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Audit > Module A HW > Flashcards

Module A HW Flashcards

1
Q
  1. An accountant may report on interim information presented separately from audited financial statements.
    True
    False
A

True

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2
Q
  1. Auditing standards apply to work on all audited financial statements and to work on unaudited financial statements of public and nonpublic
    companies.
    True
    False
A

False

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3
Q
  1. A review service engagement involving unaudited financial statements involves
    A. More work than a compilation and an audit.
    B. Less work than a compilation but more work than an audit.
    C. Less work than an audit but more work than a compilation.
    D. More work than an audit but less work than a compilation.
A

Less work than an audit but more work than a compilation.

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4
Q
  1. To perform an attestation engagement on prospective information or pro forma information, accountants must do all of the following except
    A. Understand the internal controls used in the processes that generated the information.
    B. Obtain an understanding of the process through which the information was developed.
    C. Obtain knowledge about the entity’s business and accounting principles.
    D. Evaluate the assumptions used to prepare the information.
A

Understand the internal controls used in the processes that generated the information.

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5
Q
  1. When an accountant is associated with a financial statement as part of a personal financial planning engagement, the accountant’s report should include a statement that
    A. we have not audited, reviewed, or compiled the statement.
    B. these financial statements are not designed for those who are not informed about differences among audits, reviews, and
    compilations.
    C. we do not express an opinion or any other form of assurance on them.
    D. we are not aware of any material modifications that should be made.
A

we have not audited, reviewed, or compiled the statement.

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6
Q 
6. The combination of prior-year/current-year order of lower level of service would not include
A. compilation followed by review.
B. audit followed by compilation.
C. audit followed by review.
D. review followed by compilation.
A

compilation followed by review.

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7
Q
  1. (no solution)
    Which of the following statements should be included in a practitioner’s report on the application of agreed-upon procedures?
    A. A statement of scope limitation that will qualify the practitioner’s opinion.
    B. A statement that the practitioner performed an examination of prospective financial statements.
    incorrect A statement referring to standards established by the AICPA.
    D. A statement of negative assurance based on procedures performed.
A

7

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8
Q
  1. For a compliance engagement, three conditions must be met. Which of the following is not one of the three conditions?
    A. Management provides a report attesting to satisfactory compliance.
    B. Sufficient evidence is available to support management’s evaluation.
    C. Management accepts responsibility for compliance.
    D. Management’s evaluation of compliance is capable of evaluation and is measured against reasonable criteria.
A

Management provides a report attesting to satisfactory compliance.

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9
Q
  1. The official Statements on Standards for Accounting and Review Services are applicable to practice with
    A. Unaudited financial statements of public companies.
    B. Audited financial statements of nonissuers.
    C. Unaudited financial statements of nonissuers.
    D. Audited financial statements of public companies.
A

Unaudited financial statements of nonissuers.

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10
Q
  1. According to auditing standards, financial statements presented on a special purpose framework should not
    A. Contain a note describing the special purpose framework.
    B. Describe in general how the special purpose framework differs from generally accepted accounting principles.
    C. Be accompanied by an audit report that gives an unmodified opinion with reference to the special purpose framework.
    D. Contain a note with a quantified dollar reconciliation of the assets based on the special purpose framework with the assets
    based on generally accepted accounting principles.
A

Contain a note with a quantified dollar reconciliation of the assets based on the special purpose framework with the assets
based on generally accepted accounting principles.

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11
Q
  1. A compilation report cannot be issued by an accountant who is not independent.
    True
    False
A

False

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12
Q
  1. An accountant could not issue compiled financial statements that would include a report
    A. mentioning that the management has elected to omit substantively all footnote disclosures, and if they were included they
    might influence users’ conclusions about the business.
    B. complete with all the disclosures required by GAAP.
    C. stating that the accountant is not independent.
    D. attesting to the overall fairness of the financial statements.
A

attesting to the overall fairness of the financial statements.

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13
Q
  1. Accountants are permitted to express “negative assurance” in which of the following reports?
    A. Review report on unaudited financial statements.
    B. Standard unmodified audit report on financial statements.
    C. Adverse opinion report on financial statements.
    D. Compilation report on unaudited financial statements.
A

Review report on unaudited financial statements.

