ACADFEST_AUD_Simulation

Contingent fee pricing of public accounting services is

• Always strictly prohibited in public accounting practice

• Never restricted in public accounting practice

• Prohibited for clients for whom attestation services

• Considered an act discreditable to the profession

The Accountancy Law provides that all working papers made during an audit shall be the property of the auditor. These working papers shall include the following, except:

• Schedules and memoranda made by the CPA and his staff.

• Working papers prepared and submitted by the client.

• Excerpts or copies of documents furnished the auditor.

• Reports submitted by the CPA to the client.

In obtaining an understanding of an entity’s internal control relevant to audit planning, an auditor is required to obtain knowledge about the

• Design of the controls pertaining to internal control components.

• Effectiveness of controls that have been implemented.

• Consistency with which controls are currently being applied.

• Controls related to each principal transaction class and account balance.

Which of the following is not a component of audit planning?

• Observing the client’s annual physical inventory taking and making test counts of selected items

• Making arrangement with the client concerning the timing of audit fieldwork and use of the client’s staff in completing certain phases of the examination

• Obtaining an understanding of the business

• Developing an audit program

A CPA has been retained by a client that operates in an industry that is totally new to him. Therefore, the CPA:

• May not accept such engagement

• May accept the engagement only if the accounting firm specializes in that industry

• May accept the engagement after attaining a suitable level of understanding of the transactions and accounting practices unique to that industry

• May accept the engagement because his training as a CPA transcends unique industry characteristics

To obtain an understanding of a continuing client’s business in planning an audit, an auditor most likely would

• Perform tests of details of transactions and balances

• Review prior year working papers and the permanent file for the client

• Read specialized journals

• Re-evaluate the client’s internal control system

An audit of financial statements is conducted in order to determine if the

• organization is operating efficiently and effectively.

• client is following specific procedures or rules set down by some higher authority.

• overall financial statements are stated in accordance with specified criteria.

• entity prescribes a good internal control system.

A government audit evaluates a disbursement to determine whether it is necessary, excessive, or extravagant in accordance with existing rules and regulations. What kind of audit is it conducting?

• Compliance audit

• Economy audit

• Compliance and economy audit

• None of the above

What is the most likely course of action to be taken by an auditor in assessing management integrity?

• Tour the plant

• Review the minutes of the board of directors

• Research the background and histories of officers

• Review the bank reconciliation statements

An extensive understanding of the client’s business and industry and knowledge about the company’s operations are essential for doing an adequate audit. For a new client, most of this information is obtained

• From the predecessor auditor

• For the Securities and Exchange Commission

• From the permanent file

• At the client’s premises