Final Exam AUD Burke

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Audit Final Burke
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  1. which of the following best describes what is meant by the term generally accepted auditing standards?
    measures of the quality of the auditors performance
  2. the professions ethical standards most likely would be considered to have been violated when a CPA represents that specific consulting services will be performed for a stated fee and it is apparent at the time of the representation that the
    actual fee would be substantially higher
  3. according to the ethical standards of the profession, which of the following axis generally prohibited?
    Retaining client records after engagement is terminated rioted completion and the client has demanded their return
  4. May a CPA hirer for the CPAs public accounting firm a non-CPA systems analyst who specializes in developing computer systems?
    yes, provided the CPA is able to supervise the specialist and evaluate the specialist and product
  5. Stephanie is a CPA who was working as a controller for Brentwood Corporation. She is not in public practice. Which statement is true
    she may use the CPA designation on her business cards if she also puts her employment title on them
  6. according to the standards of the profession, which of the following activities would most likely not impair a CPA's independence
    providing advisory services for client
  7. which of the following reports may be issued only by an accountant who is independent of a client
    standard report on an examination of a financial forecast
  8. according to the ethical standards of the profession, which of the following acts is generally prohibited?
    Accepting a commission for recommending a product to an audit client
  9. to exercise due professional care and auditor should
    critically review the judgment exercised by those assisting in the audit
  10. Carl, CPA, is a staff auditor participating in the audit engagement of Fort Incorporated. Which of the following circumstances impairs Carl's independence
    Carls sibling is director of internal audit at Fort
  11. on June 1, 2008, ACPA obtained a $100,000 personal loan from a financial institution client from the CPA provided compilation services. The loan was fully secured in considered material to the CPA's net worth. The CPA paid the loan in full on December 31, 2009. On April 3, 2009, the client asked the CPA to audit the clients financial statements for the year ended December 31, 2009. Is the CPA considered independent with respect to the audit of the clients December 31, 2009 financial statements?
    yes, because the CPA was not required to be independent at the time the loan was granted
  12. which of the following statements is correct regarding a CPA employee of a CPA firm taking copies of information contained in client files when the CPA leaves the firm
    one. ACPA leaving a firm may take copies of information contained in client files to assist another firm serving the client

    two. ACPA leaving a firm may take copies of information contained in client files as a method of gaining technical expertise

    neither one nor to is correct
  13. which of the following statements is correct regarding the and accountants working papers?
    The accountant owns the working papers but generally may not disclose them without the clients consent or a court order
  14. which of the following is an authoritative body designated to promulgate a test station standards?
    Auditing standards board
  15. what body establishes international auditing standards
    the international Federation of accountants
  16. which of the following is not true about international auditing standards
    international auditing standards require obtaining an attorney's letter
  17. which of the following is not true about international auditing standards
    audit report modification for consistency in the application of accounting principles is required
  18. independence standards of the GAO for audits in accordance with generally accepted government auditing standards described three types of impairments of independence. Which of the following is not one of these types of impairments?
    Unusual
  19. in accordance with the independent standards of the GAO for performing audits in accordance with generally accepted government auditing standards, which of the following is not an example of an external impairment of independence?
    Bias in the items the auditors decide to select for testing
  20. under the independent standards of the GAO for performing audits in accordance with generally accepted government auditing standards, which of the following are overreaching principles for determining whether a non-audit service impairs independence?
    One. Auditors must not perform nonaudit services that involve performing management functions are making management decisions

    to. Auditors must not audit their own work or provide nonaudit services in situations in which the nonaudit services are significant or material to the subject matter of the audit.