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14
Q
  1. Attestation reports on internal control effectiveness are required to be issued for all nonpublic companies.
    True
    False
A

False

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15
Q
  1. Which of the following is a generally accepted attestation standard but is not a fundamental auditing principle?
    A. Independence.
    B. Due care.
    C. Appropriate competence and capability.
    D. Adequate knowledge of the subject matter.
A

Adequate knowledge of the subject matter.

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16
Q
  1. In providing assurance services to clients, CPAs are building on their reputations for
    A. Independence and due professional care.
    B. Professionalism and trust.
    C. Knowledge and integrity.
    D. Objectivity and integrity.
A

Objectivity and integrity.

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17
Q
  1. Attestation reports on internal control of a service organization can be relied on by the user auditor in connection with the evaluation of the client organization.
    True
    False
A

True

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18
Q 
18. To be useful, an audit of a service organization’s controls should cover a minimum of
A. The user entity's fiscal period.
B. One year.
C. Three months.
D. Six months.
A

Six months.

19
Q
  1. In a review services engagement, an accountant performs some limited audit procedures to achieve a level of assurance.
    True
    False
A

True

20
Q
  1. Enhanced business reporting focuses on improving business reporting by developing a voluntary framework for presentation and disclosure of
    value drivers.
    True
    False
A

True

21
Q
  1. When prescribed forms are compiled by an accountant, the compilation report always must call attention to GAAP departures and disclosure
    deficiencies.
    True
    False
A

False

22
Q
  1. Management does not have to accept responsibility for the effectiveness of its internal control in order for an accountant to conduct an examination of a client’s internal control.
    True
    False
A

False

23
Q
  1. When an accountant compiles a prescribed form and the financial statements contain a departure from the information specified by the
    prescribed form, the accountant should
    A. withdraw from the engagement.
    B. ignore the departure because the financial statements do not purport to be in accordance with GAAP.
    C. disclose the departure in the body of the accountant’s report.
    D. issue an adverse opinion.
A

disclose the departure in the body of the accountant’s report.

24
Q
  1. If a nonissuer wants an accountant to perform an examination of its internal controls, the accountant should follow:
    A. PCAOB AS 5, “An Audit of Internal Control over Financial Reporting That Is Integrated with an Audit of Financial Statements.”
    B. FASB Concepts Statement No. 1, “Objectives of Financial Reporting by Business Enterprises.”
    C. AICPA AU 315, “Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement.”
    D. AICPA AT 501, “An Examination of an Entity’s Internal Control over Financial Reporting That Is Integrated with an Audit of Its Financial Statements.”
A

AICPA AT 501, “An Examination of an Entity’s Internal Control over Financial Reporting That Is Integrated with an Audit of Its Financial Statements.”

25
Q
  1. An accountant’s standard internal control report for nonpublic companies is governed by
    A. the COSO report.
    B. the Statements on Auditing Standards.
    C. the Statements on Standards for Attestation Engagements.
    D. the Statements on Standards for Accounting and Review Services.
A

the Statements on Standards for Attestation Engagements.

26
Q
  1. Which of the following is not a condition that must be met for an internal control examination?
    A. Management’s evaluation of control can be supported by sufficient evidence.
    B. Management presents a written assertion about the effectiveness of its internal control.
    C. Management must base its evaluation of internal control on standards established by the AICPA.
    D. Management accepts responsibility for the effectiveness of its internal control.
A

Management must base its evaluation of internal control on standards established by the AICPA.

27
Q
  1. B. Harper is surfing the Internet and finds a great pair of rollerblades at a really low price but he has never heard of the company and is concerned that the product he ordered may not be the product he receives. Harper may be more willing to place an order with this company if
    A. The company provides its annual report and the report of the independent auditors on its website.
    B. The website displays the WebTrust seal.
    C. Only a partial payment is required prior to receiving the product.
    D. The company provides a money-back guarantee.
A

The website displays the WebTrust seal.

28
Q
  1. An accountant associated with personal financial statements would need to give the standard compilation report disclaimer.
    True
    False
A

False

29
Q
  1. An accountant should reissue (not update) the prior year’s report when
    A. the accountant issued a compilation report in the prior year and is performing a review in the current year.
    B. the accountant is a successor accountant performing a compilation and a compilation report was issued in the prior year.
    C. the accountant is a successor accountant performing a compilation and a review report was issued in the prior year.
    D. the accountant issued a review report in the prior year and is performing a compilation in the current year.
A

the accountant issued a review report in the prior year and is performing a compilation in the current year.

