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25 Cards in this Set
- Front
- Back
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Control risk is A. The probabilitythat a material misstatement could not be prevented or detected by the entity'sinternal control policies and procedures B. The probability that a materialmisstatement could occur and not be detected by auditors' procedures C. The risk that auditors will not be able tocomplete the audit on a timely basis D. The risk that auditors will not properlycontrol the staff on the audit engagement |
A. The probability that a material misstatement could not be prevented or detected by the entity's internal control policies and procedures |
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Auditingis based on the assumption that financial data and statements are A. Inconformity with GAAP B. Verifiable C. Presentedfairly D. Consistentlyapplied |
B. Verifiable |
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Whichof the following types of auditors' reports does not require an explanation tosupport the opinion? A. Unqualifiedopinion B. Adverseopinion C. Qualifiedopinion D. Disclaimerof opinion |
A. Unqualified opinion |
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Which of thefollowing is an element of an accounting firm's quality control system thatshould be considered in establishing its quality control policies andprocedures? A. Lending credibility to a client's financialstatements B. Using statistical sampling techniques C. Acceptance andcontinuance of clients D. Membership in the Center for PublicCompany Audit Firms (CPCAF) |
C. Acceptance and continuance of clients |
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Which of thefollowing presumptions does not relate to the reliability of audit evidence? A. The more effective the client's internalcontrol, the more assurance it provides about the accounting data and financialstatements B. The auditors'opinion, to be economically useful, is formed within reasonable time and basedon evidence obtained at a reasonable cost C. Evidence obtained from independent sourcesoutside the entity is more reliable than evidence secured solely within theentity D. The independent auditors' direct personalknowledge, obtained through observation and inspection, is more persuasive thaninformation obtained indirectly |
B. The auditors' opinion, to be economically useful, is formed within reasonable time and based on evidence obtained at a reasonable cost |
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Auditevidence is usually considered sufficient when A. It isreliable B. Thereis enough quantity to afford a reasonable basis for an opinion on financialstatements C. It hasthe qualities of being relevant, objective, and free from unknown bias D. It hasbeen obtained through random selection methods |
B. There is enough quantity to afford a reasonable basis for an opinion on financial statements |
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Which of thefollowing is not considered a type of evidence? A. Scanning B. Auditors' calculations C. Physical observation D. Statements made by client personnelfont |
A. Scanning |
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TheAICPA attestation standards differ from the AICPA generally accepted auditingstandards in that: A. Theattestation standards contain no requirement to obtain an understanding of theclient and assess the risk of material misstatement B. Theattestation standards do not require technical training and proficiency C. Theattestation standards do not require planning for attestation engagements orsupervision of accountants and consultants who perform the work D. Theattestation standards do not require a report that "states the characterof the engagement." |
A. The attestation standards contain no requirement to obtain an understanding of the client and assess the risk of material misstatement |
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Anaudit of the financial statements of Camden Corporation is being conducted byexternal auditors. The external auditors are expected to: A. Certifythe correctness of Camden's financial statements B. Make a100% examination of Camden's records C. Givean opinion on the fair presentation of Camden's financial statements inconformity with generally accepted accounting principles D. Givean opinion on the attractiveness of Camden for investment purposes and critiquethe wisdom and legality of its business decisions |
C. Give an opinion on the fair presentation of Camden's financial statements in conformity with generally accepted accounting principles |
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Auditorstry to achieve independence in appearance in order to: A. Maintainpublic confidence in the profession B. Becomeindependent in fact C. Complywith the standards of field Work under generally accepted auditing standards D. Maintainan unbiased mental attitude |
A. Maintain public confidence in the profession |
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Independentauditors most likely will refer to one or more of the three general standardsof generally accepted auditing standards to determine A. Thenature of an report qualification B. Thenature, timing, and extent of audit procedures C. Requirementsfor a sufficient understanding of the risk of material misstatement D. Whetherauditors should undertake an audit examination for a particular entity |
