non-quantitative terms
    control risk, detection risk, inherent risk
  12. inherent risk and control risk differ from detection risk in that they
    exist independently of the financial statement audit
  13. on the basis of the audit evidence gathered and evaluated, auditor decides to increase the assessed level of control risk from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would
    decrease detection risk
  14. relationship between control risk and detection risk is ordinarily
  15. which of the following would it auditor most likely use determining the auditor's preliminary judgment about materiality
    the entities annualized interim financial statements
  16. which of the following statements is not correct about materiality
    in auditor considers materiality for planning purposes in terms of the largest aggregate level of the statements that could be material to anyone of the financial statement
  17. which of the following elements underlies the application of generally accepted auditing standards, particularly the standards of fieldwork and reporting?
    materiality and relative risk
  18. in considering materiality for planning purposes, and auditor believes that misstatements aggregating $10,000 would have a material fact on entities income statement, but that misstatements would have to aggregate 20,000 to materially affect the balance sheet. Ordinarily, it would be appropriate to design auditing procedures that would be expected to detect the statements that aggregate
  19. which of the following would it auditor most likely use in determining the auditor's preliminary judgment about materiality?
    the entities financial statements of the prior year
  20. holding other planning considerations equal, a decrease in the amount of misstatement in a class of transactions that an auditor could tolerate most likely would cause the auditor to
    perform the planned auditing procedures closer to the balance sheet date
  21. when issuing an unqualified opinion, the auditor who evaluates the audit findings should be satisfied that the
    estimate of the total likely misstatement is less than a material amount
  22. an attitude that includes a questioning mind and a critical assessment of audit evidence is referred to as
    professional skepticism
  23. professional skepticism requires that an auditor assume that management is
    neither honest nor dishonest
  24. which of the following is an example of fraudulent financial reporting
    company management changes inventory count tags and overstates ending inventory, while understating cost of goods sold
  25. which of the following best describes what is meant by the term fraud risk factor?
    factors whose presence often have been observed in circumstances where frauds have occurred
  26. which of the following is correct concerning requirements about auditor communications about fraud
    fraud that involves senior management should be reported directly to the audit committee regardless of the amount involved
  27. when performing a financial statement audit, auditors are required to explicitly assess the risk of material misstatement due to
  28. audits of financial statements are designed to obtain assurance of detecting misstatement due to
    errors, fraudulent financial reporting, misappropriation of assets
  29. and auditor is unable to obtain absolute assurance that misstatements due to fraud will be detected for all of the following except
    professional skepticism
  30. the most difficult type of misstatement to detect is fraud based on
    the non-recording of transactions
  31. when considering fraud risk factors relating to management's characteristics, which of the following is least likely to indicate a risk of possible misstatement due to fraud?
    Use of the unusually conservative accounting practices
  32. which of the following conditions identified during fieldwork of an audit is most likely to affect the auditor's assessment of the risk of misstatement due to fraud
    missing documents
  33. which of the following is most likely to be a response to the audit tors assessment of the risk of material misstatement due to fraud the existence of inventory is high
    observe test counts of inventory at certain locations on an an uanounced basis
  34. which of the following is most likely to be an example of fraud
    Dallcations occurring due to invalid electronic approvals
  35. which of the following characteristics most likely would heighten an auditors concern about the risk of intentional manipulation of financial statements
    management places substantial emphasis on meeting earnings projections
  36. which of the following statements reflects and auditors responsibility for detecting misstatements due to errors and fraud
    an auditorr should design the audit to provide reasonable assurance of detecting misstatements due to errors and fraud that are aterial to the financial statements
  37. disclosure of fraud to parties other than a client senior management and its audit committee or board of directors ordinarily is not part of and auditors responsibility however to which of the following outside parties may duty to disclose fraud exist
    to the SeC when the client reports an auditor change, to a successor auditor when the successor makes appropriate inquires, to a government funding agency from which this client receives financial assistance
  38. under statements on auditing standards, which of the following would be classified as an error
    misinterpretation by management a fax that existed when the financial statements were prepared
  39. what assurance does the auditor provide that misstatements due to errors, fraud, and direct effect illegal acts that are material to the financial statements will be detected
    errors reasonable, fraud reasonable, direct effect illegal acts reasonable
  40. because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of
    professional skepticism
  41. which of the following most accurately summarizes what is meant by the term material misstatement
    material error, material fraud, and certain illegal acts
  42. which of the following statements best describes the auditors responsibility to detect conditions relating to financial stress of employees or adverse relationships between a company and its employees