    Three. Auditors must not perform nonaudit services which require independence

    number one and number two only
  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. the auditor with final responsibility on the engagement had a disagreement with one of the assistants in regards to an audit procedure.if the assistant believes is necessary to disassociate from the matters resolution. The CPA firms procedures should enable the assistant to
    document the disagreement with the conclusion reached
  23. an examination of the financial forecast is a professional service that involves
    evaluating the preparation of the financial forecast and management assertions
  24. the nature and extent of the CPA firms quality control relate to
    • one. The CPA firm size
    • 2.the nature of the CPA firm's practice
    • three.cost benefit considerations
  25. a CPA firm can communicate its quality control to its personnel only through
    • one. Oral yes
    • two. Written yes
  26. which of the following is not an element of quality control
    internal control
  27. quality control of the CPA firm is referred to on the statements of quality control and quality control standards as
    applied to auditing and accounting and review services
  28. one other CPA firms goals is to provide professional services and conform to professional standards. reasonable assurance of providing the standard is done through
    a system of quality control
  29. which is correct about thePCAOB guidance that uses the term should?
    the auditor must comply with requirements unless demonstrated that alternative actions were sufficient to achieve the objectives of the standard
  30. which of the following sets of standards is the PCAOB not have the authority to establish for audits of public companies
    accounting standards
  31. how large must the actual loss identified by the auditor be for control deficiency to possibly be considered a material weakness
    • immaterial yes
    • material yes
  32. for purposes of an audit of internal control performed under public company accounting oversight board requirements, and account is significant if there is more than a
    remote likelihood that it could contain material misstatements
  33. a controlled efficiency that is more than a significant deficiency is more likely to result in what form of audit opinion relating to internal control
    adverse
  34. which of the following is most likely to be considered a
    material weakness in internal control for purposes of an internal control audit of an issue or public company
    and ineffective oversight of financial reporting by the audit committee
  35. inability to evaluate internal control due to the circumstance caused scope limitation relating to a significant account in a Sarbanes-Oxley 404 internal audit control is most likely to result in a
    qualified opinion
  36. which of the following is most likely to indicate a significant deficiency relating to a clients antifraud programs
    audit committee passivity when conducting oversight functions
  37. and auditor identified a material weakness in December. The client was informed and corrected it shortly after the as of date December 31, the auditor agrees that the correction aluminous the material weakness as of January 31. The appropriate report under a PCAOB standard five audit of internal control is
    adverse
  38. in an integrated audit, which of the following leads to an adverse opinion on internal control
    • material weakness yes
    • significant deficiencies no
  39. in an integrated audit what must the auditor communicate to the audit committee
    • no material weakness yes
    • all control deficiencies no
  40. in which manner are significant deficiencies communicated by the auditors to the audit committee under public company accounting oversight board standard five
    the communication must be in written form
  41. which is correct concerning the external auditors use of work of others an audit of internal control perform for public company
    ordinarily the work of internal auditors and others is used primarily in low risk areas
  42. in an integrated audit which must the auditor communicate in writing to management
    material weaknesses significant deficiencies and other control deficiencies
  43. which of the following is correct when applying a top-down approach to identify controls to test an integrated audit
    for certain assertions strong entity level controls may allow the auditor to admit additional testing beyond those controls
  44. which of the following is not included in the standard unqualified opinion on internal control over financial reporting performed under public company accounting oversight board requirements
    the, company name, management and audit committee is responsible for maintaining effective internal control over financial reporting
  45. walk-throughs ordinarily provide evidence it helps the auditor to
    • evaluate design effectiveness of controls yes
    • confirm whether controls of them placed in operation yes
  46. which of the following controls most likely would reduce the risk of diversion of customer receipts by and entities employees
    a bank lockbox system
  47. and auditor suspects the client cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover this embezzlement scheme the auditor most likely would compare the
    dates checks are deposited per bank statements with the dates remittance credits are reported
  48. upon receipt of customers checks in the mail room, responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the
    Treas. to compare the listing with the monthly bank statement
  49. in testing controls over cash disbursements, and auditor most likely would determine that the person who signs checks also
    is responsible for mailing checks
  50. which of the following is not an accurate statement about communication of internal control related matters to management on a nonissue or company
    previously communicated weakness that have not been corrected need to be rude return unique a did
  51. which of the following matters would in auditor most likely considered to be a material weakness to be communicated to those charged with governance of an audit client
    ineffective oversight of financial reporting by those charged with governance
  52. which of the following statements is correct concerning significant deficiencies in an odd
    in auditor may communicate significant deficiencies during an audit or after the audits completion
  53. and auditors letter issued of significant deficiencies relating to an entities internal control observe doing a financial statement audit should
    indicate that the audits purpose was to report on the financial statements and not to express an opinion on internal control
  54. which of the following statements is correct concerning and auditors required communication of significant deficiencies
    in auditor's report on significant deficiencies should include a restriction on the distribution of the report
  55. which of the following statements is correct concerning significant deficiencies noted in an audit
    the auditor should separately communicate those significant deficiencies considered to be material weaknesses
  56. which of the following representation should not be included in a report on internal control related matters noted in an audit
    there are no significant deficiencies the design or operation of internal control
  57. which of the following statements concerning material weaknesses and significant deficiencies is correct
    compensating controls may limit the severity of the material weakness or significant deficiency
  58. during the audit the independent auditor identified the existence of a weakness in the clients internal control in communicated this finding in writing to the client senior management and those charged with governance. The auditor should
    consider the effects of the condition on the audit
  59. in identifying matters communication with those charged with governance of an audit client, and auditor most likely would ask management whether
    it consulted with other CPA firm about accounting matters
  60. which of the following statements is correct concerning and auditors required communication with those charged with governance of an audit client?
    This communication should include discussion of any significant disagreements with management concerning the financial statements
  61. a auditor would least likely initiate a discussion with those charged with governance of an audit client concerning
    the maximum dollar amount of misstatements that could exist without causing the financial statements to be material misstated
  62. which of the following statements is correct about an auditors required communication with those charged with governance of an audit client
    the auditor is required to inform those charged with governance about significant misstatements discovered by the auditor and subsequently corrected by management
  63. which of the following matters is in auditor required to communicate to an entities audit committee
    • one. Disagreements with management about matters significant the entities financial statements that have been satisfactorily resolved
    • two. Initial selection of significant accounting policies in emerging areas that lack authoritative guidance

    one only
  64. should and auditor communicate the following matters to those charged with governance of an audit client
    • significant audit adjustments recorded by the entity, yes
    • managements consultation with other accountants about significant accounting matters, yes
  65. in reporting on and entities internal control over financial reporting a practitioner should include a paragraph that describes the
    inherent limitations of any internal control
  66. which of the following best describes a CPAs engagement to report on and entities internal control over financial reporting
    and attestation engagement to form an opinion on the effectiveness of its internal control
  67. an engagement to examine internal control will generally
    be more extensive in scope than the assessment of control risk made during a financial statement audit
  68. how do the scope, procedures, and purpose of an examination of internal control compared to those for obtaining an understanding of internal control and assessing control risk is part of an audit?
    • Scope, different
    • procedures, similar
    • purpose, different
  69. when an examination has been performed on the effectiveness of entities internal control over financial reporting and a material weakness has been noted, the practitioners report should express an opinion on
    the subject matter to which the assertion relates
  70. in assessing the competence of an internal auditor, an independent CPA most likely would obtain information about the
    quality of the internal auditors working paper documentation
  71. for which of the following judgments may an independent auditor share responsibility with an entities internal auditor who is assessed to be both competent and objective
    • assessment of inherent risk, no
    • assessment of control risk, no
  72. the work of internal auditors may affect the independent auditor's
    • one. Procedures performed in obtaining an understanding of internal control
    • two. Procedures performed in assessing the risk of material misstatement
    • three. Substantial procedures performed in gathering direct evidence

