Question 1

In comparing management fraud with employee fraud, the auditor's risk of failing to discover the fraud is:

Accepted Answer

A)  greater for management fraud because managers are inherently more deceptive than employees. 
B)  greater for management fraud because of management's ability to override existing internal controls. 
C)  greater for employee fraud because of the higher crime rate among blue collar workers. 
D)  greater for employee fraud because of the larger number of employees in the organization. 
A)  greater for management fraud because managers are inherently more deceptive than employees. 
B)  greater for management fraud because of management's ability to override existing internal controls. 
C)  greater for employee fraud because of the higher crime rate among blue collar workers. 
D)  greater for employee fraud because of the larger number of employees in the organization.

Question 2

Errors are usually more difficult for an auditor to detect than frauds.

Accepted Answer

A) True 
 B)False

Question 3

Briefly explain each management assertion related to account balances at period end.

Accepted Answer

• Existence. Assets, liabilities, and eq

Question 4

Auditors have a higher degree of responsibility for detecting direct-effect illegal acts than indirect-effect illegal acts.

Accepted Answer

A) True 
 B)False

Question 5

The objective of the audit of financial statements by an independent auditor is to verify that the financial statements are free of misstatements and accurately represent the company's financial position and results of operations.

Accepted Answer

A) True 
 B)False

Question 6

When comparing the auditor's responsibility for detecting employee fraud and for detecting errors, the profession has placed the responsibility:

Accepted Answer

A)  more on discovering errors than employee fraud. 
B)  more on discovering employee fraud than errors. 
C)  equally on discovering either one. 
D)  on the senior auditor for detecting errors and on the manager for detecting employee fraud. 
A)  more on discovering errors than employee fraud. 
B)  more on discovering employee fraud than errors. 
C)  equally on discovering either one. 
D)  on the senior auditor for detecting errors and on the manager for detecting employee fraud.

Question 7

After general audit objectives are understood, specific audit objectives for each account balance on the financial statements can be developed. Which of the following statements is true?

Accepted Answer

A)  There should be at least one specific objective for each relevant general objective. 
B)  There will be only one specific objective for each relevant general objective. 
C)  There will be many specific objectives developed for each relevant general objective. 
D)  There must be one specific objective for each general objective. 
A)  There should be at least one specific objective for each relevant general objective. 
B)  There will be only one specific objective for each relevant general objective. 
C)  There will be many specific objectives developed for each relevant general objective. 
D)  There must be one specific objective for each general objective.

Question 8

Which of the following statements is true?

Accepted Answer

A)  Auditors have generally found that the most effective and efficient way to conduct an audit is to obtain some assurance for each class of transaction and for the ending balance of the related account. 
B)  Management's assertions follow and are closely related to the audit objectives. 
C)  The auditor's primary responsibility is to find and disclose fraudulent management assertions. 
D)  Assertions about presentation and disclosure deal with whether the accounts have been included in the financial statements at appropriate amounts. 
A)  Auditors have generally found that the most effective and efficient way to conduct an audit is to obtain some assurance for each class of transaction and for the ending balance of the related account. 
B)  Management's assertions follow and are closely related to the audit objectives. 
C)  The auditor's primary responsibility is to find and disclose fraudulent management assertions. 
D)  Assertions about presentation and disclosure deal with whether the accounts have been included in the financial statements at appropriate amounts.

Question 9

Which of the following statements best describes the auditor's responsibility with respect to illegal acts that do not have a material effect on the client's financial statements?

Accepted Answer

A)  Generally, the auditor is under no obligation to notify parties other than personnel within the client's organization. 
B)  Generally, the auditor is under an obligation to inform the PCAOB. 
C)  Generally, the auditor is obligated to disclose the relevant facts in the auditor's report. 
D)  Generally, the auditor is expected to compel the client to adhere to requirements of the Foreign Corrupt Practices Act. 
A)  Generally, the auditor is under no obligation to notify parties other than personnel within the client's organization. 
B)  Generally, the auditor is under an obligation to inform the PCAOB. 
C)  Generally, the auditor is obligated to disclose the relevant facts in the auditor's report. 
D)  Generally, the auditor is expected to compel the client to adhere to requirements of the Foreign Corrupt Practices Act.

Question 10

If an auditor uncovers an illegal act at a public company, the auditor must notify:

Accepted Answer

A)  local law enforcement officials. 
B)  the Public Company Accounting Oversight Board. 
C)  the Securities and Exchange Commission. 
D)  all of the above. 
A)  local law enforcement officials. 
B)  the Public Company Accounting Oversight Board. 
C)  the Securities and Exchange Commission. 
D)  all of the above.

