Question 1

Which of the following statements is not correct?

Accepted Answer

A)  There are many ways an auditor can accumulate evidence to meet overall audit objectives. 
B)  Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility. 
C)  It is appropriate to minimize the cost of accumulating evidence. 
D)  Gathering evidence and minimizing costs are equally important considerations that affect the approach the auditor selects. 
A)  There are many ways an auditor can accumulate evidence to meet overall audit objectives. 
B)  Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility. 
C)  It is appropriate to minimize the cost of accumulating evidence. 
D)  Gathering evidence and minimizing costs are equally important considerations that affect the approach the auditor selects.

Question 2

Which of the following assertions is described as "this assertion addresses whether all transactions that should be included in the financial statements are in fact included"?

Accepted Answer

A)  occurrence 
B)  completeness 
C)  rights and obligations 
D)  existence 
A)  occurrence 
B)  completeness 
C)  rights and obligations 
D)  existence

Question 3

Discuss the differences in the auditor's responsibilities for discovering (1) material errors, (2) material fraud (3) direct-effect illegal acts, and (4) indirect-effect illegal acts.

Accepted Answer

Auditing standards make no distinction b

Question 4

Two overriding considerations affect the many ways an auditor can accumulate evidence:
1) Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility.
2) Cost of accumulating evidence should be minimized.
In evaluating these considerations:

Accepted Answer

A)  the first is more important than the second. 
B)  the second is more important than the first. 
C)  they are equally important. 
D)  it is impossible to prioritize them. 
A)  the first is more important than the second. 
B)  the second is more important than the first. 
C)  they are equally important. 
D)  it is impossible to prioritize them.

Question 5

Management assertions are:

Accepted Answer

A)  directly related to the financial reporting framework used by the company, usually U.S. GAAP or IFRS 
B)  stated in the footnotes to the financial statements. 
C)  explicitly expressed representations about the financial statements. 
D)  provided to the auditor in the assertions letter, but are not disclosed on the financial statements. 
A)  directly related to the financial reporting framework used by the company, usually U.S. GAAP or IFRS 
B)  stated in the footnotes to the financial statements. 
C)  explicitly expressed representations about the financial statements. 
D)  provided to the auditor in the assertions letter, but are not disclosed on the financial statements.

Question 6

The auditor has considerable responsibility for notifying users as to whether or not the statements are properly stated. This imposes upon the auditor a duty to:

Accepted Answer

A)  provide reasonable assurance that material misstatements will be detected. 
B)  be a guarantor of the fairness in the statements. 
C)  be equally responsible with management for the preparation of the financial statements. 
D)  be an insurer of the fairness in the statements. 
A)  provide reasonable assurance that material misstatements will be detected. 
B)  be a guarantor of the fairness in the statements. 
C)  be equally responsible with management for the preparation of the financial statements. 
D)  be an insurer of the fairness in the statements.

Question 7

Under the cycle approach to segmenting an audit, transactions recorded in different journals should never be combined with the general ledger balances that result from those transactions.

Accepted Answer

A) True 
 B)False

Question 8

With respect to the detection of indirect- effect illegal acts, auditing standards state that the auditor provides:

Accepted Answer

A)  no assurance that they will be detected. 
B)  the same reasonable assurance provided for other items. 
C)  assurance that they will be detected, if material. 
D)  assurance that they will be detected, if highly material. 
A)  no assurance that they will be detected. 
B)  the same reasonable assurance provided for other items. 
C)  assurance that they will be detected, if material. 
D)  assurance that they will be detected, if highly material.

Question 9

Describe what analytical procedures and tests of details of balances are and give an example of each.

Accepted Answer

Analytical procedures use comparisons an

Question 10

Auditors generally use a financial statement cycle approach when performing a financial statement audit. Describe the transaction flow, using specific examples, from journals to financial statements that produce financial statements.

Accepted Answer

Transactions-sales, cash receipts, acqui

Question 11

Why does the auditor divide the financial statements into segments around the financial statement cycles?

Accepted Answer

A)  Most auditors are trained to audit cycles as opposed to entire financial statements. 
B)  The approach aids in the assignment of tasks to different members of the audit team. 
C)  The cycle approach is required by auditing standards. 
D)  The cycle approach allows the auditor to detect indirect-effect illegal acts. 
A)  Most auditors are trained to audit cycles as opposed to entire financial statements. 
B)  The approach aids in the assignment of tasks to different members of the audit team. 
C)  The cycle approach is required by auditing standards. 
D)  The cycle approach allows the auditor to detect indirect-effect illegal acts.

Question 12

Auditors have found that the most efficient way to conduct audits is to focus primarily on testing classes of transactions and performing tests of ending account balances.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is most correct regarding errors and fraud?

