75%

Question 1

who authorizes distributions of dividends?

Answer 1

board of directors

Question 2

how relevant are subsequent events related to fair value measurements at balance sheet date?

Answer 2

not very

Question 3

which is a communication requirement from registered firms?

A. to management - a schedule of unadjusted audit differences

B. to the AC - critical accounting policies and practices used

C. to the internal audit manager - alternative accounting treatments discussed with management

Answer 3

B

Question 4

what type of assurance is provided for the following SSAE engagements?

examination
review
agreed upon procedures

Answer 4

examination - reasonable assurance
review - limited/negative assurance
agreed upon procedures - no assurance

Question 5

what type of assurance is provided for the following SSARS engagements?

review
compilation
preparation

Answer 5

review - negative/limited assurance
compilation - no assurance
preparation - no assurance

Question 6

the risk of incorrect rejection and the risk of assessing control risk too high relates to

Answer 6

the efficiency of an audit

Question 7

what does the search for unrecorded liabilities focus on?

Answer 7

payments made after balance sheet date for payables accrued on 12/31

Question 8

if an audit firm provides non-attest services related to internal control to an audit client, what steps should be taken to avoid an independence violation?

Answer 8

must be communicated in writing to the audit committee

Question 9

which of the following outside parties can the auditor disclose irregularities to?

• subpoena
• SEC when client reports an auditor change
• successor auditor
• governmental funding agency

Answer 9

all

Question 10

what are the segregated functions of timesheets and distribution of paychecks?

Answer 10

approval of timesheets - authorization function
paychecks - custody of assets

Question 11

examining vendor invoices, consignment agreements, and confirming inventory out on consignment provides evidence for which assertion?

Answer 11

rights and obligation

Question 12

observing physical inventories provides evidence for which assertion?

Answer 12

existence and completeness

Question 13

an auditor selects sales invoices and traces them to shipping documents. which assertion is tested?

Answer 13

existence

Question 14

how are major programs determined by an auditor?

Answer 14

risk based approach

Question 15

are compiled financial statements with omitted disclosures eligible for comparative financial statements?

Answer 15

no

Question 16

if an auditor issues an adverse opinion on FS, when is issuing a compliance report appropriate?

Answer 16

instances of noncompliance

Question 17

what type of assurance is provided for compliance of contractual agreements related to audited FS?

Answer 17

negative

Question 18

what must be communicated to those charged with governance?

Answer 18

disagreements with management
significant audit adjustments

Question 19

consistent application of GAAP is mentioned [explicitly v. implicitly] in the auditor’s report?

Answer 19

implicitly

Question 20

determine sample size:
tolerable misstatement: $200,000
reliability factor: 4
recorded amount of AR: $500,000

Answer 20

200,000 / 4 = 50,000

500,000 / 50,000 = 10 items to sample

Question 21

which sections are modified when an auditor qualifies an opinion for a non-issuer due to a scope limitation?

Answer 21

opinion
basis for opinion

Question 22

why would convertible bonds converted to common stock and then repurchased decrease the debt to equity ratio?

Answer 22

converting bonds decreases debt
additional common stock/treasury shares increases equity

Question 23

in a combined audit report, what must be added when:
FS = qualified opinion
ICFR = adverse

Answer 23

explanatory paragraph describing departure from GAAP
explanatory paragraph that defines and describes the material weakness

Question 24

if a customer’s response to an AR confirm is that they need additional information, what should the auditor do in response?

Answer 24

perform alternative procedures - verify shipping documents and subsequent cash collections

Question 25

why might AR turnover decrease if the client incorrectly recorded sales for inventory shipped for consignment?

Answer 25

sales number was greater than avg AR

Question 26

why might inventory turnover increase if the client incorrectly recorded sales for inventory shipped for consignement?

Answer 26

cogs
inventory

inventory TO = cogs / avg inventory
cogs increased while avg inventory decreased