Final Review

Question 1

A _____ ticket documents the steps in making a product.

Answer 1

MOVE

Question 2

Which of the following factors is most relevant when an auditor considers the client’s organizational structure in the context of control risk?

A. Management’s attitude toward information and processing and accounting departments

B. The organization’s recruiting and hiring practices

C. Physical proximity of the accounting function to upper management

D. The suitability of the client’s lines of reporting

Answer 2

D. The suitability of the client’s lines of reporting

Question 3

% change in quantity demanded > % change in price, and revenue declines if price increases

Answer 3

ELASTIC

Question 4

% change in quantity demanded = % change in price, and revenue not sensitive to price change

Answer 4

UNIT ELASTIC

Question 5

% change in quantity demanded < % change in price, and revenue will increase if price increases

Answer 5

INELASTIC

Question 6

Open market purchases of government securities by a central bank is __________________.

Answer 6

EXPANSIONARY

Question 7

As time elapses, consumers become more sensItive to changes in prices, and their demand becomes more _______________.

Answer 7

ELASTIC

Question 8

Safety ___________ reorder point focuses on a set of procedures to determine inventory levels for demand-dependent inventory types such as work-in-process and raw materials.

Answer 8

STOCK

Question 9

Professional employees of the audit firm who are not covered members may nonetheless not own more than ____ of a client’s ownership interests without impairing independence.

Answer 9

5%

Question 10

An example of nonsampling risk is the auditor selecting _______________ audit procedures.

Answer 10

INAPPROPRIATE

Question 11

A CPA compiled the financial statements of a nonissuer for the fiscal period ending March 31, Year 1. The financial statements omitted substantially all disclosures required by GAAP. The CPA should issue a _____________ report on the financial statements with a _____________ paragraph indicating management has elected to omit substantially all disclosures.

Answer 11

MODIFIED; SEPARATE

Question 12

In the audit of a nonissuer’s financial statements performed in accordance with GAAS, an auditor is required to document the auditor’s ________________ of the entity’s ______________ control structure.

Answer 12

AUDITOR’S; INTERNAL

Question 13

In a nonissuer’s financial statement audit, an auditor is required to perform procedures to determine the _______________________ of internal controls over financial reporting.

Answer 13

IMPLEMENTATION

Question 14

An accountant is asked to issue a review report on the balance sheet, but not on the other related statements. The scope of the inquiry and analytical procedures has not been restricted, but the client failed to provide a representation letter. The auditor should issue a _______________________ report with the client’s consent.

Answer 14

COMPILATION

Question 15

When considering the use of management’s representations as audit evidence about the completeness assertion, an auditor should understand that such representations _______________, but do ____ replace, substantive procedures designed to support the assertion.

Answer 15

COMPLEMENT; NOT

Question 16

An advantage of using probability-proportional-to-size sampling rather than classical variables sampling is the sampling process can begin ___________ the complete population is available.

Answer 16

BEFORE

Question 17

An accountant’s standard report on a compilation of a projection should NOT include a statement that the ______________________ assumptions used in the projection are reasonable in the circumstances.

Answer 17

HYPOTHETICAL

Question 18

When ___________ policies and procedures are unlikely to relate to the assertions, an auditor would most likely assess control risk at the maximum level for certain assertions.

Answer 18

CONTROL

Question 19

An auditor’s test of controls for completeness for the revenue cycle usually include determining whether an __________ is prepared for each shipping document.

Answer 19

INVOICE

Question 19

The business cycle in the U. S. is measured in terms of changes in _____ GDP.

Answer 19

REAL

Question 20

When evaluating results of testing a sample using attribute sampling, the auditor considers the sample’s final error rate to be equal to (Errors in the ___________ + missing elements in the sample) / total elements in the same + ______________ for sampling risk

Answer 20

SAMPLE; ALLOWANCE

Question 21

The primary concerns of macroeconomics is un______________, economic ___________, and government budget deficits.

Answer 21

EMPLOYMENT; GROWTH

Question 22

The primary concerns of microeconomics is the study of _________ of goods and services as they affect _________________ units.

Answer 22

PRICE; INDIVIDUAL

Question 23

There are many kinds of statistical estimates that an auditor may find useful, but basically every accounting estimate is either a quantity or of an error rate. The statistical terms that roughly correspond to “quantities” and “error rate,” respectively, are _______________ and ___________________.

Answer 23

VARIABLE; ATTRIBUTES

Question 24

________________ fees and commissions are prohibited for attest clients.

Answer 24

REFERRAL

Question 25

An increasing federal deficit implies a ____________ in tax revenue and an _______________ in entitlement payments.

Answer 25

DECREASE; INCREASE

Question 26

Deviations from specific ___________ control procedures at a given rate ordinarily result in misstatements at a ___________ rate.

Answer 26

INTERNAL; LOWER

Question 27

The statements on Standards for Attestation Engagements are issues by the AICPA’s _________________ Standards Board.

Answer 27

AUDITING

Question 28

A company has a policy of frequently cutting prices to increase sales. Product demand is significantly elastic. This means that quantity _______________ proportionately more than the _____________ declines.

