Auditors General are responsible for auditing which types of organizations?
A) Public companies with shares issued to investors
B) Private companies that have loans outstanding to banks or other creditors
C) Ministries, departments, agencies, and crown corporations
D) Any organization that submits tax returns to the tax authorities
As part of the conduct of a review engagement, which of the following procedures
would be appropriate for assessing the ending value of accounts payable?
A) sending zero balance confirmations to frequently used suppliers
B) use of negative confirmations to suppliers with material balances
C) comparison of the accounts payable balances by supplier to the prior year
D) examination of invoices received after the year end to ensure that they were
recorded in the proper period
The chart of accounts is an important control because it provides the framework for
determining the information presented to management and other financial statement
users. What type of errors is the chart of accounts helpful in preventing? It helps
prevent errors of
A) occurrence.
B) completeness.
C) accuracy.
D) classification.
The level of assurance that is provided by the public accountant on a compilation report
is
A) none.
B) low.
C) medium.
D) high.
Frank has discovered that his employer is part of a group of banks that is manipulating
interest rates. He would like to stop this practice at his employer, and is not sure how
best to talk to his boss. He has heard of the GVV (Giving Voice to Values) approach,
and thinks he may be able to use it successfully because his company has recently
implemented new initiatives to empower employees to speak of improvements to
business practices. The first step of the GVV approach includes
A) identifying the stakeholders, what is at stake for them, and how to connect with
them.
B) identifying the values underpinning the different positions in the conflict and the
possibilities for action.
C) considering Frank’s personal and professional purpose and choices in this situation.
D) development and practice of a powerful response that Frank can use with his boss.
Securities regulations in Canada are the responsibility of
A) national securities commission.
B) provincial securities commissions.
C) the professional accounting organizations.
D) office of the auditor general of Canada.
Helen found that the expense reports were not properly approved while the senior
accounts payable clerk was on vacation in July. Helen decided to perform a test of
control on the authorization of expense reports for all the months except for July which
she will test substantively. Helen is allowed to do this because
A) the authorized expense reports for July are not material.
B) it would not be cost beneficial to test the entire population substantively.
C) the authorizations for the month of July are not representative of the population as a
whole.
D) compensating controls exist in the payroll reconciliation process.
The new Canadian Auditing Standards require the auditor to complete the audit
working papers within how many days of the audit report date?
A) 45
B) 60
C) 90
D) 183
Which one of the following forms of evidence would be least persuasive in forming the
auditor’s opinion?
A) the auditor’s count of marketable securities
B) correspondence with a stockbroker regarding the quantity of client’s investments
held in street name by the broker
C) minutes of the board of directors authorizing the purchase of stock as an investment
D) responses to auditor’s questions by the president and controller regarding the
investments account
You are analyzing the exceptions that arose after your control testing of credit limit
approvals. There were four exceptions where credit had not been approved. One was for
a customer that was subsequently placed on C.O.D. (cash on delivery), and three
occurred while the business was in the middle of its busy season, processing three times
more transactions than most other times of the year. The company’s busy season
normally lasts about two months.
Required:
A) What is an anomaly?
B) Are any of the exceptions that you found anomalous? Why or why not?
C) Provide an example of a credit approval testing exception that would be anomalous.
The most common type of audit report contains
A) an adverse opinion.
B) a disclaimer of opinion.
C) a qualified opinion.
D) an unqualified opinion.
Each key control that the auditor intends to rely on must be supported by sufficient
A) tests of details of balances.
B) tests of controls.
C) analytical review procedures.
D) reperformance procedures.
Frag Jones Company has a December year end, with a tight reporting deadline, so the
auditors confirmed the accounts receivable as of November 30 using positive
confirmations. In addition to following up confirmation discrepancies, the auditor
should
A) test December transactions.
B) send negative confirmations as of the end of December.
C) text November transactions.
D) do cut-off testing for the month of October.
Leon Levy, a partner at the audit firm where you work, asked you to work on the audit
of the balance sheet of Geminy Corp. Geminy is not a public company and has not been
required to have audited financial statements in the past. This year, due to a new bank
loan, its bank requested that audited financial statements be provided. Who are the
primary users in this assurance engagement?
A) Leon Levy
B) The bank
C) Management of Geminy Corp
D) Shareholders of Geminy Corp
A) Describe the three basic concepts (assumptions) underlying the study of internal
control and assessment of control risk.
B) Describe the inherent limitations of internal control.
Auditor confirmation of accounts payable balances at the balance sheet date may be
unnecessary because
A) this is a duplication of cutoff tests.
B) accounts payable balances at the balance sheet date may not be paid before the audit
is completed.
C) correspondence with the audit client’s lawyer will reveal all legal action by vendors
for nonpayment.
D) there is likely to be other reliable external evidence available to support the
balances.
The primary auditor who relies on a secondary auditor
A) is responsible for any deficiencies in the secondary auditor’s work.
B) will mention the name of the secondary auditor if he or she decides that an
unqualified opinion is appropriate.
C) will never mention the name of the secondary auditor in his or her report even if the
report is qualified.
D) has no responsibility for checking the work of the secondary auditor.
The correct cutoff and valuation of accrued salaries and wages
A) is to calculate the exact hours of pay that were earned in the current period and paid
in a subsequent period.
B) is to compute an approximate proportion of the wages that were earned in the current
period and use that amount as the accrual.
C) allows the client to choose between A and B above each year.
D) depends on company policy and whether it is consistently followed.
In statistical terms, acceptable risk of assessing control risk too low (ARACR)
corresponds with
A) sampling risk.
B) inherent risk.
C) control risk.
D) nonsampling risk.
ABC Company has requested PA to prepare prospective financial information to assist
with the acquisition of a bank loan. The prospective financial information is being
prepared using management’s best estimate of future sales and expenses. The type of
information being prepared is a(n)
A) forecast.
B) projection.
C) prospective financial statement.
D) prospectus.
Silka is in the process of performing an audit. During the audit, Silka decided to change
materiality. A valid reason for this would be
A) a new user of the financial statements was identified.
B) a fraud was discovered in the accounts payable section.
C) materiality required the auditors to perform too many tests.
D) too many errors were found during testing.
Which of the following best describes the inherent limitations that should be recognized
by an auditor when considering the potential effectiveness of an accounting system?
A) Procedures whose effectiveness depends on segregation of duties can be
circumvented by collusion.
B) The competence and integrity of client personnel provides an environment
conducive to accounting control and provides assurance that effective control will be
achieved.
C) Procedures designed to assure the execution and recording of transactions in
accordance with proper authorizations are effective against irregularities perpetrated by
management.
D) The benefits expected to be derived from effective accounting system usually do not
exceed the costs of such control.