test 2 - MC Flashcards
The objective of an audit of the financial statements is an expression of an opinion on
a.the accuracy of the financial statements.
b.the accuracy of the balance sheet and income statement.
c.the fairness of the financial statements in all material respects.
d.the accuracy of the annual report.
the fairness of the financial statements in all material respects.
The trait that distinguishes auditors from accountants is the
a.auditor’s education beyond the bachelor’s degree
b. auditor’s ability to interpret IASB statements
c.auditor’s ability to interpret international financial reporting standards
d.auditor’s expertise in the accumulation and the interpretation of audit evidence.
auditor’s expertise in the accumulation and the interpretation of audit evidence.
If the auditor believes that the financial statements are not fairly stated or is unable to reach a conclusion because of insufficient evidence, the auditor
a. has the responsibility of notifying financial statement users through the auditor’s report.
b.should notify regulators of the circumstances.
c. should request an increase in audit fees so that more resources can be used to conduct the audit.
d.should withdraw from the engagement
has the responsibility of notifying financial statement users through the auditor’s report.
For publicly listed companies, the auditor also issues which of the following reports in addition to a report containing the auditor’s opinion?
a.a report on compliance with generally accepted accounting principles only
b.a report on internal control over financial reporting
c.a report on compliance with the Foreign Corrupt Practices Act (FCPA)
d.a report on compliance with the Federal Securities Act
a report on internal control over financial reporting
Which financial statement is signed by members of the Board of Directors and senior management.
a.Only the external auditors sign the financial statements
b.Statement of Cash Flows
c.Income Statement
d.Statement of Financial Position
Statement of Financial Position
The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to
a.management for the statements and the auditor for the notes.
b. management
c.the auditor.
d.both management and the auditor equally.
management
Which of the following statements is the most correct regarding errors and fraud?
a.Frauds occur more often than errors in financial statements.
b.An error is unintentional, whereas fraud is intentional.
c.Auditors have more responsibility for finding fraud than errors.
d.Errors are always fraud and frauds are always errors.
An error is unintentional, whereas fraud is intentional.
Which of the following statements is usually true?
a.Materiality is easy to quantify.
b.Reasonable assurance is a low level of assurance that the financial statements are free from material misstatement
c.Fraudulent financial statements are often easy for the auditor to detect, especially when there is collusion among management.
d.An item is considered material if it would likely have changed or influenced the decisions of a reasonable person using the statements.
An item is considered material if it would likely have changed or influenced the decisions of a reasonable person using the statements.
The concept of reasonable assurance indicates that the auditor is
a.not responsible for the fairness of the financial statements.
b.responsible for finding all misstatements.
c.responsible only for issuing an opinion on the financial statements.
d.not a guarantor of the correctness of the financial statements.
not a guarantor of the correctness of the financial statements.
Which of the following is an accurate statement regarding audit evidence?
a.All evidence must be highly persuasive.
b.Audit evidence should provide an absolute level of assurance.
c.The auditor uses evidence to determine whether the statements are fairly presented.
d.Responses to the auditor’s questions by client employees are considered highly persuasive evidence.
The auditor uses evidence to determine whether the statements are fairly presented.
Which of the following is not one of the four decisions about what evidence to gather and how much of it to accumulate in the development of an audit program?
a.which accounts must agree to the general ledger
b.what sample size to select for a given procedure
c.when to perform the procedures
d.which audit procedures to use
which accounts must agree to the general ledger
Management assertions are
a.stated in the footnotes to the financial statements.
b.directly related to the financial reporting framework used by the company, usuall U.S. GAAP or IFRS.
c.provided to the auditor in the assertions letter, but are not disclosed on the financial statements.
d. explicitly expressed representations about the financial statements.
directly related to the financial reporting framework used by the company, usuall U.S. GAAP or IFRS.
You are auditing UB. You have not been able to do confirmation of accounts receivables directly with students. You have been provided subsequent months records to show collections and you have done analytical and other procedures What would be the likely audit opinion expressed
a.Unmodified with an additional informative paragraph
b.Qualified Opinion
c.Unmodified or “Clean Opinion”
d.Adverse Opinion
Unmodified or “Clean Opinion”
You have been auditing XYZ Company. The audit uncovered that an accrual was necessary which resulted in an increase in Revenues and increase in Trade Receivables. XYZ reviewed the proposed audit entry, agreed and booked the audit entry. What would be the likely audit opinion expressed
a.Qualified Opinion with an additional informative paragraph
b.Unmodified or “Clean Opinion”
c.Unmodified with an additional informative paragraph
d.Qualified Opinion
Unmodified or “Clean Opinion”
You are engaged to audit Simon Quan. Simon Quan uses the perpetual inventory method and uses the LIFO method of inventory costing. All information and evidence requested was provided. What would be the likely audit opinion expressed
a.Adverse Opinion
b.Qualified Opinion
c.Disclaimer of Opinion
d.Unmodified or “Clean Opinion “
Adverse Opinion
