Question 1

The standard auditors' report refers to standards of the PCAOB and GAAP in which paragraph?

Accepted Answer

A) Standards of the PCAOB: Scope only; GAAP: Opinion only 
B) Standards of the PCAOB: Introductory only; GAAP: Scope and opinion 
C) Standards of the PCAOB: Introductory and scope; GAAP: Opinion only 
D) Standards of the PCAOB: Introductory only; GAAP: All paragraphs 
A) Standards of the PCAOB: Scope only; GAAP: Opinion only 
B) Standards of the PCAOB: Introductory only; GAAP: Scope and opinion 
C) Standards of the PCAOB: Introductory and scope; GAAP: Opinion only 
D) Standards of the PCAOB: Introductory only; GAAP: All paragraphs

Question 2

For each of the statements below,indicate through the appropriate letter whether it relates to the PCAOB,Auditing Standards Board,both the PCAOB and Auditing Standards Board,or neither the PCAOB nor Auditing Standards Board.
A.PCAOB
B.Auditing Standards Board
C.Both PCAOB and Auditing Standards Board
D.Neither PCAOB nor Auditing Standards Board
1___.Conducts inspections of firms that audit public entities.2___.Pronouncements may be used in the audit of nonpublic entities.3___.Pronouncements may be used in the audit of public entities.4___.Was created by the Sarbanes Oxley Act of 2002.5___.Involved with the certification and licensure of public accountants.6___.Issues Statements on Auditing Standards.7___.Conducts peer reviews of firms that audit nonpublic entities.8___.Sanctions individual auditors for violations of generally accepted auditing standards.

Accepted Answer

1.A,2.B,3.

Question 3

The role of the Public Company Accounting Oversight Board in the standard-setting process is to develop

Accepted Answer

A) Statements on Auditing Standards for the audits of nonpublic entities. 
B) Auditing Standards for the audits of public entities. 
C) Governmental Auditing Standards for the audits of governmental entities. 
D) International Standards on Auditing for the audits of foreign entities. 
A) Statements on Auditing Standards for the audits of nonpublic entities. 
B) Auditing Standards for the audits of public entities. 
C) Governmental Auditing Standards for the audits of governmental entities. 
D) International Standards on Auditing for the audits of foreign entities.

Question 4

Which of the following situations would most likely be in conflict with the responsibilities principle?

Accepted Answer

A) Auditors perform the engagement with the performance level expected of prudent auditors,but not expert auditors. 
B) Auditors obtain expertise in their client's industry as they are conducting the audit examination. 
C) Auditors are directly involved with a client manager in a strategic decision-making capacity. 
D) Auditors fail to document their assessment of control risk following their study of internal control. 
A) Auditors perform the engagement with the performance level expected of prudent auditors,but not expert auditors. 
B) Auditors obtain expertise in their client's industry as they are conducting the audit examination. 
C) Auditors are directly involved with a client manager in a strategic decision-making capacity. 
D) Auditors fail to document their assessment of control risk following their study of internal control.

Question 5

Which of the following types of audit evidence provides the least assurance of reliability?

Accepted Answer

A) Receivable confirmations received from the client's customers. 
B) Prenumbered receiving reports completed by the client's employees. 
C) Prior months' bank statements obtained from the client. 
D) Municipal property tax bills prepared in the client's name. 
A) Receivable confirmations received from the client's customers. 
B) Prenumbered receiving reports completed by the client's employees. 
C) Prior months' bank statements obtained from the client. 
D) Municipal property tax bills prepared in the client's name.

Question 6

Prior to,or in conjunction with,the information-gathering procedures for an audit,audit team members should discuss the potential for material misstatement due to fraud.Which of the following best characterizes the mind-set that the audit team should maintain during this discussion?

Accepted Answer

A) Presumptive. 
B) Judgmental. 
C) Criticizing. 
D) Questioning. 
A) Presumptive. 
B) Judgmental. 
C) Criticizing. 
D) Questioning.

Question 7

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 clearly and consistently demonstrating 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 clearly and consistently demonstrating 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 8

Which of the following is most closely associated with the responsibilities principle?

Accepted Answer

A) Due care. 
B) Planning. 
C) Qualified audit opinion. 
D) Risk of material misstatement. 
A) Due care. 
B) Planning. 
C) Qualified audit opinion. 
D) Risk of material misstatement.

