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WorksheetsAudit -2
Total questions: 65
Worksheet time: 33mins
Control risk is
the probability that a material misstatement could not be prevented or detected
by the entity's internal control policies and procedures
the probability that a material misstatement could occur and not be detected by
auditors' procedures
the risk that auditors will not be able to complete the audit on a
timely basis.
the risk that auditors will not properly control the staK on the audit
engagement.
The responsibilities principle under generally accepted auditing standards does not
include which of the following?
Competence and capabilities
Independent attitude
Due care
Planning and supervision
Which of the following types of auditors' reports does not require an additional
paragraph to support the opinion?
Unmodified opinion
Adverse opinion
Qualified opion
Disclaimer of opinion
Which of the following is an element of a system of quality control that should be
considered by a public accounting firm in establishing its quality control policies and procedures?
Lending credibility to a client's financial statements
Using statistical sampling techniques
Acceptance and continuance of client relationships and specific engagements
Membership in the Center for Public Company Audit FIrms
Which of the following presumptions does not relate to the reliability of audit evidence?
The more effective the client's internal control, the more assurance it provides
about the accounting data and financial statements.
The auditors' opinion, to be economically useful, is formed within reasonable
time and based on evidence obtained at a reasonable cost.
Evidence obtained from independent sources outside the entity is more reliable
than evidence secured solely within the entity.
The independent auditors' direct personal knowledge, obtained through
observation and inspection, is of higher quality than information obtained
indirectly
An important role of the Public Company Accounting Oversight Board is to oversee the
issuance of statements by the Financial Accounting Standards Board
preparation and grading of the Uniform CPA Examination.
peer review of member firms of the Private Companies Practice Section.
regulation of firms that audit public entities
Audit evidence is usually considered succient when
it is reliable
there is enough quantity to afford a reasonable basis for an opinion on financial statements
it has the qualities of being relevant, objective, and free from unknown bias
it has been obtained through random selection methods.
Which of the following is not considered a type of audit evidence
The entity's trial balance
Auditors' calculations
Physical observation
Verbal statements made by client personnel
An audit of the financial statements of Camden Corporation is being conducted by external auditors. The external auditors are expected to
certify the correctness of Camden's financial statements
make a complete examination of Camden's records and verify all of Camden's transactions
give an opinion on the fair presentation of Camden's >nancial statements in
conformity with the applicable >nancial reporting framework (e.g., GAAP, IFRS).
give an opinion on the attractiveness of Camden for investment purposes and
critique the wisdom and legality of its business decisions.
Auditors try to achieve independence in appearance in order to
maintain public confidence in the profession.
become independent in fact.
comply with the responsibilities principle
maintain an unbiased mental attitude.
The preparation of an audit plan prior to the beginning of fieldwork is appropriately considered documentation of
planning
supervision
information evaluation
quality assurance
Which of the following procedures would provide the most reliable audit evidence?
Inquiries of the client's accounting staff held in
private
Inspection of prenumbered client shipping
documents
Inspection of bank statements obtained directly from the client's
financial institution
Analytical procedures performed by auditors on the client's
trial balance
Which of the following would most likely be a violation of the independence requirement found in the responsibilities principle under generally accepted auditing standards?
An auditor on the engagement has a distant relative who is employed by a vendor that does a significant amount of business with clients.
The client's Chief Executive Officer graduated from the same university as the
partner in charge of the accounting >rm.
An auditor on the engagement owns a financial interest in the stock of
the client
The client provides financial support to a number of charitable causes that also
receive support from the accounting firm.
A vendor's invoice received and held by the client would be considered what type of evidence
External
Internal
External-internal
Written representation
Which of the following statements is generally correct about the appropriateness of audit evidence?
Auditors' direct personal knowledge, obtained through observation and inspection, is of higher quality than information obtained indirectly from independent outside sources
To be reliable, audit evidence must be either valid or relevant, but need
not be both
Client accounting data alone may be considered succient appropriate audit
evidence to issue an unmodi>ed opinion on client >nancial statements.
Appropriateness of audit evidence refers to the amount of corroborative
evidence to be obtained.
