The No-Name Advertising Rating Agency conducts independent surveys to determine
the sources of purchases by consumers (e.g. newspaper ad, magazine ad, television ad).
This information is then used by those media (i.e. newspapers, magazines, and
television broadcasters) to indicate to purchasers of advertising the breadth of coverage
that they have. For example, Small Local Newspaper can say that 10% of the
purchasers of soap products made their decisions based upon their ads. This helps in
selling advertising. What type of service is No-Name providing?
A) Assurance
B) Attest
C) Review
D) Compilation
The auditor is deciding upon audit procedures to be used in the audit for a particular
cycle (i.e. what combination of the four types of tests are needed to obtain sufficient
appropriate audit evidence). This type of decision is called
A) audit risk.
B) audit strategy.
C) evidence mix.
D) detection risk.
A public accountant would be facing an ethical dilemma when deciding whether or not
to
A) overlook a material overstatement of revenues to maintain a good client relationship.
B) overlook a non material error in the financial statements.
C) accept an invitation from the client to go golfing in order to maintain a good client
relationship.
D) participate in a charitable activity organized by the client.
A planned approach to the conduct of audit testing, taking into account assessed risks, is
called an
A) audit approach.
B) audit plan.
C) audit program.
D) audit strategy.
The materiality for Holloy Company is $75,000. There are carryforward misstatements
of $25,000 from the previous year. Current year anticipated misstatements are $15,000,
with anticipated corrections of $10,000. What is the performance materiality?
A) $45,000
B) $50,000
C) $55,000
D) $90,000
A sample in which the characteristics of the sample are the same as those of the
population is a(n)
A) random sample.
B) variables sample.
C) attribute sample.
D) representative sample.
It is normal practice to verify all capital stock transactions
A) that are in excess of a material amount.
B) if there aren’t very many during the year.
C) regardless of the controls in existence, because of their materiality and permanence
in the records.
D) only when the client is small.
Prior to looking at the specific cycles, the auditor will first
A) inquire and document corporate governance systems.
B) perform tests of controls on significant cycles.
C) perform analytical review of specific accounts.
D) perform a risk assessment for the audit of the organization.
What is the role of internal controls during the assessment of inherent risk?
A) Internal controls are considered separately, so they are ignored during the
assessment of inherent risk.
B) As the quality of internal controls increases, inherent risk decreases.
C) As the quality of internal controls improves, inherent risk increases.
D) There is a direct relationship between the quality of internal controls and inherent
risk.
You sent a legal letter to a lawyer who had invoiced your client. The lawyer replied that
“his practice consists of conducting real estate closings, and so he could not respond to
the letter.” What impact does this have on the financial statement audit?
A) there is no impact upon the financial statement audit
B) the audit opinion will need to be qualified
C) the auditor will need to provide a denial of opinion
D) additional information is needed by reference to legal invoices from this lawyer
For cash receipts, the occurrence transaction-related audit objective affects the
completeness balance-related audit objective of accounts receivable. Which accounts
receivable balance-related audit objective does the cash receipts transaction-related
audit objective of completeness affect?
A) allocation
B) completeness
C) rights and obligations
D) existence
The audit working papers serve as a record of the evidence accumulated and the results
of the audit tests. This helps to demonstrate that the audit was
A) properly kept confidential; information was held secure.
B) completed using Canadian generally accepted accounting principles.
C) organized effectively with no mistakes in calculations.
D) conducted in accordance with Canadian generally accepted auditing standards.
A large PA firm has assessed evidence collected during an engagement. Criteria used to
assess the financial statements were International Financial Reporting Standards
(IFRS). A high level of assurance was obtained. The type of engagement conducted was
a(n)
A) audit.
B) review.
C) management consulting.
D) compilation.
If a misstatement is immaterial relative to the financial statements of the entity for the
current period and is not expected to have a material effect in future periods, it is
appropriate to issue
A) an unqualified opinion.
B) a qualified opinion.
C) an adverse opinion.
D) a disclaimer of opinion.
What type of opinion does the auditor provide with respect to FOFI (future-oriented
financial information)? An opinion about the
A) underlying assumptions.
B) achievability of the forecast.
C) statistical nature of projections.
D) plausibility of forecasts.
If most companies in the industry use FIFO inventory valuation and straight-line
depreciation, and the audit client uses LIFO and double-declining balance, comparisons
of client and industry data
A) will be a meaningful highlight of the result of these differences in accounting
methods.
B) will enable the auditor to spot errors but not irregularities.
C) will enable the auditor to spot irregularities but not errors.
D) may not be meaningful, affecting the comparability of data.
When the auditor identifies opportunities for the client to make operational
improvements in the internal control system, it will be communicated to the client’s
audit committee in the
A) management letter.
B) reportable conditions letter.
C) engagement letter.
D) audit report.
An example of an audit procedure that relates to the auditor’s understanding of internal
control is
A) count petty cash at all locations.
B) use test data to verify functioning of data entry controls.
C) observe entity activities and operations.
D) trace all large fixed asset purchases to supporting invoices.
A) Describe some of the steps the CICA and the accounting profession as a whole can
and are taking to reduce the practitioner’s exposure to lawsuits.
B) Describe some of the steps individual practising auditors can take to minimize their
legal liability.
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 Frank has identified who is affected, what is at stake for them, and
how to connect with them. What is his next step, using the GVV analysis framework?
A) list the values underpinning the different positions in the conflict
B) consider his personal and professional purpose and choice in this situation
C) practice what he is going to say, with help from a mentor or coach
D) craft a useful, powerful response that he could use, taking into account multiple
options
The test of details of balance procedure which requires the auditor to perform tests of
lower-of-cost-or-market, selling price, and obsolescence is an attempt to satisfy the
objective of
A) existence.
B) completeness.
C) accuracy.
D) valuation.
A) Discuss the purposes of performing analytical procedures during the audit
completion phase.
B) State the two purposes of the client representation letter.
Which of the following situations best describes an advocacy threat? PA has been hired
to
A) consult with the corporate controller and the bank manager about the conditions for
financing a loan.
B) manage the accounting department for three weeks while the corporate controller is
on vacation.
C) complete the personal tax returns of all executive management.
D) prepare the year end journal entries for a subsidiary company.
ZyCo has recently converted to a new online accounts payable system. To test that only
authorized vendors have been converted to the vendor master file (occurrence), the
auditor would
A) conduct cut-off tests, for receiving reports and vendor invoices.
B) on a test basis, agree vendor file details for each vendor from the new (online)
system to the old (batch) system.
C) on a test basis, agree vendor file details for each vendor from the old (batch) system
to the new (online) system.
D) conduct tests of programs, to verify that programs in the new systems are
functioning as designed.
An aspect of analytical procedures is referred to as “attention-directing” when it
highlights
A) errors.
B) irregularities.
C) areas of improvement.
D) areas that need more detailed procedures.
An investor suing an auditor for not discovering that the financial statements of a
company are materially misstated is an example of
A) criminal liability.
B) fiduciary duty.
C) third party liability.
D) liability to client under common law.
If the auditor is appointed after the year end of the client, the auditor
A) should qualify the audit opinion for the inventory balance and cost of sales.
B) could attend a current perpetual inventory count and roll backward with the records.
C) should do an inventory count as soon as he is appointed.
D) will inquire with management of the company about the inventory count performed
at year end.
A four-column proof of cash can be performed for
A) one or more interim months.
B) the entire year.
C) the last month of the year.
D) any specified time period for which bank statements are available and which the
auditor chooses to designate.
An adverse opinion is issued when the auditor believes
A) some parts of the financial statements are materially misstated or misleading.
B) the financial statements will be found to be misleading or misstated, if an adequate
investigation is performed.
C) the overall financial statements are so materially misstated or misleading as a whole
that they do not present fairly the financial position or results of operations and changes
in financial position.
D) the audit firm is not independent.
A client’s performance measurement system includes key performance indicators that
management uses to
A) measure its profitability.
B) compare its performance with prior periods.
C) prepare the financial statements.
D) measure progress toward its objectives.
What is the title of a compilation report?
A) Opinion
B) Criteria Schedule
C) Engagement Report
D) Notice to Reader
CAS 250 requires the auditor to communicate illegal acts to the audit committee
A) if the illegal acts are slightly material.
B) if the illegal acts are material.
C) if the illegal acts are other than trivial.
D) regardless of materiality.
Formal frameworks have been developed to help people resolve ethical dilemmas. After
obtaining the relevant facts and identifying the ethical issues from the facts, what is the
next step in the six-step ethical framework?
A) Decide on the appropriate action to be taken in resolving the ethical dilemma.
B) Identify the likely consequences of actions that will be taken.
C) Determine who is affected by the outcome of the dilemma and how they are
affected.
D) Identify the alternatives available to the person who must resolve the dilemma.