Question 1

Typically, when a going concern issue exists the auditor should:

Accepted Answer

A) Issue an unqualified opinion with an explanatory paragraph 
B) Explain the reasons for the going concern issue 
C) Indicate where management's plans to deal with the going concern are addressed 
D) All of the above 
A) Issue an unqualified opinion with an explanatory paragraph 
B) Explain the reasons for the going concern issue 
C) Indicate where management's plans to deal with the going concern are addressed 
D) All of the above

Question 2

PCAOB Auditing Standard No.4 requires that the external auditors should take each of the following steps when reporting on whether a material weakness still exists in the internal controls except for:

Accepted Answer

A) Evaluate whether management has accepted responsibility for the effectiveness of internal control 
B) Evaluate whether management asserts whether the controls are effective in correcting the material weakness 
C) Evaluate whether management has obtained sufficient evidence to support its assessment 
D) Evaluate whether management has conducted an audit of internal controls 
A) Evaluate whether management has accepted responsibility for the effectiveness of internal control 
B) Evaluate whether management asserts whether the controls are effective in correcting the material weakness 
C) Evaluate whether management has obtained sufficient evidence to support its assessment 
D) Evaluate whether management has conducted an audit of internal controls

Question 3

Which of the following statements is correct regarding auditor independence as stated by the AICPA in Rule 101?

Accepted Answer

A) A covered member's immediate family can have a direct financial interest in a client. 
B) A covered member can have a joint investment with a client. 
C) A covered member involved in the audit of a bank can have an auto loan at the bank. 
D) A covered member can have a direct financial interest in a client as long as it is not material and is disclosed properly. 
A) A covered member's immediate family can have a direct financial interest in a client. 
B) A covered member can have a joint investment with a client. 
C) A covered member involved in the audit of a bank can have an auto loan at the bank. 
D) A covered member can have a direct financial interest in a client as long as it is not material and is disclosed properly.

Question 4

Susie is an auditor with XYZ Audit firm.The Senior Audit member has told her that all fieldwork must be completed by the end of the week.Susie knows that corners have been cut and certain tests not completed due to the time constraints.The integrity of the firm could be compromised.What should Susie do?

Accepted Answer

A) Do nothing. 
B) Talk with the chain of command of the client to see that her concerns are dealt with. 
C) Follow the chain of command of XYZ to see that her concerns are dealt with. 
D) Talk with a reporter from the Wall Street Journal. 
A) Do nothing. 
B) Talk with the chain of command of the client to see that her concerns are dealt with. 
C) Follow the chain of command of XYZ to see that her concerns are dealt with. 
D) Talk with a reporter from the Wall Street Journal.

Question 5

One of the articles of professional conduct, due care, requires a member to discharge professional responsibilities with _______ and _______.

Accepted Answer

A) Confidentiality and integrity 
B) Objectivity and ethics 
C) Standard morals and ethics 
D) Competence and diligence 
A) Confidentiality and integrity 
B) Objectivity and ethics 
C) Standard morals and ethics 
D) Competence and diligence

Question 6

The eight risk assessment auditing standards issued by the AICPA identify the following types of misstatements:

Accepted Answer

A) Known and unknown misstatements 
B) Likely and unknown misstatements 
C) Known and likely misstatements 
D) All material misstatements 
A) Known and unknown misstatements 
B) Likely and unknown misstatements 
C) Known and likely misstatements 
D) All material misstatements

Question 7

PCAOB Auditing Standard No.2 and eight risk assessment standards of AICPA require the auditor to do all but:

Accepted Answer

A) A more in-depth understanding of the entity and environment. 
B) A rigorous assessment of risk of material misstatement. 
C) Linkage between the risks of misstatement and the nature, timing, and extent of audit procedures. 
D) A more-in-depth sampling of evidence. 
A) A more in-depth understanding of the entity and environment. 
B) A rigorous assessment of risk of material misstatement. 
C) Linkage between the risks of misstatement and the nature, timing, and extent of audit procedures. 
D) A more-in-depth sampling of evidence.

Question 8

Which of the following is a reason for an auditor to issue a qualified opinion?

Accepted Answer

A) Difference of opinion with management on presentation of financial statements in the annual report 
B) Difference of opinion with management on earnings estimate of a material amount 
C) Difference of opinion with management on preferred accounting principles under GAAP 
D) Difference of opinion with management on a material application of accounting standards 
A) Difference of opinion with management on presentation of financial statements in the annual report 
B) Difference of opinion with management on earnings estimate of a material amount 
C) Difference of opinion with management on preferred accounting principles under GAAP 
D) Difference of opinion with management on a material application of accounting standards

Question 9

Which of the following is the most likely reason for an auditor to issue a qualified opinion?

