8) A successor auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor’s:

C) engagement letter and audit working papers.

D) it would not be typical to allow a review of either the engagement letter or the audit working papers.

10) Which of the following factors most likely would lead a CPA to conclude that a potential audit engagement should be rejected?

C) It is unlikely that sufficient appropriate evidence is available to support an opinion on the financial statements.

A) The details of most recorded transactions are not available after a specified period of time.

B) Internal control activities requiring segregation of duties are subject to management override.

D) Management has a reputation for consulting with several accounting firms about significant accounting issues.

11) Which of the following factors most likely would cause a CPA to decide not to accept a new audit engagement?

B) management’s disregard of its responsibility to maintain an adequate control environment

A) the CPA’s lack of understanding of the prospective client’s internal auditor’s computer-assisted audit techniques

C) the CPA’s inability to determine whether related party transactions were consummated on terms equivalent to arm’s-length transactions

D) management’s refusal to permit the CPA to perform substantive procedures before the year-end

12) Before accepting an engagement to audit a new client, a CPA is required to obtain:

D) the prospective client’s consent to make inquiries of the predecessor auditor.

A) an understanding of the prospective client’s industry and business.

B) the prospective client’s signature on the engagement letter.

C) a preliminary understanding of the prospective client’s control environment.

13) Which of the following situations would most likely require special audit planning?

D) Inventory is comprised of precious stones.

A) Some items of factory and office equipment do not bear identification numbers.

B) Depreciation methods used on the client's tax return differ from those used on the books

C) Assets costing less than $500 are expensed even though the expected life exceeds one year

14) During the initial planning phase of an audit, a CPA most likely would:

C) discuss the timing of the audit procedures with the client’s management.

A) identify specific internal control activities that are likely to prevent fraud.

B) evaluate the reasonableness of the client’s accounting estimates.

D) inquire of the client’s attorney as to any unrecorded claims.

15) An auditor is required to establish an understanding with a client regarding the responsibilities for each engagement. This understanding generally includes:

B) the auditor’s responsibility to plan and perform the audit to provide reasonable, but not absolute, assurance of detecting material errors or fraud.

A) management’s responsibility to guarantee that there are no material misstatements due to fraud.

C) management’s responsibility for providing the auditor with an assessment of the risk of material misstatement due to fraud.

D) the auditor’s responsibility for the fairness of the financial statements.

16) A written understanding between the auditor and the client concerning the auditor’s responsibility for the discovery of illegal acts is usually set forth in a(n):

A) client representation letter.

17) Engagement letters include all of the following except:

B) a list of adjusting journal entries.

A) a list of additional services, if any, that will be provided.

C) information about the audit fee.

D) arrangements involving the use of specialists.

18) Which of the following matters generally is included in an auditor's engagement letter?

A) management’s responsibility for the entity’s compliance with laws and regulations

B) the factors to be considered in setting preliminary judgments about materiality

C) management’s liability for illegal acts committed by its employees

D) the auditor’s responsibility to guarantee accuracy of the financial statements

19) To provide for the greatest degree of independence in performing internal audit activities, the internal audit function most likely should report to the:

C) audit committee of the board of directors.

20) All of the following refer to the competence of the internal audit function except:

A) the party in the entity to which the internal audit function reports.

B) the quality of internal audit documents and reports.

C) professional certifications held by the internal auditors.

D) supervision and review of internal audit activities.

21) An independent auditor might consider the procedures performed by the internal audit function because:

B) they are employees whose work might be relied upon.

A) they are employees whose work must be reviewed during substantive testing.

C) their work impacts the cost/benefit tradeoff in evaluating inherent limitations.

D) their degree of independence may be inferred by the nature of their work.

22) As generally conceived, the audit committee of a publicly held company should be made up of:

D) members of the board of directors who are not officers or employees.

A) representatives of the major equity interests (preferred stock, common stock).

B) the audit partner, the chief financial officer, the legal counsel, and at least one outsider.

C) representatives from the client’s management, investors, suppliers, and customers.

23) To emphasize auditor independence from management, publicly traded corporations are required to:

D) have the independent auditor report to an audit committee of independent members of the board of directors.

A) appoint a partner of the CPA firm conducting the examination to the corporation’s audit committee.

B) establish a policy of discouraging social contact between employees of the corporation and the independent auditors.

C) request that a representative of the independent auditor be on hand at the annual stockholders’ meeting.

24) An auditor obtains knowledge about a new client’s business and its industry in order to:

D) understand the events and transactions that may have an effect on the client’s financial statements.

A) make constructive suggestions concerning improvements to the client’s internal control.

B) develop an attitude of professional skepticism concerning management’s financial statement assertions.

C) evaluate whether the aggregation of known misstatements causes the financial statements taken as a whole to be materially misstated.

25) Which of the following is an example of a related party transaction?

D) A nonmonetary exchange occurs whereby Company A exchanges property for similar property owned by Company B, an unconsolidated subsidiary of Company A.

A) An action is taken by the directors of Company A to provide additional compensation for vice presidents in charge of the principal business functions of Company A.

B) A long-term agreement is made by Company A to provide merchandise or services to Company B, a long-time, friendly competitor.

C) A short-term loan is granted to Company A by a bank that has a depositor who is a member of the board of directors of Company A.

27) Which of the following would not necessarily be a related party transaction?

A) sales to another corporation with a similar name

B) purchases from another corporation that is controlled by the corporation’s chief stockholder

C) loan from the corporation to a major stockholder

D) sale of land to the corporation by the spouse of a director

28) The existence of a related party transaction may be indicated when another entity:

B) absorbs expenses of the corporation under audit.

A) sells real estate to the corporation at a price that is comparable to its appraised value.

C) borrows from the corporation at a rate of interest which equals the current market rate.

D) lends to the corporation at a rate of interest which equals the current market rate.

29) In the context of an audit of financial statements, substantive procedures are audit procedures that:

C) may be either tests of details of transactions, tests of details of account balances, or analytical procedures.

A) may be eliminated under certain conditions.

B) are primarily designed to discover significant subsequent events

D) will increase proportionately with an increase in the auditor's reliance on internal control.

31) Tolerable misstatement (also referred to as performance materiality) is:

D) materiality allocated to a specific account.

A) materiality allocated to an assertion.

B) materiality for the balance sheet as a whole.

C) materiality for the income statement as a whole.

32) Which of the following would an auditor most likely use in determining the auditor’s overall materiality?

B) the entity’s annualized interim (i.e. quarterly) financial statements

A) the anticipated sample size for planned substantive procedures

C) the results of the internal control questionnaire

D) the contents of the management representation letter

33) Which of the following isnot a qualitative factor that may affect an auditor’s establishment of materiality?

C) firm policy sets materiality at 4% of pretax income

B) the company is close to violating loan covenants

D) a small misstatement would interrupt an earnings trend

34) Which of the following isnot a concern as to whether a misstatement is qualitatively material?

B) The misstatement is less than 5% of pretax income.

A) The misstatement hides a failure to meet analysts’ expectations.

C) The misstatement increases management’s compensation.

D) The misstatement changes a small amount of profit to a small reported loss.

35) In assessing the competence of the internal audit function, an independent CPA most likely would obtain information about the:

A) quality of the work of the internal audit function.

B) organization’s commitment to integrity and ethical values.

C) influence of management on the scope of the internal audit function duties.

D) organizational levels to which the internal audit function reports.

36) Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit?

D) determining the extent of involvement of the client’s internal audit function

A) perform detailed testing of the individual balance sheet accounts

B) examining documents to detect illegal acts having a material effect on the financial statements

C) considering whether the client’s accounting estimates are reasonable in the circumstances

37) The in-charge auditor most likely would have a supervisory responsibility to explain to the staff assistants:

B) how the results of various auditing procedures performed by the assistants should be evaluated.

A) that immaterial fraud is not to be reported to the client’s audit committee.

C) how the overall audit strategy will allow the firm to reach a sufficiently low level of audit risk.

D) how overall materiality was selected.

38) Which of the following audit procedures would be least likely to disclose the existence of related party transactions of a client during the period under audit?

D) confirming purchases and sales transactions with the vendors and/or customers involved

A) reading “conflict-of-interest” statements obtained by the client from its management

B) scanning accounting records for large transactions at or just prior to the end of the period under audit

C) reading minutes of the Board of Directors meetings for authorization or discussion of material transactions

39) A dual-purpose test:

D) is both a substantive test of transactions and a test of controls.

A) simultaneously tests debits and credits.

B) is a procedure completed by both the internal and external auditors.

C) is useful to both the entity and the auditor.

40) The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the:

A) methods of statistical sampling to be used in confirming accounts receivable.

B) pending legal matters to be included in the inquiry of the client’s attorney.

C) evidence to be gathered to provide a sufficient basis for the auditor’s opinion.