    all of the above
  73. an internal auditors work would most likely affect the nature, timing, and extent of an independent CPAs auditing procedures when the internal auditors work relates to assertions about the
    existence of fixed asset additions
  74. during an audit and internals auditor may provide direct assistance to an independent CPA in
    • obtaining an understanding of internal control, it yes
    • performing tests of controls, yes
    • are forming substantial tests, yes
  75. when assessing the internal auditors competence the independent CPA should obtain permission about the
    educational background and professional certification of the internal auditors
  76. in assessing the current competence and objectivity of an entities internal auditor, an independent auditor would least likely consider information obtained from
    the results of analytical procedures
  77. if the independent auditor's decide that the work performed by the internal auditor may have a bearing on their own procedures, they should consider the internal auditors
    competence and objectivity
  78. in assessing the objectivity of internal auditors, an independent auditor should determine
    the organizational level to which the internal auditors report
  79. Which of the following would not be considered an analytical procedure?
    Projecting an error rate by comparing the results of a statistical sample with the actual population characteristics
  80. What type of analytical procedure would an auditor most likely use in developing relationships amoung balance sheet accounts when reviewing the financial statements of a non public entity?
    Ratio analysis
  81. An auditor may achieve audit objectives related to particular assertions by
    performing analytical procedures
  82. in entities income statements were misstated due to the recording of journal entries that involve 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
  83. 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
  84. analytical procedures used in the overall review stage of an audit generally include
    considering unusual or unexpected account balances that were not previously identified
  85. which of the following tends to be most predictable for purposes of analytical procedures applied as substantial tests
    relationships involving income statement accounts
  86. a basic premise underlying the application of analytical procedures is that
    plausible relationships among data may reasonably be expected to exist and continue in the absence of known conditions to the contrary
  87. for all audits of financial statements made in accordance with generally accepted auditing standards, they use of analytical procedures is required to some extent
    • in the planning stage, yes
    • as a substantive tests, no
    • in the review stage, yes
  88. and auditors analytical procedures most likely would be facilitated if the entity
    uses a standard cost system that produces variance reports
  89. analytical procedures performed in the overall review stage of an audit suggests that several accounts have unexpected relationships. The results of these procedures most likely would indicate that
    additional tests of details are required
  90. which of the following comparisons would in auditor most likely make evaluating entities costs and expenses
    the current years payroll expense with the prior year's payroll expense
  91. to be effective, analytical procedures in the overall review stage of an audit engagement should be performed by
    a manager or partner who as a comprehensive knowledge of the clients business and industry
  92. which of the following sets of information doesn't auditor usually confirm on one form
    cash in bank in collateral for loans
  93. the usefulness of the standard Bank confirmation request may be limited because the bank employee who completes the form may
    be unaware of all the financial relationships that the bank has with the client
  94. an auditor most likely would limit substandard audit tests of sales transactions when control risk is assessed as low the occurrence assertion concerning sales transactions and the auditor has already gathered evidence supporting
    cash receipts and accounts receivable
  95. in auditor should trace bank transfers the last part of the audit. In first part of the subsequent. To detect whether
    cash balances were overstated because of kiting
  96. to gather evidence regarding the balance per bank in a bank reconciliation, and auditor would examine all of the following except
    general ledger
  97. a cash shortage may be concealed by transporting funds from one location to another or by converting the negotiable assets to cash.because of this, which of the following is vital
    simultaneous verification
  98. the primary purpose of sending a standard confirmation request of financial institutions with which the client has done business during the year is to
    corroborate information regarding deposit and loan balances
  99. In auditor observes the mailing of monthly statements to clients customers reviews evidence of follow-up on errors reported by the customers. This test of controls most likely is performed to support managements financial statement assertions
    • presentation and disclosure, no
    • existence occurrence, yes
  100. for which of the following matters should in auditor obtains written management representations
    managements compliance with contractual agreements that may affect financial statements
  101. to which of the following matters would materiality limits not apply in obtaining written management representations
    the availability of minutes of stockholders and directors meetings
  102. the date of the management representation letter should coincide with the date of the
    auditors report
  103. which of the following matters would in auditor most likely increase in the management representation letter
    completeness and availability of minutes of stockholders and directors meetings
  104. the current chief executive and financial officers have only been employed by company X the past five months of the year two. X company is presenting comparative financial statements on years one and two, both of which were audited by Williams Jones, CPA. For which year should Jones obtain written representations from these two individuals?
    • year one, yes
    • year two, yes
  105. which of the following statements ordinarily is included among the written client representations obtained by the auditor
    compensating balances and other arrangements involving restrictions on cash balances have been disclosed
  106. when considering the use of management's written representations is audit evidence about the completeness assertion, and auditor should understand that such representations
    complement, but do not replace, substandard tests designed to support the assertion
  107. a written representation from a clients management which among other magic knowledge is responsibility for the fair representation of financial statements, should normally be signed by the
    chief executive officer and the chief financial officer
  108. a limitation on the scope of the auditors examination sufficient to preclude an unqualified opinion would always result when management
