Question 1

Which of the following procedures would provide the most reliable audit evidence?

Accepted Answer

A) Inquiries of the client's accounting staff held in private. 
B) Inspection of pre-numbered client shipping documents. 
C) Inspection of bank statements obtained directly from the client's financial institution. 
D) Analytical procedures performed by auditors on the client's trial balance. 
A) Inquiries of the client's accounting staff held in private. 
B) Inspection of pre-numbered client shipping documents. 
C) Inspection of bank statements obtained directly from the client's financial institution. 
D) Analytical procedures performed by auditors on the client's trial balance.

Question 2

The three fundamental principles underlying GAAS include all of the following, except:

Accepted Answer

A) general principle. 
B) performance principle. 
C) reporting principle. 
D) responsibilities principle. 
A) general principle. 
B) performance principle. 
C) reporting principle. 
D) responsibilities principle.

Question 3

The Public Company Accounting Oversight Board was established by which of the following?

Accepted Answer

A) The Financial Accounting Standards Board. 
B) The American Institute of Certified Public Accountants. 
C) The Sarbanes-Oxley Act of 2002. 
D) The International Accounting Standards Board. 
A) The Financial Accounting Standards Board. 
B) The American Institute of Certified Public Accountants. 
C) The Sarbanes-Oxley Act of 2002. 
D) The International Accounting Standards Board.

Question 4

PCAOB inspections are conducted by

Accepted Answer

A) individuals selected by the PCAOB who are not current employees of public accounting firms. 
B) another public accounting firm selected by the firm being inspected. 
C) current employees of another public accounting firm selected by the PCAOB. 
D) the AICPA's Public Oversight Board. 
A) individuals selected by the PCAOB who are not current employees of public accounting firms. 
B) another public accounting firm selected by the firm being inspected. 
C) current employees of another public accounting firm selected by the PCAOB. 
D) the AICPA's Public Oversight Board.

Question 5

Internal evidence

Accepted Answer

A) is obtained directly from third parties independent of the client. 
B) originates outside of the client's system but has been received and processed by the client. 
C) consists of documents that are produced, used, and stored within the client's information system. 
D) consists of representations made by the client's officers, directors, owners, and employees. 
A) is obtained directly from third parties independent of the client. 
B) originates outside of the client's system but has been received and processed by the client. 
C) consists of documents that are produced, used, and stored within the client's information system. 
D) consists of representations made by the client's officers, directors, owners, and employees.

Question 6

The responsibilities principle under generally accepted auditing standards does not include which of the following?

Accepted Answer

A) Competence and capabilities. 
B) Independent attitude. 
C) Due care. 
D) Planning and supervision. 
A) Competence and capabilities. 
B) Independent attitude. 
C) Due care. 
D) Planning and supervision.

Question 7

What type of evidence would provide the highest level of assurance in an attestation engagement?

Accepted Answer

A) Evidence secured solely from within the entity. 
B) Evidence obtained from independent sources. 
C) Evidence obtained indirectly. 
D) Evidence obtained from multiple internal inquiries. 
A) Evidence secured solely from within the entity. 
B) Evidence obtained from independent sources. 
C) Evidence obtained indirectly. 
D) Evidence obtained from multiple internal inquiries.

Question 8

Which of the following statements is generally correct about the appropriateness of audit evidence?

Accepted Answer

A) Auditors' direct personal knowledge, obtained through observation and inspection, is of higher quality than information obtained indirectly from independent outside sources. 
B) To be reliable, audit evidence must be either valid or relevant, but need not be both. 
C) Client accounting data alone may be considered sufficient appropriate audit evidence to issue an unmodified opinion on client financial statements. 
D) Appropriateness of audit evidence refers to the amount of corroborative evidence to be obtained. 
A) Auditors' direct personal knowledge, obtained through observation and inspection, is of higher quality than information obtained indirectly from independent outside sources. 
B) To be reliable, audit evidence must be either valid or relevant, but need not be both. 
C) Client accounting data alone may be considered sufficient appropriate audit evidence to issue an unmodified opinion on client financial statements. 
D) Appropriateness of audit evidence refers to the amount of corroborative evidence to be obtained.

Question 9

As it relates to audit evidence, appropriateness refers to the

Accepted Answer

A) originality of evidence gathered. 
B) quality of evidence gathered. 
C) quantity of evidence gathered. 
D) timeliness of evidence gathered. 
A) originality of evidence gathered. 
B) quality of evidence gathered. 
C) quantity of evidence gathered. 
D) timeliness of evidence gathered.

Question 10

Audit evidence is usually considered sufficient when

Accepted Answer

A) it is reliable. 
B) there is enough quantity to afford a reasonable basis for an opinion on financial statements. 
C) it has the qualities of being relevant, objective, and free from unknown bias. 
D) it has been obtained through random selection methods. 
A) it is reliable. 
B) there is enough quantity to afford a reasonable basis for an opinion on financial statements. 
C) it has the qualities of being relevant, objective, and free from unknown bias. 
D) it has been obtained through random selection methods.

