Quiz
opinion
Create a free account to finish this quiz
Save your progress and see your final score.
Already have an account? Sign in
Questions in this quiz (68)
1Which of the following items does not pertain to the control
environment?
- AThe accounting records.
- BManagement's philosophy and operating style.
- C. Personnel policies and practices.
- D. Participation of those charged with governance
2If specific information comes to an auditor's attention that implies the
existence of possible acts of noncompliance with laws and regulations
that could have a material, but indirect effect on the financial
statements, the auditor should next:- ASeek the advice of an informed expert qualified to practice law as to
possible contingent liabilities. - BReport the matter to an appropriate level of management at least
one level above those involved. - CDiscuss the evidence with those charged with governance.
- D. Apply audit procedures specifically directed to ascertaining whether
an act of noncompliance with laws and regulations has occurred.
- ASeek the advice of an informed expert qualified to practice law as to
3When an auditor becomes aware of a possible noncompliance with laws
and regulations by a client, the auditor should obtain an understanding
of the nature of the noncompliance to:- AEvaluate the effect on the financial statements.
- BDetermine the reliability of management's representations.
- CRecommend remedial actions to those charged with governance.
- DConsider whether other similar acts may have occurred.
4When an auditor becomes aware of a possible noncompliance with laws
and regulations by a client, the auditor should obtain an understanding
of the nature of the noncompliance to:- AEvaluate the effect on the financial statements.
- BDetermine the reliability of management's representations.
- CRecommend remedial actions to those charged with governance.
- DConsider whether other similar acts may have occurred.
5The auditor should obtain sufficient knowledge of the client's information
and communication system relevant to financial reporting to understand
all of the following, except:- Aa. Control activities related to each account balance, transaction
class, and disclosure component in the financial statements or to
every assertion relevant to them. - BThe financial reporting process, including development of significant
accounting estimates and inclusion of appropriate disclosures. - CClasses of transactions in the entity's operations that are significant
to the financial statements, and how those transactions are
processed, from initiation to inclusion in the financial statements. - D. The means the entity uses to communicate roles, responsibilities,
and significant matters relating to financial reporting.
- Aa. Control activities related to each account balance, transaction
6Which of the following information discovered during an audit most likely
would raise a question concerning possible noncompliance with laws
and regulations?- AMaterial internal control weaknesses previously reported to
management were not corrected. - BRelated party transactions, although properly disclosed, were
pervasive during the year. - CThe entity prepared several large checks payable to cash during the
year. - DThe entity was a campaign contributor to several local political
candidates during the year.
- AMaterial internal control weaknesses previously reported to
7Which of the following is not a control environment factor?
- AHiring and advancement policies.
- BProper segregation of duties.
- CManagement's approach toward business risks.
- DParticipation of those charged with governance.
8An auditor who discovers that a client's employees have paid small
bribes to public officials most likely would withdraw from the engagement
if the:- AClient receives financial assistance from a federal government
agency. - BEmployees' actions affect the auditor's ability to rely on
management's representations. - CNotes to the financial statements fail to disclose the employees'
actions. - DAudit evidence that is necessary to prove that the acts of
noncompliance with laws and regulations were committed does not
exist.
- AClient receives financial assistance from a federal government
9Which of the following statements is true regarding the risk assessment
component of internal control?- A. An auditor need not consider an entity's risk assessment because
he or she is primarily concerned with audit risk in a financial
statement audit. - B. An auditor evaluates an entity's risk assessment to understand how
management addresses risks relevant to financial reporting. - CAn auditor evaluates an entity's risk assessment because it is a
component of overall audit risk in a financial statement audit. - DAn auditor's evaluation of an entity's risk assessment may not be
applicable to the audit of every entity
- A. An auditor need not consider an entity's risk assessment because
10Before applying principal substantive tests to the details of accounts at
an interim date prior to the balance sheet date, an auditor should:- A. Consider whether the amounts of the year-end balances selected
for interim testing are reasonably predictable. - BDetermine that the accounts selected for interim testing are not
material to the financial statements taken as a whole. - CAssess control risk at a low level for the assertions embodied in the
accounts selected for interim testing. - DObtain written representations from management that all financial
records and related data will be made available.
- A. Consider whether the amounts of the year-end balances selected
11Which of the following is not true with respect to the control activities of
an entity?- AControl activities are the policies and procedures that help ensure
that the financial statements are fairly presented in conformity with
generally accepted accounting principles. - BControl activities are the policies and procedures that help ensure
that management directives are carried out. - CAn understanding of control activities may be obtained while the
auditor is obtaining an understanding of the other components of
internal control. - D. An understanding of control activities does not require an
understanding of control activities related to each account balance
included in the financial statements.
- AControl activities are the policies and procedures that help ensure
12Before applying substantive tests to the details of asset accounts at an
interim date, an auditor should assess:- AControl risk at a low level.
- BMateriality for the accounts tested as insignificant.
- CThe difficulty in controlling the incremental audit risk.
- DInherent risk at a high level.
13Which of the following statements best describes how a detailed audit
plan of a CPA who is engaged to audit the financial statements of a
large publicly held company compares with the audit client's
comprehensive internal audit program?- AThe comprehensive internal audit plan is more detailed although it
covers fewer areas than would normally be covered by the CPA. - BThe comprehensive internal audit plan is substantially identical to the
audit plan used by the CPA because both cover substantially
identical areas. - CThe comprehensive internal audit plan is more detailed and covers
areas that would normally not be covered by the CPA. - DThe comprehensive internal audit plan is less detailed and covers
fewer areas than would normally be covered by the CPA.
- AThe comprehensive internal audit plan is more detailed although it
14When assessing an internal auditor's objectivity, an independent auditor
should:
a.- AConsider the organizational level to which the internal auditor
reports. - BReview the internal auditor's audit documentation.
- CEvaluate the adequacy of the internal auditor's audit plans.
- DInquire about the internal auditor's educational background and
professional certification.
- AConsider the organizational level to which the internal auditor
15Before accepting an audit engagement, a successor auditor should
make specific inquiries of the predecessor auditor regarding:- AThe predecessor's evaluation of matters of continuing accounting
significance - BThe degree of cooperation the predecessor received concerning the
inquiry of the client's lawyer. - CDisagreements the predecessor had with the client concerning
auditing procedures and accounting principles - DThe predecessor's assessments of inherent risk and judgments
about materiality.
- AThe predecessor's evaluation of matters of continuing accounting
16The understanding with a client of an auditor's contractual obligation
ordinarily is set forth in the:
a- A. Introductory paragraph of the auditor's report.
- BScope paragraph of the auditor's report.
- C. Engagement letter.
- DManagement letter.
17An auditor should obtain knowledge of a client's information and
communication system in order to understand each of the following,
except:- AThe means used by an entity to communicate financial reporting
roles to its staff. - BHow transactions are initiated, processed, and reported.
- CThe means used by an entity to ensure that management directives
are carried out. - Dd. The process used to prepare financial statements
- AThe means used by an entity to communicate financial reporting
18The monitoring component of internal control excludes:
- AAssessing the quality of internal control performance over time.
- BEliminating controls that are not operating effectively.
- CAssessing information derived from external parties.
- DImproving controls that are not operating effectively.
19In planning an audit of a new client, an auditor most likely would
consider the methods used to process accounting information because
such methods:- AInfluence the design of internal control.
- BAssist in evaluating the planned audit objectives.
- CAffect the auditor's preliminary judgment about materiality levels.
- DDetermine the auditor's acceptable level of audit risk.
20Dunn, CPA, is auditing the financial statements of Taft Co. Taft uses
Quick Service Center (QSC) to process its payroll. Price, CPA, is
expressing an opinion on a description of the controls placed in
operation at QSC regarding the processing of its customers' payroll
transactions. Dunn expects to consider the effects of Price's report on
the Taft engagement. Price's report should contain a (an):- AOpinion on the operating effectiveness of QSC's internal controls.
- BAssertion that Price assumes no responsibility to determine whether
QSC's controls are suitably designed. - CStatement that Dunn may assess control risk based on Price's
report. - DDescription of the scope and nature of Price's procedures.
21Payroll Data Co. (PDC) processes payroll transactions for a retailer.
Cook, CPA, is engaged to express an opinion on a description of PDC's
internal controls placed in operation as of a specific date. These
controls are relevant to the retailer's internal control, so Cook's report
may be useful in providing the retailer's independent auditor with
information necessary to plan a financial statement audit. Cook's report
should:- AIdentify PDC's controls relevant to specific financial statement
assertions - BState whether PDC's controls were suitably designed to achieve the
retailer's objectives. - CDisclose Cook's assessed level of control risk for PDC.
- DContain a disclaimer of opinion on the operating effectiveness of
PDC's controls.
- AIdentify PDC's controls relevant to specific financial statement
22Computer Services Company (CSC) processes payroll transactions for
schools. Drake, CPA, is engaged to report on CSC's internal controls
placed in operation as of a specific date. These internal controls are
relevant to the schools' internal control, so Drake's report will be useful
in providing the schools' independent auditors with information
necessary to plan their audits. Drake's Type I report expressing an
opinion on CSC's internal controls placed in operation as of a specific
date should contain:
a.- ADrake's description of the service organization's system, with an
acknowledgement by management of the accuracy of Drake's
description. - BManagement's description of the service organization's system.
- CA paragraph indicating the basis for the user auditor to reduce the
assessment of control risk below maximum for areas of the entity's
accounting that are affected by the service organization. - DDrake's opinion on the operating effectiveness of the service
center's internal controls.
- ADrake's description of the service organization's system, with an
23Lake, CPA, is auditing the financial statements of Gill Co. Gill uses the
EDP Service Center, Inc. to process its payroll transactions. EDP's
financial statements are audited by Cope, CPA, who recently issued a
report on EDP's internal control structure. Lake is considering Cope's
report on EDP's internal control structure in assessing control risk on
the Gill engagement. What is Lake's responsibility concerning making
reference to Cope as a basis, in part, for Lake's own opinion?- ALake may not refer to Cope under the circumstances above.
- BLake may refer to Cope only if Lake is satisfied as to Cope's
professional reputation and independence. - CLake may refer to Cope only if Lake relies on Cope's report in
restricting the extent of substantive tests. - DLake may refer to Cope only if Lake's report indicates the division of
responsibility.
24When an auditor increases the planned assessed level of control risk
because certain control activities were determined to be ineffective, the
auditor would most likely increase the:
a.
b.
c
d.- AExtent of tests of controls.
- BLevel of detection risk.
- C. Level of inherent risk.
- DExtent of tests of details.
25An auditor is required to document the auditor's understanding of the:
I. Entity's control activities that help ensure management
directives are carried out.
II. Entity's control environment factors that help the auditor plan the
engagement.- Aa. II only.
- Bb. Both I and II.
- Cc. Neither I nor II.
- Dd. I only.
26Quick Service Center processes the payroll for a variety of clients,
including James Industries. Adams, CPA, is Quick's auditor, while
Robinson, CPA, is the auditor for James Industries. Which of the
following is not required of Adams?- A. Issuing a report that describes the scope and nature of the
procedures performed. - BMaking inquiries regarding the professional reputation of Robinson,
CPA. - CObtaining a letter of representation from the management of Quick
Service Center. - DInquiring of management regarding subsequent events that might
significantly affect user organizations such as James Industries.
- A. Issuing a report that describes the scope and nature of the
27Which of the following is a management control method that most likely
could improve management's ability to supervise company activities
effectively?
a.
b.
c.
d.- ASupporting employees with the resources necessary to discharge
their responsibilities. - BLimiting direct access to assets by physical segregation and
protective devices. - CMonitoring compliance with internal control requirements imposed by
regulatory bodies. - DEstablishing budgets and forecasts to identify variances from
expectations.