Which of the following is not included in the auditors' standard report representing
an unmodi>ed opinion?
brief indication of the responsibility of auditors and management for the
>nancial statements
An indication that all appropriate disclosures have been made and included in
the >nancial statements
An indication that the audit was conducted in accordance with standards
established by the PCAOB
The auditors' opinion on the fairness of the >nancial
statements
Which of the following presumptions is correct about the reliability of audit
evidence?
Information obtained indirectly from outside sources is the most reliable form of
audit evidence.
To be reliable, audit evidence should be convincing rather than
persuasive.
Reliability of audit evidence refers to the amount of corroborative
evidence obtained.
An eKective system of internal control provides more assurance about the
reliability of audit evidence.
The auditors' responsibility to express an opinion on the >nancial statements is
implicitly represented in the auditors'
standard report
explicitly represented in the introductory paragraph of the auditors'
standard report.
explicitly represented in the scope paragraph of the auditors'
standard report
explicitly represented in the opinion paragraph of the auditors'
standard report.
Which of the following is not a concept from the performance principle under
generally accepted auditing standards?
The auditor must plan the work and properly supervise any
assistants.
The auditor must express an opinion in accordance with the
auditor's >ndings.
The auditor must obtain succient appropriate evidence about whether material
misstatements exist.
The auditor must determine and apply an appropriate materiality level
throughout the audit
Under generally accepted auditing standards, which of the following relates to the
responsibilities principle?
The initial planning of the audit
engagement
The con>rmation of accounts
receivable
The completion of an internal control
questionnaire
Maintaining professional skepticism and exercising professional
judgment
Which of the following represent audit quality guides that remain stable over time
and are applicable for all audits?
Auditing procedures
Auditing standard
Due care
System of quality control
Which of the following situations would most likely be in conflict with the
responsibilities principle?
Auditors perform the engagement with the performance level expected of
prudent auditors, but not expert auditors.
Auditors obtain expertise in their client's industry as they are conducting the
audit examination.
Auditors are directly involved with a client manager in a strategic decision making
capacity
Auditors fail to document their assessment of control risk following their study of
internal control
Which of the following statements is not true with respect to the evidence that
would be gathered when assessments of control risk are high?
Auditors would be required to rely on external (rather than internal) forms
of evidence.
Auditors would be required to perform procedures at interim periods, rather than
at year end.
Auditors would be required to con>rm a larger number of customer accounts
receivable balances.
Auditors would be required to obtain more evidence through direct personal
observation.
As it relates to audit evidence, appropriateness refers to the
originality of evidence gathered.
quality of evidence gathered
quantity of evidence gathered
timeliness of evidence gathered
Which of the following information would not be included in the auditors' standard report?
The names of the financial statement audited
A description of the nature of an
audit
An indication that all necessary disclosures have been
presented
An opinion on the entity's >nancial
statements
The primary purpose of the auditors' study of internal control for a nonpublic entity is
to provide constructive suggestions to the client for improving its internal control
to report on internal control as required by Auditing Standard No.5
to identify and detect fraud and irregularities perpetrated by client personnel
to determine the nature, timing, and extent of further audit procedures
Which of the following statements is true with respect to the quality of audit evidence?
Quality is related to the relevance of evidence, but not the reliability of evidence.
Evidence is considered of higher quality when gathered prior to year-end than following year-end.
Evidence obtained under environments of stronger internal control is of higher
quality than evidence obtained under environments of weaker internal control.
In evaluating quality, succiency of evidence is of greater importance than
appropriateness of evidence
Which reporting options do auditors have if the client's >nancial statements are not
presented according to the applicable financial framework (e.g., GAAP, IFRS)?
Unmodi>ed opinion or disclaimer of
opinion
Quali>ed opinion or disclaimer of
opinion
Unmodi>ed opinion or adverse
opinion
Quali>ed opinion or adverse
opinion
Which of the following concepts is least related to the risk of material
misstatement?
control risk
detection risk
inherent risk
materiality
Which of the following statements describes an appropriate relationship with
respect to the reliability of audit evidence?
Receiving con>rmation from third parties as to the existence of securities is
more reliable than the auditors' personal inspection of those securities.
Verbal inquiries received from the client regarding sales made to customers are
more reliable than sales invoices prepared by the client for its customers.
A bank con>rmation received directly by the auditor is more reliable than a bank
con>rmation initially received by the client and forwarded to the auditor
Evidence drawn from a document prepared by the client is more reliable than
evidence drawn from a document prepared by an external party that is
forwarded to the auditor by the client.
