Question 1

Which of the following is accurate, as indicated in the principles underlying an audit?

Accepted Answer

A)  Management is expected to provide the auditors with all needed evidence prior to the beginning of audit work. 
B)  An auditor is unable to obtain absolute assurance that the financial statements are free from material misstatement. 
C)  Auditors are responsible for having appropriate competence to perform the audit without the assistance of outside specialists. 
D)  Management is responsible for preparing accurate financial statement amounts, while auditors are responsible for auditing those amounts and for preparing note disclosures related to those amounts. 
A)  Management is expected to provide the auditors with all needed evidence prior to the beginning of audit work. 
B)  An auditor is unable to obtain absolute assurance that the financial statements are free from material misstatement. 
C)  Auditors are responsible for having appropriate competence to perform the audit without the assistance of outside specialists. 
D)  Management is responsible for preparing accurate financial statement amounts, while auditors are responsible for auditing those amounts and for preparing note disclosures related to those amounts.

Question 2

The primary responsibility for the adequacy of disclosure in the financial statements of a publicly held company rests with the:

Accepted Answer

A)  Partner assigned to the audit engagement. 
B)  Management of the company. 
C)  Auditor in charge of the fieldwork. 
D)  Securities and Exchange Commission. 
A)  Partner assigned to the audit engagement. 
B)  Management of the company. 
C)  Auditor in charge of the fieldwork. 
D)  Securities and Exchange Commission.

Question 3

An engagement review form of peer review is least likely to include a peer reviewer's detailed analysis of:

Accepted Answer

A)  Compilation reports. 
B)  Documentation of procedures followed on a review. 
C)  Overall system of quality control. 
D)  Review reports. 
A)  Compilation reports. 
B)  Documentation of procedures followed on a review. 
C)  Overall system of quality control. 
D)  Review reports.

Question 4

Generally accepted auditing standards established by the AICPA through April of 2003:

Accepted Answer

A)  Have been accepted as interim standards by the Public Company Accounting Oversight Board. 
B)  Provide accounting guidance for nonpublic companies. 
C)  Have all been superseded by Public Company Accounting Oversight Board standards. 
D)  Are now developed by the Securities and Exchange Commission. 
A)  Have been accepted as interim standards by the Public Company Accounting Oversight Board. 
B)  Provide accounting guidance for nonpublic companies. 
C)  Have all been superseded by Public Company Accounting Oversight Board standards. 
D)  Are now developed by the Securities and Exchange Commission.

Question 5

The standard unmodified auditors' report for audits of nonpublic companies consists of three paragraphs. Identify the three paragraphs and describe the purpose of each.

Accepted Answer

• Introductory paragraph-describes the f

Question 6

Which of the following best describes what is meant by generally accepted auditing standards?

Accepted Answer

A)  Acts to be performed by the auditors. 
B)  Measures of the quality of the auditors' performance. 
C)  Procedures to be used to gather evidence to support financial statements. 
D)  Audit objectives generally determined on audit engagements. 
A)  Acts to be performed by the auditors. 
B)  Measures of the quality of the auditors' performance. 
C)  Procedures to be used to gather evidence to support financial statements. 
D)  Audit objectives generally determined on audit engagements.

Question 7

An audit performed in accordance with generally accepted auditing standards should:

Accepted Answer

A)  Be expected to provide absolute assurance that noncompliance with all laws will be detected where internal control is effective. 
B)  Be relied upon to disclose violations of truth in lending laws. 
C)  Encompass a plan to actively search for all illegalities which relate to operating aspects. 
D)  Not be relied upon to provide absolute assurance that all noncompliance with laws will be detected. 
A)  Be expected to provide absolute assurance that noncompliance with all laws will be detected where internal control is effective. 
B)  Be relied upon to disclose violations of truth in lending laws. 
C)  Encompass a plan to actively search for all illegalities which relate to operating aspects. 
D)  Not be relied upon to provide absolute assurance that all noncompliance with laws will be detected.

Question 8

Indicate whether you agree or disagree with the following statements concerning a financial statement audit conducted in accordance with generally accepted auditing standards.

Accepted Answer

A. Disagree
B. Disagree
C. Agr

Question 9

A procedure in which a quality control partner periodically tests the application of quality control procedures is most directly related to which quality control element?

Accepted Answer

A)  Engagement performance. 
B)  Human resources. 
C)  Leadership responsibilities for quality with the firm. 
D)  Monitoring. 
A)  Engagement performance. 
B)  Human resources. 
C)  Leadership responsibilities for quality with the firm. 
D)  Monitoring.

Question 10

To express an opinion on financial statements, the auditor obtains reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error.

