Completing the Audit

Question 1

Reclassifying items that should be deferred or contra-assets or liabilities to miscellaneous or other revenues and expenses, especially at the end of a quarter or year is referred to as

Answer 1

Earnings management

Question 2

The auditor’s report on the entity’s financial statements covers all events that occur up to the

Answer 2

date of the auditor’s report

Question 3

Potential warranty payments, tax disputes with the IRS and debt guarantees on behalf of another party are all examples of

Answer 3

contingent liabilities

Question 4

adjustments made to meet analysts’ profit expectations

Answer 4

Earnings management

Question 5

Auditors must rely on the attorney to inform Blank______ if an unasserted claim must be disclosed.

Answer 5

the client

Question 6

Management’s refusal to provide written representations

Answer 6

should cause auditor skepticism

constitutes a scope limitation

Question 7

When no formal lawsuit or other action has been filed or threatened, but circumstances could result in an action in the future, a(n)
blank blank exists.

Answer 7

unasserted claim

Question 8

A proposed adjustment to the financial statements that the client decides not to make is called a(n

Answer 8

uncorrected misstatement

Question 9

Subsequently discovered facts become known to the auditor after the

Answer 9

date of the auditor’s report

Question 10

When subsequently discovered facts that would result in either the revision of the auditor’s report or the financial statements are discovered after the audit report release date and individuals are continuing to rely on the statements, the Blank______ should notify the individuals that the statements should not be relied on.

Answer 10

client

Question 11

For public entities, the communication of all significant internal control deficiencies must be made to the client in writing

Answer 11

prior to the audit report release date

Question 12

For nonpublic entities, the communication of all significant internal control deficiencies must be made to the client in writing

Answer 12

no later than 60 days after the audit report release date

Question 13

Management acknowledgment of its responsibility for the fairness of the financial statements in accordance with U.S. GAAP is included in (blank) audit written representation

Answer 13

all

Question 14

A list of pending or threatened litigation, claims, or assessments currently outstanding against the client is/is not included in audit written representation

Answer 14

is not

Question 15

A description of recommendations that allow the client to improve the efficiency and effectiveness of its operations is/is not included in audit written representation

Answer 15

is not

Question 16

Availability of all financial records and related data is included in (blank) audit written representation

Answer 16

all

Question 17

Information related to the presentation and disclosure of items within the financial statements is included in (blank) audit written representation

Answer 17

all

Question 18

Disclosure of all significant deficiencies and material weaknesses in internal control is included in (blank) audit written representation

Answer 18

public entity

Question 19

Information concerning fraud involving management and employees who have significant roles in internal control is included in (blank) audit written representation

Answer 19

all

Question 20

Auditors’ judgment about the quality of the client’s accounting principles is/is not included in audit written representation

Answer 20

is not

Question 21

A statement that the financial statements are prepared according to U.S. generally accepted accounting principles is/is not included in audit written representation

Answer 21

is not (Written representations indicate that management has fulfilled its responsibility for the preparation and presentation of financial statements according to GAAP. However, written representations should not express an opinion on the financial statements)

Question 22

Working papers are reviewed at ______ supervisory level(s) of a CPA firm.

Answer 22

every

Question 23

Managers and partners typically review at the _____ of the engagement timeline.

Answer 23

end

Question 24

Concurring partners are often concerned with _____ control standard compliance.

Answer 24

quality

Question 25

Reviewers are concerned that the ________ all tie together.

Answer 25

working papers

Question 26

Reviewers are concerned if immaterial past misstatements have a ______ material effect.

Answer 26

cumulative

Question 27

conditions that have come into existence after the balance sheet date are a type ___ subsequent event

Answer 27

2

Question 28

a flood damaging a significant portion of the operating facility after year-end is a type ___ subsequent event

Answer 28

2

Question 29

additional evidence about conditions that existed at the balance sheet date is a type ___ subsequent event

Answer 29

1

Question 30

during the audit, a customer with a large A/R balance at year-end declaring bankruptcy is a type ___ subsequent event

Answer 30

1

Question 31

a lawsuit that was in progress as of year-end being settled shortly thereafter is a type ___ subsequent event

Answer 31

1

Question 32

The CPA's opinion on the ______of the financial statements may be changed by subsequent events.

Answer 32

fairness

Question 33

Many subsequent events may involve the settling of ________.

Answer 33

litigation

Question 34

Type 2 subsequent events come into existence _____ the balance sheet date.