Question 9

Which of the following is an example of the appropriate implementation of a system of quality control?

Accepted Answer

A) The firm requires all documents obtained during the audit to be destroyed immediately following the engagement to ensure the client's information remains confidential. 
B) The firm's quality control policies have evolved through the performance of audit procedures but are not formally developed or communicated to staff members. 
C) All firm employees must verbally confirm their compliance with the appropriate independence requirements before being assigned to an engagement. 
D) The firm uses manuals and standardized forms for audit documentation to help ensure engagement performance objectives and quality standards are met. 
A) The firm requires all documents obtained during the audit to be destroyed immediately following the engagement to ensure the client's information remains confidential. 
B) The firm's quality control policies have evolved through the performance of audit procedures but are not formally developed or communicated to staff members. 
C) All firm employees must verbally confirm their compliance with the appropriate independence requirements before being assigned to an engagement. 
D) The firm uses manuals and standardized forms for audit documentation to help ensure engagement performance objectives and quality standards are met.

Question 10

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.

Question 11

The state of mind that characterizes the auditors' appropriate questioning and critical assessment of audit evidence is referred to as:

Accepted Answer

A) Due care. 
B) Independence in appearance. 
C) Professional judgment. 
D) Professional skepticism. 
A) Due care. 
B) Independence in appearance. 
C) Professional judgment. 
D) Professional skepticism.

Question 12

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 13

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 14

Which of the following statements is not true with respect to the responsibility for establishing generally accepted auditing standards?

Accepted Answer

A) The PCAOB issues auditing standards for the audit of public entities,subject to SEC approval. 
B) Standards issued by the Auditing Standards Board after 2003 apply to the audits of both public and private entities. 
C) The Auditing Standards Board currently issues auditing standards for the audit of nonpublic entities. 
D) Prior to the Sarbanes-Oxley Act,the Auditing Standards Board issued auditing standards for the audits of both public and private entities. 
A) The PCAOB issues auditing standards for the audit of public entities,subject to SEC approval. 
B) Standards issued by the Auditing Standards Board after 2003 apply to the audits of both public and private entities. 
C) The Auditing Standards Board currently issues auditing standards for the audit of nonpublic entities. 
D) Prior to the Sarbanes-Oxley Act,the Auditing Standards Board issued auditing standards for the audits of both public and private entities.

Question 15

Which of the following situations would result in the issuance of a disclaimer of opinion?

Accepted Answer

A) The audit reveals weaknesses in the client's internal control over financial reporting. 
B) The auditor is discovered to own a financial interest in the entity. 
C) The audit is performed,with limited exception,in accordance with generally accepted auditing standards. 
D) The entity's financial statements are not presented in conformity with the applicable financial reporting framework. 
A) The audit reveals weaknesses in the client's internal control over financial reporting. 
B) The auditor is discovered to own a financial interest in the entity. 
C) The audit is performed,with limited exception,in accordance with generally accepted auditing standards. 
D) The entity's financial statements are not presented in conformity with the applicable financial reporting framework.

Question 16

The initial development of auditing standards was in response to

Accepted Answer

A) A scandal involving embezzlement that was not detected during an audit engagement. 
B) Auditors' concerns that all components of the financial statements were not being verified. 
C) Independent inquiries of the public accounting profession made by the SEC. 
D) Requests by companies for greater assurance with respect to the auditors' ability to detect financial statement misstatements. 
A) A scandal involving embezzlement that was not detected during an audit engagement. 
B) Auditors' concerns that all components of the financial statements were not being verified. 
C) Independent inquiries of the public accounting profession made by the SEC. 
D) Requests by companies for greater assurance with respect to the auditors' ability to detect financial statement misstatements.

Question 17

For each of the items below,indicate through the appropriate letter the fundamental principle to which the item is most closely related.
A.Responsibilities principle
B.Performance principle
C.Reporting principle
1___.Maintaining professional skepticism.2___.An auditors' overall conclusion of the fairness of the client's financial statements.3___.The use of an audit plan to identify audit procedures to be performed during the engagement.4___.Auditors' assessment of the risk of material misstatement.5___.Accounting firm policies with respect to the level of expected continuing professional education.6___.Expressing an opinion in accordance with the auditor's findings.7___.Proper supervision of assistants on the audit.8___.Auditors' requests to obtain bank statements directly from financial institutions with whom the client does business.9___.An indication that an opinion cannot be expressed.10___.Determining and applying an appropriate materiality level.

