Question 1

What should an auditor do when it is discovered that his or her independence is impaired and the audit is already in progress?

A Reduce the threats

B Decline to perform the subsequent year's audit

C Apply safeguards

D Terminate the audit

Question 2

What is the effect on independence when an auditor takes on management responsibilities for an auditee?

A. The management participation threat is so significant that no safeguards can reduce it to an acceptable level.

B. The auditor should evaluate the threat and apply safeguards to eliminate or reduce the threat to an acceptable level.

C. The auditor should apply the conceptual framework to reduce the cumulative effect on independence.

D. The self-review threat is so significant that only extraordinary safeguards can reduce it to an acceptable level.

Question 3

Which of the following is not a prohibited nonaudit service that always impairs auditor independence with respect to an auditee?

A Approving vendor invoices for payment

B Providing advice on routine business matters

C Executing a transaction to buy or sell an auditee's investment

D Making or approving business risk decisions

Question 4

Which of the following statements regarding the Yellow Book's continuing professional education (CPE) requirements is true?

A Each auditor assigned to conduct any portion of a Yellow Book audit must obtain appropriate CPE before beginning work on that audit.

B Each auditor performing any amount of work on a Yellow Book audit should complete, every two years, at least 80 hours of CPE that directly relates to the government environment.

C Each auditor working on a Yellow Book audit should obtain CPE in audit sampling,information technology, and other specialized subjects related to the work being performed.

D Each auditor involved in any amount of planning, directing, or reporting on Yellow Book audits should obtain at least 56 hours of CPE every two years that enhances his or her professional proficiency to perform audits.

Question 5

At what level does the auditor make materiality determinations in an audit of a government's basic financial statements?

A Each individual financial statement

B Government-wide statements and fund statements

C Opinion unit

D Reporting entity

Question 6

What should the auditor do if he or she determines that a significant risk exists?

A. Obtain appropriate written representations from management that the significant risk did not have a material effect on the financial statements of any opinion unit

B Perform substantive procedures, including analytical procedures, to determine the effect of the significant risk on the opinion unit's financial statements

C Obtain an understanding of the auditee's controls, including control activities, relevant to the risk and evaluate whether the controls have been suitably designed and implemented to mitigate the risk

D Perform tests of controls on each significant risk and project the results of the tests to each opinion unit to determine the extent of risk mitigation

Question 7

What should the auditor do if he or she becomes aware of abuse that could be quantitatively or qualitatively material to the financial statements in a Yellow Book audit?

A Apply audit procedures specifically directed to determining the potential effect on the financial statements

B Modify the auditor's opinion on the financial statements

C Promptly notify law enforcement officials and any other government agencies that provided the funding involved in the abuse

D Withdraw from the audit

Question 8

Why does the Yellow Book state that early communication of a control deficiency that results in noncompliance is important?

A To allow those charged with governance to determine the appropriate auditee personnel to hold accountable

B To allow management to take prompt corrective action to prevent further noncompliance

C To permit the auditor to report the control deficiency orally rather than in writing

D To permit auditee management to correct the control deficiency and avoid having it reported in the auditor's report

Question 9

What is the auditor's responsibility when responsible auditee officials provide written comments to the auditor's report in a Yellow Book audit?

A No responsibility

B Modify the comments to correspond with audit findings

C Review the comments and omit them from the report if they are accurate

D Include a copy or summary of the comments in the report

Question 10

How does the omission of required supplementary information (RSI) affect the auditor's report on the financial statements?

A The auditor should state that material departures from prescribed RSI guidelines exist and should describe the departures.

D The auditor should modify his or her opinion on the RSI.

Question 11

When does the period of professional engagement end?

Notification by the attorney of either party of termination of the professional relationship

2. B Issuance of the auditor's report and publication in the local newspaper

3. C When a week has passed since the last audit procedure completed

   Notification by either party of termination of the professional relationship or issuance of the auditor's report, whichever is later