Answer 34

after

Question 35

Subsequent events need to be disclosed in the financial statements; otherwise, the financial statements would be_______.

Answer 35

misleading

Question 36

Type 1 subsequent events require the financial statements to be _______ if needed.

Answer 36

adjusted

Question 37

Type 2 subsequent events occur after the balance sheet date but ____ the completion of fieldwork.

Answer 37

prior to

Question 38

Type 1 subsequent events come into existence due to new ______becoming available.

Answer 38

evidence

Question 39

Interim testing is done prior to year end for efficiency purposes and when overall risk of material misstatement is (blank)

Answer 39

low

Question 40

Procedures used to allow auditors to extend their conclusions to the end of the year under audit are referred to as:

Answer 40

roll-forward work

Question 41

Procedures used by auditors near the end of the audit to identify unusual or unexpected relationships not previously identified during the audit are referred to as:

Answer 41

analytical procedures

Question 42

Omitted procedures are discovered before/after the audit report release date

Answer 42

after

Question 43

What is typically the auditors' initial procedure performed to identify litigation, claims, and assessments?

Answer 43

Inquire of the entity regarding the existence of litigation, claims, and assessments.

Question 44

The attorney's expert opinion as to the probability of an unfavorable judgment against the entity is/is not included in the attorney letter

Answer 44

is not

Question 45

What audit documentation review is focused on ensuring that the quality of audit work and reporting is consistent with the quality standards of the firm?

Answer 45

Review of work by second (reviewing) partner - aka engagement quality review

Question 46

Roll-forward procedures are performed before/after the date of the financial statements

Answer 46

after

Question 47

Auditors must review accounting estimates for these two things

Answer 47

1. management's process for developing estimates 2. reasonableness

Question 48

Attorney letters are requested by the ____, prepared by the ______, sent by the ______, filled out by the attorney, and returned to the ____.

Answer 48

auditor, client, auditor, auditor

Question 49

Written representations are provided by _____ to ______.

Answer 49

management to auditors

Question 50

Written representations are dated using the date of the

Answer 50

auditor's reports (audit completion date)

Question 51

Rollover method of materiality considers the (blank blank) income effect(s) of misstatements

Answer 51

current period

Question 52

Iron curtain method considers the (blank blank) of the materiality adjustments on the entity’s balance sheet

Answer 52

aggregate effect

Question 53

all adjustments and misstatements must be communicated to the

Answer 53

audit committee/individuals charged with governance

Question 54

Near the end of the audit, (blank blank) identify unusual or unexpected relationships not previously identified

Answer 54

analytical procedures

Question 55

Reviewing and scanning for unusual/large transactions in accounts for “miscellaneous,” “other,” and “clearing” may assist in identifying (blank blank)

Answer 55

earnings management

Question 56

With respect to reasonableness, auditors should ensure estimates are consistent with these three things

Answer 56

one another, historical data, industry data

Question 57

facts that become known to auditors after the date of the auditor's report that may have caused the auditors to revise their report are called

Answer 57

subsequently discovered facts

Question 58

Reading minutes of meetings held after the date of the financial statements and reviewing the entity's latest interim financial statements are two procedures that can be performed specially to identify the existence of material (blank blank)

Answer 58

subsequent events

Question 59

An overall review of the reasonableness of accounting estimates is similar in nature and purpose to the role of (blank) procedures conducted near the end of the audit.

Answer 59

analytical

Question 60

True or false: If management refuses to provide written representations, the auditor must withdraw from the engagement.

Answer 60

False, a qualified or disclaimer of opinion may occur

Question 61

Auditor recommendations for adjustments to the financial statements are considered to be (blank) to indicate management's responsibility for the financial statements.

Answer 61

proposed

Question 62

The auditors have gathered sufficient, appropriate evidence on which to base their report at the date of

Answer 62

the auditor's report

Question 63

Significant events occurring between the date of the audit report and the audit report release date may result in a(n) (blank blank) report

Answer 63

dual date

Question 64

Attorneys should encourage clients to disclose unasserted claims to auditors if the assertion of a claim is remote/probable/possible

Answer 64

probable

Question 65

For public entities, the communication of all significant internal control deficiencies must be made to the client in writing prior to the (blank) date

Answer 65

audit report release

Question 66

Management letters ______.

Answer 66

are delivered to and discussed with the client can make the client aware of other business services offered