Accepted Answer

1.A,2.C,3.

Question 18

Which of the following would be evaluated during the PCAOB inspection process? $$\begin{array} { c c c } 
&\text { Firm's systern of } & \text { Firaracial viability of } \
&\text { quality control } & \text { the firm } \
\text { A. } & \text { Yes } & \text { No } \
\text { B. } & \text { Yes } & \text { Yes } \
\text { C. } &\text { No } & \text { Yes }\
\text { C. } &\text { No } & \text { No  }\
\end{array}$$

Accepted Answer

The answer of Which of the following would be evaluated...

Question 19

Which of the following is not considered a type of audit evidence?

Accepted Answer

A) The entity's trial balance. 
B) Auditors' calculations. 
C) Physical observation. 
D) Verbal statements made by client personnel. 
A) The entity's trial balance. 
B) Auditors' calculations. 
C) Physical observation. 
D) Verbal statements made by client personnel.

Question 20

The fundamental principles of developed by the Auditing Standards Board are best described as:

Accepted Answer

A) Ten basic standards underlying an audit. 
B) Standards that apply only to audits of public entities. 
C) Industry specific guidance on how audit procedures should be conducted. 
D) Guidelines for the general conduct of audit engagements 
A) Ten basic standards underlying an audit. 
B) Standards that apply only to audits of public entities. 
C) Industry specific guidance on how audit procedures should be conducted. 
D) Guidelines for the general conduct of audit engagements

The standard auditors' report refers to standards of the PCAOB and GAAP in which paragraph?

The role of the Public Company Accounting Oversight Board in the standard-setting process is to develop

Which of the following situations would most likely be in conflict with the responsibilities principle?

Which of the following types of audit evidence provides the least assurance of reliability?

Prior to,or in conjunction with,the information-gathering procedures for an audit,audit team members should discuss the potential for material misstatement due to fraud.Which of the following best characterizes the mind-set that the audit team should maintain during this discussion?

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

Which of the following is most closely associated with the responsibilities principle?

Which of the following is an example of the appropriate implementation of a system of quality control?

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

The state of mind that characterizes the auditors' appropriate questioning and critical assessment of audit evidence is referred to as:

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

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

Which of the following statements is not true with respect to the responsibility for establishing generally accepted auditing standards?

Which of the following situations would result in the issuance of a disclaimer of opinion?

The initial development of auditing standards was in response to

Which of the following would be evaluated during the PCAOB inspection process? Firm's systern of Firaracial viability of quality control the firm A. Yes No B. Yes Yes C. No Yes C. No No

Which of the following is not considered a type of audit evidence?

The fundamental principles of developed by the Auditing Standards Board are best described as:

Auditing and Assurance Services

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Exam 2: Professional Standards

The standard auditors' report refers to standards of the PCAOB and GAAP in which paragraph?

The role of the Public Company Accounting Oversight Board in the standard-setting process is to develop

Which of the following situations would most likely be in conflict with the responsibilities principle?

Which of the following types of audit evidence provides the least assurance of reliability?

Prior to,or in conjunction with,the information-gathering procedures for an audit,audit team members should discuss the potential for material misstatement due to fraud.Which of the following best characterizes the mind-set that the audit team should maintain during this discussion?

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

Which of the following is most closely associated with the responsibilities principle?

Which of the following is an example of the appropriate implementation of a system of quality control?

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

The state of mind that characterizes the auditors' appropriate questioning and critical assessment of audit evidence is referred to as:

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

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

Which of the following statements is not true with respect to the responsibility for establishing generally accepted auditing standards?

Which of the following situations would result in the issuance of a disclaimer of opinion?

The initial development of auditing standards was in response to

Which of the following would be evaluated during the PCAOB inspection process? Firm's systern of Firaracial viability of quality control the firm A. Yes No B. Yes Yes C. No Yes C. No No

Which of the following is not considered a type of audit evidence?

The fundamental principles of developed by the Auditing Standards Board are best described as:

Auditing and Assurance Services

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters