1) Because of the cycle’s pervasive nature, audit tests of the payroll cycle are usually
extensive.
A) True
B) False
2) Auditors should obtain copies of the client’s code of ethics and minutes of the
meetings of the board of directors to aid in their understanding of the company’s
management and governance structure.
A) True
B) False
3) Which of the following would offer the best protection for a company that wishes to
prevent a reoccurrence of a previously detected “lapping” problem with trade accounts
receivable?
A) Segregate duties so that the bookkeeper in charge of the general ledger has no access
to incoming mail
B) Segregate duties so that no employee has access to both checks from customers and
currency from daily cash receipts
C) Have customers send payments directly to the company’s depository bank
D) Request that customer’s payment checks be made payable to the company and
addressed to the treasurer
4) Interpretations of rules of conduct in the Code of Professional Conduct are not
officially enforceable and practitioners need not justify departure from them.
A) True
B) False
5) The purpose of the requirement in having communication between the predecessor
and successor auditors is to:
A) allow the predecessor to disclose information which would otherwise be confidential
B) help the successor auditor to evaluate whether to accept the engagement
C) help the client by facilitating the change of auditors
D) ensure the predecessor collects all unpaid fees prior to a change in auditor
6) Transaction related audit objectives would most likely be performed in which phase
of the audit process?
A) plan and design audit approach
B) perform audit tests for controls and transactions
C) perform analytical procedures and tests of balances
D) complete the audit and issue the audit report
7) PCAOB Auditing Standard No. 2 requires the audit of internal control over financial
reporting to be integrated with:
A) the audit of the financial statements
B) the quarterly review of financial information
C) the review of annual financial statements
D) None of the above
8) Two major factors that affect acceptable audit risk are the likely users of the financial
statements and the likelihood of issuing an unqualified audit opinion.
A) True
B) False
9) Audit documentation should provide support for:
A)
B)
C)
D)
10) Under Rule 301, Confidential Client Information, permission is not required from
the client to use the audit documentation relating to that client during an
A) True
B) False
11) The auditor has completed her assessment of subsequent events. The proper
accounting for subsequent events that have a direct effect on the financial statements is
to:
A) adjust the financial statements for the year under audit
B) disclose in the notes to financial statement the amount of the adjustment
C) duly note in the audit workpapers that next year’s financial statements need to be
adjusted
D) make no adjustment of the financial statements for the year under audit
12) A written understanding detailing what the auditors will do in determining if the
financial statements are fair representations of the company’s financial statements and
what the auditor expects from the client in performing an audit will normally be
expressed in the:
A) management letter requested by the auditor
B) engagement letter
C) Audit Plan
D) Audit Strategy for the client
13) Which of the following circumstances impairs an auditor’s independence?
I.Litigation by a client against an audit firm claiming a deficiency in the previous audit.
II.Litigation by a client against an audit firm related to tax services.
III.Litigation by an audit firm against a client claiming management fraud or deceit.
A) I and II
B) I and III
C) II and III
D) I, II, and III
14) The auditor’s internal control objective to determine that “recorded acquisitions are
for goods and services received” satisfies the audit objective of:
A) accuracy
B) occurrence
C) authorization
D) completeness
15) Which of the following statements is correct?
A) Auditors should evaluate application controls before evaluating general controls
B) Auditors should evaluate application controls and general controls simultaneously
C) Auditors should evaluate general controls before evaluating application controls
D) None of these statements is correct
16) The Single Audit Act requires that an audit be conducted for recipients who receive
total federal funds in any fiscal year of:
A) $1,000,000 or more
B) $500,000 or more
C) $300,000 or more
D) $100,000 or more
17) Which of the following departments is most likely responsible for pay rate changes
and changes in deductible amounts for employees?
A) General Accounting
B) Human Resources
C) Treasury
D) Controller
18) A financial statement review conducted in compliance with SSARS includes
obtaining an understanding of internal control.
A) True
B) False
19) When a client uses desktops and networked servers for the accounting functions, the
auditor should normally rely only on non-IT controls or may take a substantive
approach to the audit.
A) True
B) False
20) The standard bank confirmation form has been agreed upon by the:
A) SEC and FASB
B)
C) SEC and the American Bankers’ Association
D)
21) The two types of services provided in connection with the Statements on Standards
for Accounting and Review Services are:
A) audit and examination services
B) compilation and review services
C) examination and review services
D) management advisory services and compilations
22) An auditor traces a sample of electronic time cards before and after the bi-weekly
payroll report and then traces to the payroll master file to determine that payroll
transactions are reported in the correct period is gathering evidence for which audit
objective?
A) Completeness
B) Existence
C) Cut-off
D) Accuracy
23) Which of the following is/are performed in an audit of internal control over
financial reporting?
A)
B)
C)
D)
24) The phrase “generally accepted accounting principles” can be found in the opinion
paragraph of a standard unqualified report.
A) True
B) False
25) Which of the following does not have to be considered in determining the initial
sample size of a test of details?
A) tolerable misstatement
B) acceptable risk of incorrect rejection
C) estimate of misstatements in the population
D) acceptable audit risk