A periodic review of an audit >rm's system of quality control by the PCAOB is
referred to as a(n)
inspection
peer review
principles review
quality review
The performance principle would include all of the following except
the auditors' determination of materiality
levels
the auditors' evaluation of independence with respect to
their clients
the auditors' evaluation of the risk of material
misstatement.
the auditors' determination of the nature, timing, and extent of further audit
procedures.
Which of the following is most closely associated with the responsibilities
principle?
Due care
planning
qualified audit opinion
risk of material misstatement
Which of the following would normally be considered earliest in the audit
examination?
Determination of materiality levels for use during
the audit
Consideration of the ability of the entity's internal control to prevent or
detect errors
Preparation of a written audit plan
Evaluation of the type of audit opinion to be issued, based on the
auditor's >ndings
The state of mind that characterizes the auditors' appropriate questioning and
critical assessment of audit evidence is referred to as
due care
independence in appearance
professional judgement
professional skepticism
Which of the following is least related to the concept of independence in
appearance?
The auditors' objectivity and ability to act impartially
toward the client
The perceptions of individuals who rely on the >nancial statements and auditors'
opinion on the >nancial statements
The ownership of a >nancial interest in a client by
the auditor
The employment of the auditor's family member in an important position
with the client
The concept of _________ recognizes that a GAAS audit may fail to detect all
material misstatements.
absoluteassurance
due care
reasonable assurance
risk of material misstatement
Generally accepted auditing standards are
speci>c actions performed by auditors during an
examination
standards that guide the conduct of an audit
examination.
legal requirements auditors must observe during the audits of
public entities
standards used by entities in deciding whether to engage or retain the services
of auditors.
Which of the following could serve as a source of professional guidance in the audit
of a public entity?
Option A
Option B
Option C
OptionD
Which of the following is not true with respect to the responsibilities for
establishing generally accepted auditing standards?
Auditing standards for both public and private entities must be formally
approved by the Securities and Exchange Commission.
Interpretive publications are issued by the AICPA to provide guidance on the
application of generally accepted auditing standards in speci>c circumstances.
The PCAOB is the body with formal authority for the creation of auditing
standards for the audits of public entities.
If speci>c guidance is not provided by PCAOB Auditing Standards, auditors may
refer to Statements on Auditing Standards that have not been amended or
superseded.
Which of the following is not related to the responsibilities principle
Continuing professional education to ensure that professionals' knowledge
keeps pace with changes in the accounting and auditing profession
Firm-wide policies to evaluate the >nancial and professional relationships of its
professionals
Speci>c auditing procedures designed to determine the eKectiveness of the
entity's internal control over >nancial reporting
The auditors' use of professional judgment throughout the
examination
A level of performance that would be exercised by reasonable auditors in similar
circumstances is referred to as
Due care
independence
professional judgement
professional skepticism
During which stages of an audit examination are auditors required to exhibit the
appropriate use of professional judgment?
option a
option b
option c
option d
Which of the following is not true with respect to the concept of reasonable
assurance?
Reasonable assurance allows for mistakes and misinterpretations by the audit
team throughout the examination.
The nature of many audit procedures is such that they cannot always be relied
upon to detect misstatements.
Audit teams should evaluate all transactions and components of an account
balance or class of transactions
Auditors should control the overall risk in an audit to an acceptably
low level
Which of the following factors influences the risk of material misstatement?
Option A
Option B
Option C
Option D
Which of the following is not true with respect to the auditors' report for a public
entity?
The report title should contain the word
"independent."
The report provides a detailed listing of major auditing procedures performed
during the examination
The opinion assesses the >nancial statements against an applicable >nancial
reporting framework
The report speci>cally identi>es the >nancial statements and years examined by
the auditor
Which of the following paragraphs references the conduct of the audit in
accordance with PCAOB standards?
Introductory paragraph
Scope paragraph
Opinion paragraph
Internal control paragraph
Which of the following is true with respect to the PCAOB inspection process?
Option A
Option B
Option C
Option D
Which of the following types of audit evidence provides the least assurance of
reliability?
Receivable con>rmations from the client's
customers
Prenumbered receiving reports completed by the client's
employees
Prior months' bank statements obtained from
the client
Municipal property tax bills prepared in the
client's name
Which of the following courses of action is most appropriate if an auditor concludes
that there is a high risk of material misstatement?
