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Audit > Ch 3 HW > Flashcards

Ch 3 HW Flashcards

0
Q

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

T or F

A

False

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1
Q

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?

A

True

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2
Q

3) engagement letters are not necessary for continuing clients

T or F?

A

False

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3
Q

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

T or F

A

True

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4
Q

5) CAATs software requires auditors to do original programming

T or F

A

False

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5
Q

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

T or F

A

True

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6
Q

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?

A

True

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7
Q

8) the use of CAATs has significantly changed auditing objectives

T or F?

A

False

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8
Q

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

T or F?

A

False

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9
Q

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

T or F

A

True

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10
Q

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

T or F

A

True

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11
Q

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

A

True

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12
Q

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

T or F?

A

True

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13
Q

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

A

True

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14
Q

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

T or F

A

False

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15
Q

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

T or F?

A

True

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16
Q

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?

A

True

17
Q

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

T or F

A

False

18
Q

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

T or F

A

False

19
Q

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

A

True

20
Q

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

T or F?

A

True

21
Q

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

T or F

A

True

22
Q

23) Audit plans are used exclusively as CAATs

T or F?

A

False

23
Q

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

A

A) type of opinion to be produced

24
Q

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

A

C) providing evidence that the audit plan was satisfied

25
Q 
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
A

B) a quality review audit partner

26
Q 
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
A

D) time budget

27
Q

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

A

A) preparing a time budget for the audit team

28
Q

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

A

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

29
Q

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

A

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

30
Q

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

A

B) determine the reasonableness of the allowance for doubtful accounts

31
Q 
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
A

D) assets and liabilities

32
Q

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

A

C) examination of securities certificates

33
Q

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

A

D) applying the responsibilities principle

34
Q

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

A

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

35
Q

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

A

Engagement letter

36
Q

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

A

Planning memorandum

37
Q

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

A

Audit documentation

38
Q

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

A

Permanent file

39
Q

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

A

Audit trail

Audit (36 decks)

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