- ASupporting employees with the resources necessary to discharge
28In obtaining an understanding of a manufacturing entity's internal control
concerning inventory balances, an auditor most likely would:- AReview the entity's descriptions of controls over inventory.
- BAnalyze the liquidity and turnover ratios of the inventory.
- CPerform analytical procedures designed to identify cost variances.
- DPerform test counts of inventory during the entity's physical count.
29Proper segregation of duties reduces the opportunities to allow persons
to be in positions to both:- A. Record cash receipts and cash disbursements.
- B. Perpetrate and conceal errors and fraud.
- C. Establish internal controls and authorize transactions.
- D. Journalize entries and prepare financial statements.
30The ultimate purpose of assessing control risk is to contribute to the
auditor's evaluation of the risk that:
a- A. Tests of controls may fail to identify procedures relevant to
assertions. - BSpecified controls requiring segregation of duties may be
circumvented by collusion. - CEntity policies may be overridden by senior management.
- DMaterial misstatements may exist in the financial statements.
- A. Tests of controls may fail to identify procedures relevant to
31Which of the following circumstances would most likely cause an auditor
to suspect that material misstatements arising from fraud exist in a
client's financial statements?
a.- AClerical errors are listed on an EDP-generated exception report.
- BMonthly bank reconciliations usually include several in-transit items.
- CSignificantly fewer responses to confirmation requests are received
than expected. - DProperty and equipment are usually sold at a loss before being fully
depreciated.
32An auditor's flowchart of a client's information system relevant to
financial reporting is a diagrammatic representation that depicts the
auditor's:- AUnderstanding of the system.
- BAssessment of the control environment's effectiveness.
- C. Assessment of control risk.
- DIdentification of weaknesses in the system.
33Management's attitude toward aggressive financial reporting and its
emphasis on meeting projected profit goals most likely would
significantly influence an entity's control environment when:- AManagement is dominated by one individual who is also a
shareholder. - BExternal policies established by parties outside the entity affect its
accounting practices. - CThe audit committee is active in overseeing the entity's financial
reporting policies. - D. Internal auditors have direct access to those charged with
governance.
- AManagement is dominated by one individual who is also a
34In planning the audit, the auditor obtains a sufficient understanding of
the existing internal control. Which one of the following is not among the
auditor's primary objectives for obtaining such knowledge?- A. Consider the factors that affect the risk of material misstatement.
- BIdentify types of material misstatements.
- C. Make constructive suggestions to the client for improvement.
- DDesign effective substantive tests.
35An auditor would most likely be concerned with internal controls that
provide reasonable assurance about the:- AEfficiency of management's decision-making process.
- BEntity's ability to process and summarize financial data.
- CMethods of assigning production tasks to employees.
- DAppropriate prices the entity should charge for its products
36An auditor's primary consideration regarding an entity's internal control
is whether the controls:- AReflect management's philosophy and operating style.
- BAffect the financial statement assertions.
- C. Relate to the control environment.
- DPrevent management override.
37Which of the following statements about internal control is correct?
- AAll of the entity's objectives and related internal controls are relevant
to an audit of the entity's financial statements. - BAn understanding of internal control relevant to each of the entity's
operating units and business functions is necessary. - CThere is no relationship between an entity's objectives and the
components of internal control. - DInternal control is relevant to the entire entity, or to any of its
operating units or business functions.
- AAll of the entity's objectives and related internal controls are relevant
38Which of the following factors would most likely be considered an
inherent limitation to an entity's internal control?- AThe lack of management incentives to improve the control
environment. - BHuman judgment in the decision making process.
- CThe ineffectiveness of the board of directors.
- D. The complexity of the information processing system.
