Missed CPA Q Pt. II

Question 1

risk of incorrect acceptance and the likelihood of assessing control risk ___

Answer 1

too low

When i date girls, my acceptance is low. When i date girls, my rejection is high.

Question 2

a primary consideration in determining the appropriate classification of investments depends on:
management’s intent in __and ___ the investments.

Answer 2

purchasing and holding

Question 3

In a review engagement, how should the review accountant initially respond if the reviewed financial statements have been made available to third parties and a subsequently discovered fact becomes known?
Assess whether management takes appropriate steps to ensure financial statement users are ___

Answer 3

informed

Question 4

analytical procedures used in planning an audit should focus on:
____the auditor’s understanding of the___

Answer 4

enhancing

client’s business.

Question 5

The internal auditor compares the securities in the bank safe-deposit box with recorded investments. - What assertion is this

Answer 5

completness

Question 6

controller compares the current market prices of recorded investments with the brokers’ advices on file. - what assertion is this

Answer 6

valuation

Question 7

amounts of the year-end balances selected for interim testing are reasonably predictable should be considered before doing what

Answer 7

substantive tests to details of accounts at an interim date

Question 8

A factor for an auditor to consider when designing confirmation requests is the ___being tested.

Answer 8

assertion

Question 9

Some of the factors to consider when designing confirmation requests are:

the ___being addressed,
the___ of the confirmation request, and
the ___with which the confirming party can provide the information

Answer 9

assertions
layout and presentation
ease/ability

Question 10

he procedure of an accountant making inquiries about events subsequent to the date of the financial statements that would have a material effect on the financial statements is:

required for a ___only.

Answer 10

review (audit too)

Question 11

In a financial statement audit, a lawyer may:

___a response to matters that are material ___ or in the ____

Answer 11

limit
individually or in the aggregate.
(aggregate can also be called collectively)

Question 12

Audits of both issuers and nonissuers, inquiry need not be made by the auditor concerning matters that are not ____

Answer 12

material

Question 13

____is the practice of covering a defalcation of cash by transferring money from one bank to another and improperly recording the transaction

Answer 13

kiting

Question 14

The most likely indicator of kiting is one that shows efforts to ___the cash balance.

Answer 14

conceal

Question 15

“Examine deeds and title insurance certificates,” is used to satisfy the audit objective that the entity has ___ acquired during the year

Answer 15

legal right to property and equipment

Question 16

Net credit sales /Average AR = X
365/X
This is what

Answer 16

Average # of days to collect AR

Question 17

A management representation letter should include
Identification of noncompliance with ___
Appropriate accounting for and disclosure of ___
he written representation should be ____date as the auditor’s report

Answer 17

laws and regulations
related party transactions
the same

Question 18

An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to:
easure the ___of the audit evidence obtained.

Answer 18

sufficiency

Question 19

An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to:
calculate the risk of ___on the sample to assess ___

Answer 19

reliance

control risk,

Question 20

stat sampling let you make ___statements on the ___

Answer 20

objective

population

Question 21

The following are true regarding testing of controls with statistical sampling:
the allowable risk of assessing control risk too low has an effect on the ____. The risk of assessing control risk too high has ____ on the planned sample size.

Answer 21

planned sample size

no effect

Question 22

The following are true regarding testing of controls with statistical sampling:
The auditor should be concerned about the ___of the ___

Answer 22

characteristics

population

Question 23

Mead, CPA, had substantial doubt about Tech Co.’s ability to continue as a going concern when reporting on Tech’s audited financial statements for the year ended June 30, 20X1. That doubt was removed in 20X2. What is Mead’s reporting responsibility if Tech presented its financial statements for the year ended June 30, 20X2, on a comparative basis with those of 20X1?
he emphasis-of-matter paragraph included in the 20X1 auditor’s report should ____

Answer 23

not be repeated.

Question 24

A previously issued report that is not appropriate for the ___of the entity should ___be reissued or referred to in the report of the financial statements of the ___

Answer 24

current status
not
current period.

Question 25

The accounts receivable turnover ratio is:

 Net Credit Sales  
Average Receivable

Answer 25

True

Question 26

Low turnover of AR turnover could be indicative of ___problems.

Answer 26

collection

Question 27

A high turnover of AR turnover means that collections on accounts receivable are ___

Answer 27

good.

