Question 1

The auditor's objective is to determine whether the financial statements are free of material misstatement, whether from error or fraud.

Accepted Answer

A) True 
 B)False

Question 2

A segment for the allocation of a preliminary judgment may be:

Accepted Answer

A)  The income statement. 
B)  The balance sheet. 
C)  The accounts receivable and allowance for doubtful accounts. 
D)  The retained earnings statement. 
A)  The income statement. 
B)  The balance sheet. 
C)  The accounts receivable and allowance for doubtful accounts. 
D)  The retained earnings statement.

Question 3

An error or omission is considered to be material if:

Accepted Answer

A)  The act was intentional. 
B)  The results would have affected the judgment of a reasonable user. 
C)  The act was unintentional. 
D)  The omission was more than $100,000. 
A)  The act was intentional. 
B)  The results would have affected the judgment of a reasonable user. 
C)  The act was unintentional. 
D)  The omission was more than $100,000.

Question 4

What is materiality and why is it important to auditors?

Accepted Answer

The auditor's objective is to determine

Question 5

A tolerable misstatement is:

Accepted Answer

A)  A percentage threshold, such as 2%, of variance allowed in net income. 
B)  Zero as all accounts must represent 100% accuracy. 
C)  A set amount, such as $100,000, that an account can be misstated before an auditor will call for a preliminary judgment. 
D)  An amount set by the FASB based upon the industry the company is in. 
A)  A percentage threshold, such as 2%, of variance allowed in net income. 
B)  Zero as all accounts must represent 100% accuracy. 
C)  A set amount, such as $100,000, that an account can be misstated before an auditor will call for a preliminary judgment. 
D)  An amount set by the FASB based upon the industry the company is in.

Question 6

Auditing is the process of:

Accepted Answer

A)  Developing internal controls. 
B)  Testing internal controls. 
C)  Gathering and evaluating evidence. 
D)  Proving standards of SOX 2002 are upheld. 
A)  Developing internal controls. 
B)  Testing internal controls. 
C)  Gathering and evaluating evidence. 
D)  Proving standards of SOX 2002 are upheld.

Question 7

Beyond publishing findings of internal controls, fraud and misstatements, auditors must also publish findings on:

Accepted Answer

A)  Compliance with certain contractual agreements or regulatory requirements. 
B)  Compliance with other auditors findings. 
C)  Adherence to industry ratio standards. 
D)  All of the above. 
A)  Compliance with certain contractual agreements or regulatory requirements. 
B)  Compliance with other auditors findings. 
C)  Adherence to industry ratio standards. 
D)  All of the above.

Question 8

Why might an auditor use sampling?

Accepted Answer

A)  Because testing and entire accounting system is impractical and unnecessary. 
B)  Because the client has not paid for full testing of the financial statements. 
C)  The auditor deems that there is no fraud in a certain area of the business. 
D)  The auditor deems that there is fraud in a certain area of a business. 
A)  Because testing and entire accounting system is impractical and unnecessary. 
B)  Because the client has not paid for full testing of the financial statements. 
C)  The auditor deems that there is no fraud in a certain area of the business. 
D)  The auditor deems that there is fraud in a certain area of a business.

Question 9

How are acceptable audit risk and acceptable detection risk related?
Acceptable audit risk is the level of audit risk the auditor is willing to accept. Similarly, while detection risk is a risk the auditor wants to avoid, acceptable detection risk is the level of detection risk the auditor is willing to accept. How does the level of acceptable audit risk or the level of acceptable detection risk affect the audit? If, for example, the level of audit risk the auditor is willing to accept increases, this increase generally acts to decrease the nature, timing, and extent of testing the auditor performs. The same is true for an increase in acceptable detection risk.

Accepted Answer

Acceptable audit risk is the level of au

Question 10

Describe what rule making bodies are and provide an example of at least one of them.

Accepted Answer

A number of rule-making bodies affect th

Question 11

The Public Company Accounting Oversight Board has the power to do what?

Accepted Answer

A)  Enforce internal controls within auditing firms. 
B)  Audit the firms who perform audits. 
C)  Impose sanctions against auditing firms that fail to fulfill their professional responsibilities when auditing public companies. 
D)  Challenge audit findings of internal auditing committees. 
A)  Enforce internal controls within auditing firms. 
B)  Audit the firms who perform audits. 
C)  Impose sanctions against auditing firms that fail to fulfill their professional responsibilities when auditing public companies. 
D)  Challenge audit findings of internal auditing committees.

Question 12

When auditors are judging materiality, they are concerned with:

Accepted Answer

A)  Magnitude. 
B)  Errors. 
C)  Intentional omissions. 
D)  All of the above. 
A)  Magnitude. 
B)  Errors. 
C)  Intentional omissions. 
D)  All of the above.

Question 13

In what year was the Securities and Exchange Commission formed?

Accepted Answer

A)  1928. 
B)  1933. 
C)  1942. 
D)  2002. 
A)  1928. 
B)  1933. 
C)  1942. 
D)  2002.

Question 14

All auditors are regulated by the SEC as given authority by SOX 2002.

Accepted Answer

A) True 
 B)False

Question 15

The reperformance procedure is not used often because of the time it takes to reperform; however, it is a useful tool when highly reliable evidence is sought.

