Archives: Quiz

Tamra is performing a test of control consisting of looking at the numerical sequence of credit memos issued by the company. Tamra is performing a block test by looking for any missing number in the sequence. This test will provide […]

If no material fluctuations are found using analytical procedures and the auditor concludes that differences should not have occurred, A) it will be necessary to increase the tests of details of balances. B) other tests may be reduced. C) it […]

CAS 200 explains that as part of general qualifications and conduct the auditor should exercise due care in the performance of all aspects of auditing. Which of the following is an illustration of due care? A) having an objective state […]

Sarbanes-Oxley in the U.S. and regulatory reporting requirements in Canada provide the clout to make management directly responsible for the financial statements. What is one of the ways that this is implemented in the CASs (Canadian Auditing Standards)? A) all […]

Richard is performing a compilation engagement. Richard is concerned that the information is A) arithmetically correct. B) accurate. C) complete. D) in accordance with ASPE. Which of the following situations best describes a familiarity threat? A) Design and implementation of […]

Evidence can be obtained from others, or provided by the auditor, who has good knowledge of each industry but is not an expert. Which of the following types of evidence is considered to be most reliable? A) examination of diamond […]

Confirmation is most likely to be a relevant form of evidence with regard to assertions about accounts receivable when the auditor has concerns about the accounts receivable’s A) valuation. B) classification. C) existence. D) completeness. Your client has two sets […]

When conducting an audit, the auditor should look at Canadian GAAS as A) minimum standards of performance. B) normal standards of performance. C) ultimate standards of performance. D) practical standards of performance. The audit procedure which requires the auditor to […]

Your client has experienced a major data breach with lawsuits and fines pending of significant and uncertain amounts. These events are disclosed in the client financial statements and clearly explained in the notes. How do these events affect the independent […]

During his examination of a January 19, 2013 cutoff bank statement, an auditor noticed that the majority of cheques listed as outstanding at December 31, 2012 had not cleared the bank. This would indicate A) a high probability of lapping. […]

To ensure that goods and services acquired are for authorized company purposes, and help acquire only needed items A) receiving reports should be independently signed and reconciled to the purchase order. B) proper authorization for acquisitions and changes to the […]

Three presentation and disclosure audit objectives are not affected by assessed control risk for the sales transactions. These are A) rights and obligations, valuation, understandability. B) understandability, valuation, occurrence. C) valuation, rights and obligations, classification. D) classification, understandability, rights and […]

PA is working on the audit of a publicly held corporation. At what level will the auditor likely set audit risk? A) low B) medium C) high D) very high As part of audit planning, you have calculated accounts receivable […]

When the auditor knows that the financial statements may be misleading because they were not prepared in accordance with an acceptable financial reporting framework, he or she must issue A) a qualified opinion. B) an adverse opinion. C) a disclaimer […]

To do an audit, it is necessary to have information in a verifiable form and some criteria by which the auditor can evaluate the information. Required: A) What information and criteria would a public accounting firm use when auditing a […]

The information systems audit specialist on your audit team has indicated that the general controls over program changes are inadequate for all application cycles. What impact does this have upon your audit of sales invoice processing? A) The auditor could […]

In rare cases, auditors have been held liable for criminal acts. A criminal conviction against an auditor can result only when it is demonstrated that the auditor A) was negligent. B) was grossly negligent. C) intended to deceive or harm […]

Which of the following illustrates the definition of auditing with respect to the evidence analysis process? A) accumulation and evaluation of evidence about balance sheet accounts B) learning about different types of computing technology, such as mainframes C) writing an […]

The accountant needs to establish an understanding with the client about the terms of the engagement, any limitations on the use of the financial statements, and the understanding through a written communication with management. The following tests of controls are […]

Auditors test the ICFR by reviewing the receiving process. The Sarbanes-Oxley Act requires that the PCAOB perform audits on all publicly traded companies. Answer: F Information about changes in a company’s ownership, management, and/or audit firm is provided within Form […]

Auditors should make inquiries about whether there is knowledge of fraud in the company. Such inquiries should be made of: (a) management. (b) the audit committee. (c) internal auditors. (d) All of the above. The process of client acceptance or […]

Whenever a company refuses to allow business professionals to communicate openly with an auditor, the auditor should be concerned about the likelihood that: (a) a RFP was not formalized. (b) information exists that the company wants to withhold. (c) management […]

Forensic accountants rely on the: a. identify theft theory. b. tax evasion theory. c. vendor fraud theory. d. fraud triangle theory. e. customer fraud theory. An audit report may need to be reissued if: a. the auditor is replaced and […]

Organizations that might use a SAS 70 report are: a. application service providers. b. mortgage bankers that service mortgages for others. c. Both a and b. d. None of the above. Companies are required to have an auditor complete a […]

Which of the following assertions address presentation and disclosure: (a) existence. (b) accuracy and valuation. (c) rights and obligations. (d) Both b and c. Controls are needed to ensure that goods are shipped on a timely basis and bills are […]

Going concern issues may arise when: (a) Acquisitions or discontinued operations have recently occurred. (b) The accounting information systems have been modified. (c) The economy has negatively impacted the client company. (d) Changes in applicable accounting standards affect the client […]

The rule of independence would relate to which of the following accounting professionals? A. Internal auditor. B. CPA performing an audit. C. Controller preparing the firm’s financial statements. D. Tax accountant. If serious control deficiencies are detected prior to year-end […]

If internal auditors provide direct assistance to the external audit team, the independent external auditor must (a) reperform all of the work provided by the internal auditors. (b) supervise and evaluate the work performed by the internal auditors. (c) refuse […]

The AICPA guidance defines how many management assertions? a. 5 b. 8 c. 11 d. 13 e. 10 Defined benefit plans can be: (a) funded by the employer. (b) unfunded by the employer. (c) funded through a trust. (d) All […]

Five cases are listed below that illustrate different types of audit engagements. In the space provided, indicate the type of audit that would be conducted, the specific auditor who might undertake the engagement, and the auditing standards that would probably […]

Which of the following is NOT a “Big Four” firm? a. PwC. b. Grant-Thornton. c. Deloitte & Touche. d. Ernst & Young The responsibility of the audit firm is to communicate to users: A. its opinion on whether the company’s […]

Evidence about whether an ICFR is operating as designed and whether the control is being performed by someone with appropriate authority and qualifications are provided by: a. the risk level. b. management responsibility. c. effective operations. d. complimentary tests. e. […]

In the U.S., the first legislation requiring management of public companies to maintain a system of internal controls was the: (a) Committee of Sponsoring Organizations (COSO) of the Treadway Commission Act. (b) Sarbanes-Oxley Act. (c) Foreign Corrupt Practices Act. (d) […]

You are assigned to audit accounts payable for a manufacturing client. As part of the planning, your manager sets a tolerable misstatement amount of+/- $125,000. Your review of unpaid invoices indicates an understatement error of $25,253 from a sample of […]

An entity that, as part of its normal business operations, makes loans or extends credit to the general public, is referred to as a: A. financial institution. B. savings and loan. C. federal reserve bank. D. FDIC. When audit tests […]

Per GAAS, a standard audit report consists of at least: a. opinion, scope, and explanatory paragraphs in that order. b. introductory, explanatory, and scope paragraphs in that order. c. introductory, scope, and opinion paragraphs in that order. d. None of […]

Which of the following is not a responsibility of an audit committee? (a) Hiring, compensating, and overseeing the company’s independent auditor relationship. (b) Receiving and addressing complaints about accounting, internal control, and auditing matters. (c) Resolving disagreements between management and […]

When audit clients acquire new, more sophisticated IT systems, (a) The audit strategy will not be impacted as long as the duties of accounting personnel are primarily unchanged. (b) Auditors with advanced IT knowledge may need to be added to […]

Shareholders use audit reports to monitor management performance. An example of an item that an audit report does NOT provide is: a. Reasonable assurance on reported information that might be used to provide justification for management’s performance-based compensation. b. Access […]

According to the AICPA Interpretations of Rule 101, independence: During the period of the professional engagement, auditor independence is NOT considered to be impaired if the auditor: A. had or was committed to acquire any direct or material indirect financial […]

By speaking with individuals inside the company, an auditor may learn about: (a) Management’s philosophy and integrity. (b) The composition of the Board of Directors and audit committee. (c) The organizational structure and accounting functions. (d) All of the above. […]

The “answer” in a legal proceeding: a. Refers to the auditor’s response. b. Can cite lack of standing on the part of the plaintiff. c. Contains answers that agree with the complaint. d. All of the above. One test that […]

Post-retirement benefits are generally: (a) health benefits to retired employees. (b) health benefits to persons who have left the firm. (c) health benefits to non-employees. (d) None of the above. Client A hires part-time seasonal employees to perform routine accounting […]

The moral intensity criteria that cause a decision maker to realize that a situation has moral components include: A. consequences are very large or significant. B. identify alternative courses of action. C. ethical issues need to be identified. D. the […]

The last component of the of the fraud triangle is that the person must be capable of rationalizing or personally justifying his or her illegal behavior. In the course of an investigation, forensic accountants may look at evidence from the […]

In a manufacturing company, which one of the following audit procedures would give the least assurance of the valuation and allocation assertion for inventory at the audit date? A.Examining paid vendors’ invoices. B.Testing the computation of standard overhead rates. C.Obtaining […]

The essence of a financial report audit is to: A.examine individual transactions so that the auditor may certify as to their validity. B.detect fraud. C.assure the consistent application of correct accounting procedures. D.determine whether the client’s financial reports are fairly […]

Which of the following forms of advertising is permissible? A.Advertising that indicates the auditor’s educational and professional attainments. B.Advertising that implies the ability to influence a court. C.Advertising that claims to be able to save the taxpayer 20 per cent […]

In a compliance audit, which of the following matters is the auditor primarily concerned about? A.Whether the financial report is fairly presented in accordance with the identified financial reporting framework. B.Whether the entity has achieved its stated objectives. C.Whether the […]

The auditor’s best course of action with respect to ‘other financial information’ included in an annual report containing the auditor’s report is to: A.consider whether the ‘other financial information’ is accurate by performing a review engagement. B.indicate in the auditor’s […]