- AThe lack of management incentives to improve the control
39In an audit of financial statements in accordance with generally
accepted auditing standards, an auditor is required to:- A. Perform tests of controls to evaluate the effectiveness of the
entity's information system relevant to financial reporting. - B. Document the auditor's understanding of the entity's internal control.
- CDetermine whether controls operated effectively to prevent or detect
material misstatements. - D. Search for significant deficiencies in the operation of internal
control.
- A. Perform tests of controls to evaluate the effectiveness of the
40Which of the following factors is most important concerning an auditor's
responsibility to detect errors and fraud?- AThe possibility that management fraud, defalcations, and the
misappropriation of assets may indicate the existence of acts of
noncompliance with laws and regulations. - BThe probability that unreasonable accounting estimates result from
unintentional bias or intentional attempts to misstate the financial
statements. - C. The risk that mistakes, falsifications, and omissions may cause the
financial statements to contain material misstatements. - DThe susceptibility of the accounting records to intentional
manipulations, alterations, and the misapplication of accounting
principles.
- AThe possibility that management fraud, defalcations, and the
41In assessing control risk, an auditor ordinarily selects from a variety of
techniques, including:- AReperformance and observation.
- BInspection and verification.
- CInquiry and analytical procedures.
- D. Comparison and confirmation.
42An auditor wishes to perform tests of controls on a client's cash
disbursements procedures. If the controls leave no audit trail of
documentary evidence, the auditor most likely will test the procedures
by:
a.
b.- AConfirmation and observation.
- BAnalytical procedures and confirmation.
- CObservation and inquiry.
- DInquiry and analytical procedures.
43Which of the following audit techniques most likely would provide an
auditor with the most assurance about the effectiveness of the
operation of internal control?
a.- AConfirmation with outside parties.
- BObservation of client personnel.
- CRecomputation of account balance amounts.
- DInquiry of client personnel.
44Audit evidence concerning proper segregation of duties ordinarily is
best obtained by:
a.- AReviewing job descriptions prepared by the personnel department.
- B. Inquiring whether control activities operated consistently throughout
the period. - CDirect personal observation of the employees who apply control
activities. - DPreparation of a flowchart of duties performed by available
personnel.
45An auditor may decide not to test controls related to certain assertions
because the auditor believes:- AEvaluating the effectiveness of controls is inefficient.
- B. Sufficient appropriate evidence to support the assertions is likely to
be available. - C. Considering the relationship of assertions to specific account
balances is more efficient. - DMore emphasis on tests of controls than substantive tests is
warranted.
46For certain controls, such as segregation of duties, documentary
evidence may not exist. An auditor would most likely test the controls
by:- AReperformance and corroboration.
- BConfirmation and recomputation.
- C. Observation and inquiry.
- DInspection and vouching.
47After obtaining an understanding of internal control and performing risk
assessment procedures, an auditor decided not to perform tests of
controls. The auditor most likely concluded that the:- A. Evidence obtainable through tests of controls would not support an
increased level of control risk. - BAdditional evidence to support a reduction in control risk was not
cost-beneficial to obtain. - CAssessed level of inherent risk exceeded the assessed level of
control risk. - DInternal control was properly designed and justifiably may be relied
on.
- A. Evidence obtainable through tests of controls would not support an
48An auditor generally tests the segregation of duties related to inventory
by:- AAnalytical procedures and invoice recomputation.
- BDocument inspection and reconciliation.
- CTest counts and cutoff procedures.
- DPersonal inquiry and observation.
49An auditor's engagement letter most likely would include:
- AThe auditor's preliminary assessment of the risk factors relating to
misstatements arising from fraudulent financial reporting. - BA reminder that management is responsible for acts of
noncompliance with laws and regulations committed by employees. - CA request for permission to contact the client's lawyer for assistance
in identifying litigation, claims, and assessments. - DManagement's acknowledgment of its responsibility for maintaining
effective internal control.
