Questions From Progress Test

Question 0

When an accountant provides limited assurance that the financial statements of a nonissuer require no material modifications to be in accordance with generally accepted accounting principles, the accountant is performing what time of engagement?

Answer 0

REVIEW

Question 1

When there has been a change in accounting principles, but the effect of the change on the comparability of the financial statements is not material, the auditor should:

Answer 1

Not refer to consistency in the auditor’s report.

Question 2

What is meant by the term generally accepted auditing standards?

Answer 2

Measures of the quality of the auditor’s performance.

Question 3

Six months after issuing an unmodified opinion on audited financial statements, an auditor discovered that the engagement personnel failed to confirm several of the client’s material accounts receivable balances. The auditor should first:

Answer 3

Assess the importance of the omitted procedures to the auditor’s ability to support the previously expressed opinion.

Question 4

When an auditor discovers the omission of an audit procedure related to a previously issued report, the auditor should first:

Answer 4

Assess the importance of the omitted procedures to the auditor’s ability to support the previously expressed opinion.

Question 5

If the auditor believes that there is a probable likelihood of a material loss resulting from an uncertainty that is sufficiently supported and disclosed, an auditor most likely would:

Answer 5

Express an unmodified opinion and would not add an additional paragraph to the report.

Question 6

An auditor most likely would express an unmodified opinion and would not add emphasis-of-matter or other-matter paragraphs to the report if the auditor:

Answer 6

Believes that there is a probable likelihood of a material loss resulting from an uncertainty that is sufficiently supported and disclosed.

Question 7

After an audit report is issued, an auditor discovers that an important audit procedure was not performed. What audit procedure should be performed first?

Answer 7

The first step in such a situation would be to determine whether any other alternative steps may have been performed that would tend to compensate for the omitted procedures, thus allowing the audit report to stand as supported.

Question 8

The accountant is not required to specifically assess fraud risk or to perform procedures designed to detect material misstatements due to fraud or illegal acts in which type of engagements?

Answer 8

In compilation and review engagements.

Question 9

What is the objective of a review of interim financial information?

Answer 9

The objective is to provide the accountant, through inquiries and analytical procedures, with a basis for reporting whether material modifications should be made to such information to conform with generally accepted accounting principles.

Question 10

The study of relationships among financial statement elements is part of performing analytical procedures. The auditor is not required to perform analytical procedures as part of a(n) ___________ engagement?

Answer 10

Compilation Engagement

Question 11

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 11

West should disclose the basis of accounting used in West’s compilation report.

Question 12

In planning an audit of a new client, an auditor most likely would consider the methods used to process accounting information because such methods:

Answer 12

Influence the design of internal control.

Question 13

Information that may raise a question concerning possible noncompliance with laws and regulations include unusually large payments made to:

Answer 13

Cash
Bearer
Purchase cashiers checks
Transfer funds to numbered accounts

Question 14

In considering whether the service auditor’s report is satisfactory for the user auditor, the user auditor should:

Answer 14

Make inquiries concerning the service auditor’s reputation.

Question 15

Before applying substantive tests to the details of asset accounts at an interim date, an auditor should assess:

Answer 15

The difficulty in controlling the incremental audit risk.

Question 16

Audit evidence consists of the underlying accounting data AND:

Answer 16

ALL corroborating information available to the auditor.

*A client’s accounting data by itself is not considered sufficient audit evidence to support the financial statements.

Question 17

In a comparison of 20X2 to 20X1, Neir Co.’s inventory turnover ratio increased substantially although sales and inventory amounts were essentially unchanged. Which of the following statements explains the increased inventory turnover ratio?

Answer 17

Gross profit percentage decreased.