Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n):
The Sarbanes-Oxley Act applies to which of the following companies?
The use of the Certified Public Accountant title is regulate by:
state law through a licensing department or agency of each state
An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as a(n):
Which of the following services provides the lowest level of assurance on a financial statement?
A compilation (No assurance at all)
In "auditing" financial accounting data, the primary concern is with:
Determining whether recorded information properly reflects the economic events that occurred during the accounting period
Financial statement users often receive unreliable financial information from companies. Which of the following is NOT a common reason for this?
Each of these choices is a common reason for unreliable financial information
Which one of the following is more difficult to evaluate objectively?
Efficiency and effectiveness of operations
The Sarbanes-Oxley Act prohibits a CPA firm that audits a public company from providing which of the following types of services to that company?
Most consulting services
The trait that distinguishes auditors from accountants is the:
auditor's accumulation and interpretation of evidence related to a company's financial statements
Which one of the following is not one of the three General Standards?
Proper planning and supervision
Which one of the following is not a Field Work Standard?
Due professional care
Prior to the passage of the Sarbanes-Oxley Act, which of the following was responsible for establishing auditing standards?
Auditing Standards Board
An auditor need not abide by a particular auditing standard if the auditor believes that:
the issue in question is immaterial in amount
The Public Company Accounting Oversight Board does not:
establish auditing standards that must be followed by CPA's on all audits
The form that must be completed and filed with the Securities and Exchange Commission whenever a company experiences a significant event that is of interest to public investors is the:
The third general standard states that due care is to be exercised in the performance of an audit. This standard is generally interpreted to require:
critical review of work done at every level of supervision
Which of the following statements best describes the primary purpose of Statements on Auditing Standards?
They are interpretations that are intended to clarify the meaning of "generally accepted auditing standards."
The auditor's judgment concerning the overall fairness of presentation of financial position, results of operations, and changes in cash flow is applied within the framework of:
generally accepted accounting principles
Within the context of quality control, the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide its personnel with:
knowledge required to fulfill assigned responsibilities
Williams & Co., a member of the Private Companies Practice Section, is to have a "peer review." The peer review can be performed by:
either a or b.
Which of the following is true regarding the AICPA approved practice monitoring programs?
Public accounting firms must be enrolled in an AICPA approved practice monitoring program for members in the firm to be eligible for membership in the AICPA
If an auditor of a public company cannot find guidance issued by the PCAOB on a particular audit matter, the auditor should generally seek guidance from which of the following sources?
Statements on Auditing Standards
The AICPA has authority to establish standards and rules in all but which of the following areas?
Auditing standards applicable to financial statements of private and public companies
Auditing standards require that the audit report must be titled and that the title must:
include the word "independent"
To emphasize the fact that the auditor is independent, a typical addressee of the audit report could be:
Company Controller NO
Board of Directors YES
When determining whether an exception is "highly material," the extend to which the exception affects different elements of the financial statements must be considered. This concept is called:
An auditor determines the financial statements include a material departure from GAAP. Which type of opinion may be issued?
If an auditor performs an audit of a private company, the scope paragraph should make references to which standards?
U.S. generally accepted auditing standards
A CPA may wish to emphasize specific matters regarding the financial statements even though an unqualified opinion will be issued. Normally, such explanatory information is:
included in a separate paragraph in the report
An auditor who issues a qualified opinion because sufficient appropriate evidence was not obtained should describe the limitations in an explanatory paragraph. The auditor should also refer to the limitation in the:
Scope paragraph YES
Opinion paragraph YES
Notes to the financial statements NO
The audit report indicates that (1) management is responsible for the content of the financial statements and (2) the auditor is responsible for evaluating the appropriateness of the accounting principles chosen by management. Which paragraph contains those statements?
None of the above are true
If the balance sheet of a company is dated December 31, 2009, the audit report is dated February 8, 2010, and both are released on February 15, 2010, this indicates that the auditor has searched for subsequent events that occurred up to:
February 8, 2010
When the auditor determines the financial statements are fairly stated and then determines that the auditor lacks independence, the auditor should issue:
a disclaimer of opinion
Whenever there is a scope restriction, the appropriate response is to issue a(n):
unqualified report, a qualification of scope and opinion, or a disclaimer, depending on materiality
When a client has not applied GAAP consistently from the prior year to the current year, the auditor does not concur with the appropriateness of the change, and the change in GAAP has a material effect on the financial statements, the auditor should issue a(n):
Items that materially affect the comparability of financial statements generally require disclosure in the footnotes. If the client refuses to properly disclose the item, the auditor will most likely issue:
a qualified opinion
When there is uncertainty about a company's ability to continue as a going concern, the auditor's concern is the possibility that the client may not be able to continue its operations or meet its obligations for a "reasonable period of time." For this purpose, a reasonable period of time is considered not to exceed:
one year from the date of the financial statements
When the auditor concludes that there is substantial doubt about the entity's ability to continue as a going concern, the appropriate audit report would be:
either an unqualified opinion with an explanatory paragraph or a disclaimer or opinion
A company has changed its method of inventory valuation from an unacceptable one to one in conformity with generally accepted accounting principles. The auditor's report on the financial statements of the year of the change should include:
an explanatory paragraph explaining the change
Indicate which changes would require an explanatory paragraph in the audit report.
A departure from GAAP YES
The CPA makes reference NO
A CPA would express a qualified opinion with at least four paragraphs for:
An unjustified accounting change YES
A justified accounting change NO
William Gregory, CPA
may refer to the examination of the other auditor
Misstatements must be compared with some measurement base before a decision can be made about materiality. A commonly accepted measurement base includes:
all of the above
"Independence" in auditing means:
taking an unbiased and objective viewpoint
When CPA's are able to maintain their actual independence, it is referred to as independence in:
Which of the following statements is true? The CPA firm will lose its independence if:
a staff auditor providing audit services to the client acquires stock in that client
Interpretations of Rule 101 prohibit covered members from owning any stock or other direct investment in audit clients. Covered members include all but which of the following?
All partners in an office that has no responsibility for the engagement
Interpretations of the rules regarding independence allow an auditor to serve as:
an honorary director for a not-for-profit charitable or religious organizations
The Sarbanes-Oxley Act requires which of the following employees of an accounting firm to rotate off the engagement every five years?
In-Charge Auditor NO
Partner responsible for concurring review YES
Of the four parts of the AICPA's Code of Professional Conduct, which part is enforceable?
Rules of Conduct
An example of an "indirect ownership interest in a client" would be ownership of a client's stock by a member's:
Interpretations to the Rules of Conduct permit a CPA firm to do both bookkeeping and auditing for the same client if three criteria are met. Which of the following is NOT one of those criteria?
The client is required to file an annual report, including audited financial statements, with the Securities and Exchange Commission
A CPA is allowed to accept a referral fee for recommending a client to another CPA if:
The client pre-approves the trans. NO
Payment of the referral fee is disclosed YES
In which of the following circumstances would a CPA be bound by ethics to refrain from disclosing any confidential information about a client?
A major stockholder of a client company seeks accounting information from the CPA after management declined to disclose the requested information
Generally, loans between CPA firm or its members and an audit client are prohibited because it is a financial relationship. Which of the following, made under normal lending procedures, is NOT a exception to this rule?
The standard of due care to which the auditor is expected to adhere is referred to as the:
prudent person concept
"Absence of reasonable care that can be expected to a person in a set of circumstances" defines:
Which of the following most accurately describes constructive fraud?
Extreme or unusual negligence without the intent to deceive
A third-party beneficiary is one which:
does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract
A broad interpretation of the rights of third-party beneficiaries holds that users that the auditor should have been able to foresee as being likely users of financial statements have the same rights as those with privity of contract. This is known as the concept of:
Under the Securities Act of 1933, the auditor's responsibility for making sure the financial statements were fairly stated extends to:
the date the registration statement becomes effective
Under the Securities Act of 1934, which type of organization is required to submit audited financial statements to the SEC?
Every company with securities traded on national and over-the-counter exchanges
Under the common law, an individual or company that (1) does not have a contract with an auditor, (2) is known by the auditor in advance of the audit, and (3) will use the auditor's report to make decisions about the client company has:
the same rights against an auditor as a client
The preferred defense in third-party suits is:
The Securities and Exchange Commission has authority to:
determine accounting principles for the purpose of financial reporting by companies offering securities to the public.
