Question 1

With what types of contingencies might an auditor be concerned?

Accepted Answer

The auditor is generally concerned with contingencies arising from pending litigation for patent infringement, income tax disputes, product warranties, notes receivable discounted, guarantees of obligations of others, and unused balances of outstanding letters of credit.

Question 2

The auditor's responsibility with respect to events occurring between the balance sheet date and the end of the audit examination is best expressed by which of the following statements?

Accepted Answer

A)  The auditor is fully responsible for events occurring in the subsequent period and should extend all detailed procedures through the last day of fieldwork. 
B)  The auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period. 
C)  The auditor's responsibility is to determine that a proper cutoff has been made and that transactions recorded on or before the balance sheet date actually occurred. 
D)  The auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the balance sheet date. 
A)  The auditor is fully responsible for events occurring in the subsequent period and should extend all detailed procedures through the last day of fieldwork. 
B)  The auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period. 
C)  The auditor's responsibility is to determine that a proper cutoff has been made and that transactions recorded on or before the balance sheet date actually occurred. 
D)  The auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the balance sheet date. B

Question 3

Which of the following is not a contingent liability with which an auditor is particularly concerned?

Accepted Answer

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

Question 4

Subsequent events for which disclosure, but no adjustment, is required provide information about significant events/conditions which existed at the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 5

The auditor has completed her assessment of subsequent events. The proper accounting for subsequent events that have a direct effect on the financial statements is to:

Accepted Answer

A)  adjust the financial statements for the year under audit. 
B)  disclose in the notes to financial statement the amount of the adjustment. 
C)  duly note in the audit workpapers that next year's financial statements need to be adjusted. 
D)  make no adjustment of the financial statements for the year under audit. 
A)  adjust the financial statements for the year under audit. 
B)  disclose in the notes to financial statement the amount of the adjustment. 
C)  duly note in the audit workpapers that next year's financial statements need to be adjusted. 
D)  make no adjustment of the financial statements for the year under audit.

Question 6

Which of the following auditing procedures is ordinarily performed last?

Accepted Answer

A)  reading minutes of the board of directors' meetings 
B)  confirming accounts payable 
C)  obtaining a client representation letter 
D)  testing the purchasing function 
A)  reading minutes of the board of directors' meetings 
B)  confirming accounts payable 
C)  obtaining a client representation letter 
D)  testing the purchasing function

Question 7

A client has a calendar year-end. Listed below are four events that occurred after December 31. Which one of these subsequent events might result in adjustment of the December 31 financial statements?

Accepted Answer

A)  sale of a major subsidiary 
B)  adoption of accelerated depreciation methods 
C)  write-off of a substantial portion of inventory as obsolete 
D)  collection of 90% of the accounts receivable existing at December 31 
A)  sale of a major subsidiary 
B)  adoption of accelerated depreciation methods 
C)  write-off of a substantial portion of inventory as obsolete 
D)  collection of 90% of the accounts receivable existing at December 31

Question 8

Which of the following statements is correct?

Accepted Answer

A)  A letter of representation is documentation of management's acceptance of responsibility for the financial statements and is deemed to be reliable evidence. 
B)  A letter of representation is not deemed to be reliable evidence because of the potential incompetence of management. 
C)  A letter of representation is not deemed to be reliable evidence because of the lack of independence of the preparers. 
D)  A letter of representation is documentation of the CPA's acceptance of responsibility for the audit of the financial statement and is deemed to be reliable. 
A)  A letter of representation is documentation of management's acceptance of responsibility for the financial statements and is deemed to be reliable evidence. 
B)  A letter of representation is not deemed to be reliable evidence because of the potential incompetence of management. 
C)  A letter of representation is not deemed to be reliable evidence because of the lack of independence of the preparers. 
D)  A letter of representation is documentation of the CPA's acceptance of responsibility for the audit of the financial statement and is deemed to be reliable.

Question 9

Which of the following subsequent events is most likely to result in an adjustment to a company's financial statements?

Accepted Answer

A)  merger or acquisition activities 
B)  bankruptcy (due to deteriorating financial condition) of a customer with an outstanding accounts receivable balance 
C)  issuance of common stock 
D)  an uninsured loss of inventories due to a fire 
A)  merger or acquisition activities 
B)  bankruptcy (due to deteriorating financial condition) of a customer with an outstanding accounts receivable balance 
C)  issuance of common stock 
D)  an uninsured loss of inventories due to a fire

Question 10

List four specific matters that should be included in a client representation letter.

Accepted Answer

• Management's acknowledgment of its res

Question 11

Which of the following procedures and methods are important in assessing a company's ability to continue as a going concern?

Accepted Answer

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

Question 12

An auditor must obtain written client representations that might be signed by all but which of the following?

