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Question(s) / Instruction(s):

41.
medium     Only three management assertions are associated with transaction-related audit objectives. Which one of the following is not?
     a.     Existence or occurrence
     b.     Completeness
     c.     Valuation or allocation
     d.     Presentation and disclosure
     
42.     Which of the following statements is not true?
medium     a.     Balance-related audit objectives are applied to account balances.
     b.     Transaction-related audit objectives are applied to classes of transactions.
     c.     Balance-related audit objectives are applied to the ending balance in balance sheet accounts.
     d.     Balance-related audit objectives are applied to both beginning and ending balances in balance sheet accounts.
     
43.     In testing for cutoff, the objective is to determine
medium     a.     whether all of the current period’s transactions are recorded.
     b.     whether transactions are recorded in the proper period.
     c.     that no transactions of the current period have been delayed and recorded in a future period.
     d.     that no transactions from the prior period are included in the current period’s balances.
     
44.     The detail tie-in objective is not concerned that the details in the account balance
medium     a.     agree with related subsidiary ledger amounts.
     b.     are properly disclosed, in accordance with GAAP.
     c.     foot to the total in the account balance.
     d.     agree with the total in the general ledger.
     
45.     The disclosure objective is concerned that
medium     a.     the account balance is properly presented on the financial statements.
     b.     disclosure requirements are properly presented on the financial statements and in the footnotes.
     c.     both a and b above.
     d.     none of the above.
     

46.
medium     Which of the following is not a proper match of auditor’s objective with management’s assertion?
     a.     Ownership matches with rights and obligations.
     b.     Existence matches with existence/occurrence.
     c.     Classification matches with presentation/disclosure.
     d.     Completeness matches with completeness.
     
47.     Which of the following statements is not correct?
medium
     a.     There are many ways an auditor can accumulate evidence to meet the overall audit objectives.
     b.     Sufficient competent evidence must be accumulated to meet the auditor’s professional responsibility.
     c.     The cost of accumulating the evidence should be minimized.
     d.     Gathering evidence and minimizing costs are equally important considerations that affect the approach the auditor selects.
     
48.     Two overriding considerations affect the many ways an auditor can accumulate evidence:
medium
     1.     Sufficient competent evidence must be accumulated to meet the auditor’s professional responsibility.
     2.     Cost of accumulating evidence should be minimized.
In evaluating these considerations,
     a.     the first is more important than the second.
     b.     the second is more important than the first.
     c.     they are equally important.
     d.     it is impossible to prioritize them.
     
49.     Which of the following is not one of the four phases in the audit process?
medium     a.     Plan and design an audit approach.
     b.     Test controls and transactions.
     c.     Inform client of any adjustments or corrections to be made to the financial statements.
     d.     Complete the audit and issue the report.
     
50.
medium
     If the auditor has obtained a reasonable level of assurance about the fair presentation of the financial statements through understanding internal control, assessing control risk, testing controls, substantive tests of transactions, and analytical procedures, then the auditor
     a.     can issue an unqualified opinion.
     b.     can significantly reduce the test of details of balances.
     c.     can write the engagement letter.
     d.     needs to do additional tests of controls so that the assurance level can be increased.
     
51.
medium
     After the auditor has completed all the procedures, it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented. This is a highly subjective process that relies heavily on
     a.     generally accepted auditing standards.
     b.     the AICPA’s Code of Professional Conduct.
     c.     generally accepted accounting principles.
     d.     the auditor’s professional judgment.
     
52.     When is the auditor responsible for detecting fraud?
medium     a.     When the fraud did not result from collusion.
     b.     When third parties are likely to rely on the client’s financial statements.
     c.     When the client’s system of internal control is judged by the auditor to be inadequate.
     d.     When the application of generally accepted auditing standards would have uncovered the fraud.
53.
medium     If an auditor was engaged to discover errors and irregularities and the auditor performed extensive detail work, which of the following could the auditor be expected to detect?
     a.     Unrecorded transactions.
     b.     Mis-postings of recorded transactions.
     c.     Counterfeit signatures on paid checks.
     d.     Collusive fraud.
     
54.
medium     Which of the following statements best describes the auditor’s responsibility with respect to illegal acts that do not have a material effect on the client’s financial statements?
     a.     Generally, the auditor is under no obligation to notify parties other than personnel within the client’s organization.
     b.     Generally, the auditor is under an obligation to see that stockholders are notified.
     c.     Generally, the auditor is obligated to disclose the relevant facts in the auditor’s report.
     d.     Generally, the auditor is expected to compel the client to adhere to requirements of the Foreign Corrupt Practices Act.
     
55.
medium     Which of the following statements best describes the auditor’s responsibility regarding the detection of fraud?
     a.     The auditor is responsible for the failure to detect fraud only when such failure clearly results from nonperformance of audit procedures specifically described in the engagement letter.
     b.     The auditor must extend auditing procedures to actively search for evidence of fraud in all situations.
     c.     The auditor must extend auditing procedures to actively search for evidence of fraud where the examination indicates that fraud may exist.
     d.     The auditor is responsible for the failure to detect fraud only when an unqualified opinion is issued.
     
56.     The essence of the attest function is to
medium     a.     assure the consistent application of correct accounting procedures.
     b.     determine whether the client’s financial statements are fairly stated.
     c.     examine individual transactions so that the auditor may certify as to their validity.
     d.     detect collusion and fraud.
     
57.
medium     The primary difference between an audit of the balance sheet and an audit of the income statement lies in the fact that the audit of the income statement deals with the verification of
     a.     transactions.
     b.     authorizations.
     c.     costs.
     d.     cutoffs.
     
58.
challenging     The auditor’s evaluation of the likelihood of material employee fraud is normally done initially as a part of
     a.     tests of controls.
     b.     tests of transactions.
     c.     understanding the entity’s internal control.
     d.     the assessment of whether to accept the audit engagement.
     
59.
challenging     When using the cycle approach to segmenting the audit, the reason for treating capital acquisition and repayment separately from the acquisition of goods and services is that
     a.     the transactions are related to financing a company rather than to its operations.
     b.     most capital acquisition and repayment cycle accounts involve few transactions, but each is often highly material and therefore should be audited extensively.
     c.     both a and b above.
     d.     neither a nor b above.
     
60.     Illegal acts are defined in SAS 54 (AU217) as
challenging     a.     violations of laws or government regulations.
     b.     violations of laws or government regulations, other than errors.
     c.     violations of laws or government regulations, other than fraud.
     d.     violations of law which would result in the arrest of the perpetrator.
     

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