Question

MULTIPLE-CHOICE QUESTIONS
1. In evaluating whether the client is a going concern, the auditor should ask which of the following questions?
a. Are there indicators of going concern problems?
b. Is it likely that management can mitigate the problems?
c. Are disclosures about the problems adequate?
d. All of the above.

2. The Altman Z-Score is a model used to help assess the likelihood that a company will go bankrupt. The model contains which of the following ratios?
a. Working capital to total assets.
b. Working capital to total sales.
c. Sales to total debt.
d. Sales to total accounts receivable.

3. Which of the following statements concerning analytical review procedures at the completion of the audit is false?
a. Analytical procedures help auditors assess the overall presentation of the financial statements.
b. The auditor's expectations in final analytical procedures should be more precise than those for substantive analytics.
c. Auditing standards require the use of analytical procedures in the final review phase of the audit to assist in identifying ending account relationships that are unusual.
d. Ratio analysis, common-size analysis, and analysis of the dollar and percentage changes in each income statement item over the previous year are useful for performing final analytical procedures.

4. The analytical procedures of the financial statements of Koss Corporation that are depicted in Exhibit 14.5 reveal which of the following indicators of the fraud?
a. Cash balances had declined to their lowest level since FYE 2004.
b. Cost of goods sold as a percentage of sales had risen sharply over the period, with a particularly significant increase from FYE 2008 to 2009.
c. Net income as a percentage of sales had decreased sharply over the period, with a particularly significant decrease from FYE 2008 to 2009.
d. All of the above.

5. In completing the audit, the auditor must obtain a management representation letter. Which of the following statements about the management representation letter is false?
a. The management representation letter is intended to remind management about its responsibility for the financial statements.
b. The management representation letter is prepared on the client's letterhead, is addressed to the auditor, and should be signed by the CEO and the CFO.
c. Management's refusal to sign the management representation letter is considered such a violation of ethics and professionalism that auditors of publicly traded clients must resign from the engagement immediately and require the client to file a Form 8K with the SEC.
d. The contents of the management representation letter may be limited to matters that are considered material to the financial statements and should include representations about known fraud involving management or employees.

6. In completing the audit, the auditor must assess management's representations, including certifications required under SOX for public companies. Which of the following statements is true concerning this certification?
a. Section 302 of SOX requires the signing officers of publicly traded companies (usually the CEO and CFO) to certify, among other things, that the financial statements are fairly presented in accordance with GAAP.
b. Section 302 of SOX requires the auditor of publicly traded companies to certify, among other things, that the financial statements are fairly presented in accordance with GAAP.
c. Section 302 of SOX requires the signing officers of publicly traded companies (usually the CEO and CFO) to certify, among other things, that no material fraud has taken place within the entity for a period not to exceed one year prior to the issuance of the financial statements.
d. Section 302 of SOX requires the auditor of publicly traded companies to certify, among other things, that no material fraud has taken place within the entity for a period not to exceed one year prior to the issuance of the financial statements.

7. Which of the following is an example of a Type II subsequent event?
a. A lawsuit is settled for a different amount than was accrued.
b. A sale of inventory below carrying value provides evidence that the net realizable value was less than cost at year end.
c. Information becomes available that provides evidence about the valuation of an estimate or reserve that had been accrued at year end.
d. None of the above.

8. After the report release date, the auditor may become aware of facts that may have affected the financial statements and auditor's report, had the facts been known at the time of issuance. With regard to this situation, which of the following statements is true?
a. Because such facts become known after the report release date, the auditor cannot reasonably be held accountable for these issues; no action is required on the part of the auditor.
b. If the auditor decides that steps should be taken to prevent further reliance on the financial statements and audit report, the client is advised to make appropriate and timely disclosure of these new facts.
c. If such facts would have been investigated had they been known at the report date, the auditor should determine whether engagement personnel are competent and qualified to perform audits; action is required on the part of the auditor to assess whether engagement personnel should be retained to work on the engagement in the subsequent year.
d. If the auditor decides that steps should be taken to prevent further reliance on the financial statements and audit report, the auditor should notify the audit committee immediately; no action beyond this is required on the part of the auditor because of confidentiality concerns.
9. Which of the following statements is true when considering omitted audit procedures discovered after the report date?
a. After the audit report has been issued, the auditor may discover that an important audit procedure was not performed.
b. Such an omission may be discovered when audit documentation is reviewed as part of an external or internal review program.
c. The auditor should decide whether the previously issued audit report can still be supported in light of the omitted procedures.
d. All of the above.

10. If it is discovered after the report date that the auditor failed to confirm receivables, which of the following statements is true?
a. The auditor should try to examine subsequent collections of accounts receivable to help determine whether the accounts receivables existed and whether they were properly valued at the balance sheet date.
b. The auditor must resign immediately.
c. The auditor must notify the SEC immediately.
d. The auditor must notify users of the financial statements immediately.



$1.99
Sales2
Views189
Comments0
  • CreatedSeptember 22, 2014
  • Files Included
Post your question
5000