Question 28

The primary objective of analytical procedures used in the overall review stage of an audit is to:
assist the auditor in assessing the ___of the conclusions reached.

Answer 28

validity

Question 29

When testing the entity’s fair value measurements and disclosures, the auditor evaluates whether:

management’s assumptions are ____and reflect, or are not inconsistent with,___.
the fair value measurement was determined using an ___ if applicable.
management used ___information that was reasonably available at the time

Answer 29

reasonable
market information
appropriate model,
relevant

Question 30

review the aged trial balance for significant past due accounts respond to the audit objective for accounts receivable that accounts receivable are stated at net realizable value. Why?
because it provides evidence of receivables that are likely to be ___

Answer 30

uncollectible.

The realizable value nets (collectible & uncollectible)

Question 31

Which of the following items would most likely require an adjustment to the financial statements for the year ended December 31, Year 1?
1Uninsured loss of inventories purchased in Year 1 as a result of a flood in Year 2
2Settlement of litigation in Year 2 over an event that occurred in Year 2
3Loss on an uncollectible trade receivable recorded in Year 1 from a customer that declared bankruptcy in Year 2
4Proceeds from a capital stock issuance in Year 2 that was being approved by the board of directors in Year 1

Answer 31

1. No
2. No
3. Yes
4. No
   Does this event provide additional evidence with respect to conditions that existed at the balance sheet date?” The other three answer choices provide evidence with respect to conditions that did not exist at the balance sheet date but arose subsequent to that date. Each event would require DISCLOSURE

Question 32

No loss contingency exists – what is the tile of the attorney letter

Answer 32

na - no need for attorney letter if no loss contigency exists

Question 33

. Unless otherwise satisfied regarding the inventory through ____, it will always be necessary for the auditor to make, or ___, some physical counts of the inventory and apply appropriate tests of intervening transactions.

Answer 33

alt procedures

Observe

Question 34

Common audit procedure:
Request that the client’s lawyer evaluate whether the client’s pending litigation, claims, and assessments indicate a going concern problem

Answer 34

False – attorneys dont give a shit about going concern

Question 35

Which of the following is an audit procedure that an auditor most likely would perform concerning litigation, claims, and assessments?
Discuss with management its ___ adopted for evaluating and accounting for litigation, claims, and assessments

Answer 35

policies and procedures

Question 36

IF upper precision limit > tolerable rate, you do what

Answer 36

increase control risk

or decrease precision limit

Question 37

The difference between management’s calculation of a warranty accrual and that of the independence auditor is what type of misstatement

Answer 37

Likely – this is a calculation. Not an ACTUAL misstatement

Question 38

When payroll is extensively audited by the state government, the auditor may consider a ____acceptable level of____(i.e., ___substantive tests)

Answer 38

Higher
Detection Risk
Fewer

Question 39

Selection of the sampling unit is one decision an auditor must make when using ____sampling.

Answer 39

statistical

Question 40

In confirming a client’s accounts receivable in prior years, an auditor found that there were many differences between the recorded account balances and the confirmation replies. These differences, which were not misstatements, required substantial time to resolve. In defining the sampling unit for the current year’s audit, the auditor most likely would choose:

Answer 40

When the results are useless or cause inefficiency, the selection of another sampling unit would be in order. In this case changing the sampling unit from account balances to individual invoices may eliminate the described problem.

Question 41

In a financial statement audit, if the entity’s substantial doubt about its ability to continue as a going concern for a reasonable period of time remains at year-end and is properly disclosed, the auditor should:
issue an ___opinion ___an ___ paragraph.

Answer 41

unmodified
with
emphasis-of-matter

Question 42

The auditor should not use conditional language concerning the existence of substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time.

Answer 42

False - never use conditional language. Use language that is applicable to the AFRF

Question 43

____relationships among financial and nonfinancial data must be able to be determined to apply analytical procedures as evidence.

Answer 43

Plausible

Question 44

Which of the following parties should request inquiry of a client’s lawyer?

Answer 44

Client’s management

Question 45

Current electronic clearing of checks serves to make this float time negligible. This is a defense of what

Answer 45

kiting

Question 46

the auditor’s conclusion as to whether undetected misstatements, individually or in aggregate, do or do not cause the financial statements to be materially misstated, and the basis for that conclusion.
How should you write the conclusion to this?