Accepted Answer

A) True 
 B)False

Question 11

The auditors who find that the client has committed an illegal act would be most likely to withdraw from the engagement when the:

Accepted Answer

A)  Management fails to take appropriate corrective action. 
B)  Illegal act has material financial statement implications. 
C)  Illegal act has received widespread publicity. 
D)  Auditors cannot reasonably estimate the effect of the illegal act on the financial statements. 
A)  Management fails to take appropriate corrective action. 
B)  Illegal act has material financial statement implications. 
C)  Illegal act has received widespread publicity. 
D)  Auditors cannot reasonably estimate the effect of the illegal act on the financial statements.

Question 12

Auditors must consider the possibility of fraud by employees or management on every audit engagement. They must also consider the possibility that the client has not complied with laws.
(a) Distinguish between employee and management fraud.
(b) Describe the auditors' responsibility for the detection of fraud in an audit.
(c) Describe the auditors' responsibility regarding noncompliance with laws by a client.

Accepted Answer

(a) Employee fraud is dishonest actions

Question 13

The auditors are primarily responsible for preparing the financial statements and expressing an opinion on whether they follow generally accepted auditing standards.

Accepted Answer

A) True 
 B)False

Question 14

When a Statement on Auditing Standards uses the word "should" relating to a requirement, it means that the auditor:

Accepted Answer

A)  Must fulfill the responsibilities under all circumstances. 
B)  Must comply with requirements unless the auditor demonstrates and documents that alternative actions are sufficient to achieve the objectives of the standards. 
C)  Should consider whether to follow the advice based on the exercise of professional judgment in the circumstances. 
D)  May choose to change responsibilities relating to various professional standards that remain under consideration. 
A)  Must fulfill the responsibilities under all circumstances. 
B)  Must comply with requirements unless the auditor demonstrates and documents that alternative actions are sufficient to achieve the objectives of the standards. 
C)  Should consider whether to follow the advice based on the exercise of professional judgment in the circumstances. 
D)  May choose to change responsibilities relating to various professional standards that remain under consideration.

Question 15

Primary responsibility for the financial statements lies with: $$\begin{array} { | c | c | c | } 
\hline & \text { Auditors } & \text { Management } \
\hline \text { A. } & \text { Yes } & \text { Yes } \
\hline \text { B. } & \text { Yes } & \text { No } \
\hline \text { C. } & \text { No } & \text { Yes } \
\hline \text { D. } & \text { No } & \text { No } \
\hline
\end{array}$$

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 16

When the auditors express an opinion on financial statements, their responsibilities extend to:

Accepted Answer

A)  The underlying wisdom of their client's management decisions. 
B)  Whether the results of their client's operating decisions are fairly presented in the financial statements. 
C)  Active participation in the implementation of the advice given to their client. 
D)  An ongoing responsibility for their client's solvency. 
A)  The underlying wisdom of their client's management decisions. 
B)  Whether the results of their client's operating decisions are fairly presented in the financial statements. 
C)  Active participation in the implementation of the advice given to their client. 
D)  An ongoing responsibility for their client's solvency.

Question 17

Audits of financial statements are designed to obtain reasonable assurance of detecting misstatement due to: $$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { Frauoulent } \
\text { Financial } \
\text { Reporting }
\end{array} & \begin{array} { c } 
\text { Misappropriation } \
\text { of Assets }
\end{array} \
\hline \text { A. } & \text { Yes } & \text { Yes } \
\hline \text { B. } & \text { Yes } & \text { No } \
\hline \text { C. } & \text { No } & \text { Yes } \
\hline \text { D. } & \text { No } & \text { No } \
\hline
\end{array}$$

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 18

A set of criteria used to determine measurement, recognition, representation, and disclosure of all material items appearing in the financial statements is referred to as a(n)

Accepted Answer

A)  Financial reporting framework. 
B)  Public Company Accounting Oversight Board Criteria. 
C)  Quality control presentation standard. 
D)  Special purpose audit standard. 
A)  Financial reporting framework. 
B)  Public Company Accounting Oversight Board Criteria. 
C)  Quality control presentation standard. 
D)  Special purpose audit standard.

Question 19

Which of the following best describes a portion of the auditors' responsibility regarding noncompliance with laws by clients?