Accepted Answer

A)  Treasurer 
B)  Chief financial officer 
C)  Vice president of operations 
D)  Chief executive officer 
A)  Treasurer 
B)  Chief financial officer 
C)  Vice president of operations 
D)  Chief executive officer

Question 13

Auditing Standards (SAS No. 59) requires auditors to evaluate whether there is a substantial doubt about a client's ability to continue as a going concern. One of the most important audit procedures to perform to assess the going concern question is:

Accepted Answer

A)  analytical procedures. 
B)  confirmations of creditors. 
C)  statistical sampling procedures. 
D)  inquiries of client and its legal counsel. 
A)  analytical procedures. 
B)  confirmations of creditors. 
C)  statistical sampling procedures. 
D)  inquiries of client and its legal counsel.

Question 14

Which of the following is the most efficient audit procedure for the detection of unrecorded liabilities at the balance sheet date?

Accepted Answer

A)  obtain an attorney's letter from the client's attorney 
B)  confirm large accounts payable balances at the balance sheet date 
C)  examine purchase orders issued for several days prior to the close of the year 
D)  compare cash disbursements in the subsequent period with the accounts payable trial balance at year-end 
A)  obtain an attorney's letter from the client's attorney 
B)  confirm large accounts payable balances at the balance sheet date 
C)  examine purchase orders issued for several days prior to the close of the year 
D)  compare cash disbursements in the subsequent period with the accounts payable trial balance at year-end

Question 15

The letter of representation is prepared on the CPA firm's letterhead, addressed to the client's chief executive officer, and signed by the audit engagement partner.

Accepted Answer

A) True 
 B)False

Question 16

If an auditor concludes there are contingent liabilities, then he or she must evaluate the:

Accepted Answer

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

Question 17

Current professional auditing standards mandate the use of analytical procedures during the testing phase of the audit.

Accepted Answer

A) True 
 B)False

Question 18

Auditors are required to communicate either orally or in writing with the audit committee about internal control weaknesses.

Accepted Answer

A) True 
 B)False

Question 19

Which event that occurred after the end of the fiscal year under audit but prior to issuance of the auditor's report would not require disclosure in the financial statements?

Accepted Answer

A)  sale of a bond or capital stock issue 
B)  loss of plant or inventories as a result of fire or flood 
C)  a significant decline in the market price of the corporation's stock 
D)  settlement of litigation when the event giving rise to the claim took place after the balance sheet date 
A)  sale of a bond or capital stock issue 
B)  loss of plant or inventories as a result of fire or flood 
C)  a significant decline in the market price of the corporation's stock 
D)  settlement of litigation when the event giving rise to the claim took place after the balance sheet date

Question 20

A commitment is best described as:

Accepted Answer

A)  an agreement to commit the firm to a set of fixed conditions in the future. 
B)  an agreement to commit the firm to a set of fixed conditions in the future that depends on company profitability. 
C)  an agreement to commit the firm to a set of fixed conditions in the future that depends on current market conditions. 
D)  a potential future obligation to an outside party for an as yet to be determined amount. 
A)  an agreement to commit the firm to a set of fixed conditions in the future. 
B)  an agreement to commit the firm to a set of fixed conditions in the future that depends on company profitability. 
C)  an agreement to commit the firm to a set of fixed conditions in the future that depends on current market conditions. 
D)  a potential future obligation to an outside party for an as yet to be determined amount.

Exam 24: Completing the Audit

With what types of contingencies might an auditor be concerned?

The auditor's responsibility with respect to events occurring between the balance sheet date and the end of the audit examination is best expressed by which of the following statements?

Which of the following is not a contingent liability with which an auditor is particularly concerned?

Subsequent events for which disclosure, but no adjustment, is required provide information about significant events/conditions which existed at the balance sheet date.

The auditor has completed her assessment of subsequent events. The proper accounting for subsequent events that have a direct effect on the financial statements is to:

Which of the following auditing procedures is ordinarily performed last?

A client has a calendar year-end. Listed below are four events that occurred after December 31. Which one of these subsequent events might result in adjustment of the December 31 financial statements?

Which of the following statements is correct?

Which of the following subsequent events is most likely to result in an adjustment to a company's financial statements?

List four specific matters that should be included in a client representation letter.

Which of the following procedures and methods are important in assessing a company's ability to continue as a going concern?

An auditor must obtain written client representations that might be signed by all but which of the following?

Auditing Standards (SAS No. 59) requires auditors to evaluate whether there is a substantial doubt about a client's ability to continue as a going concern. One of the most important audit procedures to perform to assess the going concern question is:

Which of the following is the most efficient audit procedure for the detection of unrecorded liabilities at the balance sheet date?

The letter of representation is prepared on the CPA firm's letterhead, addressed to the client's chief executive officer, and signed by the audit engagement partner.

If an auditor concludes there are contingent liabilities, then he or she must evaluate the:

Current professional auditing standards mandate the use of analytical procedures during the testing phase of the audit.

Auditors are required to communicate either orally or in writing with the audit committee about internal control weaknesses.

Which event that occurred after the end of the fiscal year under audit but prior to issuance of the auditor's report would not require disclosure in the financial statements?

A commitment is best described as:

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

The CPA Profession

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

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters