Quiz Note: It is recommended that you save your response as you complete each question. Question...

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Quiz Note: It is recommended that you save your response as you complete each question. Question 1 (2 points) The financial statements are the responsibility of: Question 1 options: C O C F A) the auditor Save Question 2 (2 points) Ⓒ B) management C C) the stockholders An auditor is sued by a creditor of a client that loaned the client money based on the financial statements and incurred losses when the client went bankrupt. The auditor's best defense would be: C D) financial statement users Question 2 options: A) that the auditor met GAAS B) that the creditor was not an intended beneficiary C) that the auditor was unaware of any material misstatements Save Question 3 (2 points) For an auditor to be held criminally responsible for fraud, he or she must have: Question 3 options: C C D) that the auditor did not cause the client to go bankrupt O C A) failed to comply with GAAS intentionally permitted the issuance of financial statements that are materially false and misleading C B) Save Question 4 (2 points) C) been negligent D) have profited from the audit Which of the following questions to the predecessor auditors for X Mark Corpora- tion would be inappropriate? Question 4 options: A) why are you no longer the X Mark Corporation auditors? B) Was management cooperative when you proposed adjustments to the financial statements? C) Did you use PPS sampling when you audited accounts receivable? Save Question 5 (2 points) The auditor's primary responsibility is: Question 5 options: O C C D) Were there disagreements with management concerning accounting principles used? C C C A) to prepare the financial statements. Save Question 6 (2 points) C B) to issue the financial statements The auditor sets the acceptable level of audit risk based on: Question 6 options: C) to opine to the correctness of the financial statements D) to attest to the fairness of the financial statements A) AICPA guidelines B) her judgment C) statistical tables and analysis D) the level of acceptable detection risk Save Question 7 (2 points) F The primary purpose of the engagement letter is to: Question 7 options: C C C C LENTE c Save Question 8 (2 points) C A) schedule the timing of the auditing procedures C B) inform management of the auditing procedures the auditor plans to use The relationship between the materiality threshold and the amount of audit evi- dence needed can best be described as: Question 8 options: A) direct C emphasize that the auditor's certification of the financial statements is for the client's use D) only C) provide a written record of the auditor and client responsibilities concerning the audit B) inverse C) indirect D) no real relationship exists Save Question 9 (2 points) F Inherent risk: Question 9 options: C C C C C A) is directly affected by the internal controls C B) is the risk the financial statements might contain material misstatements or omissions Save Question 10 (2 points) C C) is directly affected by the acceptable level of audit risk EDP significantly affects the audit by: Question 10 options: D) may be lowered if the auditor raises the tolerable detection risk A) changing the nature of the audit trail B) increasing the number of humans involved in processing transactions C) eliminating the need for auditor judgment C D) reducing the auditor's need to understand technology Save Question 11 (2 points) The starting point in the audit logic process is to: Question 11 options: C C C C c C A) identify the audit objectives Save Question 12 (2 points) C B) identify the type of audit evidence needed The auditor reviews a schedule of aged accounts receivable. The management as- sertion being tested is: Question 12 options: C C) identify the management assertions D) select the auditing procedures needed to obtain sufficient, competent evidential matter A) completeness B) valuation or allocation C) rights and obligations D) existence or occurrence Save Question 13 (2 points) If an auditor sets control risk at the maximum, Question 13 options: A) she must proceed to conduct tests of the controls to obtain evidence for her assessment B) she need not conduct any testing of the controls C) she must proceed to conduct substantive tests to obtain evidence for her assessment D) she must withdraw from the audit because the statements are not auditable Save Question 14 (2 points) Which of the following characteristics or actions is not necessary for evidence to be useful to the auditor? Question 14 options: A) Evidence must respond to the audit objective for which it's being gathered. B) Evidence must be convincing, beyond all doubt. C) Evidence must be evaluated in an unbiased manner by the auditor. D) Evidence must persuade the auditor that the audit objective has been met. Save Question 15 (2 points) The auditor conducts a test of an individual internal control and concludes that the number of times the client fails to observe the procedure (i.e., the deviations) is too high for the auditor to rely on to reduce the level of control risk. In fact, the sample the auditor is using misrepresents the rate of deviation in the population, and the true rate of deviation in the population is sufficiently low to permit the auditor to rely on the control procedure to reduce control risk. This is an example of Question 15 options: C c C C 6 A) the risk of incorrect rejection B) the risk of incorrect acceptance C C) the risk of assessing control risk of high Save Question 16 (2 points) D) the risk of assessing control risk too low The document the customer returns with her payment, which notes the amount due, is the Question 16 options: A) vendor invoice B) remittance advice C) bill of lading D) customer purchase order Save Question 17 (2 points) The auditor must obtain "sufficient, competent" evidential matter to support his opinion. "Competent" means: Question 17 options: A) enough C B) believable C) written D) relevant Save Question 18 (2 points) The auditor is evaluating whether the client consistently uses prenumbered sales invoices. This is an example of: Question 18 options: A) control testing B) substantive testing C) dual-purpose testing D) materiality testing Save Question 19 (2 points) An employee who maintains the accounts receivable subsidiary ledger should not also authorize Question 19 options: C A) cash payments C B) customer credit Save Question 20 (2 points) C C) write-offs of customer accounts The key assumption applicable to statistical audit sampling is that Question 20 options: D) purchases A) it eliminates the need for audit judgment B) reasonably close predications may be made about a population based on a sample C) the auditor may eliminate risk from reviewing only a portion of the items in the population D) the auditor may pinpoint a population value without looking at all of the items in the population Save Question 21 (2 points) An auditor reviews credit ratings of customers with accounts receivable that are past due. The auditor is most likely reviewing this evidence to verify Question 21 options: A) valuation or allocation B) presentation and disclosure C) existence or occurrence D) rights and obligations Save Question 22 (2 points) An auditor prepares an analysis of the repair and maintenance expense account to consider if any items should be classified as capital expenditures. This proce- dure would be most applicable to the audit objective of Question 22 options: A) verifying that the company owns its fixed assets B) verifying that the repairs exist C) verifying that the repairs are complete D) verifying that the fixed assets are complete Save Question 23 (2 points) The audit report is dated Question 23 options: C C F A) on the date of the financial statements B) on the date fieldwork was completed C) on the date the financial statements are issued Save Question 24 (2 points) (mm) D) on the date the report is issued Under which of the following circumstances would the auditor issue a qualified opinion? Question 24 options: A) Significant uncertainties remain as to the fairness of the financial statements. B) The financial statements do not comport with GAAP in a material way that has a discrete effect on the financial statements. C) The financial statements do not comport with GAAP in a very material way that has a pervasive effect on the financial statements. D) The auditor is not independent. Save Question 25 (2 points) The auditor may consider issuing an unqualified report with an explanatory para- graph in each of the following circumstances except Question 25 options: C C C C C Save Question 26 (2 points) C A) GAAP has been inconsistently applied When another auditor is involved in examining a portion of the financial state- ments, and the primary auditor decides to make no reference to the other auditor in the audit report, Question 26 options: C B) there is substantial doubt as to whether the firm is a going concern C) there is a material departure from GAAP because following GAAP will make the financial statements misleading C D) there is a material departure from GAAP A) the auditor is issuing a shared opinion report B) the auditor is accepting responsibility for the other auditor's work C) the auditor is not responsible for the other auditor's work D) the auditor is not responsible for the other auditor's work Save Question 27 (2 points) Which of the following is not a "cash equivalent"? Question 27 options: C C C A) Time deposits B) Marketable securities 1 C) Certificates of deposit Save Question 28 (2 points) 17 D) Money market funds All of the following would not be uncovered by a bank reconciliation except for: Question 28 options: 0 C Save Question 29 (2 points) duplicate payment of a vendor's invoice. improper payments of officers' personal expenditures. payments on notes payable debited directly to the the bank account by the bank but not recorded on the books. payment to an employee for more hours than he worked The final step in the evaluation of the audit results is the decision to: Question 29 options: A) accept the population as fairly stated or to require further action. B) determine sampling error and calculate the estimated total population error. Save Question 30 (2 points) H In the performance of an audit, a CPA: Question 30 options: c C) project the point estimate. D) determine the error in each sample. C C A) is legally liable for detecting an immaterial client fraud. B) Must strictly follow GAAP for privately held clients. C) Must exercise constructive professional care in the performance of their audit responsibilities. D) Must exercise due professional care in the performance of their audit responsibilities. Save All Responses Quiz Note: It is recommended that you save your response as you complete each question. Question 1 (2 points) The financial statements are the responsibility of: Question 1 options: C O C F A) the auditor Save Question 2 (2 points) Ⓒ B) management C C) the stockholders An auditor is sued by a creditor of a client that loaned the client money based on the financial statements and incurred losses when the client went bankrupt. The auditor's best defense would be: C D) financial statement users Question 2 options: A) that the auditor met GAAS B) that the creditor was not an intended beneficiary C) that the auditor was unaware of any material misstatements Save Question 3 (2 points) For an auditor to be held criminally responsible for fraud, he or she must have: Question 3 options: C C D) that the auditor did not cause the client to go bankrupt O C A) failed to comply with GAAS intentionally permitted the issuance of financial statements that are materially false and misleading C B) Save Question 4 (2 points) C) been negligent D) have profited from the audit Which of the following questions to the predecessor auditors for X Mark Corpora- tion would be inappropriate? Question 4 options: A) why are you no longer the X Mark Corporation auditors? B) Was management cooperative when you proposed adjustments to the financial statements? C) Did you use PPS sampling when you audited accounts receivable? Save Question 5 (2 points) The auditor's primary responsibility is: Question 5 options: O C C D) Were there disagreements with management concerning accounting principles used? C C C A) to prepare the financial statements. Save Question 6 (2 points) C B) to issue the financial statements The auditor sets the acceptable level of audit risk based on: Question 6 options: C) to opine to the correctness of the financial statements D) to attest to the fairness of the financial statements A) AICPA guidelines B) her judgment C) statistical tables and analysis D) the level of acceptable detection risk Save Question 7 (2 points) F The primary purpose of the engagement letter is to: Question 7 options: C C C C LENTE c Save Question 8 (2 points) C A) schedule the timing of the auditing procedures C B) inform management of the auditing procedures the auditor plans to use The relationship between the materiality threshold and the amount of audit evi- dence needed can best be described as: Question 8 options: A) direct C emphasize that the auditor's certification of the financial statements is for the client's use D) only C) provide a written record of the auditor and client responsibilities concerning the audit B) inverse C) indirect D) no real relationship exists Save Question 9 (2 points) F Inherent risk: Question 9 options: C C C C C A) is directly affected by the internal controls C B) is the risk the financial statements might contain material misstatements or omissions Save Question 10 (2 points) C C) is directly affected by the acceptable level of audit risk EDP significantly affects the audit by: Question 10 options: D) may be lowered if the auditor raises the tolerable detection risk A) changing the nature of the audit trail B) increasing the number of humans involved in processing transactions C) eliminating the need for auditor judgment C D) reducing the auditor's need to understand technology Save Question 11 (2 points) The starting point in the audit logic process is to: Question 11 options: C C C C c C A) identify the audit objectives Save Question 12 (2 points) C B) identify the type of audit evidence needed The auditor reviews a schedule of aged accounts receivable. The management as- sertion being tested is: Question 12 options: C C) identify the management assertions D) select the auditing procedures needed to obtain sufficient, competent evidential matter A) completeness B) valuation or allocation C) rights and obligations D) existence or occurrence Save Question 13 (2 points) If an auditor sets control risk at the maximum, Question 13 options: A) she must proceed to conduct tests of the controls to obtain evidence for her assessment B) she need not conduct any testing of the controls C) she must proceed to conduct substantive tests to obtain evidence for her assessment D) she must withdraw from the audit because the statements are not auditable Save Question 14 (2 points) Which of the following characteristics or actions is not necessary for evidence to be useful to the auditor? Question 14 options: A) Evidence must respond to the audit objective for which it's being gathered. B) Evidence must be convincing, beyond all doubt. C) Evidence must be evaluated in an unbiased manner by the auditor. D) Evidence must persuade the auditor that the audit objective has been met. Save Question 15 (2 points) The auditor conducts a test of an individual internal control and concludes that the number of times the client fails to observe the procedure (i.e., the deviations) is too high for the auditor to rely on to reduce the level of control risk. In fact, the sample the auditor is using misrepresents the rate of deviation in the population, and the true rate of deviation in the population is sufficiently low to permit the auditor to rely on the control procedure to reduce control risk. This is an example of Question 15 options: C c C C 6 A) the risk of incorrect rejection B) the risk of incorrect acceptance C C) the risk of assessing control risk of high Save Question 16 (2 points) D) the risk of assessing control risk too low The document the customer returns with her payment, which notes the amount due, is the Question 16 options: A) vendor invoice B) remittance advice C) bill of lading D) customer purchase order Save Question 17 (2 points) The auditor must obtain "sufficient, competent" evidential matter to support his opinion. "Competent" means: Question 17 options: A) enough C B) believable C) written D) relevant Save Question 18 (2 points) The auditor is evaluating whether the client consistently uses prenumbered sales invoices. This is an example of: Question 18 options: A) control testing B) substantive testing C) dual-purpose testing D) materiality testing Save Question 19 (2 points) An employee who maintains the accounts receivable subsidiary ledger should not also authorize Question 19 options: C A) cash payments C B) customer credit Save Question 20 (2 points) C C) write-offs of customer accounts The key assumption applicable to statistical audit sampling is that Question 20 options: D) purchases A) it eliminates the need for audit judgment B) reasonably close predications may be made about a population based on a sample C) the auditor may eliminate risk from reviewing only a portion of the items in the population D) the auditor may pinpoint a population value without looking at all of the items in the population Save Question 21 (2 points) An auditor reviews credit ratings of customers with accounts receivable that are past due. The auditor is most likely reviewing this evidence to verify Question 21 options: A) valuation or allocation B) presentation and disclosure C) existence or occurrence D) rights and obligations Save Question 22 (2 points) An auditor prepares an analysis of the repair and maintenance expense account to consider if any items should be classified as capital expenditures. This proce- dure would be most applicable to the audit objective of Question 22 options: A) verifying that the company owns its fixed assets B) verifying that the repairs exist C) verifying that the repairs are complete D) verifying that the fixed assets are complete Save Question 23 (2 points) The audit report is dated Question 23 options: C C F A) on the date of the financial statements B) on the date fieldwork was completed C) on the date the financial statements are issued Save Question 24 (2 points) (mm) D) on the date the report is issued Under which of the following circumstances would the auditor issue a qualified opinion? Question 24 options: A) Significant uncertainties remain as to the fairness of the financial statements. B) The financial statements do not comport with GAAP in a material way that has a discrete effect on the financial statements. C) The financial statements do not comport with GAAP in a very material way that has a pervasive effect on the financial statements. D) The auditor is not independent. Save Question 25 (2 points) The auditor may consider issuing an unqualified report with an explanatory para- graph in each of the following circumstances except Question 25 options: C C C C C Save Question 26 (2 points) C A) GAAP has been inconsistently applied When another auditor is involved in examining a portion of the financial state- ments, and the primary auditor decides to make no reference to the other auditor in the audit report, Question 26 options: C B) there is substantial doubt as to whether the firm is a going concern C) there is a material departure from GAAP because following GAAP will make the financial statements misleading C D) there is a material departure from GAAP A) the auditor is issuing a shared opinion report B) the auditor is accepting responsibility for the other auditor's work C) the auditor is not responsible for the other auditor's work D) the auditor is not responsible for the other auditor's work Save Question 27 (2 points) Which of the following is not a "cash equivalent"? Question 27 options: C C C A) Time deposits B) Marketable securities 1 C) Certificates of deposit Save Question 28 (2 points) 17 D) Money market funds All of the following would not be uncovered by a bank reconciliation except for: Question 28 options: 0 C Save Question 29 (2 points) duplicate payment of a vendor's invoice. improper payments of officers' personal expenditures. payments on notes payable debited directly to the the bank account by the bank but not recorded on the books. payment to an employee for more hours than he worked The final step in the evaluation of the audit results is the decision to: Question 29 options: A) accept the population as fairly stated or to require further action. B) determine sampling error and calculate the estimated total population error. Save Question 30 (2 points) H In the performance of an audit, a CPA: Question 30 options: c C) project the point estimate. D) determine the error in each sample. C C A) is legally liable for detecting an immaterial client fraud. B) Must strictly follow GAAP for privately held clients. C) Must exercise constructive professional care in the performance of their audit responsibilities. D) Must exercise due professional care in the performance of their audit responsibilities. Save All Responses

Answer rating: 100% (QA)

Detailed Explanation Answer 1 The correct option is B Management Explanation The primary responsibility for preparing and presenting financial statements lies with the management of a company The audi... View the full answer