Accepted Answer

A) Inability to gather sufficient relevant information to form the basis for the opinion 
B) Differences with management that lead to trust issues on the part of the auditor 
C) Going concern issue 
D) Difference of opinion with management on the application of generally accepted accounting principles 
A) Inability to gather sufficient relevant information to form the basis for the opinion 
B) Differences with management that lead to trust issues on the part of the auditor 
C) Going concern issue 
D) Difference of opinion with management on the application of generally accepted accounting principles

Question 10

The auditors' determination of whether the financial statements "present fairly" is based on:

Accepted Answer

A) Whether the users are able to assess the reliability of the financial statements 
B) Whether the statements have been prepared in accordance with the same GAAP used from one year to another 
C) Whether the auditor has been able to gather sufficient evidence to warrant the statement that the financial statements present fairly 
D) Whether the accounting principles used are appropriate in the circumstances 
A) Whether the users are able to assess the reliability of the financial statements 
B) Whether the statements have been prepared in accordance with the same GAAP used from one year to another 
C) Whether the auditor has been able to gather sufficient evidence to warrant the statement that the financial statements present fairly 
D) Whether the accounting principles used are appropriate in the circumstances

Question 11

Backdating options refers to:

Accepted Answer

A) Crossing out the date of exercise on the option certificate and changing it to an earlier date when the stock price was lower 
B) Changing the grant date of the options to lower the exercise price and reduce reported earnings 
C) Granting options to employees working for the company in years prior to the granting of the options 
D) Changing the future exercise price to correspond market increases in the stock price 
A) Crossing out the date of exercise on the option certificate and changing it to an earlier date when the stock price was lower 
B) Changing the grant date of the options to lower the exercise price and reduce reported earnings 
C) Granting options to employees working for the company in years prior to the granting of the options 
D) Changing the future exercise price to correspond market increases in the stock price

Question 12

The Audit Client Consideration case deals with issues related to:

Accepted Answer

A) Acceptance of new clients 
B) Issues that arise between the predecessor audit firm and the client 
C) Going concern issues raised by previous auditors 
D) All of the above 
A) Acceptance of new clients 
B) Issues that arise between the predecessor audit firm and the client 
C) Going concern issues raised by previous auditors 
D) All of the above

Question 13

Which of the following is not an element of the scope paragraph of the auditor's report?

Accepted Answer

A) States the auditor's responsibility to express an opinion on the financial statements. 
B) States the audit provides reasonable assurance that the statements are free of material misstatement. 
C) States audit provides reasonable basis for the opinion. 
D) States the audit evaluates the overall financial statement presentation. 
A) States the auditor's responsibility to express an opinion on the financial statements. 
B) States the audit provides reasonable assurance that the statements are free of material misstatement. 
C) States audit provides reasonable basis for the opinion. 
D) States the audit evaluates the overall financial statement presentation.

Question 14

Auditors are responsible to detect and correct errors when they are:

Accepted Answer

A) Material 
B) Material or immaterial 
C) Due to an illegal act 
D) Management fails to correct for the error 
A) Material 
B) Material or immaterial 
C) Due to an illegal act 
D) Management fails to correct for the error

Question 15

All of the following are in a position to commit fraud except for:

Accepted Answer

A) Employees who have access to assets 
B) Top management who can override internal controls 
C) External auditors who manipulate the amounts recorded in the financial statements 
D) All of the above are in a position to commit fraud 
A) Employees who have access to assets 
B) Top management who can override internal controls 
C) External auditors who manipulate the amounts recorded in the financial statements 
D) All of the above are in a position to commit fraud

Question 16

One ethical dilemma for professional accountants is a conflict between the interests of the stakeholders.Who or what is a stakeholder?

Accepted Answer

A) Everyone but the people within the company 
B) People who are affected by the outcomes of decisions that are made 
C) Supervisor of an accountant 
D) Employees only 
A) Everyone but the people within the company 
B) People who are affected by the outcomes of decisions that are made 
C) Supervisor of an accountant 
D) Employees only

Question 17

In the Imperial Valley Thrift & Loan case, each of the following were reasons for the going concern issue except for:

Accepted Answer

A) The magnitude of loan losses 
B) Insufficient equity capital 
C) Operating losses over an extended period of time 
D) Questions about the collectability of outstanding loans 
A) The magnitude of loan losses 
B) Insufficient equity capital 
C) Operating losses over an extended period of time 
D) Questions about the collectability of outstanding loans

Question 18

The AICPA issued eight Statements on Auditing Standards (SAS 104-111) that address risk assessment with respect to:

Accepted Answer

A) The design and performance of audit procedures to respond to assessed risks 
B) Whether the standards close the expectation gap 
C) The role and responsibilities of the audit committee in preventing fraud 
D) All of the above 
A) The design and performance of audit procedures to respond to assessed risks 
B) Whether the standards close the expectation gap 
C) The role and responsibilities of the audit committee in preventing fraud 
D) All of the above

Question 19

The Committee of Sponsoring Organizations of the Treadway Committee (COSO) analyzed the financial reporting of public companies during the 1987-1997 periods when business failures due to accounting fraud were high.Describe the major findings of COSO with respect to financial statement fraud.