Answer 46

You dont – no need to conclude on information you haven’t detected

Question 47

An “_____test” (observing equipment and tracing it to the equipment subsidiary ledger) would detect ____assets.

Answer 47

upstream

unrecorded

Question 48

In testing for unrecorded retirements of equipment, an auditor most likely would:
select items of equipment from the___and then locate them during the plant tour. This is called ____

Answer 48

accounting records

downstream

Question 49

if the CFO waived approvals on all checks to one vendor to expedite payment, the auditor should be deeply concerned about ___of controls

Answer 49

management override

Question 50

With ___confirmations, customers are asked to reply only if their records show a different account balance.

Answer 50

negative

Question 51

Negative confirmation of accounts receivable is less effective than positive confirmation of accounts receivable because:
the auditor cannot detremine that all nonrespondents have verified their account information.

Answer 51

true

Question 52

___estimation sampling is based on ratios between ___amounts and ___amounts. This approach is most efficient when the ratio is not equal to ___

Answer 52

Ratio
audited & Recorded
1

Question 53

Since there are numerous errors in pricing and extensions,____would result in numerous usable results that would produce the most precise evaluation.

Answer 53

Ratio Estimation

Question 54

____sampling is used to estimate the value of a population by multiplying the number of units in a population by the sample mean of the population.

Answer 54

Mean-per-unit variables

Question 55

With derivatives, what is the first step involving them

Answer 55

The first step is to obtain an understanding of the economic substance of the derivative(s)

Question 56

What is the 2nd step of derivatives? After understanding the derivative,

Answer 56

The auditor can then determine if outside, specialized assistance is needed to audit the derivatives and also assess the risk of material misstatement for the derivatives.
*Determine if you need a specialist & assess RMM

Question 57

How would you notify the risks involved w/ derivatives to the audit committee

Answer 57

The audit committee would not be notified about the risks involved in derivative transactions.

Question 58

the competency and objectivity of the internal audit department is included in a mangement rep letter

Answer 58

false - not it aint

Question 59

Information concerning fraud by the CFO is included in a management rep letter

Answer 59

true – it is the Knowledge of any fraud

Question 60

The purpose of tracing documents from the detail level to the journal level is to verify whether or not the transactions were ____.

Answer 60

properly recorded

Question 61

auditor traced a sample of purchase orders and the related receiving reports to the purchases journal and the cash disbursements journal. The purpose of this substantive audit procedure most likely was to:

verify that cash disbursements were for goods actually received.

Answer 61

False - It doesn’t matter if the goods were actually received, the point is to see if everything was properly recorded

Question 62

Uncorrected misstatements should be documented in a manner that allows the auditor to:

separately consider the effects of known and likely misstatements, including uncorrected misstatements identified in prior periods,
consider the aggregate effect of misstatements on the financial statements, and
consider the qualitative factors that are relevant to the auditor’s consideration whether misstatements are material.

Answer 62

study this good

Question 63

Inventory observation may be observed before or after the balance sheet date if the records are poorly maintained and periodically checked and compared to the physical amounts.

Answer 63

False – only when the records are adequately maintained

Question 64

analytical procedures indicate unusual fluctuations in recurring payroll entries., how would the auditor react to this

Answer 64

performed substantive test of details

Question 65

the auditor should design and perform ______near the end of the audit that assist the auditor when forming an overall conclusion about whether the financial statements are consistent with the auditor’s understanding of the entity.”

Answer 65

analytical procedures

Question 66

If the client refuses to disclose the newly discovered facts and their impact on the financial statements to persons known to be currently using or likely to use the financial statements – what will the accountant do

Answer 66

notify the users through a disclosure

Question 67

Outstanding balance due on a line of credit with variable interest rates and frequent withdrawals and repayments for cash flow management purposes - should you confirm this

Answer 67

yes

Question 68

Which of the following would be a consideration in planning an auditor’s sample for a test of controls?

The auditor’s allowable risk of assessing control risk is too low. OR HIGH?

Answer 68

Low

Question 69

Sampling risk varies __________ with sample sizes.

Answer 69

Inversely

the smaller the sample size, the greater the sampling risk.

