Question 1

An example of the use of data analytics at the end of the audit is using software to scan unusual journal entries that may require additional consideration by the auditor of their potential impact on the year-end financial statements.

Accepted Answer

A) True 
 B)False

Question 2

An example of a nonrecognized subsequent event which may require disclosure if it is significant is the issuance of bonds or equity securities by a company.

Accepted Answer

A) True 
 B)False

Question 3

The auditor is responsible for communicating significant internal control deficiencies to the audit committee, or those charged with governance. This communication

Accepted Answer

A)  may be oral or written. 
B)  must be oral. 
C)  must be written. 
D)  must be oral via direct communication.

Question 4

When using the probability threshold for contingencies, the likelihood of the occurrence of the event is classified as

Accepted Answer

A)  not likely, likely, or highly likely. 
B)  remote, reasonably possible, or probable. 
C)  slight, moderate, great. 
D)  remote, likely, possible.

Question 5

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 it is a written statement from a nonindependent source. 
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 6

The auditor has completed her or his 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 the financial statements 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 7

Which of the following is correct regarding supplementary information?

Accepted Answer

A)  The auditor must express an opinion on the supplementary information. 
B)  When reporting on supplementary information, the auditor uses a different materiality threshold from that used in forming an opinion on the basic financial statements. 
C)  If the auditor's report on the audited financial statements contains an adverse opinion, the auditor can still issue an unqualified opinion on the supplementary information. 
D)  The auditor can issue a separate report on the supplementary information; it does not need to be part of the report on the financial statements.

Question 8

With what types of contingencies might an auditor be concerned?

Accepted Answer

The answer of With what types of contingencies might an...

Question 9

Which of the following is an accurate statement regarding presentation and disclosure?

Accepted Answer

A)  Auditors generally set the risk as low that all required information may not be completely disclosed in the footnotes. 
B)  Audit tests performed in earlier audit phases provides sufficient appropriate evidence about contingent liabilities and subsequent events. 
C)  Auditors do not conduct tests of controls related to disclosures when the initial assessment of control risk is below maximum. 
D)  In phase IV (completing the audit), auditors evaluate whether the overall presentation of the financial statements and related footnotes complies with accounting standards.

Question 10

Companies ordinarily describe all commitments either in a separate footnote or combine them with a footnote related to contingencies.

Accepted Answer

A) True 
 B)False

Question 11

When preparing a standard inquiry to the client's attorney letter, the client's letterhead should be used, and the letter should be signed by the client company's officials.

Accepted Answer

A) True 
 B)False

Question 12

The Financial Accounting Standards Board (FASB) describes a reasonable period of time as two years after the date the financial statements are issued for management to evaluate the entity's ability to continue as a going concern.

Accepted Answer

A) True 
 B)False

Question 13

The American Bar Association has refused to amend its attorney-client confidentiality rules to permit attorneys to breach confidentiality if a client is committing a crime or fraud.

Accepted Answer

A) True 
 B)False

Question 14

When reviewing the summary of misstatements found in the audit,

Accepted Answer

A)  an adjusting journal entry must be made by the auditor for all material misstatements. 
B)  auditors must combine individually immaterial misstatements to evaluate whether the combined amount is material. 
C)  the auditor is not required to consider the impact on the current financial statements of misstatements in the prior year that were not corrected. 
D)  auditors only need to consider the misstatements that impact the income statement.

Question 15

Current professional auditing standards make it clear that management, not the auditor, is responsible for identifying and deciding the appropriate accounting treatment for contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 16

State the three purposes of the management representation letter.

Accepted Answer

The answer of State the three purposes of the management...

Question 17

Besides the search for contingent liabilities and the review for subsequent events, the auditor has five important final evidence accumulation responsibilities, all of which are required by current professional auditing standards. Discuss each of these four responsibilities.

Accepted Answer

The answer of Besides the search for contingent liabilities and...

Question 18

When subsequent events are used to evaluate the amounts included in the year-end financial statements, auditors must distinguish between conditions that existed at the balance sheet date and those that came into being after the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 19

The first stop in the audit of contingencies is to determine the amount of the contingency.

Accepted Answer

A) True 
 B)False

Question 20

While there is no professional requirement to do so on audit engagements, CPAs frequently issue a formal "management" letter to clients. The primary purpose of this letter is to provide

Accepted Answer

A)  evidence indicating whether the auditor is reasonably certain that internal accounting control is operating as prescribed. 
B)  a permanent record of the internal accounting control work performed by the auditor during the course of the engagement. 
C)  the client with the CPA's recommendations for improving any part of the client's business. 
D)  a summary of the auditor's observations that resulted from the auditor's special study of internal control.

Exam 24: Completing the Audit

An example of the use of data analytics at the end of the audit is using software to scan unusual journal entries that may require additional consideration by the auditor of their potential impact on the year-end financial statements.

An example of a nonrecognized subsequent event which may require disclosure if it is significant is the issuance of bonds or equity securities by a company.

The auditor is responsible for communicating significant internal control deficiencies to the audit committee, or those charged with governance. This communication

When using the probability threshold for contingencies, the likelihood of the occurrence of the event is classified as

Which of the following statements is correct?

The auditor has completed her or his 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 is correct regarding supplementary information?

With what types of contingencies might an auditor be concerned?

Which of the following is an accurate statement regarding presentation and disclosure?

Companies ordinarily describe all commitments either in a separate footnote or combine them with a footnote related to contingencies.

When preparing a standard inquiry to the client's attorney letter, the client's letterhead should be used, and the letter should be signed by the client company's officials.

The Financial Accounting Standards Board (FASB) describes a reasonable period of time as two years after the date the financial statements are issued for management to evaluate the entity's ability to continue as a going concern.

The American Bar Association has refused to amend its attorney-client confidentiality rules to permit attorneys to breach confidentiality if a client is committing a crime or fraud.

When reviewing the summary of misstatements found in the audit,

Current professional auditing standards make it clear that management, not the auditor, is responsible for identifying and deciding the appropriate accounting treatment for contingent liabilities.

State the three purposes of the management representation letter.

Besides the search for contingent liabilities and the review for subsequent events, the auditor has five important final evidence accumulation responsibilities, all of which are required by current professional auditing standards. Discuss each of these four responsibilities.

When subsequent events are used to evaluate the amounts included in the year-end financial statements, auditors must distinguish between conditions that existed at the balance sheet date and those that came into being after the balance sheet date.

The first stop in the audit of contingencies is to determine the amount of the contingency.

While there is no professional requirement to do so on audit engagements, CPAs frequently issue a formal "management" letter to clients. The primary purpose of this letter is to provide