    refuses to furnish a management representations letter to the auditor
  109. a purpose of a management representation letter is to reduce
    the possibility of a misunderstanding concerning managements responsibility for the financial statements
  110. a lawyers response to an auditors inquiry concerning litigation, claims, and assessments may be limited to matters that are considered individually or collectively material to the clients financial statements. Which party should reach an understanding on the limits of materiality for this purpose?
    The lawyer and the auditor
  111. the refusal of the clients attorneys to provide information requested an inquiry letter generally is considered
    a limitation on the scope of the audit
  112. which of the following is an audit procedure that and auditor most likely would perform concerning litigation, claims, and assessments?
    Discuss with management its policies and procedures adopted for evaluating and accounting for litigation, claims, and assessments
  113. the primary reason and auditor request letters of inquiry be sent to clients attorneys is to provide the auditor with
    corroboration of the information furnished by management about litigation, claims, and assessments
  114. which of the following is not an audit procedure that the independent auditor would perform concerning litigation, claims, and assessments?
    Confirm directly with the clients lawyer that all claims of been recorded in the financial statements
  115. the scope of an audit is not restricted when in attorneys response to an auditor is result of the clients letter of audit inquiry limits the response to
    matters to which the attorney is given substantial attention in the form of legal representation
  116. a CPA as received in attorneys letter in which no significant disagreements with the client assessments of contingent liabilities were noted. The resignation of the clients lawyer shortly after receipt of the letter should alert the auditor that
    undisclosed unasserted claims may have arisen
  117. which of the following statements extracted from a clients lawyer's letter concerning litigation, claims, and assessments most likely would cause the auditor to request clarification?
    I believe that the action team be settled for less than the damages claimed
  118. the objective of an accountant's compilation of the financial statements of a nonissue or, nonpublic company is to provide what type of assurance?
    No assurance
  119. the existence of audit risk is recognized by the statement in the auditor standard report that the auditor
    obtains reasonable assert insurance about whether the financial statements are free of material misstatement.
  120. When and accountant performs more than one level of service for example a compilation and a review, or a compilation and an audit, concerning the financial statements of a nonissue or entity, the accountant generally should issued the report that is appropriate for
    the highest level of service rendered
  121. which of the following is least likely to be restricted use report?
    a report on financial statements prepared following a comprehensive basis of accounting other than generally accepted accounting principles
  122. which of the following statements is correct concerning and auditors responsibility for controlling the distribution by the client of a restricted use report?
    And auditor is not responsible for controlling the distribution of such reports
  123. which of the following statements is a basic element of the auditors standard report
    an audit includes assessing significant estimates made by management
  124. in May 2009, and auditor reissues the auditor's report on the 2007 financial statements and a continuing clients request. The 2007 financial statements are not restated in the auditor does not revise the wording of the report. The auditor should
    use the original report date on the reissued report
  125. which paragraph 7 auditor standard report on financial statements should refer to generally accepted auditing standards in generally accepted accounting principles
    • G a a S, scope
    • G a a P, opinion
  126. auditor expressed a qualified opinion on the prior years financial statements because of lack of adequate disclosure. These financial statements are properly restated in the current year and presented in comparative form with the current years financial statements. The auditors updated report on the prior years financial statement should
    express and unqualified opinion on the restated financial statements of that prior year
  127. and auditors responsibility to express an opinion on the financial statements is
    explicitly represented in the opening paragraph of the auditors standard report
  128. which of the following phrases should be included in the opinion paragraph when in auditor expresses a qualified opinion
    • when read in conjunction with note B, no
    • with the foregoing explanation, no
  129. how does an auditor make the following representations when issuing the standard auditors report on comparative financial statements
    • examination of evidence on a test basis, explicitly
    • consistent application of accounting principles, implicitly
  130. the fourth standard of reporting requires the auditor's report to contain either an expression of opinion regarding the financial statements taken as a whole or assertion to the effect that an opinion cannot be expressed. The objective of the fourth standard is to prevent
    misinterpretations regarding the degree of responsibility the auditor is assuming
  131. 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 into each individual financial statement
  132. Wilson CPA completed the fieldwork of the audit of ABC December 31, 2009 financial statements on March 6, 2010. A subsequent event requiring adjustment to the 2009 financial statements occurred on April 10, 2010 in came to Wilson's attention on April 24, 2010. If the adjustment is made without disclosure of the event, Wilson's report ordinarily should be dated
    March 6, 2010
  133. in auditor issued an audit report that was dual dated for a subsequent event occurring after the completion of fieldwork but before issuance of the auditors report. The auditors responsibility for events occurring subsequent to the completion of fieldwork was
    limited to the specific event referenced
  134. if financial statement audit report issued for the audit of an issue or public company concludes that the financial statements follow
    generally accepted accounting principles
  135. which of the following is not correct concerning information included in an audit report of financial statements issued under the requirements of the public company accounting oversight board
    the report should include a paragraph referring to the auditor's report on compliance with laws and regulations
  136. a principal auditor decides not to refer to the audit of another CP a who audited a subsidiary of the principle auditors client. After making inquiries about the other CPAs professional reputation and independence, the principal auditor most likely would
    contact the other CPA and review the audit programs and working papers pertaining to the subsidiary
  137. the introductory paragraph of an auditors report contains a following sentences

    we did not audit the financial statements of ABC Inc. a wholly-owned subsidiary which statements reflect total assets and revenues constituting 27% and 29% respectively, of the related consolidated totals. Though statements audited by other auditors Street whose report has been furnished to us in our opinion in so far as it relates to the amounts included for ABC Incorporated is based solely on the report of other auditors
    these sentences indicated division of responsibility
  138. in which of the following situations would and auditor ordinarily issuing unqualified audit opinion without an explainatory paragraph
    the auditor decides to make reference to the report of another auditor as a basis, in part, for the auditors opinion
  139. in auditor may issue the standard audit report when the
    principle auditor assumes responsibility for the work of another auditor
  140. in the auditor's report the principle auditor decides not to make reference to another CPA who audited a client subsidiary. The principle auditor could justify this decision if, among other requirements, the principle auditor
    is satisfied as the independence and professional reputation of the other CPA
  141. when financial statements of a company that follows G a S b standards would be misleading due to unusual circumstances departure no standards, the auditor should explain the unusual circumstances a separate paragraph and express an opinion that is
    unqualified
  142. in auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. If the entities financial statements adequately disclose its financial difficulties, the auditor's report is required to include an explanatory paragraph the specifically uses the phrases
    • reasonable period of time not to exceed one year, no
    • going concern, yes
  143. Wilson CPA has substantial doubt about ABC company's ability to continue as a going concern when reporting on ABC's audited financial statements for the year ended June 30, 2009. That doubt has been removed in 2010. What is Wilson's reporting responsibility if ABC is presenting its financial statements for the year ended June 30, 2010, on a comparative basis with those of 2010?
    The explanatory paragraph included in the 2010 auditor's report should not be repeated
  144. when in 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 auditors responsibility is to
    consider the adequacy of disclosure about the clients possible inability to continue as a going concern
  145. Green CPA concludes that there is substantial doubt about ABC company's ability to continue as a going concern if ABC's financial statements adequately disclose its financial difficulties, greens auditor's report should
    • include in explanatory paragraph following the opinion paragraph, yes
    • specifically use the words going concern, yes
    • specifically use the word substantial doubt yes
  146. in which of the following circumstances would in
    auditor most likely add an explanatory paragraph to the standard report
    on not affecting the auditors unqualified opinion?
    there is substantial doubt about the entity's ability to continue as a going concern
  147. after considering and entities negative trends and financial difficulties, and auditor has substantial doubt about the entity's ability to continue as a going concern. The auditors considerations relating to management's plans for dealing with the adverse effects of these conditions most likely would include managements plans to
    increase ownership equity
  148. which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity's ability to continue as a going concern
    usual trade credit from suppliers is denied
  149. Wilson CPA believes there is substantial doubt about the ability of ABC Corporation to continue as a going concern for a reasonable period of time. In evaluating ABC's plans for dealing with the adverse effects of future conditions and events, Wilson most likely would consider as a mitigating factor ABC's plans to
    postpone expenditures for research and development projects
  150. which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity's ability to continue as a going concern
    cash flows from operating activities are negative
  151. which of the following auditing procedures most likely would assist in auditor and identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?
    Confirming with third parties the details of arrangements to maintain financial support
  152. which of the following audit procedures would most likely assist in auditor and identifying conditions and events that may indicate there could be substantial doubt about an entity's ability to continue as a going concern
    review compliance with the terms of debt agreements
  153. Wilson CPA believes there is substantial doubt about the ability of ABC company to continue as a going concern for a reasonable period of time. In evaluating ABC's plans for dealing with the adverse effects of future conditions and events Wilson most likely would consider, as a mitigating factor, ABC's plans to
    negotiate reductions in required dividends being paid on preferred stock
  154. the adverse effects of events causing auditor to believe there is substantial doubt about an entity's ability to continue as a going concern would most likely be mitigated by evidence relating to the
    marketability of assets that management plans to sell
  155. which of the following events within auditor issue a report that omits any reference to consistency
    a change in the useful life used to calculate the provision depreciation expense
  156. and auditor would express and unqualified opinion with an explanatory paragraph added to the auditor's report for
    • in unjustified accounting change, no
    • in material weakness in internal control, no
  157. under which of the following circumstances would a disclaimer of opinion not be appropriate
    management does not provide reasonable justification for change in accounting principles
  158. ABC company uses the FIFO method of costing for international subsidiaries inventory and LIFO for its domestic inventory. Under these circumstances, the auditor's report on ABC's financial statements should express and
    unqualified opinion
  159. in the first audit of a new client, and auditor was able to extend auditing procedures to gather sufficient evidence about consistency. Under these circumstances, the auditor should
    not refer to consistency in the auditor's report
  160. when management does not provide reasonable justification that a change in accounting principle is preferable and it represents comparative financial statements, the auditor should express a qualified opinion
    each year that the financial statements initially reflecting the change represented
  161. when an entity changes his method of accounting for income taxes, which has a material effect on comparability, the auditor should refer to the change in an explanatory paragraph added to the auditor's report. This paragraph should identify the nature of the change and
    referred to the financial statement note that discusses the change in detail
  162. an entity change from the straight line method to the declining balance method of depreciation for all newly acquired assets. This changes no material effect on the current years financial statements, but is reasonably certain to have a substantial effect in later years. If the change is disclosed in the notes to the financial statements, the auditor should issue a report with a
    unqualified opinion
  163. when reporting on comparative financial statements, and auditor ordinarily should change the previously issued opinion on the prior years financial statements if the
    prior years financial statements are restated to conform with generally accepted accounting principles
  164. Wilson CPA audited ABC companies prior-year financial statements. These statements are presented with those of the current year for comparative purposes without Wilson's auditor's report, expressed a qualified opinion. In drafting the current years auditors report, Johnson CPA the successor auditor, should
    • one. Not named Wilson as the predecessor auditor
    • two. Indicate the type of report issued by Johnson
    • three. Indicate the substantive reasons for Wilson's qualification