D. Whether auditors should undertake an audit examination for a particular entity |
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Whichof the following procedures would provide the most reliable auditevidence? A. Inquiriesof the client's internal audit staff held in private B. Inspectionof prenumbered client purchase orders filed in the vouchers payable department C. Analyticalprocedures performed by auditors on the client's trial balance D. Inspectionof bank statements obtained directly from the client's financial institution |
D. Inspection of bank statements obtained directly from the client's financial institution |
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Whichof the following is not an attestation standard? A. Thepractitioner must obtain sufficient evidence to provide a reasonable basis forthe conclusion expressed in the report B. Thepractitioner must identify the subject matter or the assertion being reportedon and state the character of the engagement C. Thepractitioner must adequately plan the work and must properly supervise anyassistants D. Asufficient understanding of the client's internal controls shall be obtained toplan the engagement |
D. A sufficient understanding of the client's internal controls shall be obtained to plan the engagement |
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Whichof the following would most likely be a violation of the independence standardunder generally accepted auditing standards? A. Anauditor on the engagement has a distant relative who is employed by a vendorthat does a significant amount of business with clients B. Theclient's Chief Executive Officer graduated from the same university as thepartner in charge of the accounting firm C. Anauditor on the engagement owns a small financial interest in the stock of theclient D. Theclient provides financial support to a number of charitable causes that alsoreceive support from the accounting firmvice" |
C. An auditor on the engagement owns a small financial interest in the stock of the client |
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Which of the following statements is generally correct about theappropriateness of audit evidence? A. Auditors'direct personal knowledge, obtained through observation and inspection, is morepersuasive than information obtained indirectly from independent outsidesources B. To bereliable, audit evidence must be either valid or relevant, but need not be both C. Clientaccounting data alone may be considered sufficient appropriate audit evidenceto issue an unqualified opinion on client financial statements D. Appropriatenessof audit evidence refers to the amount of corroborative evidence to be obtained |
A. Auditors' direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly from independent outside sources |
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The standardauditors' report refers to GAAS and GAAP in which paragraph? A. GAAS: Scopeonly; GAAP: Opinion only B. GAAS: Introductory only; GAAP: Scope andopinion C. GAAS: Introductory and scope; GAAP:Opinion only D. GAAS: Introductory only; GAAP: Allparagraphs |
A. GAAS: Scope only; GAAP: Opinion only |
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Avendor's invoice received and held by the client would be considered what typeof evidence? A. External B. Internal C. External-internal D. Writtenrepresentation |
C. External-internal |
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Whichof the following presumptions is correct about the reliability of auditevidence? A. Informationobtained indirectly from outside sources is the most reliable form of auditevidence B. To bereliable, audit evidence should be convincing rather than persuasive C. Reliabilityof audit evidence refers to the amount of corroborative evidence obtained D. Aneffective system of internal control provides more assurance about thereliability of audit evidence |
D. An effective system of internal control provides more assurance about the reliability of audit evidence |
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The auditors'responsibility to express an opinion on the financial statements is A. Implicitly represented in the auditors'standard report B. Explicitlyrepresented in the introductory paragraph of the auditors' standard report C. Explicitly represented in the scopeparagraph of the auditors' standard report D. Explicitly represented in the opinionparagraph of the auditors' standard report |
B. Explicitly represented in the introductory paragraph of the auditors' standard report |
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Whichof the following is one of the four standards of reporting included ingenerally accepted auditing standards? A. Theauditor must exercise due professional care in the performance of the audit andthe preparation of the report B. Thereport must state whether the financial statements are presented in accordancewith GAAP C. Sufficientappropriate audit evidence should be obtained D. Thereport must state that generally accepted auditing standards have been followedin the conduct of the audit0S!S |
B. The report must state whether the financial statements are presented in accordance with GAAP |