Which of the following statements best describes the auditor's responsibility regarding the detection of fraud?
The auditor must extend auditing procedures to actively search for evidence of fraud where the examination indicates that fraud may exist
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:
both a and b are correct
Which of the following journals would be included most often in the various audit cycles?
If the auditor believes that the financial statements are not fairly stated or is unable to reach an conclusion because of insufficient evidence, the auditor:
has the responsibility of notifying financial statement users through the auditor's report.
Auditors accumulate evidence to:
enable them to reach conclusions about the fairness of the financial statements
Which of the following is NOT one of the reasons that auditors provide only reasonable assurance on the financial statements?
Auditors believe that reasonable assurance is sufficient in the vast majority of cases
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, and analytical procedures, then the auditor:
can significantly reduce other substantive tests
The occurrence assertion applies to___:
classes of transactions and events during the period
When the auditor has reason to believe an illegal act has occurred, the auditor should:
consider accumulating additional evidence to determine if there is actually an illegal act
If an auditor uncovers an illegal act at a public company, the auditor must notify:
the Securities and Exchange Commission
Which of the following form of evidence is most reliable?
Confirmation of accounts receivable balance received from a customer
Which of the following is NOT a characteristic of the reliability of evidence?
Degree of subjectivity
Calculating the gross margin as a percent of sales and comparing it with previous periods is what type of evidence?
Audit evidence obtained directly by the auditor will not be reliable if:
the auditor lacks the qualifications to evaluate the evidence
Appropriateness of evidence is a measure of the:
quality of evidence
Which of the following statements regarding the relevance of evidence is correct?
To be relevant, evidence must pertain to the audit objective of the evidence
Two determinants of the persuasiveness of evidence are:
appropriateness and sufficiency
Three common types of confirmations used by auditors are (1) negative confirmations, (2) blank form positive confirmations, and (3) positive confirmations with information included. Place the confirmations in order of reliability from highest to lowest.
2, 3, 1
When auditors use documents to support recorded transactions, the process is often called:
Sarbanes-Oxley requires auditors of public companies to maintain audit documentation for what period of time?
Not less than 7 years
The Auditing Standards Board has concluded that analytical procedures are so important that they are required during:
planning and completion phases
Which of the following statements is NOT correct concerning audit documentation?
Audit documentation is acquired to defend against claims that the auditor performed a deficient audit
Which of the following is the most objective type of evidence?
The physical count of securities and cash
Traditionally, confirmations are used to verify:
bank balances and accounts receivable
Which items affect the sufficiency of evidence when choosing a sample?
Selecting items with a high likelihood YES
The randomness of the items selected NO
Most auditors assess inherent risk as high for related parties and related-party transactions because:
of the lack of independence between parties
A successor auditor may perform which of the following for a new audit client?
Speak to local attorneys, banks YES
Speak to predecessor auditors YES
The purpose of an engagement letter is to:
document the terms of the engagement in writing to minimize misunderstandings
Which of the following normally signs the engagement letter for an audit of a private company?
The purpose of the requirements in SAS No. 84 of having communication between the predecessor and successor auditor is to:
help the successor auditor to evaluate whether to accept the engagement
Whenever an auditor compares client data to client-prepared budgets, there are two special concerns. Indicate if the two items below are concerns.
Assessing whether the budgets were realistic plans - A CONCERN
Client data may have been altered to conform to the budget - A CONCERN
When may the auditor refer to a specialist in the audit report?
Only if the specialist's report results in a modification of the audit opinion YES
Only if the specialist assisted in the audit of an account material to the financial statements NO
Which of the following would NOT likely be classified as a related-party transaction?
An advance of one week's salary to an employee
Which of the following statements is NOT correct?
Analytical procedures used in the completion phase are primarily aimed at assessing going concern and secondarily aimed at directing the auditor's attention to areas that may contain possible misstatements
Which of the following is correct with respect to a company's corporate charter?
