Ch 3 HW

Question 0

2) the code of professional conduct permits predecessor auditors to give information to auditors without client consent.

T or F

Answer 0

False

Question 1

1) an important element of a public accounting firm’s system of quality control is the decision about client acceptance and retention

T or F?

Answer 1

True

Question 2

3) engagement letters are not necessary for continuing clients

T or F?

Answer 2

False

Question 3

4) a quality review (I.e second) audit partner is required for audits if financial statements filed with the SEC

T or F

Answer 3

True

Question 4

5) CAATs software requires auditors to do original programming

T or F

Answer 4

False

Question 5

6). A first time audit typically requires more work than a repeat engagement

T or F

Answer 5

True

Question 6

7) a major reason for thinking about overall materiality at the planning stage is to try and “fine-tune” the audit for effectiveness and efficiency

T or F?

Answer 6

True

Question 7

8) the use of CAATs has significantly changed auditing objectives

T or F?

Answer 7

False

Question 8

9) the computer has simplified auditing by providing a better and an easier audit trail to follow

T or F?

Answer 8

False

Question 9

10) the use of computer systems has helped to increase the potential for management supervision of the internal control system

T or F

Answer 9

True

Question 10

11) the degree of computer complexity and use may influence the nature, timing and extent of audit procedures

T or F

Answer 10

True

Question 11

12) Control activities in computerized accounting systems may have characteristics that differ from manual control systems designed to accomplish the same control objectives

T or F

Answer 11

True

Question 12

13) CAATs software may be utilized to read, compute and operate on machine readable records

T or F?

Answer 12

True

Question 13

14) The most important facet of the current audit evidence files is the requirement that they show the auditor’s decision making process and conclusions reached.

T or F

Answer 13

True

Question 14

15) the concept of materiality emphasizes the accountants’ and managers’ point of view, not the users point of view

T or F

Answer 14

False

Question 15

16) Auditors are generally left without definitive, quantitative guidelines for determining materiality

T or F?

Answer 15

True

Question 16

17) When management can exercise discretion over an accounting treatment, auditors tend to exercise more care and use a more stringent materiality criterion

T or F?

Answer 16

True

Question 17

18) Auditors usually choose separate measures of materiality for each financial statement account

T or F

Answer 17

False

Question 18

19) Auditors usually prepare an audit plan that summarizes the preliminary analytical review and the materiality assessment

T or F

Answer 18

False

Question 19

20) Auditors discuss 2 general types of procedures in the audit plan, one set of procedures are designed to obtain evidence about internal control effectiveness and the other set of procedures are for obtaining evidence about the amounts on the financial statements and disclosures
T or F

Answer 19

True

Question 20

21) audit procedures are intended to enable auditors to conduct work in accordance with the performance principle

T or F?

Answer 20

True

Question 21

22) Scanning is an “eyes open” approach for anything unusual in the accounts

T or F

Answer 21

True

Question 22

23) Audit plans are used exclusively as CAATs

T or F?

Answer 22

False

Question 23

24) an audit engagement letter should normally exclude the following matter of agreement between the public accounting firm and the client:
a) type of opinion to be produced
B) fees to be charged
C) terms of engagement
D) schedules to be prepared by client

Answer 23

A) type of opinion to be produced

Question 24

25) the time reports are recorded by budget categories for all the following purposes except for A) evaluating the efficiency of the audit team members on an engagement B) compiling a record for planning the next years audit C) providing evidence that the audit plan was satosfied D) compiling a record for billing the client for the audit engagement

Answer 24

C) providing evidence that the audit plan was satisfied

Question 25

``` 26) for all audits of financial statements filed with the Securities and Exchange Commisiion, which of the following is required? A) computer assisted audit techniques B) a quality review audit partner C) electronic documentation D) a computer specialist ```

Answer 25

B) a quality review audit partner

Question 26

``` 27) which of the following is used to maintain control of the audit and ensure that it is completed on a timely basis? A) termination letter B) engagement letter C) analytical procedures D) time budget ```

Answer 26

D) time budget

Question 27

28) which of the following is not an example of early information gathering activities at the client? A) preparing a time budget for the audit team B) reading and studying the minutes of the meetings of directors and committees if the board of directors C) review of important contracts, agreements, and legal proceedings D) review of the corporate charter and bylaws

Answer 27

A) preparing a time budget for the audit team

Question 28

29) in a computerized information system, uniform processing of transactions A) subjects similar transactions to the exact same processing instructions every time B) means that transactions will never be processed incorrectly C) always leaves an audit trail that can be understood D) requires that a company use the same computer program for all functions

Answer 28

A) subjects similar transactions to the exact same processing instructions every time

Question 29

30) auditing standards don't require that documentation show that A) sufficient appropriate evidential matter was obtained to conclude on the audit B) it conforms to the AICPA model work papers for an audit C) the work was adequately planned and supervised D) the client's accounting record agree or reconcile with financial statements

Answer 29

B) it conforms to the AICPA model work papers for an audit

Question 30

31) Which of the following can CAATs not do? A) scan inventory quantities for negative balances B) determine the reasonableness of the allowance for doubtful accounts C) recalculate depreciation expense D) select customers accounts receivable for confirmation

Answer 30

B) determine the reasonableness of the allowance for doubtful accounts

Question 31

``` 32) The major cycles that auditors typically group accounts by do not include A) Finance and Investment B) Revenue and Collection C) Production and Conversion D) Assets and liabilities ```

Answer 31

D) assets and liabilities

Question 32

33) Physical observation by an audit team would include A) recalculation of depreciation B) examination of sales invoice C) examination of securities certificates D) scanning of the expense accounts for unusual transactions

Answer 32

C) examination of securities certificates

Question 33

34) the concept of materiality is not used by auditors as a guide to A) planning the nature and extent of audit procedures to be completed on an engagement B) making decisions about the audit report C) evaluating the evidence D) applying the responsibilities principle

Answer 33

D) applying the responsibilities principle

Question 34

35) steps to be taken to determine whether to accept a new client would likely not include which of the following procedures? A) evaluate the competence and independence of the internal auditors B) obtain written representation from the client concerning collectibility if accounts receivable C) attempt to communicate with the predecessor auditors D) determine whether the firm was independent of the potential new client

Answer 34

B) obtain written representation from the client concerning collectibility of accounts receivable

Question 35

36) 1. Sets forth a contractual understanding with the client

Answer 35

Engagement letter

Question 36

36) 2. Auditor's record of compliance with the planning and supervision provisions of GAAS

Answer 36

Planning memorandum

Question 37

36) 3. The written basis for the auditor's conclusions

Answer 37

Audit documentation

Question 38

36) 4. A file that contains information of continuing audit significance

Answer 38

Permanent file

Question 39

36) 5. Chain of evidence found at an audit client

Answer 39

Audit trail