Use smaller, rather than larger, sample
sizes.
Perform substantive tests as of an
interim date
Select more eKective substantive
tests.
Increase tests of
controls.
Which of the following actions should a CPA >rm take to comply with the AICPA's
quality control standards?
Establish procedures that comply with the standards of the Sarbanes-
Oxley Act
Use attributes sampling techniques in testing internal
controls.
Consider inherent risk and control risk before determining
detection risk
Establish policies to ensure that the audit work meets applicable professional
standards
Which of the following is a de>nition of control risk?
The risk that a material misstatement will not be prevented or detected on a
timely basis by the client's internal controls
The risk that the auditor will not detect a material
misstatement
The risk that the auditor's assessment of internal controls will be at less than the
maximum level
The susceptibility of material misstatement assuming there are no related
internal control policies or procedures
Prior to, or in conjunction with, the information-gathering procedures for an audit,
audit team members should discuss the potential for material misstatement due to
fraud. Which of the following best characterizes the mindset that the audit team
should maintain during this discussion?
Presumptive
Judgemental
Criticizing
Questioning
An independent auditor must have which of the following?
A pre-existing and well-informed point of view with respect to
the audit
Technical training that is adequate to meet the requirements of a
professional
A background in many different
disciplines
Experience in taxation that is sufficient to comply with generally accepted
auditing standards
What type of evidence would provide the highest level of assurance in an
attestation engagement?
Evidence secured solely from within the
entity
Evidence obtained from independent
sources
Evidence obtained
indirectly
Evidence obtained from multiple internal
inquiries
Which of the following is an important consideration during the planning of the
audit?
Considering the independence of members of the
audit team
Performing some of the audit procedures prior to the end of the year
under audit
Considering the ability and expertise of the audit team with respect to
accounting and auditing issues in the client's industry
Considering the impact of tests of controls on the overall assessment of
control risk
The initial development of auditing standards was in response to
a scandal involving embezzlement that was not detected during an audit
engagement.
auditors' concerns that all components of the >nancial statements were not
being veri>ed
independent inquiries of the public accounting profession made by
the SEC.
requests by companies for greater assurance with respect to the auditors' ability
to detect >nancial statement misstatements.
The particular and specialized actions that auditors undertake to obtain evidence in
a speci>c audit engagement are known as
Interim Auditing Standards
Audit procedures
Interpretive publications
Statements on Auditing Standards
The role of the Public Company Accounting Oversight Board in the standard-setting
process is to develop
Statements on Auditing Standards for the audits of
nonpublic entities
Auditing Standards for the audits of public
entities
Governmental Auditing Standards for the audits of
governmental entities
International Standards on Auditing for the audits of
foreign entities
The three fundamental principles underlying GAAS include all of the following,
except
general principle
performance principle
reporting principle
responsibilities principle
The relevant ethical requirements relating to due care, professional skepticism, and
professional judgment are responsibilities of the auditor at which stage(s) of the
audit?
Option A
Option B
Option C
Option D
Which of the following does not directly relate to an auditor's responsibility for
having appropriate competence and capabilities to perform the audit?
Participating in continuing professional
education
Gaining experience through hands-on
practice
Obtaining reliable documentary
evidence
Attending on-the-job
training
In a system of quality control, leadership responsibilities for quality within the >rm
are best characterized by
basing personnel performance evaluations on the employees' ability to generate
revenues from existing clients or by acquiring new clients
management's evaluation of the integrity and business reputation
of the client
management's clear and consistent demonstration of its own commitment to
quality control and high-quality work.
assigning management responsibilities in such a manner that commercial
considerations are the >rm's top priority
The audit failures of both Enron and WorldCom were examples in which the
leadership responsibilities for quality work within the accounting >rm were
overshadowed by fears that losing a key client would
result in shareholder losses from reduced company
pro>tability.
require additional audit procedures and increase the fees paid by the companies
to the accounting >rm.
negatively inUuence the results of the >rm's
inspection.
negatively impact individual auditors' performance
evaluations
Which element of a system of quality control strives to provide the >rm with
reasonable assurance that its policies and procedures are operating eKectively?
Human resources
Leadership responsibilities for quality within the firm
Monitoring
Relevant ethical requirements