Question 70

In evaluating the reasonableness of an accounting estimate, the auditor focuses on the key factors and assumptions that are ______

Answer 70

deviations from historical patterns

Question 71

When the combined assessed level of inherent and control risk over the sale is moderate - you should dowhat with this

Answer 71

confirm the terms

Question 72

anagement should address written representations about a firm’s annual audit to the:

Answer 72

auditor

Question 73

The use of the ratio estimation sampling technique is most effective when the calculated audit amounts are approximately ___to the client’s book amounts.

Answer 73

proportional

Question 74

ratio estimation sampling technique is most effective when:

a relatively small number of differences exist in the population.

Answer 74

False

Question 75

____estimation takes the ratio of the ___of the sample ___values to the mean of the sample ___values and applies it to the ___

Answer 75

Ratio 
mean
audit
book
total book value

Question 76

the registrar keeps records of outstanding ___for an issuer

Answer 76

stock certificates

Question 77

Confirm dividends paid w/ The registrar

Answer 77

False - they keep records of outstanding stock certificates for an issuer; it would not have knowledge of the dividends paid.

Question 78

For kiting, the disbursement date cant not be after the ___

Answer 78

receipt date

Question 79

While conducting an audit of a new nonissuer client, an auditor discovers that accounting policies applied in relation to the financial statement opening balances are inconsistent with accounting policies applied during the period under audit. In this scenario, what should the auditor do?

Obtain sufficient appropriate evidence about whether changes in the accounting policies have been ___ and _____in accordance with the applicable financial reporting framework

Answer 79

accounted for

adequately disclosed

Question 80

Generally accepted auditing standards (GAAS) suggest that, as part of the subsequent-period auditing procedures, the auditor should _____, compare them with the financial statements being reported upon, and make any comparisons considered appropriate in the circumstances.

Answer 80

read the latest available interim financial statements

Question 81

A letter of inquiry to external legal counsel is presumed in an audit of an ____only.

Answer 81

issuer

Question 82

If an issuer doesn’t speak to external counsel,

Answer 82

The auditor should document the basis for any determination not to seek direct communication with the entity’s external legal counsel.

Question 83

An audit team has concluded that inventory is highly susceptible to misappropriation and that a potential misstatement would be material to the financial statements. How should the audit team address the audit procedures to the increased risk?

Review the client’s control procedures over the safeguarding of inventory, and perform a physical inventory count throughout the year.

Answer 83

NOPE – only on the last day of the year

Question 84

Projecting an error rate by comparing the results of a statistical sample with the actual population characteristics is an analytical procedure

Answer 84

false – it is test of details

Question 85

Estimating payroll expense by multiplying the number of employees by the average hourly wage rate and the total hours worked is an analytical procedure

Answer 85

true – operating statistics

Question 86

Computing accounts receivable turnover by dividing credit sales by the average net receivables is an analytical procedure

Answer 86

true – evaluating a ratio

Question 87

treat the difference between the accounting estimate and the closest reasonable estimate determined by the auditor as a likely misstatement is done when?

Answer 87

When the CPA determines the accounting estimate used is not reasonable

Question 88

When the CPA determines the accounting estimate used is not reasonable, the cpa ____

Answer 88

treat the difference between the accounting estimate and the closest reasonable estimate determined by the auditor as a likely misstatement is done when?

Question 89

Verify additions and retirements during the year by vouching to supporting documents will test ___

Answer 89

accuracy.

Question 90

____ is determined to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements in the financial statements exceeds materiality for the financial statements as a whole.

Answer 90

Performance materiality

Question 91

When management’s plans include financial support by third parties, or the entity’s owner-manager, the auditor must obtain sufficient appropriate audit evidence____ about the intent and ability to provide financial support

Answer 91

in written form

Question 92

Analytical procedures have the highest level of evidence when they use ___ ___ ___ within financial statements. The amount of interest expense is directly related to balances and rates of interest bearing accounts and notes payable

Answer 92

direct predictable relationships

Question 93

A manager or partner who has a comprehensive knowledge of the client’s business and industry shouldperform what in the review stage

Answer 93

analytical procedures

Question 94

A ____or ____who has a comprehensive knowledge of the client’s business and industry should perform what in the review stage

Answer 94

manager

partner

Question 95

When an auditor is unable to count securities held by a bank on the balance sheet date, the auditor should request that the client have the bank____

Answer 95

seal the safe-deposit box until the auditor can count the securities at a subsequent date.