    all of the above
  165. before reissuing the prior years audit auditor's report on the financial statements of a former client, the predecessor auditor should obtain a letter a representations from the
    • former clients management, yes
    • successor auditor, yes
  166. when single year financial statements are presented, and auditor you ordinarily would express and unqualified opinion in an unmodified report if the
    prior years financial statements were audited by another CPA whose report, which expressed in unqualified opinion, is not presented
  167. a client is presenting comparative two-year financial statements. Which of the following is correct concerning reporting responsibilities of a continuing auditor?
    The auditor should issue one audit report that is on both presented years
  168. the predecessor auditor, who was satisfied after properly communicating with the successor auditor, has reissued a report because the audit client desires comparative financial statements. The predecessor auditor's report should make
    no reference to the report or the work of the successor auditor
  169. on audited financial statements for the prior year presented in comparative form with audited financial statements for the current year should be clearly marked to indicate their status and
    • one. The report on the priorshould be reissued to accompany the current report
    • two. The report on the current should include as a separate paragraph a description of the responsibility assumed for the priors financial statements

    either one or two
  170. in an audit of a nonissue or company, which statement is correct concerning requirements supplementary information by a designated accounting standard setter?
    The auditor should apply certain limited procedures to the required supplement Terry information, the report deficiencies in, or omissions of, such information
  171. in auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. If the auditor concludes that the financial statements do not require revision, but the client refuses to revise or eliminate the material inconsistency, the auditor may
    revise the auditor's report to include a separate explanatory paragraph describing the material inconsistency
  172. when audited financial statements are presented in a clients document containing other information, the auditor should
    read the other information to determine that it is consistent with the audited financial statements.
  173. In auditor includes a separate paragraph in an otherwise unmodified report to emphasize that the entity being reported all on had significant transactions with related parties. The inclusion of the separate paragraph
    is appropriate and would not negate the unqualified opinion
  174. and auditor concludes of the clients illegal act, which is a material effect on the financial statements, has not been properly accounted for or disclosed. Depending on the materiality of the effect on the financial statements, the auditor should express either a
    qualified opinion or an adverse opinion
  175. which of the following phrases would in auditor most likely including the auditor's report when expressing a qualified opinion because of inadequate disclosure?
    Except for the omission of the information discussed in the preceding paragraph
  176. in which of the following circumstances would in auditor be most likely to express an adverse opinion?
    The financial statements are not in conformity with the fasb statements regarding the capitalization of leases
  177. when in auditor qualifies an opinion because of inadequate disclosure, the auditor should describe the nature of the omission in a separate explanatory paragraph and modify the
    • introductory paragraph, no
    • scope paragraph, no
    • opinion paragraph, yes
  178. if a publicly held company issues financial
    statements that purport to present its financial position and results of
    operations but omits the statement of cash flows, the auditor
    ordinarily would express a
    qualified opinion
  179. in which of the following situations would in auditor ordinarily choose between expressing an except for qualified opinion or an adverse opinion
    the financial statements failed to disclose information that is required by generally accepted accounting principles
  180. in which of the following situations would in auditor ordinarily choose between expressing a qualified opinion or an adverse opinion
    conditions that cause the auditor to have substantial doubt about the entity's ability to continue as a going concern are inadequately disclosed
  181. in the first audit of a client and auditor was not able to gather sufficient evidence about the consistent application of accounting principles between the current in the prior year as well as the amounts of assets or liabilities at the beginning of the current year. His was due to the clients record retention policies. If the amounts in question could materially affect current operating results, the auditor would
    be unable to express an opinion on the current year's results of operations and cash flows
  182. in which of the following circumstances would in auditor not express an unqualified opinion?
    The auditor is unable to obtainaudited financial statements of the consolidated investee
  183. due to a scope limitation, and auditor disclaimed an opinion on the financial statements taken as a whole, but the auditor's report included a statement that the current asset portion of the entity's balance sheet was fairly stated. The inclusion of the statement is
    not appropriate because it may tend to overshadow the auditors disclaimer of opinion
  184. Wilson CPA, was engaged to audit the financial statements of ABC company, a new client, the year ended December 31, 2009. Wilson obtain sufficient audit evidence for all of ABC's financial statement items except ABC's opening inventory. Due to inadequate financial records, Wilson could not verify ABC's January 1, 2009 inventory balances. Wilson's opinion on ABC's 2009 financial statements most likely will be
    • balance sheet, unqualified
    • income statement, disclaimer
  185. in auditor who qualifies an opinion because of an insufficiency of evidence show matter should describe the limitations in an explanatory paragraph. The auditor should also referred to the limitation in the
    • scope paragraph, yes
    • opinion paragraph, yes
    • nose to the financial statements, no
  186. Wilson CPA, has been asked to audit and report on the balance sheet of ABC company but not on the statements of income, retained earnings, or cash flows. Wilson will have access to all information underlying the basic financial statements. Under these circumstances, Wilson may
    except the engagement because such engagements merely involve limited reporting objectives.
  187. When disclaiming opinion due to a client imposed scope limitation, and auditor should indicate in a separate paragraph why the audit did not comply with generally accepted auditing standards. The auditor should also omit the
    • scope paragraph, yes
    • opinion paragraph, no
  188. in auditor decides to issue a qualified opinion on and entities financial statements because a major inadequacy in its computerized accounting records prevents the auditor from applying necessary procedures. The opinion paragraph of the auditors report should state that the qualification prep pertains to
    the possible effects on the financial statements
  189. a scope limitation sufficient to preclude an unqualified opinion always will result when management
    refuses to acknowledge its responsibility for the fair present Tatian of the financial statements in conformity with generally accepted accounting principles
  190. in auditor may not issue a qualified opinion when
    the auditor lacks independence with respect to the audited entity
  191. in auditor may express an opinion on and entities Accounts Receivable balanceeven if the auditor has disclaimed in opinion on the financial statements taken as a whole provided the
    report on the Accounts Receivable is presented separately from the disclaimer of opinion on the financial statements
  192. Wilson CPA is engaged by ABC Corp. the client to audit the financial statements of XYZ Corp. a company that is not Wilson's client. ABC expects to present XYZ's audited financial statements with Wilson's auditors report to First Federal Bank to obtain financing in ABC's attempt to purchase XYZ
    ABC Corp. the client that engaged Wilson
  193. when in auditor expresses an adverse opinion, the opinion paragraph should include
    a direct reference to a separate paragraph disclosing the basis for the opinion
  194. and auditor should disclose as substantive reasons for expressing an adverse opinion in an explanatory paragraph
    preceding the opinion paragraph
  195. whenever independent CPA assistant preparing the financial statements of a publicly held entity, but has not audited or reviewed them, the CPA should issue a disclaimer of opinion. In such situations, the CPA has no responsibility to apply any procedures beyond
    reading the financial statements for obvious material misstatements
  196. when an independent CPA is associated with the financial statements of a publicly held entity but has not audited or reviewed such statements, the appropriate form of report to be issued must must include a
    disclaimer of opinion
  197. Wilson CPA is aware that Wilson's name is to be included in the interim report of national company a publicly held entity nationals quarterly financial statements are contained in the interim report. Wilson has not audited or reviewed these interim financial statements. Wilson should request that
    • one Wilson's name not be included in the communication
    • to the financial statements be marked as on audited with a notation that no opinion is expressed on them