The corporate charter includes the exact name of the corporation, the date of incorporation, and the types of business the corporation is authorized to conduct
Which of the following underlies the application of generally accepted auditing standards, particularly the standards of fieldwork and reporting?
The elements of materiality and relative risk
Which of the following is NOT a primary consideration when assessing inherent risk?
Frequency and intensity of management's review of accounting transactions and records
When a different extent of evidence is planned for the various cycles, the difference is caused by:
An auditor's expectations of errors and assessment of internal control
When allocating materiality, most practitioners choose to allocate to:
the balance sheet accounts because there are fewer
When the auditor is attempting to determine the extent to which external users rely on a client's financial statements, they may consider several factors except for:
assessment of detection risk
To what extent do auditors typically rely on internal controls of their public company clients?
___ misstatements are those where the auditor can determine the amount of the misstatement in the account.
Which of the following statements is NOT correct?
Either an overstatement of an asset account or an overstatement of a liability account would have the same effect on the income statement.
Auditors begin their assessment of inherent risk during audit planning. Which of the following would NOT help in assessing inherent risk during the planning phase?
Obtaining client's agreement on the engagement letter
Why do auditors establish a preliminary judgment about materiality?
To plan the appropriate audit evidence to accumulate and develop an overall audit strategy
Internal control reports issued by public companies must identify the framework used to evaluate the effectiveness of internal control. Which of the following is the most common framework in the U.S.?
Internal Control - Integrated Framework - COSO
The auditor's tests to understand the client's internal controls might include which of the following types of procedures?
Observation of employees YES
Inquiries of personnel YES
In the audit of a private company, the auditor will test controls when control risk is initially assessed at:
To determine if significant internal control deficiencies are material weaknesses, they must be evaluated on their:
Internal controls normally include procedures designed to provide reasonable assurance that:
transactions are executed in accordance with management's authorization
Which of the following is NOT a likely procedure to support the operating effectiveness of internal controls?
Completing an internal control questionnaire
Of the following statements about internal controls, which one is NOT valid?
Control procedures reasonably ensure that collusion among employees cannot occur
An auditor should consider two key issues when obtaining an understanding of a client's internal controls. These issues are:
the design and utilization of the controls
Hanlon Corp. maintains a large internal audit staff that reports directly to the chief financial officer. Audit reports prepared by the internal auditors indicate that the system is functioning as it should and that the accounting records are reliable. An independent auditor will probably:
place limited reliance on the work performed by the internal audit staff
Proper segregation of functional responsibilities calls for separation of:
authorization, recording, and custody
Which of the following most accurately defines professional skepticism as it is used in auditing standards?
It neither assumes that management is dishonest nor assumes unquestioned honesty
After fraud risks are identified and documented, the auditor should evaluate factors that ____ fraud risk before developing an appropriate response to the risk of fraud.
Which of the following issues is normally part of the "brainstorming" session required by SAS No. 99?
How assets could be misappropriated YES
Where the entity's financial statements are susceptible to material misstatements due to fraud YES
Which of the following statements describes circumstances that underlie employee incentives to misappropriate assets?
Dissatisfied employees may steal from a sense of entitlement
The most common technique used by management to misstate financial information is:
improper revenue recognition
Who is least likely to perpetrate fraudulent financial reporting?
Which of the following is a factor that relates to incentives or pressures to commit fraudulent financial reporting?
Excessive pressure for management to meet debt repayment requirements
Which of the following best defines fraud in a financial statement auditing context?
Fraud is an intentional misstatement of the financial statements
Which of the following is a factor that relates to incentives to misappropriate assets?
Significant personal financial obligations
Which of the following is not a benefit of using IT-based controls?
Over-reliance on computer-generated reports
Which of the following is a category of general controls?
Physical and online security
To determine that user ID and password controls are functioning, an auditor would most likely:
attempt to sign on to the system using invalid user identification and passwords
___ controls prevent and detect errors while transaction data are processed
A database management system:
physically stores each element of data only once
Which of the following is NOT associated with converting from a manual to an IT system?
