Audit true or false Flashcards
Audit true or false
The term “ethics” refers to a person’s propensity to follow the laws of the land.
False
Professionalism refers to the conduct, aims, or qualities that characterize a given profession.
true
The Principles of Professional Conduct set forth the minimum standards.
false
When auditing a public company, a CPA must follow the auditing standards and Code of CSQM-1 Quality Management for Firms That Perform Audits or Review of Financial Statements.
true
Rules of Conduct are enforceable.
true
Interpretations of Rules of Conduct are enforceable.
false
Principles are stated at a conceptual level, not a detailed level.
true
The rules contained in Section 202 cover issues relating to integrity, due care and objectivity.
true
If an auditor is not independent of the client, it is unlikely that a user of financial statements will place much reliance on the CPA’s work.
true
As per the CPA Rules of Professional Conduct, a CPA is required to identify and assess the extent to which a threat to independence exists.
true
An indirect financial interest is defined as a financial interest that is owned or is under the control of an individual or entity.
false
A financial interest is “beneficially owned” when an individual or entity is NOT the recorded owner of the interest but has a right to some or all of the underlying benefits of ownership.
true
If a CPA owns an insurance policy issued by an attest client, independence would be considered impaired, even if the policy was purchased under the insurance company’s normal terms and procedures and does not offer an investment option.
false
The independence standards issued by the CPA Rules of Professional Conduct do not prohibit the provision of tax services to an attest client.
true
CPA Rules of Professional Conduct require tax services provided by a public company auditor to be considered and approved by the company’s audit committee.
true
A going concern issue requires an explanatory paragraph to be added to the standard unqualified audit report (public company).
true
An opinion based in part on the report of another auditor requires an explanatory/emphasis-of-matter paragraph be added to the standard unqualified audit report.
false
A basic assumption that underlies financial reporting is that an entity will continue as a going concern.
true
A change in accounting estimate is an example of an accounting change that affects comparability and requires an explanatory paragraph in the audit report.
false
A correction of a material misstatement in previously issued financial statements is an example of an accounting change that affects comparability and requires an explanatory paragraph in the audit report.
true
Changes that affect comparability but that do not involve a change in accounting principle or the correction of a misstatement are normally disclosed in the footnotes but do not require an explanatory paragraph in the audit report.
true
An auditor may be unable to express an unqualified opinion if an immaterial departure from GAAP is present in the financial statements.
false
An auditor must disclaim an opinion when the auditor lacks independence.
true
The choice of which audit report to issue depends on the nature and the materiality of the condition giving rise to the departure.
true
A scope limitation results from an inability to obtain sufficient appropriate evidence about some component of the financial statements.
true
Every contingent liability must be recorded.
false
An example of a contingent liability is an income tax dispute.
true
Reading contracts and loan agreements is one way to identify unrecorded contingent liabilities.
true
A legal letter will include and evaluate all contingent liabilities of the company.
false
Type II subsequent events are conditions that require an adjustment to the account balance shown on the financial statements.
false
An example of a Type I event or condition is the settlement of a lawsuit after the balance sheet date for an amount different from the amount recorded in the year-end financial statements.
true
An example of a Type II event or condition is an uncollectible account receivable resulting from deterioration in a customer’s financial condition prior to year end, about which the entity is unaware. The customer declares bankruptcy after the balance sheet date but prior to the issuance of the financial statements.
false
Dual dating is used to identify unrecorded contingent liabilities.
false
The auditor must perform final analytical procedures before deciding on the appropriate audit report to issue for the entity.
true
If there is substantial doubt about the entity’s ability to continue as a going concern, the auditor should obtain information about the management’s plans to mitigate the problem and assess the likelihood that such plans can be implemented.
true
The responsibility to assess the entity’s ability to continue as a going concern rests solely with the auditor.
false
The cash account is affected by all of the entity’s business processes.
true
The general cash account is normally the principal account used to disburse payroll.
false
An imprest cash account is used for specific purposes and contains a stipulated amount of money.
true
The auditor’s use of analytical procedures for auditing cash is limited.
true
A major control that directly affects the audit of cash is the bank reconciliation prepared by the auditor.
false
A cutoff bank statement is used to verify the propriety of the reconciling items shown on the bank reconciliation.
true
Kiting is an audit procedure used to test the accuracy of the cash receipts.
false
It is generally more efficient to follow a substantive strategy for auditing investments.
true
If the entity maintains custody of its investments, the auditor normally examines the actual securities.
true
Level 1 inputs are more risky and difficult to audit than Level 3 inputs to a valuation model.
false