Question 11

Which of the following would most likely be a violation of the independence requirement found in the responsibilities principle under generally accepted auditing standards?

Accepted Answer

A) An auditor on the engagement has a distant relative who is employed by a vendor that does a significant amount of business with clients. 
B) The client's Chief Executive Officer graduated from the same university as the partner in charge of the accounting firm. 
C) An auditor on the engagement owns a financial interest in the stock of the client. 
D) The client provides financial support to a number of charitable causes that also receive support from the accounting firm. 
A) An auditor on the engagement has a distant relative who is employed by a vendor that does a significant amount of business with clients. 
B) The client's Chief Executive Officer graduated from the same university as the partner in charge of the accounting firm. 
C) An auditor on the engagement owns a financial interest in the stock of the client. 
D) The client provides financial support to a number of charitable causes that also receive support from the accounting firm.

Question 12

In a system of quality control, leadership responsibilities for quality within the firm are best characterized by:

Accepted Answer

A) basing personnel performance evaluations on the employees' ability to generate revenues from existing clients or by acquiring new clients. 
B) management's evaluation of the integrity and business reputation of the client. 
C) management's clear and consistent demonstration of its own commitment to quality control and high-quality work. 
D) assigning management responsibilities in such a manner that commercial considerations are the firm's top priority. 
A) basing personnel performance evaluations on the employees' ability to generate revenues from existing clients or by acquiring new clients. 
B) management's evaluation of the integrity and business reputation of the client. 
C) management's clear and consistent demonstration of its own commitment to quality control and high-quality work. 
D) assigning management responsibilities in such a manner that commercial considerations are the firm's top priority.

Question 13

Which of the following presumptions does not relate to the reliability of audit evidence?

Accepted Answer

A) The more effective the client's internal control, the more assurance it provides about the accounting data and financial statements. 
B) The auditors' opinion, to be economically useful, is formed within reasonable time and based on evidence obtained at a reasonable cost. 
C) Evidence obtained from independent sources outside the entity is more reliable than evidence secured solely within the entity. 
D) The independent auditors' direct personal knowledge, obtained through observation and inspection, is of higher quality than information obtained indirectly. 
A) The more effective the client's internal control, the more assurance it provides about the accounting data and financial statements. 
B) The auditors' opinion, to be economically useful, is formed within reasonable time and based on evidence obtained at a reasonable cost. 
C) Evidence obtained from independent sources outside the entity is more reliable than evidence secured solely within the entity. 
D) The independent auditors' direct personal knowledge, obtained through observation and inspection, is of higher quality than information obtained indirectly.

Question 14

Which of the following is a definition of control risk?

Accepted Answer

A) The risk that a material misstatement will not be prevented or detected on a timely basis by the client's internal controls 
B) The risk that the auditor will not detect a material misstatement 
C) The risk that the auditor's assessment of internal controls will be at less than the maximum level 
D) The susceptibility of material misstatement assuming there are no related internal control policies or procedures 
A) The risk that a material misstatement will not be prevented or detected on a timely basis by the client's internal controls 
B) The risk that the auditor will not detect a material misstatement 
C) The risk that the auditor's assessment of internal controls will be at less than the maximum level 
D) The susceptibility of material misstatement assuming there are no related internal control policies or procedures

Question 15

Which reporting options do auditors have if the client's financial statements are not presented according to the applicable financial framework (e.g., GAAP, IFRS)?

Accepted Answer

A) Unmodified opinion or disclaimer of opinion. 
B) Qualified opinion or disclaimer of opinion. 
C) Unmodified opinion or adverse opinion. 
D) Qualified opinion or adverse opinion. 
A) Unmodified opinion or disclaimer of opinion. 
B) Qualified opinion or disclaimer of opinion. 
C) Unmodified opinion or adverse opinion. 
D) Qualified opinion or adverse opinion.

Question 16

A periodic review of an audit firm's system of quality control by the PCAOB is referred to as a(n):

Accepted Answer

A) inspection. 
B) peer review. 
C) principles review. 
D) quality review. 
A) inspection. 
B) peer review. 
C) principles review. 
D) quality review.

Question 17

Which of the following is least related to the concept of independence in appearance?

Accepted Answer

A) The auditors' objectivity and ability to act impartially toward the client. 
B) The perceptions of individuals who rely on the financial statements and auditors' opinion on the financial statements. 
C) The ownership of a financial interest in a client by the auditor. 
D) The employment of the auditor's family member in an important position with the client. 
A) The auditors' objectivity and ability to act impartially toward the client. 
B) The perceptions of individuals who rely on the financial statements and auditors' opinion on the financial statements. 
C) The ownership of a financial interest in a client by the auditor. 
D) The employment of the auditor's family member in an important position with the client.