    the auditor is not required to plan the audit to discover these conditions but should consider them if year she becomes aware of them during the audit
  43. when the auditor believes in misstatement is or may be the result of fraud but that the effect of the misstatement is not material to the financial statements, which of the following steps is required
    consider the implications for other aspects of the audit
  44. which of the following statements is correct relating to the auditors consideration of fraud
    the auditor's interest in fraud consideration relates to fraudulent acts because a material misstatement of financial statements
  45. which of the following factors are conditions is and auditor least likely to plan an audit to discover
    financial pressures affecting employees
  46. at which stage of the audit may fraud risk factors be identified
    planning stage yes, a obtaining understanding stage yes, conducting fieldwork yes
  47. management's attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence and entities control environment when
    management is dominated by one individual who is also a shareholder&
  48. which of the following is least likely to be required on an audit
    make a legal determination of whether fraud has occurred
  49. which of the following is most likely to be an overall response to fraud risks identified in an audit
    use less predictable audit procedures
  50. which of the following is least likely to be included in an auditors inquiry of management while obtaining information to identify the risks of material misstatement due to fraud
    are financial reporting operations control by and limited to one location
  51. individuals who commit fraud are ordinarily able to rationalize the act and also have and
    incentive yes, opportunity yes
  52. what is and auditors responsibility you discovers management involved in what is financially immaterial fraud
    report the fraud to the audit committee
  53. which of the following is most likely to be considered a risk factor relating to fraudulent financial reporting
    negative cash flows from operations
  54. which of the following is most likely to be presumed to represent fraud risk on an audit
    improper revenue recognition
  55. an auditor who discovers the client's employees paid small bribes to municipal officialsmost likely would withdraw from the engagement if
    management fails to take the appropriate remedial action
  56. which of the following factors most likely would cause a CPA to not accept a new audit engagement
    the prospective client is unwilling to make all financial records available to the CPA
  57. which of the following factors would most likely heighten and auditors concerned about the risk of fraudulent financial reporting
    overly complex organizational structure balding unusual lines of authority
  58. in auditor who discovers the client employees have paid small bribes to public officials most likely would withdraw from the engagement if the
    employees actions affect the auditor's ability to rely on management's representations
  59. which of the following illegal acts should an audit be designed to obtain reasonable assurance of detecting
    accrual and billing of an improper amount of revenue under government contracts
  60. which of the following relatively small misstatements most likely could have a material effect on an entity's financial statements
    an illegal payment to a foreign official that was not recorded
  61. during the annual audit of Ajax Corporation a publicly held company, Jones, CPA, a continuing auditor Jones notified the Board of Directors about the illegal contributions, but they refused to take any action because the amounts involved were immaterial to the financial statements. Jones should reconsider the intended degree of reliance to be placed on the
    managment representation letter
  62. the most likely explanation why the auditor's examination cannot reasonably be expected to bring all illegal acts the client to the auditor's attention is that
    illegal acts by clients offer relate to operating aspects rather than accounting aspects
  63. if specific information comes to an auditor's attention that implies the existence of possible illegal acts that could have a material, but indirect effect on the financial statements, the auditors should next
    apply audit procedure specifically directed to ascertaining whether illegal act has occurred
  64. in auditor discovers the client employees have committed an illegal act as a material fact the clients financial statements most likely would withdraw from the engagement if
    the client does not take the remedial action that the auditor considers necessary
  65. under the Pvt. securities litigation Reform Act of 1995, Baker, CPA, reported certain uncorrectable illegal acts to supermarkets Board of Directors. Baker believed that failure to take remedial action would warrant qualified audit opinion because the illegal acts Adam serial affect on supermarkets financial statements. Supermarkets failed to take appropriate remedial action and the Board of Directors refused to inform the SEC that it had received such notification from Baker. Under these circumstances, Baker is required to
    deliver a report concerning illegal acts to the SEC within one business day
  66. which of the following would be least likely to be considered an audit planning procedure
    perform risk assessment
  67. which of the following factors would most likely cause ACPA to decide not to accept a new audit engagement
    management disregard of its responsibility to maintain an adequate internal control environment
  68. before accepting an engagement to audit and the client, A CPA is required to obtain
    the prospective client's consent to make inquiries of the predecessor auditor, if any
  69. before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding
    disagreements the predecessor had with the client concerning auditing procedures and accounting principles
  70. before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessors
    understanding as to the reasons for the change of auditors
  71. and auditor is required to establish an understanding with the client regarding the services to be formed for each engagement. This understanding generally includes
