Practice Ques 1

Question 1

What is least likely to be included in the auditor’s risk assessment process to identify and assess the risks of material misstatement?

Answer 1

Consider the likelihood that risks could result in misstatements of an amount which is less than material. Because the Auditor must consider the likelihood of risks of MATERIAL MISSTATEMENTS NOT LESS than material.

Question 2

A primpary purpose of the engagement performance element, in the context of quality control is to ensure what?

Answer 2

To ensure that Engagements are properly supervised

Question 3

A compilation should report that financial statements are what if the accountant is reporting on a nonpublic entity’s COMPILED Financials that omit substantially all disclosures required by GAAP?

Answer 3

Not designed for those who aren’t informed about the omitted disclosures.

Question 4

Reviews of annual info for nonpublic companies

Answer 4

should obtain evidence to provide a reasonable basis for obtaining limited assurance that no material modifications are needed.

Question 5

If a non-public entity’s financials for year 1 omitted substantially all disclosures by GAAP can the statements for year 2 that are compiled in accordance to GAAP by presented in a comparative form?

Answer 5

NO, because they are not comparable.

Question 6

Auditor association of MD&A Include what?

Answer 6

Review & Examination

Question 7

What is true of the PCAOB which was created by SOX 2002?

Answer 7

1. The SEC Oversees it (not Vice Versa)
2. Consists of 5 members
3. Discipline CPA firms that audit public companies
4. Develop independence standards for CPA firms that audit Public Companies.

Question 8

An independent auditor should look at what when assessing the internal auditor’s objectivity?

Answer 8

The policies that prohibit Internal auditor’s from assessing areas that they were recently assigned to.

Question 9

If an auditor observes current inventory but not the physical inventory of the previous year-end date, and determines that the opening inventory balance (which isn’t auditable) is a material factor in determining COGS, then what must he/she do?

Answer 9

1. Express Unmodified Opinion on the BS

2. Disclaim an opinion on the Income Statement

Question 10

How does an auditor gain reasonable assurance that additions to PPE aren’t understated?

Answer 10

Look at the “Repairs” account.

Question 11

Which is an analytical procedure which an auditor would perform during the risk assessment of an audit?

Answer 11

Compare current year account balances for conformity with predictable patterns.

Question 12

What kind of transaction has less less risk?

Answer 12

Routine Transactions.

Question 13

A client’s AR Turnover is lower for the currently year than for the prior year which could indicate that?

Answer 13

there was an improper cutoff of sales at the end of the year

Question 14

If using a statistical sampling plan, a smaller sample would be used if?

Answer 14

Sampling risk increases.

Question 15

Those who commit fraud are ordinarily able to rationalize the act and have

Answer 15

Incentive

Question 16

One reason why we establish quality control policies for acceptance and continuing client relationships is so that

Answer 16

We undertake engagements that we are competent to perform

Question 17

Attribute samping is least likely used for?

Answer 17

Inspecting purchase orders for approval by supervisors.

Question 18

“In our opinion, with the foregoing explanation, the financial statements referred to above present fairly…” is an example of what type of opinion?

Answer 18

None, this is inappropriate reporting.

Question 19

During a Financial Statement Audit, an internal auditor can provide assistance in?

Answer 19

Tests of Controls & Substantive Tests.

Question 20

In counting negotiable securities, auditors record details on a security count worksheet. What other info is included in this sheet?

Answer 20

Acknowledgement by a client representative that the securities were returned in tact.