30
Q
  1. Which of the following conditions must be met before an accountant can conduct an examination of an entity’s internal control?
    A. The accountant must have designed a significant portion of the internal controls.
    B. Management must present its assertion about the effectiveness of its internal control in a written report.
    C. Management must represent that there are no internal control deficiencies.
    D. The accountant must represent that he or she has not conducted an audit of the financial statements.
A

Management must present its assertion about the effectiveness of its internal control in a written report.

31
Q
  1. A review service provides a basis for expressing an opinion on financial statements.
    True
    False
A

False

32
Q
  1. When accountants are not independent, which of the following reports can they nevertheless issue?
    A. Compilation report.
    B. Standard unmodified audit report.
    C. Examination report on a forecast.
    D. Examination of internal control over financial reporting.
A

Compilation report.

33
Q
  1. During a review of a nonissuer’s financial statements, accountants are required to make certain inquiries of management. Which of the following inquiries is not required by the SSARS?
    A. The basis for the preparation of financial statements.
    B. Internal control deficiencies.
    C. Significant transactions occurring near the end of the reporting period.
    D. Material subsequent events.
A

Internal control deficiencies.

34
Q
  1. For a compliance attestation engagement, the auditor accepts responsibility for compliance.
    True
    False
A

False

35
Q
  1. When interim financial information is presented in a footnote to annual financial statements, the standard audit report on the annual financial statements should
    A. Not mention the interim information unless there is an exception that the auditors need to include in the report.
    B. Contain an extra paragraph that gives negative assurance on the interim information if it has been reviewed.
    C. Contain an extra paragraph if the interim information note is labeled “Unaudited.”
    D. Contain an audit opinion paragraph that specifically mentions the interim financial information if it is not in conformity with
    GAAP.
A

Not mention the interim information unless there is an exception that the auditors need to include in the report.

36
Q
  1. An assurance service is defined as a service that
    A. Reviews unaudited financial information.
    B. Reduces the risk in management decision making.
    C. Improves the quality of information for decision makers.
    Provides auditing services to nonfinancial information.
A

Improves the quality of information for decision makers.

37
Q
  1. An accountant’s review on unaudited financial statements would not include
    A. performing analytical procedures.
    B. confirmation of accounts receivable.
    C. inquiring about the accounting system and bookkeeping procedures.
    D. reading the financial statements for indications that they conform with the applicable financial reporting framework (e.g., GAAP,
    IFRS).
A

confirmation of accounts receivable.

38
Q 
38. Which of the following is not a principle of Trust Services?
A. Security.
B. Confidentiality.
C. Privacy.
D. Authentication.
A

Authentication.

39
Q
  1. The AICPA Special Committee on Assurance Services identified five global “mega trends” that can affect a CPA’s business. Which of the following is not one of these mega trends?
    A. The decreasing supply of natural resources.
    B. Information technology.
    C. Demands for transparency.
    D. New social structures.
A

The decreasing supply of natural resources.

40
Q
  1. If the auditor expresses an adverse or disclaimer of opinion on the complete set of financial statements, she or he is not permitted to:
    A. Express a similar opinion on a single financial statement.
    B. Perform any of the above.
    C. Express an unmodified opinion on a single financial statement.
    D. Express an unmodified opinion on an element of the financial statements.
A

Express an unmodified opinion on a single financial statement.

41
Q
  1. The performance of an attestation engagement on prospective financial information does not require which of the following?
    A. Management must disclose the probability of obtaining the results included in the prospective financial information.
    B. If the basis of the prospective financial information is different than the financial statements, a reconciliation of the two must be provided.
    C. Management must disclose all significant assumptions used in generating the prospective financial information.
    D. Management must disclose significant accounting policies and procedures used in generating the prospective financial information.
A

Management must disclose the probability of obtaining the results included in the prospective financial information.

42
Q
  1. Companies that are not subject to SEC regulations can choose to present financial information in accordance with a special purpose framework other than GAAP.
    True
    False
A

True

43
Q
  1. CPA SysTrust provides assurance that a Web site meets certain criteria.
    True
    False
A

False

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