Quiz Mods 1-4

Question 0

The auditor should perform retrospective review of significant accounting estimates reflected in the financial statements of the prior year to determine…

Answer 0

Whether management judgements and assumptions relating to

The estimates indicate bias of management

Question 1

The objective of analytical procedures used in the overall review stage of the audit is to…

Answer 1

Assist the auditor in assessing the validity of the conclusions
reached

Question 2

The significant accounting estimates selected for testing should include those that are based…

Answer 2

On highly sensitive assumptions or otherwise significantly affected
By judgements made by management

Question 3

What affect would fictitious credit sales have on accounts receivable turnover ratio?

Answer 3

They would lower it because the numerator and denominator

Would both increase by the same amount

Question 4

Financial expert defined by SOX, is a person through education and experience as…5

Answer 4

1 public accountant
2 auditor
3 principal financial officer
4 comptroller or
5 principal accounting officer of issuer

Question 5

Characteristics of a financial expert according to SOX:

has an understanding of…

Answer 5

GAAP and financial statements

Question 6

Characteristics of a financial expert according to SOX:

Experience in…2

Answer 6

1 preparation or auditing of financial statements of generally
Comparable issuers and

2 the application of such principles in connection with the
Accounting for estimates, accruals and reserves

Question 7

Characteristics of a financial expert according to SOX:

Has experience with internal…

Answer 7

Internal accounting controls

Question 8

Characteristics of a financial expert according to SOX:

Has an understanding of…

Answer 8

Audit committee functions

Question 9

There is no requirement that the financial expert had to obtain experience by…

Answer 9

Serving on a prior audit committee or board of directors

Question 10

A management representation letter is written by…

Answer 10

The client to the auditor

Question 11

The purpose of the management representation letter is to…

Answer 11

Serve as corroborating evidence with other evidence gathered
During the audit

Question 12

“There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices.” What is this passage likely included in?

Answer 12

The management representation letter

Question 13

All material weaknesses are…

Answer 13

Significant deficiencies

Question 14

Once the sequence of tags is accounted for, the auditor, by taking a sample of those tags and tracing to the physical inventory listing will obtain evidence about…

Answer 14

Items on tags being included in the listing

Question 15

Establishing an Understanding with the Client, requires the CPA to address 4 areas with the client in the engagement letter

Answer 15

1 objectives of the engagement
2 responsibilities of management
3 limitations of the engagement
4 responsibilities of the practitioner

Question 16

For the engagement letter, information about fees and billing…

Answer 16

May be included but is not required

Question 17

The Statements of Standards for Accounting and Review Services (SSARS) do not specifically give a time period for retention of records. Therefore the firm must…

Answer 17

Establish policies and procedures to retain the engagement records
For a period sufficient

Question 18

How long do standards require a firm to retain engagement documentation?

Answer 18

The firm should establish policies and procedures for the retention
of records for a sufficient period

Question 19

Methods of determining the effectiveness of the design and operation of controls (obtaining evidence of control risk) include…4

Answer 19

1 inquiry
2 inspection
3 observation
4 reperformance

Question 20

Name three substantive tests used in an audit?

Answer 20

1 analytical procedures

2 calculations

3 confirmations

Question 21

The determination of the audit ability of an entity is…

Answer 21

One of the first matters the auditor considers in initial planning
For the audit before accepting it

Question 22

One of the requisites of audit ability is…

Answer 22

Adequate, sufficient, reliable accounting records

Question 23

Operating effectiveness of controls relates more to the auditor’s consideration of…

Answer 23

Nature, timing and extent of audit procedures

Question 24

The auditor should develop auditing procedures based on the auditor’s understanding of the entity and its environment, including…3

Answer 24

1 composition of revenues

2 specific attributes of revenue transactions

3 unique industry considerations

Question 25

Management must make certain representations to the auditor regarding the…6

Answer 25

1 financial statements
2 completeness of info provided to auditor
3 recognition
4 measurement
5 disclosure
6 info concerning subsequent events

Question 26

The phrase, “No events have occurred subsequent to the balance sheet date that require adjustment to, or disclosure in, the financial statements,” would be included in…

Answer 26

The management representation letter

Question 27

Payroll fraud is when…

Answer 27

An employee is paid for hours not worked or when a no employee
is paid under the category of “payroll”

Question 28

Having a supervisor approve a summary of hours helps ensure…

Answer 28

Only employees are paid and amount is for hours actually worked

Question 29

An auditor is required to perform an audit professionally and in accordance with…

Answer 29

All standards

Question 30

The auditor must understand all standards to…

Answer 30

Perform an audit in the first place

Question 31

An auditor is required to have competence, skills, technical knowledge, and experience to perform an audit professionals and in accordance with…

Answer 31

All standards

Question 32

Analytical procedures involve comparison of…

Answer 32

Recorded amounts to their expectations

Question 33

Since analytical procedures involve the comparison of recorded amounts to expectations, the auditor is most likely to detect misstatement by performing…

Answer 33

Analytical procedures designed to disclose differences from expectations

Question 34

Evaluations jeg the effectiveness of internal controls may not detect…

Answer 34

Misstatements caused by the circumvention or management

Override of internal controls