AUD 8 Flashcards

1
Q

The existence of audit risk is recognized by the statement in the auditor’s standard report that the

A

auditor obtains reasonable assurance about whether the financial statements are free of material misstatements

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2
Q

an example of an analytical procedure is the comparison of

A

financial information with similar information regarding the industry in which the entity operates

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3
Q

An entity prepares it financial statements on its income tax basis. A description of how that basis differs from GAAP should be included in the

A

notes to the financial statements

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4
Q

when performing a review of a nonpublic company, the auditors should obtain in representation letter acknowledgement of management for its responsibility for each of the following EXCEPT:

A

responsibility for identifying all illegal acts committed by employees

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5
Q

the date of the management representation letter should coincide with the

A

date of the auditor’s report

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6
Q

which of the following statements is correct concerning statistical sampling in tests of controls?

A

deviations from specific internal control procedures at a given rate ordinarily result in misstatements at a lower rate

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7
Q

which of the following is NOT a principle included in trust services engagements?

A

independence

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8
Q

which of the following circumstances most likely would cause an auditor to suspect that there are material misstatements in an entity’s financial statements?

A

supporting accounting record and files that should be readily available are not produced promptly when requested

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9
Q

in attribute sampling, a 25% change in which of the following factors will have the smallest effect on the size of the sample?

A

number of items in the population because population size isn’t considered in determining the sample size for an attributes sampling application.

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10
Q

when an adverse opinion is expressed, the opinion paragraph should include a direct reference to

A

a separate paragraph which discuses the basis for the opinion rendered.

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11
Q

analytical procedures performed during the risk assessment phase of an audit should focus on

A

enhancing the auditors understanding of the transactions and events that have occurred since the last audit

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12
Q

An auditor’s primary consideration regarding an entity’s internal control structure policies and procedures is whether they

A

affect the financial statement assertions

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13
Q

Validity Check

A

the computer flags any transmission for which the control field value didn’t match that of existing file record. A check to see if the data carry valid values.

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14
Q

which of the following computer-assistend auditing techniques processes client input data on a control program under the auditor’s control to test controls in the computer system?

A

parallel simulation.

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15
Q

an advantage that using statistical sampling methods have over non statistical sampling methods in tests of controls is that the statistical methods

A

provide an objective basis for quantitatively evaluating sample risk

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16
Q

An auditor includes an “emphasis-of-matter” paragraph in an otherwise unmodified report in order to emphasize that the entity being reported upon is a subsidiary of another business enterprise. This inclusion of the emphasis-of-matter paragraph

A

is appropriate and would not negate the unmodified opinion.

17
Q

while observing a client’s annual physical inventory, an auditor recorded test counts for several items and noticed that certain test counts were higher than the recorded quantities in the client’s perpetual records. This situation could be the result of the clients failure to record:

A

sales returns. This could have been an omitted journal entry. the failure to record sales returns results in a situation in which the item is returned by a customer and included in the inventory count, but not recorded in the perpetual records.

18
Q

which of the following procedures would an auditor most likely perform when auditing the Statement of Cash Flows?

A

reconciled the amounts included in the statement of cash flows to the other financial statements’ balances and amounts

19
Q

considering only the provisions of the AICPA code of professional conduct, which of the following services may a CPA perform for a commission or contingent fee?

A

representation of a nonattest client in an IRS examination.

20
Q

an auditor most likely would be responsible for assuring that management communicates significant deficiencies in the design of the internal control structure

A

to specific legislative and regulatory bodies when reporting under government auditing standards.

21
Q

in the first audit of a new client, an auditor was able to extend auditing procedures to gather sufficient evidence about consistency. under these circumstances, the auditor should:

A

not refer to consistency in the auditor’s report. if the consistency requirement is met, no need to mention it in the report.

22
Q

a CPA might find information on the structure of relational database tables through which language of interface?

A

data definition language. this is used to define database, including creating, altering, and deleting tables and establishing various constraints.