Question 96

Last year was a review, this year is an audit, what type of audit is this

Answer 96

initial

Question 97

Areas of significant estimation are properly disclosed.

Answer 97

true

Question 98

consideration in planning a sample for a test of subsequent cash receipts?
___ judgments about ____ ____

Answer 98

Preliminary judgments about materiality levels

Question 99

When there are no observable market prices and the entity estimates fair value using a ____

Answer 99

valuation method,

Question 100

When there are no observable market prices and the entity estimates fair value using a valuation method, the auditor should ____whether the entity’s method of valuation is ____in the circumstances

Answer 100

evaluate

appropriate

Question 101

In determining if the valuation method is appropriate,
management has sufficiently evaluated and appropriately applied the criteria, if any, provided by ____to support the selected method,

Answer 101

GAAP

Question 102

In evaluating reasonableness, the auditor should obtain an understanding of how management developed the estimate.

Answer 102

True

Question 103

In evaluating reasonableness, the auditor should obtain an understanding of how management developed the estimate.
The auditor should not simply rely on the process development by management, but should actually __the process to ensure that results from the process are reliable.

Answer 103

test

Question 104

In evaluating reasonableness, the auditor should obtain an understanding of how management developed the estimate, the auditor could also:
____ of the estimate to corroborate the reasonableness of management’s estimate.
review ____or ____occurring prior to the date of the auditor’s report.

Answer 104

develop an independent expectation

subsequent events or transactions

Question 105

Performing the search for unrecorded liabilities primarily addresses which of the following assertions

Answer 105

Completeness

Question 106

In auditing material inventory, the auditor is required to observe the physical inventory counting, unless:

Answer 106

impractical

Question 107

Estimates are potentially biased and based on subjective assumptions.

Answer 107

Fal

Question 108

In the first audit of a new client, an auditor was able to extend auditing procedures to gather sufficient evidence about consistency. Under these circumstances, the auditor should:

Answer 108

not refer to consistency in the report

Question 109

no change in accounting principles has occurred, which paragraph refers to the consistency in the audit report

Answer 109

NA - you dont make one

Question 110

Existence assertion would answer what two questions

Answer 110

The procedures would answer the questions “Do the added assets exist?” and “Have all new assets been added to the financial records?”

Question 111

Obtaining a detailed fixed-asset register and ensuring items are appropriately capitalized would test 2 assertions

Answer 111

accuracy and valuation.

Question 112

btaining a detailed fixed-asset register and ensuring depreciation methods are applied consistently would test

Answer 112

valuation.

Question 113

Obtaining a listing of current-year additions and verifying that items are recorded in the proper period would test 2 assertions

Answer 113

accuracy and completeness.

Question 114

The acceptable level of detection risk for financial statement assertions is determined using the auditor’s assessed level of __

Answer 114

control risk

Question 115

An auditor uses the assessed level of control risk to:

Answer 115

determine the acceptable level of detection risk for financial statement assertions.

Question 116

An auditor uses the assessed level of control risk to:

Answer 116

evaluate the effectiveness of the entity’s internal control.

Question 117

Compare the financial statements with budgets or forecasts is a procedure in a review

Answer 117

yes - this is an analyical

Question 118

1. Applying substantive tests at an interim date, rather than at the balance sheet date, increases what?
2. A misstatement may occur between the interim and year-end dates and exist at the balance sheet date. This increase in risk is the ____

Answer 118

Audit risk

incremental audit risk

Question 119

If inherent risk is at the maximum level, the auditor should consider whether or not using interim procedures will be ___, since this assessment affects the ____of substantive tests to cover the remaining period.

Answer 119

cost effective

nature, timing, and extent

Question 120

Testing for the completeness assertion is testing to see that the list is not complete, and performing ____procedures accomplishes this task.

Answer 120

cutoff

Question 121

The____ to common shareholders measures the portion of net income to common shareholders paid out in dividends.

Answer 121

payout ratio

Question 122

The going concern concept reflects the entity’s inability to meet its obligations.

Answer 122

False

Question 123

Continuation of an entity as a going concern is assumed in financial reporting in the absence of significant information to the contrary.