    either one or two
  198. the objective of a review of interim financial information of a public entityissuer is to provide an accountant with the basis for reporting whether
    material modification should be made to conform with generally accepted accounting principles
  199. an independent accountants report is based on a review of interim financial information. If this report is presented in a registration statement, a prospect this should include a statement clarifying that the
    accountants review report is not a part of this registration statement within the meaning of the securities act of 1933
  200. modification of the CPAs report on a review of the interim financial statements of a publicly held company would be necessitated by which of the following?
    Inadequate disclosure
  201. which of the following procedures ordinarily should be applied when an independent accountant conducts a review of interim financial information of publicly held entity?
    Read the minutes of the board of directors meetings
  202. which of the following is least likely to be a procedure included in an accountants review of interim financial information of a public entity?
    Observe counting the physical inventory
  203. and accountants review report on interim financial information of the public entity is most likely to include a
    description of the procedures for review
  204. and auditor may report on condensed financial statements that are derived from complete financial statements if the
    auditor indicates whether the information in the condensed financial statements is fairly stated in all material respects in relation to the complete financial statements from which it has been derived
  205. and auditor is engaged report on selected financial data that are included in a client prepared document containing audited financial statements. Under these circumstances, the report on the selected data should
    be limited to data derived from the audited financial statements
  206. before reporting on the financial statements of the US entity that have been prepared in conformity with another countries accounting principles, and auditor practicing in the US should
    understand the accounting principles generally accepted in the other country
  207. which of the following is least likely to be included in an agreed-upon procedures atesttation engagement report?
    limited assurance on the information presented
  208. a summary of findings rather than assurance is most likely to be included in
    agreed-upon procedures report
  209. which of the following is not correct concerning us pacified parties of an agreed-upon procedures report under either the auditing or attestation standards
    they must sign engagement letter
  210. when and accountant examines projected financial statements, the accountant's report should include a separate paragraph that
    describes the limitations on the usefulness of the presentation
  211. and accountant may accept an engagement to apply agreed-upon procedures to perspective financial statements provided that
    use of the report is restricted to the specified parties
  212. and accountants compilation report on a financial forecast should include a statement that
    they will usually be differences between the forecasted an actual results
  213. accepting an engagement to examine in entities financial projection most likely would be appropriate if the projection were to be distributed to
    a bank with which the entity is negotiating for a loan
  214. A CPA in public practice is required to comply with the provisions of the statements on standards for atesttation engagements, SSAE when
    • testifying as an expert witness in accounting and auditing matters given stipulated facts, no
    • compiling a clients financial projection that presents a hypothetical course of action, yes
  215. and accountants compilation report of the financial forecast should include a statement that the
    compilation does not include evaluation of the support of the assumptions underlying the forecast
  216. which of the following is a perspective financial statement for general use upon which an accountant may appropriately report
    financial forecast
  217. given one or more hypothetical assumptions, a responsible party may prepare, to the best of its knowledge and belief, and entities expected financial position, results of operations, and changes in financial position. Such perspective financial statements are known as
    financial projections
  218. and accountant may except the engagement to apply agreed-upon procedures to perspective financial statements provided that
    distribution of the report is restricted to the specified parties
  219. when accounting examines a financial forecast the fails to disclose several significant assumptions used to prepare the forecast, the accountant should describe the assumptions and the accountants report an issue a
    adverse opinion
  220. an account is report of the review of pro forma financial information should include a
    reference to the financial statements from which the historical financial information is derived
  221. which of the following is not an objective of a CPAs examination of the clients management discussion and analysis prepared pursuant to securities and exchange commission rules and regulations?
    The presentation is in conformity with rules and regulations adopted by the securities and exchange commission
  222. which of the following is an assertion embodied in management's discussion and analysis?
    Consistency with the financial statements
  223. which of the following statements is correct relating to an auditors review engagements on and entities management discussion and analysis?
    The review report of a public entity should be restricted to the use of specified parties
  224. statements on standards for accounting and review services establish standards and procedures for which of the following engagements?
    Compiling an individual's personal financial statement to be used to obtain a mortgage
  225. the authoritative body designated to promulgate standards concerning accountants Association with on audited financial statements of an entity that is not required to file financial statements within agency regulating the issuance of the entity securities is the
    accounting and review services committee
  226. which of the following accounting services main
    accountant perform without being required to issue a compilation or review report under the statements on standards for accounting and
    review services?
    • one. Preparing a working trial balance
    • two. Preparing standard monthly Journal entries

    both one and two
  227. Main accounting except the engagement to compile or review the financial statements of a not-for-profit entity if the accountant is unfamiliar with the specialized industry accounting principles, or plans to obtain the required level of knowledge before compiling or reviewing the financial statements?
    • Compilation, yes
    • review, yes
  228. which of the following statements is correct concerning both an engagement to compile and engagement to review a nonissue or financial statements?
    The accountant does not contemplate obtaining an understanding of internal control
  229. in accounting is required to comply with the provisions of statements on standards for accounting and review services when
    • one. Reproducing client prepared financial statements, without modification, as an accommodation to a client.
    • Two. Preparing standard monthly Journal entries for just depreciation and expiration of prepaid expenses

    neither one nor to
  230. ABC company engaged Wilson CPA to submit to ABC a written personal financial plan containing on audited personal financial statements. Wilson anticipates omitting certain disclosures required by Because the engagement sole purpose is to assist ABC in developing a personal financial plan. For Wilson to be exempt from comp line with the requirements of statements on standards for accounting and review services. ABC is required to agree that the
    financial statements will not be used to obtain credit
  231. statements on standards for accounting and review services apply when accountant has
    generated, to the use of computer software, financial statements prepared in accordance with a comprehensive basis of accounting other than gap.
  232. Wilson CPA accepted engagement to audit the financial statements of ABC resources, a nonissue or. Before the completion of the audit, ABC requested Wilson to change the engagement to a compilation of financial statements. Before Wilson agrees to change the engagement, Wilson is required to consider the
    • one. Additional audit effort necessary to complete the audit, yes
    • two. Reason given for ABC's request, yes
  233. and accountant may compile a nonissue is financial statements that omits all of the disclosures required by gap only of the omission is
    • one. Clearly indicated in the accountant's report
    • two. Not undertaken with the intention of misleading the financial statement users

    both one and two
  234. while performing a compilation of financial statements, information indicating that the entity use information is being compiled may lack the ability to continue as a going concern has come to the accountants attention. The client agrees that such a situation does exist, a refuses to add disclosures relating to it. What effect is this most likely to have on the account is review report?
    the report should indicate a departure from generally acceptedaccounting principles, with modification of the reports. In addition of an explanatory paragraph
  235. when the content is engaged to compile a nonissue or's financial statements that omit substantially all disclosures required by, the accountant should indicate in the compilation report that the financial statements are
    not designed for those who are uninformed about the omitted disclosures
  236. when on audited financial statements of a nonissue or are presented in comparative form with audited financial statements in the subsequent year, the on audited financial statement should be clearly marked to indicate their status and
    • one. The report on the on audited financial statement should be reissued
    • two. The report on the audited financial statement should include a separate paragraph describing the responsibility assumed for the on audited financial statements