- AThe auditor's preliminary assessment of the risk factors relating to
50Which of the following auditor concerns most likely could be so serious
that the auditor concludes that a financial statement audit cannot be
conducted?- AThe entity has no formal written code of conduct.
- BThe integrity of the entity's management is suspect.
- CManagement fails to modify prescribed controls for changes in
conditions. - DProcedures requiring segregation of duties are subject to
management override.
51Which of the following factors most likely would influence an auditor's
determination of the auditability of an entity's financial statements?- AThe operating effectiveness of controls.
- B. The existence of related party transactions.
- CThe complexity of the information system relevant to financial
reporting. - DThe adequacy of the accounting records.
52Before accepting an audit engagement, a successor auditor should
make specific inquiries of the predecessor auditor regarding the
predecessor's:- AAwareness of the consistency in the application of GAAP between
periods. - BOpinion of any subsequent events occurring since the
predecessor's audit report was issued. - CUnderstanding as to the reasons for the change of auditors.
- D. Evaluation of all matters of continuing accounting significance.
- AAwareness of the consistency in the application of GAAP between
53Which of the following factors most likely would cause an auditor not to
accept a new audit engagement?- AAn inability to perform preliminary analytical procedures before
accepting the engagement. - BConcluding that the entity's management probably lacks integrity.
- CAn inadequate understanding of the entity's internal control.
- AAn inability to perform preliminary analytical procedures before
54Before accepting an engagement to audit a new client, an auditor is
required to:- AMake inquiries of the predecessor auditor after obtaining the
consent of the prospective client. - BPrepare a memorandum setting forth the staffing requirements and
documenting the preliminary audit plan. - CDiscuss the management representation letter with the prospective
client's audit committee. - DObtain an understanding of the entity and its environment, including
its internal control.
- AMake inquiries of the predecessor auditor after obtaining the
55A document in an auditor's working papers includes the following
statement:
"Our audit is subject to the inherent risk that material errors and fraud,
including defalcations, if they exist, will not be detected. However, we
will inform you of fraud that comes to our attention, unless it is
inconsequential."
The above passage is most likely from a(an):- ARepresentation letter.
- B. Letter of audit inquiry.
- CComfort letter.
- DEngagement letter.
56In assessing the objectivity of internal auditors, an independent auditor
should:- A. Test a sample of the transactions and balances that the internal
auditors examined. - BExamine documentary evidence of the work performed by the
internal auditors. - CEvaluate the quality control program in effect for the internal
auditors. - DDetermine the organizational level to which the internal auditors
report.
- A. Test a sample of the transactions and balances that the internal
57An auditor should design the written audit plan so that:
a.- ASubstantive tests prior to the balance sheet date will be minimized.
- BAll material transactions will be selected for substantive testing.
- CThe audit procedures selected will achieve specific audit objectives.
- DEach account balance will be tested under either tests of controls or
tests of transactions.
58Which of the following statements is correct concerning an auditor's use
of the work of a specialist?
a
b.
d- A. The work of a specialist who is related to the client may be
acceptable under certain circumstances. - BAn auditor may not use a specialist in the determination of physical
characteristics relating to inventories. - CIf there is a material difference between a specialist's findings and
the assertions in the financial statements, only an adverse opinion
may be issued. - D. If an auditor believes that the determinations made by a specialist
are unreasonable, only a qualified opinion may be issued.
- A. The work of a specialist who is related to the client may be
59When assessing the internal auditors' competence, the independent
CPA should obtain information about the:- AInternal auditors' access to records and information that is
considered sensitive. - BOrganizational level to which the internal auditors report.
- C. Policies prohibiting the internal auditors from auditing areas where
relatives are employed. - DEducational background and professional certification of the internal
auditors.