Answer 123

True

Question 124

Risk of incorrect accept/reject & setting control risk too high/low is what type of risk

Answer 124

samplingn

Question 125

2 advantages of using statistical over nonstatistical sampling methods in tests of controls is that the statistical methods:

Answer 125

provide an objective basis for quantitatively evaluating sample risk.
Statistical sampling allows the auditor to calculate this risk quantitatively.

Question 126

Statistical sampling eliminates professional judgment.

Answer 126

false no it dont

Question 127

In a probability-proportional-to-size sample with a sampling interval of $10,000, an auditor discovered that a selected account receivable with a recorded amount of $5,000 had an audited amount of $4,000. If this were the only misstatement discovered by the auditor, the projected misstatement of this sample would be 2000. why?

Answer 127

5k is half the sample
1k is the error

5k/10k = 2 *1k error = 2k

Question 128

Only if the voucher has been_____would the auditor replace it with another voucher in the random sample.

Answer 128

properly voided

Question 129

In testing plant and equipment balances, an auditor may inspect new additions listed on the analysis of plant and equipment. This procedure is designed to obtain evidence concerning management’s assertions of existence. Why not valuation/allocation

Answer 129

The question did not ask about the amounts at which the assets were recorded

Question 130

The question did not ask about the amounts at which the assets were recorded is an audit procedure regarding what

Answer 130

lca - litigation claim assessment

Question 131

An auditor confirmed accounts receivable as of an interim date, and all confirmations were returned and appeared reasonable. Which of the following additional procedures most likely should be performed at year-end?
Review supporting documents for-____occurring after the interim date, and evaluate any ____in balances at year-end.

Answer 131

new large balances

significant changes

Question 132

In a review engagement, the review accountant is responsible for performing review procedures (including identifying subsequent events) through the date of:

Answer 132

review report

Question 133

Allowance for loan losses
Annual effective tax rate in interim reporting
Percent of completion under contract accounting

examples of what

Answer 133

estimates made by management

Question 134

There are two broad categories of statistical sampling:

Answer 134

attribute (or proportional) and variable (or quantitative) sampling

Question 135

ypes of sampling allows an auditor to quantify sampling risk?

Answer 135

attribute

Question 136

Variable sampling is used when

Answer 136

the auditor needs to estimate or test a client’s book value and is generally used in substantive testin

Question 137

A client decides not to make an auditor’s proposed adjustments that collectively are not material and wants the auditor to issue the report based on the unadjusted numbers. Which of the following statements is correct regarding the financial statement presentation?

Answer 137

The financial statements are free from material misstatement, and no disclosure is required in the notes to the financial statements.

Question 138

The level of deficiency of an I/C can be affected by the

Answer 138

diversity & size of entity

Question 139

Which of the following is required documentation when evaluating the summary of uncorrected misstatements at the end of an audit? (Materiality related.)

Answer 139

Levels of materiality applied, and how those considerations were determined

Question 140

Which of the following is required documentation when evaluating the summary of uncorrected misstatements at the end of an audit? (corrected by management related)

Answer 140

and all known and likely misstatements identified by the auditor during the audit, other than those that are trivial, that have been corrected by management.

Question 141

Which of the following is required documentation when evaluating the summary of uncorrected misstatements at the end of an audit?
All known and likely misstatements, except those corrected by management

Answer 141

Nope - include management corrections

Question 142

An auditor reviews the reconciliation of payroll tax forms that a client is responsible for filing in order to:

Answer 142

identify potential liabilities for unpaid payroll taxes.

Question 143

In an audit of a nonissuer, what is the auditor’s appropriate response if there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time, management’s plans do not alleviate that uncertainty, and the reporting entity refuses to provide adequate disclosure of the circumstances?

Answer 143

Qualifed or adverse

Question 144

____sampling is used when the auditor wants to reach a conclusion about a population in terms of dollar amount.

Answer 144

Variable

Question 145

If a client will not permit inquiry of outside legal counsel, the auditor’s report ordinarily will contain:

Answer 145

disclaim

Question 146

The cost of obtaining evidence is an important consideration to an auditor in deciding what evidence should be obtained.

Answer 146

Cost or difficulty should play no role

Question 147

A client’s accounting data cannot by itself be considered sufficient appropriate audit evidence to support the financial statements.