Accepted Answer

A)  The auditors have a responsibility to discover all material noncompliance. 
B)  If audit procedures reveal noncompliance, the auditors should take appropriate actions. 
C)  If the auditors suspect noncompliance, they should conduct a legal audit of the company. 
D)  The auditors' responsibility for the detection of all noncompliance is the same as their responsibility regarding material misstatements due to errors and fraud. 
A)  The auditors have a responsibility to discover all material noncompliance. 
B)  If audit procedures reveal noncompliance, the auditors should take appropriate actions. 
C)  If the auditors suspect noncompliance, they should conduct a legal audit of the company. 
D)  The auditors' responsibility for the detection of all noncompliance is the same as their responsibility regarding material misstatements due to errors and fraud.

Question 20

The auditors' report may be addressed to the company whose financial statements are being examined or to that company's:

Accepted Answer

A)  Chief operating officer. 
B)  President. 
C)  Board of Directors. 
D)  Chief financial officer. 
A)  Chief operating officer. 
B)  President. 
C)  Board of Directors. 
D)  Chief financial officer.

Which of the following is accurate, as indicated in the principles underlying an audit?

The primary responsibility for the adequacy of disclosure in the financial statements of a publicly held company rests with the:

An engagement review form of peer review is least likely to include a peer reviewer's detailed analysis of:

Generally accepted auditing standards established by the AICPA through April of 2003:

The standard unmodified auditors' report for audits of nonpublic companies consists of three paragraphs. Identify the three paragraphs and describe the purpose of each.

Which of the following best describes what is meant by generally accepted auditing standards?

An audit performed in accordance with generally accepted auditing standards should:

Indicate whether you agree or disagree with the following statements concerning a financial statement audit conducted in accordance with generally accepted auditing standards.

A procedure in which a quality control partner periodically tests the application of quality control procedures is most directly related to which quality control element?

To express an opinion on financial statements, the auditor obtains reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error.

The auditors who find that the client has committed an illegal act would be most likely to withdraw from the engagement when the:

The auditors are primarily responsible for preparing the financial statements and expressing an opinion on whether they follow generally accepted auditing standards.

When a Statement on Auditing Standards uses the word "should" relating to a requirement, it means that the auditor:

Primary responsibility for the financial statements lies with: Auditors Management A. Yes Yes B. Yes No C. No Yes D. No No

When the auditors express an opinion on financial statements, their responsibilities extend to:

Audits of financial statements are designed to obtain reasonable assurance of detecting misstatement due to: Frauoulent Financial Reporting Misappropriation of Assets A. Yes Yes B. Yes No C. No Yes D. No No

A set of criteria used to determine measurement, recognition, representation, and disclosure of all material items appearing in the financial statements is referred to as a(n)

Which of the following best describes a portion of the auditors' responsibility regarding noncompliance with laws by clients?

The auditors' report may be addressed to the company whose financial statements are being examined or to that company's:

The Role of the Public Accountant in the American Economy

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property, Plant, and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Filters

Exam 2: Professional Standards

Which of the following is accurate, as indicated in the principles underlying an audit?

The primary responsibility for the adequacy of disclosure in the financial statements of a publicly held company rests with the:

An engagement review form of peer review is least likely to include a peer reviewer's detailed analysis of:

Generally accepted auditing standards established by the AICPA through April of 2003:

The standard unmodified auditors' report for audits of nonpublic companies consists of three paragraphs. Identify the three paragraphs and describe the purpose of each.

Which of the following best describes what is meant by generally accepted auditing standards?

An audit performed in accordance with generally accepted auditing standards should:

Indicate whether you agree or disagree with the following statements concerning a financial statement audit conducted in accordance with generally accepted auditing standards.

A procedure in which a quality control partner periodically tests the application of quality control procedures is most directly related to which quality control element?

To express an opinion on financial statements, the auditor obtains reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error.

The auditors who find that the client has committed an illegal act would be most likely to withdraw from the engagement when the:

The auditors are primarily responsible for preparing the financial statements and expressing an opinion on whether they follow generally accepted auditing standards.

When a Statement on Auditing Standards uses the word "should" relating to a requirement, it means that the auditor:

Primary responsibility for the financial statements lies with: Auditors Management A. Yes Yes B. Yes No C. No Yes D. No No

When the auditors express an opinion on financial statements, their responsibilities extend to:

Audits of financial statements are designed to obtain reasonable assurance of detecting misstatement due to: Frauoulent Financial Reporting Misappropriation of Assets A. Yes Yes B. Yes No C. No Yes D. No No

A set of criteria used to determine measurement, recognition, representation, and disclosure of all material items appearing in the financial statements is referred to as a(n)

Which of the following best describes a portion of the auditors' responsibility regarding noncompliance with laws by clients?

The auditors' report may be addressed to the company whose financial statements are being examined or to that company's:

The Role of the Public Accountant in the American Economy

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property, Plant, and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Filters