Quiz Wrong Answers

Question 0

An auditor concludes that a substantive auditing procedure considered necessary during the prior period’s audit was omitted. Which of the following factors would most likely cause the auditor promptly to apply the omitted procedures?

Answer 0

Omission of procedure impairs auditor’s present ability to support previously expressed opinion

Question 1

When an auditor decides to confirm A/R balances rather than individual invoices, it most likely would be beneficial to include with the confirmations…

Answer 1

Client prepared statements of account that shoe the details of the account balances

Question 2

If properly disclosed in the financial statements, which of the following would ordinarily cause an accountant to modify his or her standard compilation of review report?

1) uncertainty about entity’s ability to continue as a going concern
2) inconsistency in application of accounting principles

Answer 2

Neither

Question 3

An accountant’s report on a review of pro forma financial information should include a…

Answer 3

Reference to the financial state,nets from which the historical
Financial information is derived

Question 4

After making inquiries about credit granting policies, an auditor selects a sample of sales transactions and examines evidence of credit approval. This test of controls most likely supports management’s financial statement assertion of…

Answer 4

Valuation or allocation

Question 5

When a CPA examines a client’s projected financial statements, the CPA’s report should…

Answer 5

State that the CPA performed procedures to evaluate management’s assumptions

Question 6

An auditor’s inquiries of management disclosed that the entity recently invested in a series of energy derivatives to hedge against the risks associated with fluctuating oil prices. Under these circumstances the auditor should…

Answer 6

Examine the contracts for possible risk exposure and the need to recognize losses

Question 7

An auditor’s procedures indicate a lower than expected return on an equity method investment. This situation would most likely be caused by…

Answer 7

An error recording excess amortization

Question 8

An auditor used test data to verify the existence of controls in a certain computer program. Even though the program performed well on the test, the auditor may still have concern that…

Answer 8

The program tested is the same one used in regular production
Runs

Question 9

An auditor’s letter issued on significant deficiencies relating to a entity’s internal control observed during a financial statement audit should…

Answer 9

Indicate that the audit’s purpose was to report on the FS

and not provide assurance on internal control

Question 10

Which of the following is an element of a CPA firm’s quality control system that should be considered in establishing its quality control policies and procedures?

Answer 10

Assigning personnel to engagements

Question 11

An auditor examining inventory most likely would use variables sampling rather than attributes sampling to…

Answer 11

Estimate whether the dollar amount of inventory is reasonable

Question 12

The personnel that were involved in the booking the transaction would…

Answer 12

Not be considered in understanding the business rationale of the transaction

Question 13

The existence of subsequent events does not…

2) so no…

Answer 13

Impair independence

2) no modification regarding independence is necessary for a compilation report

Question 14

An auditor observes the mailing of monthly statements to a client’s customers and reviews evidence of follow up on errors reported by the customers. This test of controls most likely is performed to support management’s financial statement assertion of…

Answer 14

Existence

Question 15

The primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor with…

Answer 15

Knowledge necessary for audit planning

Question 16

After the report release date…

Answer 16

Additions may be made

Question 17

An auditor must communicate…

2) to those in charge with governance through…

Answer 17

Any matter of independence

2) written communication

Question 18

Which of the following is the primary reason that many auditor’s hesitate to use embedded audit modules?

Answer 18

Auditors are required to be involved in the system design of the application to be monitored

Question 19

A CPA is required to comply with the provisions of Statements on Standards for Attestation Engagements (SSAE) when engaged to…

Answer 19

Review MD&A prepared pursuant to rules and regulations adopted
By the SEC

Question 20

Application controls pertain to…

Answer 20

Processing of individual applications in an IT environment

Question 21

An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when…

Answer 21

Sample rate of deviation + allowance for sampling risk

exceeds the tolerable rate

Question 22

When an accountant is engaged to report on subject matter or presentation based on measurement or disclosure criteria contained in contractual agreements or regulatory provisions he should…

2) Why?

Answer 22

Restrict the report

2) because it may be misunderstood by those who are not
adequately informed of the basis, assumptions or purpose of presentation

Question 23

On receiving a client’s bank cutoff statement, an auditor is most likely would trace…

Answer 23

Prior year checks listed in the cutoff statement to the year end outstanding checklist

Question 24

When an accounting application is processed by computer, an auditor cannot verify the reliable operating of programmed controls by…2

Answer 24

Manually reperforming, as of a point in time, the processing of
Input data

And comparing the simulated results to the actual results

Question 25

Investigate changes in capital stock recorded after year end is…

Answer 25

A procedure an auditor would likely perform to obtain evidence
About the occurrence of subsequent events

Question 26

Analytical procedures have the highest level of evidence when they use…

Answer 26

Direct predictable relationships within financial statements

Question 27

Which of the following procedures would the principal auditor most likely perform after deciding to make reference to another CPA who audited a subsidiary of the entity?

Answer 27

Make inquiries about the professional reputation and independence
of the other CPA

Question 28

To be effective, analytical procedures in the overall review stage of an audit engagement should be performed by which of the following?

Answer 28

A manager or partner who has a comprehensive knowledge of the client’s business and industry

Question 29

Ineffective general controls by themselves…

2) however they can…

Answer 29

Do not cause misstatements

2) permit applications controls to operate improperly and allow misstatements to occur

Question 30

The independent auditor’s Procedures performed in assessing the risk of material misstatement…

Answer 30

May be affected by work of internal auditors

Question 31

For effective internal control, the accounts payable department generally should…

Answer 31

Establish the agreement of the vendor’s invoice with the receiving
report and purchase order

Question 32

Allows the relative frequency of an interval to be determined by knowing only the mean and the standard deviation

Answer 32

Normal distribution

Question 33

Measures the extent to which the values of the items are spread about the mean

Answer 33

Standard deviation

Question 34

If a major customer files for bankruptcy. What is the journal entry?

Answer 34

Bad debt exp (operating exp.). Xxx

Allow. For doubtful accts. xxx

Question 35

The internal control questionnaires, flowcharts and narratives are part of the understanding of internal control and are also prepared prior to field work. However these may be expanded to answer questions that arise or collect additional information and therefore are…

Answer 35

Never finalized until fieldwork is performed to some extent

Question 36

Updating the prior year’s written audit program should…

Answer 36

Be performed prior to the beginning of fieldwork on a continuing
Client

Question 37

Confirmation is the process of obtaining a…

2) from…

Answer 37

Direct communication

A third party

Question 38

Rights and obligations as well as presentation and disclosure can…

Answer 38

Be addressed by confirmations

Question 39

“Nonresponses do not provide audit evidence about the financial statement assertions being addressed.” This statement describes a drawback of which type of confirmation?

Answer 39

Positive confirmations

Question 40

Which type of confirmation runs the risk of the third party signing it and returning it without verifying that the information is correct?

Answer 40

Positive confirmation request