Answer 147

True

Question 148

A___ is the formal written statement specifying the conditions (terms) under which a bond is issued, including any restrictions or covenants.

Answer 148

bond indenture

Question 149

What is a bond indenture

Answer 149

formal written statement specifying the conditions (terms) under which a bond is issued, including any restrictions or covenants.

Question 150

An auditor’s program for the examination of long-term debt should include steps that require the:
verification of the existence of the bondholders.

Answer 150

NO

Question 151

Existence is a management assertion that assets and liabilities are real and exist at a specific date

Answer 151

yep

Question 152

considering the adequacy of the evidence gathered in response to unexpected balances identified in planning.

is an example of what

Answer 152

analytical procedures

Question 153

Ratio analysis and reasonableness test are examples of what

Answer 153

analytical procedures

Question 154

reperformance and observation. are techniques for tests of

Answer 154

controls

Question 155

The condition of the client’s records would affect nature and quantity of evidence

Answer 155

yes

Question 156

likely affect the quantity and content of an auditor’s working papers? content rep letter

Answer 156

false it is not evidence

Question 157

hen making the decision of whether to apply analytical procedures or tests of details to a certain account balance or class of transactions, the auditor should consider the:

Answer 157

Assertion
Availability
Precision of expectation
(omitted known reasons)

Question 158

A factual misstatement would include the

Answer 158

misstatements the auditor is able to identify within an audit.

Question 159

differences between management and the auditor’s judgment regarding estimates. is a factual misstatement

Answer 159

false it is a judgmental misstatement

Question 160

what is a covenant?

Answer 160

Restrictions on debt (loans, notes, and bonds)
Limits that the issuing enterprise must meet (e.g., specific ratios, current ratio, and debt-to-equity)
Levels of retained earnings that must be maintained
Restrictions on dividends declared by the issuer on its capital stock
Sinking fund requirements

Question 161

Maintain a minimum debt to equity ratio of 2:1. is a valid debt covenant

Answer 161

false – it should be maximum

Question 162

Maintain a maximum current ratio of 1:1. is a valid debt covenant

Answer 162

false it should be minmum

Question 163

Maintain a times interest earned ratio of at least 6. is a valid ebt covenant

Answer 163

true

Question 164

evaluating whether the financial statements as a whole are presented fairly, in all material respects, in conformity with generally accepted accounting principles.

Answer 164

False no its not lolz

Question 165

Russell CPA is auditing contingent liabilities. What generally is the primary risk of material misstatement related to related financial statement disclosures? what assertion is it

Answer 165

completeness

Question 166

ask the client to contact the customers to request that the confirmations be returned. is ok before the auditor sends the 2nd letter

Answer 166

yeah it is

Question 167

Regarding estimates, evaluating whether changes from the prior period are appropriate in the circumstances is required by the auditor

Answer 167

yes

Question 168

ensuring disclosures of all individual areas of estimation and methods of estimation are made, regardless of materiality.

Answer 168

False

Question 169

Which of the following is correct regarding the application of sampling to testing an account balance in a financial statement audit?
Project the error from the results of the sample to the entire account balance being tested.

Answer 169

False. Make sure it says the fucking population

Question 170

Which of the following events occurring after the issuance of an auditor’s report most likely would cause the auditor to make further inquiries about the previously issued financial statements?

New information is discovered concerning undisclosed related party transactions of the prior year. ( bc it existed at b/s date)

Answer 170

yep

Question 171

An auditor desired to test credit approval on 10,000 sales invoices processed during the year. The auditor designed a statistical sample that would provide a 1% risk of assessing control risk too low (99% confidence) that not more than 7% of the sales invoices lacked approval. The auditor estimated from previous experience that about 2.5% of the sales invoices lacked approval. A sample of 200 invoices was examined and 7 of them were lacking approval. The auditor then determined the achieved upper precision limit to be 8%.

The allowance for sampling risk was:

Answer 171

The allowance for sampling risk is 4.5%. It is the difference between the upper precision limit of 8% and the sample deviation rate of 3.5% (seven errors in a sample of 200 items).

Question 172

Upper precison limit less sample deviation rate = what

Answer 172

sampling risk

Question 173

The auditor is responsible for which of the following concerning fair value measurements?