Answer 28

ICNREASES; PRICE

Question 29

Whenever reports filed on a printed form designed by authorities call upon the independent auditor to make an assertion that the auditor believes is not justified, the auditor should ____________ the form or attach a separate report.

Answer 29

REWORD

Question 30

Retired, unemployed and those “otherwise not working in the professions” are all _____________ members.

Answer 30

OTHER

Question 31

An auditor should not include a KAM section in a report expressing an adverse opinion or disclaimer of opinion because it may ___________ from the opinion.

Answer 31

DISTRACT

Question 32

As the acceptable level of detection risk decreases, the assurance directly provided from substantive tests should _____________.

Answer 32

INCREASE

Question 33

During a period with an increasing federal budget surplus, fiscal policy is most likely ________________.

Answer 33

CONTRACTIONARY

Question 34

Assessing control risk below the maximum level most likely would involve identifying specific ______________ control policies and procedures relevant to _____________ assertions.

Answer 34

INTERNAL; SPECIFIC

Question 35

CRIME

Answer 35

Control environment
Risk assessment
Information and communication
Monitoring
(Existing) control activities

Question 36

EBOCA (Control Environment)

Answer 36

THICS
Independent BOD
ORGANIZATIONAL structure
Commitment to COMPETENCE
ACCOUNTABILITY

Question 37

SAFR (Risk Assessment)

Answer 37

SPECIFY objectives
ASSESS change
Consider potential for FRAUD
Anaylze RISKS

Question 38

OIE (Information and Communication)

Answer 38

OBTAIN and USE information
INTERNALLY communicate information
EXTERNALLY communicate with external parties

Question 39

SoD (Monitoring)

Answer 39

SEPARATE and ONGOING evaluations
Communicate DEFECIENCIES

Question 40

CATP (Existing control activities)

Answer 40

CONTROL activities
TECHNOLOGY controls
POLICIES and PROCEDURES deployment

Question 41

_____________________ risk relates to the nature, timing, and extent of the auditor’s procedures.

Answer 41

DETECTION

Question 42

__________________ financial statements cannot be reviewed.

Answer 42

PROSPECTIVE

Question 43

In order to address unemployment, Congress should ______________ taxes, _______________ government expenditures, and run _______________.

Answer 43

REDUCE; INCREASE; DEFICITS

Question 44

In an attest relationship, the periods which the independence rules are applicable are the period covered by the __________________ statements and by the professional _____________________.

Answer 44

FINANCIAL; RELATIONSHIP

Question 45

_____________________ is an audit procedure that is performed during substantive testing.

Answer 45

CONFIRMATION

Question 46

Inadequate disclosure of the substantial doubt about an entity’s ability to continue as a going concern is a departure from GAAP, resulting in either a ____________ or ____________ opinion.

Answer 46

QUALIFIED; ADVERSE

Question 47

Obtaining a representation letter from the CEO is more likely to be performed in a ___________ engagement of a nonissuer (where obtaining the letter is required) than in a compilation engagement.

Answer 47

REVIEW

Question 48

SOX does not require an assertion that any identified internal control weaknesses will be rectified within __ days after the report is issued.

Answer 48

60

Question 49

A scope limitation requires the auditor to ____________ an opinion or ___________ from the engagement.

Answer 49

DISCLAIM; WITHDRAW

Question 50

A material weakness in internal control requires the auditor to issue an ___________ opinion.

Answer 50

ADVERSE

Question 51

Basic elements of a report on compliance include a statement that the audit should be planned to obtain ___________________ assurance about whether noncompliance could have a ______________ effect on the programs audited.

Answer 51

REASONABLE; MATERIAL

Question 52

Tracing (old) equipment recorded in the books to the actual equipment during a plant tour is a control which tests for __________________ retirements.

Answer 52

UNRECORDED

Question 53

When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor most likely would increase the extent of test of ______________.

Answer 53

DETAILS

Question 54

Negative assurance may be expressed when an accountant is requested to report on the results of performing a review of _____________________ assertion.

Answer 54

MANAGEMENT’S

Question 55

The primary evidence regarding year-end cash balances in the financial statements is documented in _________ reconciliations.

Answer 55

BANK

Question 56

When an accountant compiles a financial forecast, the accountant’s report should include a statement that the practitioner assumes ______ responsibility to update the report for events and circumstances occurring after the date of the report.

Answer 56

NO

Question 57

An auditor usually tests the reasonableness of dividend income from investments in publicly-held companies by computing the amounts that should have been received by referring to _______________ record books produced by investment ______________ services

Answer 57

DIVIDEND; ADVISORY

Question 58

An auditor’s purpose in reviewing the renewal of a note payable shortly after the balance sheet date most likely is to obtain evidence concerning management’s assertions about understandability of _____________________ and _________________________.

Answer 58

PRESENTATION; CLASSIFICATION

Question 59

A critical component of the determination of whether providing a nonaudit service would create a threat to independence is consideration of management’s ability to effectively ______________ the nonaudit service to be performed.

Answer 59

OVERSEE