AUD 1

Question 1

The auditor’s primary concern with regard to related-party transactions is?

Answer 1

Disclosure

Question 2

Is it possible for the auditor to ascertain whether the transactions would have occurred had the relationship not been present?

Answer 2

No

Question 3

What can assist the auditor in identifying related-party transactions?

Answer 3

Indications of guarantees

Question 4

What type of audit opinion should be issued if management states that related party transactions occurred at arms length but doesn’t have back-up?

Answer 4

PCAOB states the auditor should consider a qualified or adverse opinion under such circumstances

Question 5

Loss on AR as the result of a customer filing bankruptcy in January, year 2 should be reported in year 1 or year 2?

Answer 5

Year 1 because the impairment of collectability was already in process in year 1

Question 6

What date should the auditor use when a subsequent event occurs requiring adjustment of the financial statements but no disclosure of that subsequent event is made?

Answer 6

When sufficient appropriate audit evidence had been obtained, the original audit report date is used

Question 7

The auditor issued an audit report that was dual dated, the auditor’s responsibility for events occurring subsequent to the audit report date was?

Answer 7

Limited its responsibility for events occurring subsequent to the audit report date to the specific event referenced

Question 8

Which of the following procedures would an auditor be most likely to perform in obtaining evidence about subsequent events?

Answer 8

Significant change in capital stock, long-term debt, or working capital after year end

Question 9

What should the auditor’s report contain when there is substantial doubt about a company’s ability to continue as a going concern?

Answer 9

The audit report should include a separate “Going Concern” section following the “Opinion” and “Basis of Opinion” sections to bring attention to the existence of the going concern issue. The “Going Concern” section should include the phrases “substantial doubt” and “going concern.”

Question 10

Assessing the risk of material misstatement below the maximum based on controls involves

Answer 10

(1) identifying specific controls relevant to specific assertions
(2) performing tests of controls to evaluate their effectiveness.