Pass Keys

Question 1

What is the most relevant assertion for AR?

Answer 1

Existence- the risk AR will be overstated is higher than risk that AR will understated (completeness)

Question 2

What is the most relevant assertion for AP?

Answer 2

Completeness and accuracy (risk of understatement is greater than risk of overstatement (rights and obligations)

Question 3

6 FS Assertions

Answer 3

COVERU

Question 4

Performing a count of negotiable securities auditor records on worksheet

Answer 4

Acknowledgement that securities returned infact

Question 5

5 Component s of internal control

Answer 5

Control environment
Risk assessment
Information and communication
Monitoring
Existing Control activities

Question 6

What are assertion s for account balance?

Answer 6

Testing inventory is an account balance, so the 4 assertions for account balances apply: 1) existence, 2) completeness, 3) rights and obligations, and 4) valuation and allocation.

Question 7

Quality control system if CPA firm

Answer 7

The firm must establish and maintain a system of quality control. The system of quality control should include policies and procedures addressing each of the following elements:

Leadership responsibilities for quality within the firm (the tone at the top): There should be policies and procedures that promote an internal culture that emphasizes that quality is essential in performing engagements.

Relevant ethical requirements: This mainly deals with independence. A firm needs to have policies that make sure personnel understand independence requirements, have a system to evaluate possible independence issues for engagements, and policies for responding to possible breaches of independence. It should also obtain written confirmation annually from personnel required to be independent that they are in compliance with the policies and procedures on independence.

Acceptance and continuance of client relationships and specific engagements: There should be policies and procedures that evaluate any risks associated with a possible engagement and to help ensure that the firm only accepts engagements that can be completed with professional competence.

Human resources: There should be policies to ensure the firm has the appropriate and sufficient staff to perform engagements that 1) are in accordance with professional standards and 2) enable the firm to issue reports that are appropriate for the circumstances. The firm’s policies should also address personnel professional development as they advance in position and experience.

Engagement performance: There should be policies that provide reasonable assurance that engagements are performed in accordance with professional standards and that the firm issues reports that are appropriate for the circumstances. This also involves the engagement quality control review policies of the firm.

Monitoring: Policies and procedures that provide reasonable assurance that the firm’s quality control system is functioning properly and that the system is adequate and relevant.

Question 8

In which case unmodified opinion would not be appropriate?

Answer 8

A material related party transaction not properly disclosure d

Question 9

Which of the following info would raise a question concerning with incompliance with laws?

Answer 9

Entity prepared several large cash checks payable during the year

Question 10

Which of the following auditor least likely to consider with respect to fair value?

Answer 10

Disclosure of the information available subsequent to the audit

Question 11

Processing data through the use of the simulated files provedes auditor info of operating effectiveness of control. What technique is involved?

Answer 11

An integrated test facility

Question 12

Factors CPA consider in the planning stage of audit engagement

Answer 12

FS account s likely to consider misstatement s

Condition s that require test extensions

Question 13

Control related to occurrence assertion in payroll transaction

Answer 13

Segregation of duties

Question 14

Before accepting engagement for new audit client auditor should

Answer 14

Get concern regarding making inquiry to predecessor auditor

Question 15

Decrease of misstatement in a statement that auditor could tolerare

Answer 15

Perform planed audit procedure close to balanshhet date.

Question 16

To determine there check being issued for anautorized expenditures

Answer 16

Select items from Canceled checks

Question 17

Customer Zag omits statement of cash flow

Answer 17

Explane to Zag that omission requires qualification of opinion

Question 18

Management representation should be obtained about all except

Answer 18

Management consultation with other accountants

Question 19

Search for unrecorded payables

Answer 19

Compare cash payments after balance sheet date with the accounts payable trial balance

Question 20

Negative assurance (Not aware, nothing came to our attention)-Review, but positive-Examination. If there is no word assertion, then it is subject matter (because of the effect)

Answer 20

Review Report vs Examination Report

Question 21

Which of the following is not the risk assessment procedure

Answer 21

Risk assessment procedures to obtain an understanding of the entity include:

Inquiries of management

Analytics, such as using high level data to compare the prior year to the current year’s results

Observation and inspection, such as walkthroughs

Question 22

FOB 2 types

Answer 22

FOB Shipping Point, indicates that the sale occurred at the shipping point—at the seller’s shipping dock. FOB Destination indicates that the sale will occur when it arrives at the destination—at the buyer’s receiving dock.

Question 23

Prior to, or in conjunction with, the information-gathering procedures for an audit, audit team members should discuss the potential for material misstatement due to fraud. Which of the following best characterizes the mind-set that the audit team should maintain during this discussion?

Answer 23

Questioning

Question 24

For an initial audit, which of the following is not a likely audit procedure for the opening balances?

Answer 24

High level analytical procedures comparing the previous period to the current year trial balance.

Question 25

The independent auditor wants to assign tasks for the internal auditor to perform.He may allow

Answer 25

Allow the internal auditor to perform tests of internal controls.

Question 26

Which is not considered entity level control

Answer 26

Comparison actual assets will h balances

Question 27

Which is impairment of CPA independence under GAS?

Answer 27

Developing entity programme policies

Question 28

Risk factor relates to misstatement arising from misapropriation of assets?

Answer 28

Lack of independent checks

Question 29

A planning to use substantive anal Procedures. What is not a primary factor that affects the Efficiency and effectiveness of these Procedures in detecting possible Misstatements?

Answer 29

Analytical procedures should be applied to assertions that have potential misstatement s

Question 30

Which is NOT a part of obtaining understanding of IC?

Answer 30

Determining there IC is operating effectively

Question 31

In order to test existence and occurrence assertion of clients account payable auditor would most likely perform

Answer 31

Vouch selected amounts from AP listing to the clients voucher package

Question 32

In planning Audit, auditor should consider materiality for the financial statements as a whole in terms of:

Answer 32

The smallest aggregate level of misstatements that could be considered material to any one of Fin Statements because FS are interrelated.