    the auditors responsibility for ensuring that the audit committee is aware of any significant deficiencies in internal control the country the auditor's attention
  72. which of the following matters is generally included in an auditors engagement letter
    management's responsibility for the entities compliance with laws and regulations
  73. during the initial planning phase of an audit, ACPA most likely would
    discuss the timing of the audit procedures with the clients management
  74. which of the following statements would least likely appear and auditors engagement letter
    after performing our preliminary analytical procedures we will discuss with you the other procedures we consider necessary to complete the engagement
  75. which of the following documentation is not required for an audit in accordance with generally accepted auditing standards
    a client engagement letter that summarizes the timing and details of the auditors planned fieldwork
  76. an engagement letter should ordinarily include information on the objectives of the engagement
    CPA responsibilities yes, client responsibilities yes, limitation of engagement yes
  77. arrangements concerning which of the following are least likely to be included in engagement letter
    CPA investment in client securities
  78. the auditor should document the understanding established with the client through a
    written communication with the client
  79. which of the following factors most likely would influence and auditor's determination of the auditability of an entity's financial statements
    the adequacy of the accounting records
  80. which of the followingis most likely to require special planning considerations related to asset valuation
    inventory is comprised of diamond rings
  81. ACPA wishes to determine how various publicly held companies have complied with the disclosure requirements of a new financial accounting standards. Which of the following information sources with the CPA most likely consult for the information
    a I CP a accounting trends and techniques
  82. an audit for should design the written audit program so that
    the audit procedures selected will achieve specific audit objectives
  83. the audit program usually cannot be finalized until the
    consideration of the entity's internal control has been completed
  84. audit program should be designed so that
    the audit evidence gathered supports the auditors conclusions
  85. in designing written audit programs, and auditory should establish specific audit objectives that relate primarily to the
    financial statement assertions
  86. with respect to planning an audit which of the following statements is always true
    is acceptable to perform a portion of the audit of a continuing audit client at interim dates
  87. the element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the
    timing of inventory observation seizures to be performed
  88. to obtain an understanding of a continuing clients business, and auditory is likely
    review prior year working papers and the permanent file for the client
  89. on an audit engagement performed by a CPA firm with one office, at the minimum, knowledge of the relevant national accounting and auditing standards should be held by
    all professionals working upon the audit
  90. in auditor obtains knowledge about a new client business and its industry to
    understand the events and transactions that may have an effect on the clients financial statements
  91. which of the following procedures would and auditory least likely perform while obtaining an understanding of a client and a financial statement audit
    selecting a sample of vendors invoices for comparison to receive reports
  92. ordinarily the predecessor auditory permits the successor auditor to review the predecessors working paper analysis relating to
    contingencies and balance sheet accounts
  93. in auditing the financial statements of Star Corporation, land discovered information leading land to believe that stars prior years financial statements, which audited by tell, requires substantial revisions. Under these circumstances, Land should
    request start to arrange a meeting among the three parties to resolve the matter
  94. a successor auditors should request a new client to authorize the predecessor auditor to allow a review of the predecessors
    engagement letter no, working papers yes
  95. which of the following procedures within auditor most likely perform implanting a financial statement audit
    comparing the financial statements to anticipated results
  96. analytic procedures used in planning an audit should focus on
    enhancing the auditor's understanding of the clients business
  97. the objective of performing analytic procedures and planning an audit is to identify the existence of
    unusual transactions and events
  98. which of the following nonfinancial information within auditory most likely consider him performing analytic procedures during the planning phase of an audit
    square footage of selling space
  99. the in charge auditor most likely would have a supervision tree responsibility to explain to the staff assistance
    how the results of various auditing procedures performed by the assistance should be evaluated
  100. the audit work performed by each assistant should be reviewed to determine whether it was adequately performed and to evaluate whether the
    results are consistent with the conclusions to be presented in the auditor's report
  101. while assessing the risks of material misstatement auditors identify risks, relate risk to what could go wrong, consider the magnitude of risks and
    consider the likelihood that the risks could result in material misstatements
  102. which of the following are considered further audit procedures that may be designed after assessing the risks of material misstatement
    substantive tests of details yes, risk assessment procedures no
  103. which of the following is least likely to be considered a risk assessment procedure
  104. confirmation of ending Accounts Receivable
  105. in an audit of a non-issue or, non-public company, the auditors identify significant risks. These risks often
    involved judgment till matters