Auditing chapter 5 homework

Question 1 of 30

1

The PCAOB’s General Auditing Standards requires that an audit be performed by which type of person?

Select one of the following:

An auditor with seasoned judgment in varying degrees of supervision and review
An auditor having the appropriate professional qualifications
An auditor with adequate technical and leadership skills
All of the above

Explanation

Question 2 of 30

1

Which auditing standards apply to private companies?

Select one of the following:

The AICPA Standards
The IASSB Standards
The Standards of the PCAOB
All of the above

Explanation

Question 3 of 30

1

The AICPA Principles Governing an Audit include which of the following categories that guide the conduct of an audit?

Select one of the following:

Purpose of an audit and premise upon which an audit is conducted
Responsibilities
Performance
All of the above

Explanation

Question 4 of 30

1

What is the scope of applicability of the auditing standards of the AICPA?

Select one of the following:

Public companies traded in the U.S.
Public companies traded in non-U.S. markets
Nonpublic companies in the U.S.
Nonpublic companies traded in non-U.S. markets

Explanation

Question 5 of 30

1

Which of the following organizations provides auditing standards for public companies?

Select one of the following:

GAO
AICPA
GAAP
PCAOB

Explanation

Question 6 of 30

1

Which of the following factors has the greatest effect on the reliability of financial statements?

Select one of the following:

The industry of the client
The client's internal control structure
The client's trend of earnings
The size of the client

Explanation

Question 7 of 30

1

What is management’s responsibility with respect to the conduct of an audit?

Select one of the following:

Preparing financial statements
Maintaining internal control over financial reporting
Providing the auditor with relevant information and access to personnel
All of the above

Explanation

Question 8 of 30

1

Which of the following assertions address whether accounts have been included in the financial statements at appropriate amounts?

Select one of the following:

Completeness assertion
Valuation or allocation assertion
Rights and obligations assertion
None of the above

Explanation

Question 9 of 30

1

Which of the following is the primary assertion related to testing inventory on hand to see if it includes consignment goods?

Select one of the following:

Rights and Obligations
Valuation
Existence
Completeness

Explanation

Question 10 of 30

1

Which assertion is most closely related to the determination of the adequacy of the allowance for doubtful accounts?

Select one of the following:

Rights and Obligations
Presentation and Disclosure
Valuation
Existence

Explanation

Question 11 of 30

1

Which assertion addresses whether all transactions and accounts that should be included in the financial statements are included?

Select one of the following:

Existence
Completeness
Rights and Obligations
Valuation

Explanation

Question 12 of 30

1

Which assertion addresses whether the financial statement items are properly classified in the financial statements?

Select one of the following:

Valuation
Presentation and Disclosure
Existence
Completeness

Explanation

Question 13 of 30

1

Which of the following is a procedure that requests a direct written response to the auditor from a third party?

Select one of the following:

Inspection
Inquiry
Confirmation
Observation

Explanation

Question 14 of 30

1

Which of the following is a procedure which analyzes plausible relationships among financial and nonfinancial data?

Select one of the following:

Analytical procedures
Observation
Scanning
Reviewing

Explanation

Question 15 of 30

1

Which of the following terms describes procedures designed to detect material misstatements in accounts?

Select one of the following:

Control tests
Substantive procedures
Business risk procedures
Risk assessment procedures

Explanation

Question 16 of 30

1

Which of the following statements accurately describes the auditor’s reporting responsibility for a financial statement audit?

Select one of the following:

The auditor will identify in the auditor’s report those circumstances in which auditing principles have not been consistently observed in the current period in comparison to the preceding period.
The auditor will state explicitly whether the financial statements are fairly presented in accordance with the applicable financial reporting framework.
The auditor will review adjusting journal entries for accuracy, and if the auditor concludes those entries are not reasonably accurate, the auditor must so state in the auditor’s report.
The auditor will express an unqualified opinion on the financial statements or will conduct additional audit procedures until such an opinion can be expressed.

Explanation

Question 17 of 30

1

Which of the following is a reason why an auditor needs an understanding of internal controls?

Select one of the following:

To provide individual comments on internal control non-compliance
To assess the risk of possible misstatements in the financial statements
To become comfortable that the client will pay its audit bills
To asses materiality

Explanation

Question 18 of 30

1

Which of the following is not a typical accounting cycle?

Select one of the following:

Inventory
Revenue
Internal controls
Cash

Explanation

Question 19 of 30

1

Which of the following statements about assertions is true?

Select one of the following:

All assertions are equally important for all accounts
The importance of an assertion depends on the account
Assertions are not related to accounts
None of the above

Explanation

Question 20 of 30

1

Which of the following assertions would the auditor usually consider most relevant for accounts payable?

Select one of the following:

Completeness
Valuation
Existence
Disclosure

Explanation

Question 21 of 30

1

Which of the following is a use of audit documentation?

Select one of the following:

Assisting the engagement team in planning and performing the audit
Assisting members of the engagement team responsible for supervising and reviewing the audit work
Retaining a record of matters of continuing significance to future audits of the same organization
All of the above

Explanation

Question 22 of 30

1

Which of the following factors influence the risk of material misstatement?

Select one of the following:

Business risks
Management incentives
IT risks
All of the above

Explanation

Question 23 of 30

1

What does business risk include?

Select one of the following:

Economic factors
Competitive factors
Regulatory risk
All of the above

Explanation

Question 24 of 30

1

What does the effectiveness of internal controls influence?

Select one of the following:

Inherent risk
Control risk
Risk of material misstatement
Both B and C

Explanation

Question 25 of 30

1

Which statement is true concerning materiality?

Select one of the following:

Materiality guidelines are specifically prescribed by the PCAOB
Materiality is not a useful concept in assessing internal control effectiveness
Materiality is a concept applied to financial statement presentation but not to disclosures
Misstatements are material if they could reasonably be expected to influence the decisions of users of the financial statements

Explanation

Question 26 of 30

1

Which of the following statements is true regarding client acceptance or continuance decisions?

Select one of the following:

The client acceptance/continuance decision is one of the most important factors in audit quality.
Potential audit fees are not a valid consideration in the acceptance or continuance decision.
Audit firms are not permitted to conduct background checks on the management of a potential client.
An audit firm cannot discontinue providing audit services to a client without just cause.

Explanation

Question 27 of 30

1

Which of the following factors affect the substantive procedures performed in an audit?

Select one of the following:

The subjectivity of the accounting process
Size of the account
Effectiveness of the relevant controls
All of the above affect the substantive procedures that are performed

Explanation

Question 28 of 30

1

If the auditor’s assessment of the materiality of the account balance is high, what would be the respective effect on (1) the extent of substantive testing and (2) the nature of procedures performed?

Select one of the following:

(1) More (2) More rigorous
(1) Less (2) Less rigorous
(1) Less (2) More rigorous
(1) More (2) Less rigorous

Explanation

Question 29 of 30

1

An auditor gathers evidence on internal controls for which respective time periods for the purposes of expressing an opinion on (1) control effectiveness and for (2) testing controls in the financial statement period?

Control Effectiveness Financial Statement

Select one of the following:

(1) Throughout the year (2) Throughout the year
(1) Throughout the year (2) As of year end
(1) As of year end (2) As of year end
(1) As of year end (2) Throughout the year

Explanation

Question 30 of 30

1

Which of the following would not be a factor in whether a control weakness would be considered to be a material weakness as opposed to a significant deficiency?

Select one of the following:

The materiality of the related balance
The volume of transactions affected
The nature of the client's industry
The subjectivity of the account balance

	Created by Kayla Harbaugh over 3 years ago