- AInternal auditors' access to records and information that is
60In using the work of a specialist, an auditor referred to the specialist's
findings in the auditor's report. This would be an appropriate reporting
practice if the:
a.- AAuditor understands the form and content of the specialist's findings
in relation to the representations in the financial statements. - BAuditor, as a result of the specialist's findings, decides to indicate a
division of responsibility with the specialist. - CClient is not familiar with the professional certification, personal
reputation, or particular competence of the specialist. - DAuditor, as a result of the specialist's findings, adds an explanatory
paragraph in a modified opinion emphasizing a matter regarding the
financial statements.
- AAuditor understands the form and content of the specialist's findings
61Which of the following circumstances most likely would cause an auditor
to consider whether material misstatements exist in an entity's financial
statements?- A. Supporting records that should be readily available are frequently
not produced when requested. - B. Differences are discovered during the client's annual physical
inventory count. - CSignificant deficiencies in internal control previously communicated
have not been corrected. - DClerical errors are listed on a monthly computer-generated exception
report.
- A. Supporting records that should be readily available are frequently
62An auditor intends to use the work of an actuary who has a relationship
with the client. Under these circumstances, the auditor:- AShould assess the risk that the actuary's objectivity might be
impaired. - B. Is not permitted to rely on the actuary because of a lack of
independence. - C. Is required to disclose the contractual relationship in the auditor's
report. - DShould communicate this matter to those charged with governance
as a significant deficiency in internal control.
- AShould assess the risk that the actuary's objectivity might be
63When assessing the competence of the internal auditors, an
independent CPA should obtain information about the:- AOrganizational level to which the internal auditors report.
- BQuality of the internal auditors' working paper documentation.
- C. Policies prohibiting internal auditors from auditing sensitive matters.
- DInternal auditors' preliminary assessed level of control risk.
64An auditor who discovers that a client's employees paid small bribes to
municipal officials most likely would withdraw from the engagement if:- AManagement fails to take the appropriate remedial action.
- BThe client receives financial assistance from a federal government
agency. - CDocumentation that is necessary to prove that the bribes were paid
does not exist. - DThe payments violated the client's policies regarding the adherence
to applicable laws and regulations
65Which of the following characteristics most likely would heighten an
auditor's concern about the risk of intentional manipulation of financial
statements?- AManagement places substantial emphasis on meeting earnings
projections. - BTurnover of senior accounting personnel is low.
- CThe rate of change in the entity's industry is slow.
- DInsiders recently purchased additional shares of the entity's stock.
- AManagement places substantial emphasis on meeting earnings
66Which of the following circumstances most likely would cause an auditor
to consider whether material misstatements exist in an entity's financial
statements?- AThe board of directors makes all major financing decisions.
- BTransactions selected for testing are not supported by proper
documentation. - CManagement places little emphasis on meeting earnings projections.
- DSignificant deficiencies in internal control previously communicated
to management are not corrected.
67The most likely explanation why the auditor's examination cannot
reasonably be expected to bring all acts of noncompliance with laws and
regulations by the client to the auditor's attention is that:- A. Acts of noncompliance with laws and regulations may be perpetrated
by the only person in the client's organization with access to both
assets and the accounting records. - BActs of noncompliance with laws and regulations are perpetrated by
management override of internal accounting controls. - CActs of noncompliance with laws and regulations by clients often
relate to operating aspects rather than accounting aspects. - DThe client's system of internal accounting control may be so strong
that the auditor performs only minimal substantive testing.
- A. Acts of noncompliance with laws and regulations may be perpetrated
68An auditor of a manufacturer would most likely question whether that
client has committed acts of noncompliance with laws and regulations if
the client has:- AFailed to correct material weaknesses in internal accounting control
that were reported after the prior year's audit - BDisclosed several subsequent events involving foreign operations in
the notes to the financial statements - CBeen an annual donor to a local political candidate
- DBeen forced to discontinue operations in a foreign country.
- AFailed to correct material weaknesses in internal accounting control
Information
- Description
- gg audit-A3 Quiz on opinion, created by Harpratap Singh on 28/02/2017.
- Author
- Harpratap Singh
- Language
- English
- Views
- 1
- Tags
- Rating
- No ratings yet Rate this quiz