Question 18

Which of the following does not directly relate to an auditor's responsibility for having appropriate competence and capabilities to perform the audit?

Accepted Answer

A) Participating in continuing professional education 
B) Gaining experience through hands-on practice 
C) Obtaining reliable documentary evidence 
D) Attending on-the-job training 
A) Participating in continuing professional education 
B) Gaining experience through hands-on practice 
C) Obtaining reliable documentary evidence 
D) Attending on-the-job training

Question 19

The concept of _____ recognizes that a GAAS audit may fail to detect all material misstatements.

Accepted Answer

A) absolute assurance 
B) due care 
C) reasonable assurance 
D) risk of material misstatement 
A) absolute assurance 
B) due care 
C) reasonable assurance 
D) risk of material misstatement

Question 20

Which of the following is not included in the auditors' standard report representing an unmodified opinion?

Accepted Answer

A) A brief indication of the responsibility of auditors and management for the financial statements. 
B) An indication that all appropriate disclosures have been made and included in the financial statements. 
C) An indication that the audit was conducted in accordance with standards established by the PCAOB. 
D) The auditors' opinion on the fairness of the financial statements. 
A) A brief indication of the responsibility of auditors and management for the financial statements. 
B) An indication that all appropriate disclosures have been made and included in the financial statements. 
C) An indication that the audit was conducted in accordance with standards established by the PCAOB. 
D) The auditors' opinion on the fairness of the financial statements.

Which of the following procedures would provide the most reliable audit evidence?

The three fundamental principles underlying GAAS include all of the following, except:

The Public Company Accounting Oversight Board was established by which of the following?

PCAOB inspections are conducted by

Internal evidence

The responsibilities principle under generally accepted auditing standards does not include which of the following?

What type of evidence would provide the highest level of assurance in an attestation engagement?

Which of the following statements is generally correct about the appropriateness of audit evidence?

As it relates to audit evidence, appropriateness refers to the

Audit evidence is usually considered sufficient when

Which of the following would most likely be a violation of the independence requirement found in the responsibilities principle under generally accepted auditing standards?

In a system of quality control, leadership responsibilities for quality within the firm are best characterized by:

Which of the following presumptions does not relate to the reliability of audit evidence?

Which of the following is a definition of control risk?

Which reporting options do auditors have if the client's financial statements are not presented according to the applicable financial framework (e.g., GAAP, IFRS)?

A periodic review of an audit firm's system of quality control by the PCAOB is referred to as a(n):

Which of the following is least related to the concept of independence in appearance?

Which of the following does not directly relate to an auditor's responsibility for having appropriate competence and capabilities to perform the audit?

The concept of _____ recognizes that a GAAS audit may fail to detect all material misstatements.

Which of the following is not included in the auditors' standard report representing an unmodified opinion?

Auditing and Assurance Services

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Revenue and Collection Cycle 279

Acquisition and Expenditure Cycle 336

Production Cycle 394

Finance and Investment Cycle 443

Completing the Audit 500

Reports on Audited Financial Statements

Filters

Exam 2: Professional Standards

Which of the following procedures would provide the most reliable audit evidence?

The three fundamental principles underlying GAAS include all of the following, except:

The Public Company Accounting Oversight Board was established by which of the following?

PCAOB inspections are conducted by

Internal evidence

The responsibilities principle under generally accepted auditing standards does not include which of the following?

What type of evidence would provide the highest level of assurance in an attestation engagement?

Which of the following statements is generally correct about the appropriateness of audit evidence?

As it relates to audit evidence, appropriateness refers to the

Audit evidence is usually considered sufficient when

Which of the following would most likely be a violation of the independence requirement found in the responsibilities principle under generally accepted auditing standards?

In a system of quality control, leadership responsibilities for quality within the firm are best characterized by:

Which of the following presumptions does not relate to the reliability of audit evidence?

Which of the following is a definition of control risk?

Which reporting options do auditors have if the client's financial statements are not presented according to the applicable financial framework (e.g., GAAP, IFRS)?

A periodic review of an audit firm's system of quality control by the PCAOB is referred to as a(n):

Which of the following is least related to the concept of independence in appearance?

Which of the following does not directly relate to an auditor's responsibility for having appropriate competence and capabilities to perform the audit?

The concept of _____ recognizes that a GAAS audit may fail to detect all material misstatements.

Which of the following is not included in the auditors' standard report representing an unmodified opinion?

Auditing and Assurance Services

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Revenue and Collection Cycle 279

Acquisition and Expenditure Cycle 336

Production Cycle 394

Finance and Investment Cycle 443

Completing the Audit 500

Reports on Audited Financial Statements

Filters