ICARE REVIEWERS Flashcards
- An assurance engagement is a means of satisfying the need for reliable
information on the part of decision makers. Factors which contribute to this need
include the following, except
A. New and changing business relationships lead to innovative reporting problems
B. Information to be reported may arise from multiple transactions processed daily
through sophisticated computerized systems
C. Information will be biased in favor of the decision-maker
D. Decision-makers normally rely on information prepared by another party
C. Information will be biased in favor of the decision-maker
- Business managers and financial statement users may conclude to incur costs to
reduce information risk through
A. Verification of information by its provider
B. Sharing of the information risk with its preparer
C. Providing financial statements to the user
D. Disclosing other supplementary information
B. Sharing of the information risk with its preparer
- Which of the following is not a precondition for an assurance engagement?
A. Roles and responsibilities of the appropriate parties are suitable in the
circumstances
B. Appropriate underlying subject matter information
C. Criteria that the practitioner expects to be applied in the preparation of the
subject matter information are suitable
D. A rational purpose
B. Appropriate underlying subject matter information
8. Suitable criteria exhibit the following characteristics, except A. Relevance B. Completeness C. Verifiability D. Neutrality
C. Verifiability
- The risk that the practitioner expresses an inappropriate conclusion when the
subject matter information is materially misstated.
A. Business risk
B. Information risk
C. Engagement risk
D. Attestation risk
C. Engagement risk
- This is a component of assurance engagement risk that is more relevant for direct
engagements than attestation engagements.
A. Inherent risk
B. Control risk
C. Detection risk
D. Measurement or evaluation risk
D. Measurement or evaluation risk
- A limited assurance engagement involves the following, except
A. Based on an understanding of the underlying subject matter and other
engagement circumstances, identifying areas where a material misstatement
of the subject matter information is likely to arise
B. Designing and performing procedures to address those areas and to obtain
limited assurance to support the practitioner’s conclusion
C. If the practitioner becomes aware of a matter(s) that causes the practitioner to
believe the subject matter information may be materially misstated, designing
and performing additional procedures to obtain further evidence
D. None of the above
D. None of the above
- The Auditing and Assurance Standards Council (AASC) en banc should discuss
drafts of statement, studies or standards. How many members of AASC are
required to approve the draft for exposure?
A. Ten
B. Eleven
C. Twelve
D. Majority
D. Majority
- Before accepting an audit engagement, a successor auditor should make specific
inquiries of the predecessor auditor regarding
a. Disagreements the predecessor had with the client concerning auditing procedures and
accounting principles
b. the predecessor’s evaluation of matters of continuing accounting significance
c. the degree of cooperation the predecessor received concerning the inquiry of client’s
lawyer
d. the predecessor auditor’s assessment of inherent risk and judgments about materiality
a. Disagreements the predecessor had with the client concerning auditing procedures and
accounting principles
- The successor auditor requested permission to communicate with the predecessor
auditor and review certain portions of the predecessor auditor’s working papers. The
prospective client’s refusal to permit this will bear directly on the successor auditor’s
decision concerning the
a. adequacy of the preplanned audit program
b. ability to establish consistency in application of accounting principles between years
c. apparent scope limitation
d. integrity of management
a. adequacy of the preplanned audit program
CONTINUE SA AUD 03-03
ASD
Which of the following is not an assurance that the auditor gives to the parties who rely on the FS?
a. Auditors know how the amounts and disclosures un the FS were produced
b. Auditors give assurance that the FS are accurate
c. Auditors gather enough evidence to provide reasonable basis for forming an opinion
d. If the evidence allows the auditor to do so, auditors give assurance in the form of an opinion whether the FS are presented fairly or not
b. Auditors give assurance that the FS are accurate
Which of the following is least likely to increase the risk of fraud or error?
a. Questions as to the competence and integrity of management
b. Unusual pressures within the entity
c. Unusual transactions
d. Lack of transaction trail
d. Lack of transaction trail
Which of the following conditions or events increases the risk of error or fraud?
a. Management is dominated by several individuals
b. There are frequent changes of auditors or legal counsel
c. There is significantly low turnover of senior accounting personnel
d. The entity does not correct internal control deficiencies that it knows about
b. There are frequent changes of auditors or legal counsel
What is the auditor’s responsibility who discovers that management is involved in a potentially immaterial fraud?
a. Report the fraud to the audit committee
b. Report the fraud to SEC
c. Report the fraud to a level of management at least on level below those involved in the fraud
d. Determine that the amounts involved are indeed immaterial, and if so, there is no reporting responsibility
a. Report the fraud to the audit committee
Most noncompliance affects the FS:
a. directly
b. indirectly
c. directly and indirectly
b. indirectly
Generally, the decision to notify parties outside the organization of the client regarding noncompliance with laws and regulations is the responsibility of the
a. independent auditor
b. client’s legal counsel
c. management
d. internal auditor
c. management
Which of the following does not properly describe a procedure that the auditor normally performs in connection with noncompliance?
a. The auditor should obtain a general understanding of legal and regulatory framework applicable to the entity
b. The auditor should perform procedures to identify instances of noncompliance with laws and regulations
c. The auditor should obtain oral representation that management has disclosed to the auditor all known actual or possible noncompliance with laws and regulation
d. Auditor should obtain sufficient appropriate evidence about noncompliance with laws and regulations
c. The auditor should obtain oral representation that management has disclosed to the auditor all known actual or possible noncompliance with laws and regulation
After obtaining sufficient understanding about the client’s legal and regulatory framework, the auditor should
a. develop a code of conduct and ensure that these employees comply with such code
b. perform procedures to help identify instances of noncompliance with laws and regulations
c. monitor entity’s legal requirements and ensure that operating procedures
d. inquire of management as to the laws or regulations that may be expected to have a fundamental effect on the operations of the entity
b. perform procedures to help identify instances of noncompliance with laws and regulations
If the client refuses to accept an audit report that is qualified due to noncompliance with laws and regulations, the auditor should
a. withdraw from the engagement and indicate the reasons to the audit committee in writing
b. issue an adverse opinion if management agrees to fully disclose the matter
c. withdraw from the engagement and indicate the reasons to the SEC or other regulatory body in writing
d. issue a disclaimer of opinion instead
a. withdraw from the engagement and indicate the reasons to the audit committee in writing
The sequence of steps in gathering evidence as the basis of auditor's opinion: 1 - Substantive test 2. Documentation of internal control structure 3 - Test of Controls a. 123 b. 231 c. 213 d. 312
b. 231
In making the client acceptance decisions the audit firm will consider
a. inherent and control risk of the client
b. audit risk the the CPA firm
c. client business risk and CPA firm engagement risk
d. CPA firm’s potential ongoing revenue with client
c. client business risk and CPA firm engagement risk
Within the context of quality control, the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide its personnel with
a. technical training that assures proficiency as a valuation expert.
b. professional education that is required in or order to perform with due professional care.
c. knowledge required to fulfil assigned responsibilities
d. knowledge required to perform a peer review
c. knowledge required to fulfil assigned responsibilities
In compliance with the element of human resources, the firm should address issues relating to
a. engagement performance
b. assignment of engagement teams
c. consultations
d. differences of opinion
b. assignment of engagement teams