    either one or two
  237. Wilson CPA compiled improperly reported on the financial statements of ABC company a nonissue or, for the year ended March 31, 2008. These financial statements omitted substantially all disclosures required by generally accepted accounting principles. ABC company asked Wilson to compile the statements for the year ended March 31, 2009 and to include all Disclosures for the 2009 statements only, but otherwise present both years financial statements in comparative form. What is Wilson's responsibility concerning the proposed engagement
    Wilson may not report on the comparative financial statements because the 2008 statements are not comparable to the 2009 statements that include the gap disclosures
  238. which of the following statements should not be included in an accountant standard report a stone the compilation of an entities financial statements?
    A statement that the accountant does not express an opinion but expresses only limited assurance on the financial statements
  239. if requested to perform review engagement for a nonissue or in which an accountant has an immaterial direct financial interest, the accountant is
    not independent and, therefore, may not issue a review report
  240. Wilson CPA has been asked to issue a review report on the balance sheet of ABC company a nonissue or. Wilson will not be reporting on ABC company statements of income, retained earnings, and cash flows. Wilson may issue the review report provided the
    scope of the inquiry and analytical procedures has not been restricted
  241. Wilson CPA was engaged review the financial statements of ABC company a nonissue or. During the engagement Wilson uncovered a complex scheme involving client illegal acts that materially affect ABC's financial statements. If Wilson believes a modification of the standard review report is not adequate to indicate the deficiencies in the financial statements will show Wilson should
    withdraw from the engagement
  242. which of the following is not generally considered a procedure followed by an accountant in obtaining a reasonable basis for the expression of limited assurance for review of financial statements?
    Assess fraud risk
  243. which of the following procedures would and accountant least likely perform during an engagement to review the financial statements of a nonissue or Russian Mark
    observing the safeguards over access to and use of assets and records
  244. which of the following procedures should and accountant performs during an engagement to review the financial statements of a nonissue or?
    Obtaining a client representation letter from members of management
  245. and accountant should perform analytical procedures during an engagement to
    • compile a nonissue or is financial statements, no
    • review a nonissue or financial statements, yes
  246. which of the following inquiry or analytical procedures ordinarily is performed in an engagement to review a nonissue or is financial statements?
    Inquiries concerning the entities procedures for recording and summarizing transactions
  247. which of the following procedures would most likely be included in the review engagement of a nonissue or
    inquiring about related party transactions
  248. and accountant has been engaged to review a nonissue is financial statements that contained several departures from gap. If the financial statements are not revised and modification of the standard review report is not adequate to indicate the deficiencies, the accountant should
    withdraw from the engagement and provide no further services concerning these financial statements
  249. each page of a nonissue is financial statements reviewed by an accountant should include the following reference:
    see accountants review report
  250. financial statements of a nonissue or that have been reviewed by and accountant should be accompanied by a report stating that a review
    consist principally of inquiries of company personnel and analytical procedures applied to financial data
  251. and accountant who it begun an audit of the financial statements of a nonissue or was asked to change the engagement to review because of a restriction on the scope of the audit. If there is reasonable justification for the change, the accountant review report should include reference to the
    • scope limitation that cause the changed engagement, no
    • original engagement that was agreed to, no
  252. Wilson CPA is engaged to review the 2008 financial statements of ABC company a nonissue or. Previously Wilson audited ABC's 2007 financial statements and expressed in unqualified opinion. Wilson decides to include a separate paragraph 2008 review report because ABC plans to present comparative financial statements for 2008 and 2007. This separate paragraph should indicate that
    no auditing procedures were performed after the date of the 2007 auditor's report
  253. in accountant standard report and review of the financial statements of a nonissue or should state that the accountant
    is not aware of any material modifications that should be made to the financial statements for them to conform to gap
  254. advantage of using statistical over nonstatistical sampling sampling methods and test of controls is of the statistical methods
    provide an objective basis for quantitatively evaluating sample risk
  255. an advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps in auditor to
    measure the sufficiency of the evidential matter obtained
  256. the likelihood of assessing control risk to high is the risk that the sample selected to test controls
    does not support the auditors planned assessed level of control risk and the true operating effectiveness of the control structure justifies such an assessment
  257. the risk of incorrect acceptance and the likelihood of assessing control risk to low relate to the
    effectiveness of the audit
  258. which of the following best illustrates the concept of sampling risk
    a randomly chosen sample may not be representative of the population as a whole on the characteristic of interest
  259. in assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk to high relate to the
    efficiency of the audit
  260. which of the following sampling methods would be used to estimate a numerical measurement of the population, such as a dollar value?
    Variables sampling
  261. for which of the following audit tests would in auditor most likely use attribute sampling?
    Inspecting employee time cards for proper approval by supervisors
  262. in underlying feature of random-based selection of items is that each
    item in the accounting population should have an opportunity to be selected
  263. which of the following statistical selection techniques is least desirable for use by an auditor
    block selection
  264. what is the primary objective of using stratification as a sampling method in auditing
    to decrease the effective variance in the total population
  265. as a result of test of controls, and auditor assessed control risk to low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was
    more than the deviation rate in the auditor sample
  266. which of the following factors are considered in determining the sample size for a test of controls?
    • Expected deviation rate, yes
    • tolerable deviation rate, yes
  267. which of the following statements is correct concerning statistical sampling and test of controls?
    There is an inverse relationship between the sample size and the tolerable tolerable rate
  268. in determining the sample size for test of controls, and auditor should consider the likely rate of deviations, the allowable risk of assessing control risk to low, and the
    tolerable deviation rate
  269. which of the following combinations results in the decrease in sample size and the sample for attributes?
    • Risk of assessing control risk to low, increase
    • tolerable rate, increase
    • expected population deviation rate, decrease
  270. in auditor is testing internal control procedures that are evidenced on and entities vouchers by matching random numbers with Bulger's numbers. If a random number matches the number of avoided voucher, the vulture ordinarily should be replaced by another voucher in the random sample if the voucher
    has been properly voided
  271. in auditor plans to examine a sample of 20 purchase orders for proper approvals as prescribed by the clients control procedures. one of the purchase orders and the chosen sample of 20 cannot be found, and the auditor is unable to use alternative procedures to test whether the purchase order was properly approved. The auditor should
    treat the missing purchase order as a deviation the purpose of evaluating the sample
  272. which of the following statements is correct concerning probability proportional to size sampling, also known as dollar unit sampling?
    The auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan
  273. which of the following statements is correct concerning the auditors use of statistical sampling?
    In auditor needs to estimate the dollar amount of the standard deviation of the population to use classical variables sampling
  274. which of the following most likely would be in advantage in using classical variables sampling rather than probability proportional to size sampling?
    Inclusion of zero and negative balances generally does not require special design considerations

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