Making the fair value measurements and disclosures in the financial statements
Establishing an accounting and financial reporting process for determining the fair value measurements
Selecting appropriate valuation methods

Answer 173

NONE

Question 174

In determining whether transactions have been recorded, the direction of the audit testing should be from the:o

Answer 174

original source documents

Question 175

Disclose fair value measurements?

Answer 175

hell yeah

Question 176

An auditor’s program to examine long-term debt most likely would include steps that require:

Answer 176

correlating interest expense recorded for the period with outstanding debt.

Question 177

Comparing the current-year ratio of aggregate salaries paid to the number of employees to the prior year’s ratio is what type of analytical proceure

Answer 177

substantive

Question 178

an auditor usually obtains evidence of stockholders’ equity transactions by reviewing the entity’s:

Answer 178

minutes

Question 179

an auditor most likely add to the negative form of confirmation of accounts receivable to encourage timely consideration by the recipients?

Answer 179

anything with timing

Question 180

In the first audit of a client, an auditor was not able to gather sufficient appropriate audit evidence about the consistent application of accounting principles between the current and the prior year, as well as the amounts of assets or liabilities at the beginning of the current year. This was due to the client’s record retention policies. If the amounts in question could materially affect current operating results, the auditor would:

Answer 180

be unable to express an opinion on the current year’s results of operations and cash flows.

Question 181

The accountant’s disclosure should include a brief description of the client’s conduct or motive with regard to its refusal to notify third parties.

Answer 181

False - dont disclose their conduct. who gives a shit

Question 182

Which of the following comparisons would an auditor most likely make in evaluating an entity’s costs and expenses?
The current year’s payroll expense with the prior year’s payroll expense

Answer 182

NOPE

Question 183

The best procedure for searching for liabilities unrecorded at year-end is to examine

Answer 183

cash disbursements recorded in the period subsequent to year-end.

Question 184

A CPA is reporting on comparative financial statements of a nonissuer. The CPA audited the prior year’s financial statements and reviewed those of the current year in accordance with Statements on Standards for Accounting and Review Services (SSARS). The CPA has added a separate paragraph to the review report to describe the responsibility assumed for the prior year’s audited financial statements. This separate paragraph should indicate:
the type of opinion expressed previously.

Answer 184

No opinons are expressed in reviews, but in this scenario PY is an audit that had an opinion.

Question 185

In a review, what should an auditor do regarding the minutes? 2 things

Answer 185

The auditor should read the available minutes

inquire about matters dealt with at meetings for which minutes are not available to identify matters

Question 186

In a financial statement audit performed in accordance with generally accepted auditing standards, the auditor communicates some matters not required to be included in the report on internal control and compliance in a separate “management letter.” How does the issuance of this management letter impact the form of the report on internal control and compliance?

Answer 186

reference to management letter is optional

Question 187

West, CPA, is engaged to compile the financial statements of Lake Co., a nonissuer. Lake’s financial statements are prepared in conformity with the cash basis of accounting. If Lake’s financial statements do not disclose the basis of accounting used, which of the following statements best describes West’s reporting responsibility concerning this matter?

Answer 187

Normally in the notes, but for compilations, West should disclose the basis of accounting used in West’s compilation report b/c the disclosures could be omitted

Question 188

MD&A stands for what

Answer 188

management’s discussion and analysis

Question 189

Which of the following statements best serves as management’s assertion of consistency in an MD&A presentation?

Answer 189

Nonfinancial data have been accurately derived from related records.

Question 190

If the practitioner believes that one or more significant assumptions do not provide a reasonable basis for the forecast, or a reasonable basis for the projection given the hypothetical assumptions, he or she should express an

Answer 190

adverse opinion.

Question 191

The compilation report will not state that the hypothetical assumptions used in the projection are reasonable in the circumstances. Why?

Answer 191

This statement would imply some type of assurance on the assumptions.

Question 192

Management makes the accounting estimates in the financial statements because (2)

Answer 192

the measurement of amounts or valuation of some accounts is uncertain, pending future events, or

relevant data concerning events that have already occurred cannot be accumulated on a timely, cost-effective basis.

Question 193

____ a widely used statistic that is employed to measure the extent to which the values of the items are spread about the mean.

Answer 193

Standard deviation is