Accepted Answer

A)  An error is unintentional, whereas fraud is intentional. 
B)  Frauds occur more often than errors in financial statements. 
C)  Errors are always fraud and frauds are always errors. 
D)  Auditors have more responsibility for finding fraud than errors. 
A)  An error is unintentional, whereas fraud is intentional. 
B)  Frauds occur more often than errors in financial statements. 
C)  Errors are always fraud and frauds are always errors. 
D)  Auditors have more responsibility for finding fraud than errors.

Question 14

Which of the following best describes tests of details of balances?

Accepted Answer

A)  audit procedures designed to test for monetary misstatements in the accounts summarized in the financial statements 
B)  audit procedures designed to test for the monetary amounts of transactions 
C)  audit procedures designed to test for reasonableness of account balances 
D)  audit procedures designed to test for effectiveness in recording accounting information 
A)  audit procedures designed to test for monetary misstatements in the accounts summarized in the financial statements 
B)  audit procedures designed to test for the monetary amounts of transactions 
C)  audit procedures designed to test for reasonableness of account balances 
D)  audit procedures designed to test for effectiveness in recording accounting information

Question 15

The auditor's best defense when existing material misstatements in the financial statements are not uncovered in the audit is:

Accepted Answer

A)  the audit was conducted in accordance with auditing standards. 
B)  the financial statements are the client's responsibility. 
C)  the client is guilty of contributory negligence. 
D)  the client is guilty of fraudulent misrepresentation. 
A)  the audit was conducted in accordance with auditing standards. 
B)  the financial statements are the client's responsibility. 
C)  the client is guilty of contributory negligence. 
D)  the client is guilty of fraudulent misrepresentation.

Question 16

If the auditor insists on financial statement disclosures that the management finds unacceptable, the auditor can:

Accepted Answer

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

Question 17

For a private company audit, tests of controls are normally performed only on those internal controls the auditor believes have not been operating effectively during the period under audit.

Accepted Answer

A) True 
 B)False

Question 18

After the auditor has completed all audit procedures, it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented. This is a highly subjective process that relies heavily on:

Accepted Answer

A)  generally accepted auditing standards. 
B)  the AICPA's Code of Professional Conduct. 
C)  generally accepted accounting principles. 
D)  the auditor's professional judgment. 
A)  generally accepted auditing standards. 
B)  the AICPA's Code of Professional Conduct. 
C)  generally accepted accounting principles. 
D)  the auditor's professional judgment.

Question 19

Tests of details of balances typically involve the use of comparisons and relationships to assess the overall reasonableness of account balances.

Accepted Answer

A) True 
 B)False

Question 20

Which is the following is most correct regarding the distinction(s) between the auditor's responsibilities for searching for errors and fraud.

Accepted Answer

A)  little 
B)  a significant 
C)  no 
D)  various 
A)  little 
B)  a significant 
C)  no 
D)  various

Exam 6: The CPA Profession

Which of the following statements is not correct?

Which of the following assertions is described as "this assertion addresses whether all transactions that should be included in the financial statements are in fact included"?

Discuss the differences in the auditor's responsibilities for discovering (1) material errors, (2) material fraud (3) direct-effect illegal acts, and (4) indirect-effect illegal acts.

Two overriding considerations affect the many ways an auditor can accumulate evidence: 1) Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility. 2) Cost of accumulating evidence should be minimized. In evaluating these considerations:

Management assertions are:

The auditor has considerable responsibility for notifying users as to whether or not the statements are properly stated. This imposes upon the auditor a duty to:

Under the cycle approach to segmenting an audit, transactions recorded in different journals should never be combined with the general ledger balances that result from those transactions.

With respect to the detection of indirect- effect illegal acts, auditing standards state that the auditor provides:

Describe what analytical procedures and tests of details of balances are and give an example of each.

Auditors generally use a financial statement cycle approach when performing a financial statement audit. Describe the transaction flow, using specific examples, from journals to financial statements that produce financial statements.

Why does the auditor divide the financial statements into segments around the financial statement cycles?

Auditors have found that the most efficient way to conduct audits is to focus primarily on testing classes of transactions and performing tests of ending account balances.

Which of the following statements is most correct regarding errors and fraud?

Which of the following best describes tests of details of balances?

The auditor's best defense when existing material misstatements in the financial statements are not uncovered in the audit is:

If the auditor insists on financial statement disclosures that the management finds unacceptable, the auditor can:

For a private company audit, tests of controls are normally performed only on those internal controls the auditor believes have not been operating effectively during the period under audit.

After the auditor has completed all audit procedures, it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented. This is a highly subjective process that relies heavily on:

Tests of details of balances typically involve the use of comparisons and relationships to assess the overall reasonableness of account balances.

Which is the following is most correct regarding the distinction(s) between the auditor's responsibilities for searching for errors and fraud.

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Section 404 Audits of Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details and Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls and Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters