QUESTION 1

A control deficiency that is less severe than a material weakness, but important enough to merit attention by those responsible for oversight of the company's financial reporting is referred to as a (n):

a-Control deficiency.

b-Inherent limitation.

c-Reportable deficiency.

d-Significant deficiency.

QUESTION 2

Auditors should consider materiality in the planning of an audit job. The materiality for planning is:

a- Preliminary estimation of the auditors of the largest number of misstatements that would be important for any of the client's financial statements.

b-Preliminary estimate of the auditors of the least amount of misstatements that would be important for any of the client's financial statements.

c-Preliminary estimate of the auditors of the amount of misstatements that would be important for the balance of the client.

d - An amount that can not be declared quantitatively since it depends on the nature of the article.

QUESTION 3

Which of the following is not an example of a likely adjustment in the auditor's overall audit approach when it is discovered that a significant risk exists?

a-Apply more professional skepticism about material transactions.

b-Increase the level of risk of detection assessed.

c-Assign personnel with special skills to high-risk areas.

d- Obtain more evidence about the convenience of the selection of accounting principles of the administration.

QUESTION 4

At least what level of probability of a material misstatement is required for a control deficiency to be considered a material weakness?

a-More than remote.

b-Probable.

c-Reasonable possibility.

d-Sufficient

QUESTION 5

CPA firms may use written narratives to describe internal control in their audit working papers. True

False

QUESTION 6

Which of the following situations would probably require special audit planning by the auditors?

a-Some factory items and office equipment do not carry identification numbers.

b-The depreciation methods used in the client's tax return differ from those used in the books.

c-Assets that cost less than $ 500 are charged to results although the expected life exceeds one year.

d-Inventory is composed of precious stones.

QUESTION 8

The risk that a material misstatement occurs in an account, assuming an absence of internal control, is called:

a-Risk of the account.

b-Control risk

c-Detection risk.

d-Inherent risk.

QUESTION 9

Before accepting an audit intervention, a successor auditor must make specific inquiries of the predecessor auditor with respect to the predecessor:

a-Knowledge of the consistency in the application of generally accepted accounting principles between accounting periods.

b-Evaluation of all matters of accounting continuity.

c-An opinion was issued on the subsequent events that have occurred since the publication of the previous audit report.

d-Understanding the reasons for the change of auditors.

QUESTION 10

Which of the following factors would probably lead a CPA to conclude that a potential audit engagement should not be accepted?

a-There are important transactions between related parties that the management claims occurred in the normal course of business.

b-Internal control activities that require segregation of duties are subject to cancellation of management.

c-Management continues to employ an inefficient information technology system to record financial transactions.

d-It is unlikely that sufficient evidence is available to support an opinion on the financial statements.