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Whichof the following statements is not true with respect to the evidencethat would be gathered when assessments of control risk are high? A. Auditorswould be required to rely on external (rather than internal) forms of evidence B. Auditorswould be required to perform procedures at interim periods, rather than at yearend C. Auditorswould be required to confirm a larger number of customer accounts receivablebalances D. Auditorswould be required to obtain more evidence through direct personal observation |
B. Auditors would be required to perform procedures at interim periods, rather than at year end |
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Theprimary purpose of the auditors' study of internal control for a nonpublicentity is to A. To provideconstructive suggestions to the client for improving its internal control B. Toreport on internal control as required by Auditing Standard No. 5 C. To identify and detect fraud and irregularitiesperpetrated by client personnel D. Todetermine the nature, timing, and extent of substantive procedures |
D. To determine the nature, timing, and extent of substantive procedures |
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Whichreporting options do auditors have if the client's financial statements are notpresented according to GAAP? A. Unqualifiedor disclaimer of opinionB. Qualifiedor disclaimer of opinionC. Unqualifiedor adverse D. Qualifiedor adverse |
D. Qualified or adverse |
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Distinguish between attestation standards and generally accepted auditing standards by identifying and describing major differences between the two sets of standards. |
1.Attestation standards do not attempt to describe one type of engagement (suchas a GAAS audit) or identify one type of information on which assurance isprovided (such as the financial statements).2. In addition to general training and knowledge in the attest (audit)function, attestation standards require that practitioners have adequateknowledge of the subject matter to which the attestation engagement relates.(Because of the wide range of attestation engagements, this is a requirementthat is necessary for attestation engagements but not audit engagements).3. Practitioners can only accept attestation engagements if the subject matteris capable of being assessed against established criteria (since financialstatements can always be assessed against GAAP, there is no requirement such asthis in GAAS).4. Attestation standards do not require auditors to obtain an understanding ofthe client to assess the risk of material misstatement.5. Attestation standards do not address the consistent application ofaccounting principles, as this is not applicable in attestation engagementsother than audits of financial statements.6. Since attestation engagements may not depend upon one type of criteria (suchas GAAP in an audit), information is evaluated based on "established orstated criteria".7. Since attestation engagements may be conducted on a wide range ofinformation, the use of the attestation report may be limited to specifiedindividuals (the use of auditors' reports is generally available to anyinterested party).T |
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Foreach of the matters below, indicate through the appropriate letter the group ofgenerally accepted auditing standards to which the matter is most closelyrelated. A. General standards B. Standards of field work C. Standards of reporting (1) The mental attitude andimpartiality of auditors. (2) Auditors' overall conclusion of thefairness of the client's financial statements. (3) The use of an audit program toidentify audit procedures to be performed during theengagement. (4) Auditors' assessment of controlrisk after performing tests of controls. (5) Accounting firm policies withrespect to the level of expected continuing professional education. (6) Client's disclosure of all pending litigation against theclient at year end. (7) The hierarchical review processused to evaluate the appropriateness of audit documentation prepared byassistants. (8) Auditors' requests to obtain bankstatements directly from institutions with whom the client does business. (9) The client's use of accountingprinciples that are consistent with those used in prior years. (10) Actions taken by auditors tocommunicate their level of involvement with and responsibility assumed for theclient's financial statements. |
(1) The mental attitude and impartiality of auditors. = A. General Standards (2) Auditors' overall conclusion of the fairness of the client's financial statements. = C. Standards of Reporting (3) The use of an audit program to identify audit procedures to be performed during the engagement. = B. Standards of Field Work (4) Auditors' assessment of control risk after performing tests of controls. = B. Standards of field work (5) Accounting firm policies with respect to the level of expected continuing professional education. = A. General Standards (6) Client's disclosure of all pending litigation against the client at year end. = C. Standards of Reporting (7) The hierarchical review process used to evaluate the appropriateness of audit documentation prepared by assistants. = A. General Standards (8) Auditors' requests to obtain bank statements directly from institutions with whom the client does business. = B. Standards of Field work (9) The client's use of accounting principles that are consistent with those used in prior years. = C. Standards of reporting (10) Actions taken by auditors to communicate their level of involvement with and responsibility assumed for the client's financial statements. = C. Standards of Reporting |