41) The audit client's board of directors and audit committee refused to take any action with respect to an immaterial illegal act which was brought to their attention by the auditor. Because of their failure to act, the auditor withdrew from the engagement. The auditor’s decision to withdraw was primarily due to doubts concerning:

D) the integrity of management.

A) adequate financial statement disclosures.

B) compliance with the statutory laws and regulations.

C) scope limitations resulting from their inaction.

42) Which of the following procedures would an auditor most likely include in the initial planning of an examination of financial statements?

A) assess the need for the use of specialists in the audit

B) inquiring of the client’s attorney as to any claims that are likely to be asserted

C) perform detailed testing of the individual financial statement accounts

D) determining whether necessary internal controls procedures are being applied as prescribed

43) An entity's financial statements were misstated over a period of years due to large amounts of revenue being recorded in journal entries that involved debits and credits to an illogical combination of accounts. The auditor could most likely have been alerted to this fraud by:

A) scanning the general journal for unusual entries.

B) performing a revenue cutoff test at year-end.

C) tracing a sample of journal entries to the general ledger.

D) examining documentary evidence of sales returns and allowances recorded after year end.

44) Under the Sarbanes-Oxley Act, the audit committee of a public company has the following requirement(s):

A) each member of the committee must be a board member and shall be independent.

B) the audit committee must preapprove all audit and nonaudit services.

C) the audit committee must establish and maintain procedures to handle issues that relate to accounting, internal control, and auditing.

45) Which of the following is a general type of audit procedure?

C) preparation of corporate tax returns

46 Which of the following arranges the general types of audit procedures in the order they are normally performed in an audit?

C) risk assessment procedures, tests of controls, and substantive procedures

A) substantive procedures, tests of controls, and risk assessment procedures

B) substantive procedures, risk assessment procedures, and tests of controls

D) risk assessment procedures, substantive procedures, and tests of controls

47) Which of the following relatively small misstatements most likely would have a material effect on an entity’s financial statements?

A) an illegal payment to a foreign official that was not recorded

B) a piece of obsolete office equipment that was not retired

C) a petty cash fund disbursement that was not properly authorized

D) an uncollectible account receivable that was not written-off

48) Which of the following is the most important qualitative factor that auditors should consider when making materiality judgments?

C) The misstatement will cause the client to fail to meet an earnings forecast.

A) A misstatement exceeded five percent of net income.

B) The auditor also provides consulting services to the audit client.

D) The audit committee is not well-educated about the accounting principle in question.

49) Which element(s) is/are pervasive to the application of the Principles Underlying an Audit Conducted in Accordance with GAAS particularly the Performance and Reporting sections?

A) the elements of materiality and audit risk

B) the element of internal control

C) the element of corroborating evidence

D) the element of reasonable assurance

50) An auditor uses data visualization software to discover anomalies that may represent risk and require further testing. Which of the following best describes the procedure being performed by the auditor?

D) review of client data with auditor reperformance

51) Which of the following statements is not correct about materiality?

B) An auditor considers materiality for the aggregate level of misstatements that could be material to any one of the financial statements individually.

A) The concept of materiality recognizes that some matters are important for fair presentation of financial statements in conformity with GAAP, while other matters are not important

C) Materiality judgments are made in light of surrounding circumstances and necessarily involve both quantitative and qualitative judgments.

D) An auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of a reasonable person who will rely on the financial statements.

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C) documentation that is necessary to prove that the bribes were paid does not exist.

D) management fails to take the appropriate remedial action.

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Chuong so Ba Ke hoach kiem toan,...

74 questions

1) Hawkins requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor’s working papers. The prospective client's refusal to permit this will bear directly on Hawkins’ decision concerning the:

2) In assessing whether to accept a client for an audit engagement, a CPA should consider:

3) Evaluating a prospective client requires which of the following steps?

4) An auditor inspects a document for proper authorization of a transaction and verifies a transaction amount that is stated within the document. The auditor has performed a(n)

5) Which of the following should an auditor obtain from the predecessor auditor prior to accepting an audit engagement?

6) Which of the following factors most likely would cause a CPA not to accept a new audit engagement?

7) An auditor who discovers that a client’s employees paid small bribes to municipal officials most likely would withdraw from the engagement if:

8) A successor auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor’s:

9) Evaluating a prospective client requires which of the following steps?

10) Which of the following factors most likely would lead a CPA to conclude that a potential audit engagement should be rejected?

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