Accepted Answer

A) True 
 B)False

Question 16

On every audit, the auditor is required to assess the ability of the audited entity to continue to operate for a period not to exceed one year from the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 17

There are no standard setting boards for auditors as their trade is more of an art than a specific science.

Accepted Answer

A) True 
 B)False

Question 18

The Public Company Accounting Oversight Board was created by the ________?

Accepted Answer

A)  Sarbanes-Oxley Act of 2002. 
B)  Securities and Exchange Commission. 
C)  Financial Accounting Standards Board. 
D)  United States Congress. 
A)  Sarbanes-Oxley Act of 2002. 
B)  Securities and Exchange Commission. 
C)  Financial Accounting Standards Board. 
D)  United States Congress.

Question 19

An unqualified report means that the auditor who is doing the report feels unqualified to make any sound judgments about the company.

Accepted Answer

A) True 
 B)False

Question 20

What are the seven evidence gathering procedures?

Accepted Answer

Confirmation, observation, phy

The auditor's objective is to determine whether the financial statements are free of material misstatement, whether from error or fraud.

A segment for the allocation of a preliminary judgment may be:

An error or omission is considered to be material if:

What is materiality and why is it important to auditors?

A tolerable misstatement is:

Auditing is the process of:

Beyond publishing findings of internal controls, fraud and misstatements, auditors must also publish findings on:

Why might an auditor use sampling?

Describe what rule making bodies are and provide an example of at least one of them.

The Public Company Accounting Oversight Board has the power to do what?

When auditors are judging materiality, they are concerned with:

In what year was the Securities and Exchange Commission formed?

All auditors are regulated by the SEC as given authority by SOX 2002.

The reperformance procedure is not used often because of the time it takes to reperform; however, it is a useful tool when highly reliable evidence is sought.

On every audit, the auditor is required to assess the ability of the audited entity to continue to operate for a period not to exceed one year from the balance sheet date.

There are no standard setting boards for auditors as their trade is more of an art than a specific science.

The Public Company Accounting Oversight Board was created by the ________?

An unqualified report means that the auditor who is doing the report feels unqualified to make any sound judgments about the company.

What are the seven evidence gathering procedures?

Introduction to Forensic Accounting and Fraud Examination

The Forensic Accounting Legal Environment

Fundamentals I: Accounting Information Systems

Fraud Prevention and Risk Management

Fraud Detection

The Fraud Investigation and Engagement Processes

The Evidence Collection Process

Fraud Examination Evidence I: Physical, Documentary, and Observational Evidence

Fraud Examination Evidence II: Interview and Interrogation Methods

Fraud Examination Evidence III: Forensic Science and Computer Forensics

The Fraud Report, Litigation, and the Recovery Process

Employee, Vendor, and Other Frauds Against the Organization

Financial Statement Fraud

Fraud and Sox Compliance

Tax Fraud

Bankruptcy, Divorce, Identity Theft

Organized Crime, Counterterrorism, and Anti-Money Laundering

Business Valuation

Dispute Resolution Services

Filters

Exam 4: Fundamentals II: The Auditing Environment

The auditor's objective is to determine whether the financial statements are free of material misstatement, whether from error or fraud.

A segment for the allocation of a preliminary judgment may be:

An error or omission is considered to be material if:

What is materiality and why is it important to auditors?

A tolerable misstatement is:

Auditing is the process of:

Beyond publishing findings of internal controls, fraud and misstatements, auditors must also publish findings on:

Why might an auditor use sampling?

Describe what rule making bodies are and provide an example of at least one of them.

The Public Company Accounting Oversight Board has the power to do what?

When auditors are judging materiality, they are concerned with:

In what year was the Securities and Exchange Commission formed?

All auditors are regulated by the SEC as given authority by SOX 2002.

The reperformance procedure is not used often because of the time it takes to reperform; however, it is a useful tool when highly reliable evidence is sought.

On every audit, the auditor is required to assess the ability of the audited entity to continue to operate for a period not to exceed one year from the balance sheet date.

There are no standard setting boards for auditors as their trade is more of an art than a specific science.

The Public Company Accounting Oversight Board was created by the ________?

An unqualified report means that the auditor who is doing the report feels unqualified to make any sound judgments about the company.

What are the seven evidence gathering procedures?

Introduction to Forensic Accounting and Fraud Examination

The Forensic Accounting Legal Environment

Fundamentals I: Accounting Information Systems

Fraud Prevention and Risk Management

Fraud Detection

The Fraud Investigation and Engagement Processes

The Evidence Collection Process

Fraud Examination Evidence I: Physical, Documentary, and Observational Evidence

Fraud Examination Evidence II: Interview and Interrogation Methods

Fraud Examination Evidence III: Forensic Science and Computer Forensics

The Fraud Report, Litigation, and the Recovery Process

Employee, Vendor, and Other Frauds Against the Organization

Financial Statement Fraud

Fraud and Sox Compliance

Tax Fraud

Bankruptcy, Divorce, Identity Theft

Organized Crime, Counterterrorism, and Anti-Money Laundering

Business Valuation

Dispute Resolution Services

Filters