Question 11

Which of the following statements is not true?

Accepted Answer

A)  Balance-related audit objectives are applied to ending account balances. 
B)  Transaction-related audit objectives are applied to classes of transactions. 
C)  Balance-related audit objectives are applied to the ending balance in balance sheet accounts. 
D)  Balance-related audit objectives are applied to both beginning and ending balances in balance sheet accounts. 
A)  Balance-related audit objectives are applied to ending account balances. 
B)  Transaction-related audit objectives are applied to classes of transactions. 
C)  Balance-related audit objectives are applied to the ending balance in balance sheet accounts. 
D)  Balance-related audit objectives are applied to both beginning and ending balances in balance sheet accounts.

Question 12

When the auditor knows that an illegal act has occurred, the auditor must:

Accepted Answer

A)  report it to the proper governmental authorities. 
B)  consider the effects on the financial statements, including the adequacy of disclosure. 
C)  withdraw from the engagement. 
D)  issue an adverse opinion. 
A)  report it to the proper governmental authorities. 
B)  consider the effects on the financial statements, including the adequacy of disclosure. 
C)  withdraw from the engagement. 
D)  issue an adverse opinion.

Question 13

If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the:

Accepted Answer

A)  completeness assertion. 
B)  existence assertion. 
C)  cutoff assertion. 
D)  classification and understandability assertion. 
A)  completeness assertion. 
B)  existence assertion. 
C)  cutoff assertion. 
D)  classification and understandability assertion.

Question 14

When using the cycle approach to segmenting the audit, the reason for treating capital acquisition and repayment separately from the acquisition of goods and services is that:

Accepted Answer

A)  the transactions are related to financing a company rather than to its operations. 
B)  most capital acquisition and repayment cycle accounts involve few transactions, but each is often highly material and therefore should be audited extensively. 
C)  both A and B are correct. 
D)  neither A nor B is correct. 
A)  the transactions are related to financing a company rather than to its operations. 
B)  most capital acquisition and repayment cycle accounts involve few transactions, but each is often highly material and therefore should be audited extensively. 
C)  both A and B are correct. 
D)  neither A nor B is correct.

In comparing management fraud with employee fraud, the auditor's risk of failing to discover the fraud is:

Errors are usually more difficult for an auditor to detect than frauds.

Briefly explain each management assertion related to account balances at period end.

Auditors have a higher degree of responsibility for detecting direct-effect illegal acts than indirect-effect illegal acts.

The objective of the audit of financial statements by an independent auditor is to verify that the financial statements are free of misstatements and accurately represent the company's financial position and results of operations.

When comparing the auditor's responsibility for detecting employee fraud and for detecting errors, the profession has placed the responsibility:

After general audit objectives are understood, specific audit objectives for each account balance on the financial statements can be developed. Which of the following statements is true?

Which of the following statements is true?

Which of the following statements best describes the auditor's responsibility with respect to illegal acts that do not have a material effect on the client's financial statements?

If an auditor uncovers an illegal act at a public company, the auditor must notify:

Which of the following statements is not true?

When the auditor knows that an illegal act has occurred, the auditor must:

If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the:

When using the cycle approach to segmenting the audit, the reason for treating capital acquisition and repayment separately from the acquisition of goods and services is that:

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

Exam 6: The CPA Profession

In comparing management fraud with employee fraud, the auditor's risk of failing to discover the fraud is:

Errors are usually more difficult for an auditor to detect than frauds.

Briefly explain each management assertion related to account balances at period end.

Auditors have a higher degree of responsibility for detecting direct-effect illegal acts than indirect-effect illegal acts.

The objective of the audit of financial statements by an independent auditor is to verify that the financial statements are free of misstatements and accurately represent the company's financial position and results of operations.

When comparing the auditor's responsibility for detecting employee fraud and for detecting errors, the profession has placed the responsibility:

After general audit objectives are understood, specific audit objectives for each account balance on the financial statements can be developed. Which of the following statements is true?

Which of the following statements is true?

Which of the following statements best describes the auditor's responsibility with respect to illegal acts that do not have a material effect on the client's financial statements?

If an auditor uncovers an illegal act at a public company, the auditor must notify:

Which of the following statements is not true?

When the auditor knows that an illegal act has occurred, the auditor must:

If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the:

When using the cycle approach to segmenting the audit, the reason for treating capital acquisition and repayment separately from the acquisition of goods and services is that:

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