Accepted Answer

The major findings of COSO with respect

Question 20

Under which of the following set of circumstances might the auditors disclaim an opinion?

Accepted Answer

A) The financial statements contain a departure from generally accepted accounting principles, the effect of which is material 
B) There is a client scope restriction that precludes the auditors' compliance with generally accepted auditing standards 
C) There has been a material change between periods in the method of the application of accounting principles 
D) Differences with management that lead to trust issues on the part of the auditor 
A) The financial statements contain a departure from generally accepted accounting principles, the effect of which is material 
B) There is a client scope restriction that precludes the auditors' compliance with generally accepted auditing standards 
C) There has been a material change between periods in the method of the application of accounting principles 
D) Differences with management that lead to trust issues on the part of the auditor

Typically, when a going concern issue exists the auditor should:

PCAOB Auditing Standard No.4 requires that the external auditors should take each of the following steps when reporting on whether a material weakness still exists in the internal controls except for:

Which of the following statements is correct regarding auditor independence as stated by the AICPA in Rule 101?

One of the articles of professional conduct, due care, requires a member to discharge professional responsibilities with _ and _.

The eight risk assessment auditing standards issued by the AICPA identify the following types of misstatements:

PCAOB Auditing Standard No.2 and eight risk assessment standards of AICPA require the auditor to do all but:

Which of the following is a reason for an auditor to issue a qualified opinion?

Which of the following is the most likely reason for an auditor to issue a qualified opinion?

The auditors' determination of whether the financial statements "present fairly" is based on:

Backdating options refers to:

The Audit Client Consideration case deals with issues related to:

Which of the following is not an element of the scope paragraph of the auditor's report?

Auditors are responsible to detect and correct errors when they are:

All of the following are in a position to commit fraud except for:

One ethical dilemma for professional accountants is a conflict between the interests of the stakeholders.Who or what is a stakeholder?

In the Imperial Valley Thrift & Loan case, each of the following were reasons for the going concern issue except for:

The AICPA issued eight Statements on Auditing Standards (SAS 104-111) that address risk assessment with respect to:

The Committee of Sponsoring Organizations of the Treadway Committee (COSO) analyzed the financial reporting of public companies during the 1987-1997 periods when business failures due to accounting fraud were high.Describe the major findings of COSO with respect to financial statement fraud.

Under which of the following set of circumstances might the auditors disclaim an opinion?

Ethical Reasoning Implications for Accounting

Accountants Ethical Decision Process and Professional Judgment

Corporate Governance and Ethical Management

Aicpa Code of Professional Conduct

Legal and Regulatory Obligations in an Ethical Framework

Earnings Management and the Quality of Financial Reporting

International Financial Reporting: Ethics and Corporate Governance Considerations

Filters

Exam 5: Audit Responsibilities and Accounting Fraud

Typically, when a going concern issue exists the auditor should:

PCAOB Auditing Standard No.4 requires that the external auditors should take each of the following steps when reporting on whether a material weakness still exists in the internal controls except for:

Which of the following statements is correct regarding auditor independence as stated by the AICPA in Rule 101?

One of the articles of professional conduct, due care, requires a member to discharge professional responsibilities with _______ and _______.

The eight risk assessment auditing standards issued by the AICPA identify the following types of misstatements:

PCAOB Auditing Standard No.2 and eight risk assessment standards of AICPA require the auditor to do all but:

Which of the following is a reason for an auditor to issue a qualified opinion?

Which of the following is the most likely reason for an auditor to issue a qualified opinion?

The auditors' determination of whether the financial statements "present fairly" is based on:

Backdating options refers to:

The Audit Client Consideration case deals with issues related to:

Which of the following is not an element of the scope paragraph of the auditor's report?

Auditors are responsible to detect and correct errors when they are:

All of the following are in a position to commit fraud except for:

One ethical dilemma for professional accountants is a conflict between the interests of the stakeholders.Who or what is a stakeholder?

In the Imperial Valley Thrift & Loan case, each of the following were reasons for the going concern issue except for:

The AICPA issued eight Statements on Auditing Standards (SAS 104-111) that address risk assessment with respect to:

The Committee of Sponsoring Organizations of the Treadway Committee (COSO) analyzed the financial reporting of public companies during the 1987-1997 periods when business failures due to accounting fraud were high.Describe the major findings of COSO with respect to financial statement fraud.

Under which of the following set of circumstances might the auditors disclaim an opinion?

Ethical Reasoning Implications for Accounting

Accountants Ethical Decision Process and Professional Judgment

Corporate Governance and Ethical Management

Aicpa Code of Professional Conduct

Legal and Regulatory Obligations in an Ethical Framework

Earnings Management and the Quality of Financial Reporting

International Financial Reporting: Ethics and Corporate Governance Considerations

Filters

One of the articles of professional conduct, due care, requires a member to discharge professional responsibilities with _ and _.