It may take the record keeping function and the document preparation function away from those who have custody of assets and put those functions into the IT center
An important characteristic of IT is uniformity of processing. Therefore, a risk exists that:
erroneous processing can result in the accumulation of a great number of misstatements in a short period of time
Controls which apply to a specific element of the system are called:
Controls which are built in by the manufacturer to detect equipment failure are called:
Auditors usually evaluate the effectiveness of:
general controls before applications controls
Output controls are NOT designed to assure that data generated by the computer are:
used appropriately by employees in making decisions
Auditors usually obtain information about general and application control through:
all of these methods
The audit approach in which the auditor runs his or her own program on a controlled basis to verify the client's data recorded in a machine language is:
the generalized audit software approach
Errors in data processed in a batch computer system may not be detected immediately because:
there are time delays in processing transactions in a batch system
Which of the following computer-assisted auditing techniques allows fictitious and real transactions to be processed together without client operating personnel being aware of the testing process?
Integrated test facility
Which of the following is NOT an application control?
Separation of duties between computer programmer and operators
Application controls vary across the IT system. To gain an understanding of internal control for a private company, the auditor must evaluate the application controls for every:
every audit area where the auditor plans to reduce assessed control risk
The most important output control is:
review of data for reasonableness by someone who knows what the output should look like
Old and new systems operating simultaneously in all locations is a test approach known as:
When the client uses a computer but the auditor chooses to use only the non-IT segment of internal control to assess control risk, it is referred to as auditing around the computer. Which one of the following conditions need not be present to audit around the computer.
Computer programs must be available in English
Collectively, procedures performed to obtain an understanding of the entity and its environment, including internal controls, represent the auditor's:
risk assessment procedures
For efficiency, tests of controls are frequently done at the same time as:
tests of transactions
Which of the following statements is NOT true?
Tests of controls are concerned with evaluating whether controls are sufficiently effective to justify reducing control risk and thereby reducing analytical review procedures
When the auditor finds that there are missing controls in an area of the accounting system, the audit program in that area would be modified in such a way as to:
eliminate the need for a test of controls
Analytical procedures must be performed in:
the planning and completion stages
An increased extent of tests of controls is most likely to occur when:
controls are effective and the preliminary control risk assessment is low
When an auditor believes that analytical procedures indicate a reasonable possibility of misstatement, the auditor would:
Perform additional test of controls NO
Decide to modify tests of details of balances YES
Which of the following ultimately determines the specific audit procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion?
The auditor's judgment
Only ___ involve physical examination and confirmation
test of balances
Which of the following types of evidence is NOT available when using substantive tests of transactions?
After finishing the review phase of the study and evaluation of internal control in an audit, the auditor should perform tests of controls on:
those controls that the auditor wants and plans to rely upon
Documentation evidence is obtained in every type of test except ___.
The primary emphasis in most tests of details of balances is on the:
balance sheet accounts
Tests of transactions are used to determine whether ___have been satisfied
transaction-related audit objectives
If no material differences are found using analytical procedures and the auditor concludes that misstatements are not likely to have occurred:
other tests may be reduced
Most companies recognize sales revenue when:
goods are shipped
Which of the following is not a business function within the "Sales" class of transactions?
Processing and recording sales returns and allowances
The document that supports reductions in accounts receivable is the:
When designing audit procedures, the direction of tests is a crucial step in satisfying the:
Which of the following documents is not commonly associated with the "cash receipts" class of transactions?
When posting items from the sales journal, details of the journal and journal totals are posted to which items?
Details of the journal are posted to - The accounts receivable master file
Journal totals are posted to - The general ledger
Some companies have customers send payments directly to an address maintained by a bank. This is called a(n) ___ system.
After the auditor has identified the key internal controls and deficiencies and assessed control risk for a private company, it is appropriate to decide whether:
substantive tests will be reduced sufficiently to justify costs of performing tests of controls
An effective procedure to test for unbilled shipments is to trace from the:
shipping documents to the sales journal
The auditor traces items from the source documents to the journals to satisfy the:
Smith Manufacturing Company's accounts receivable clerk has a friend who is also a Smith's customer. The accounts receivable clerk has issued fictitious credit memos to his friend for goods supposedly returned. The most effective procedure for preventing this activity is to:
require receiving reports to support all credit memorandums before they are approved
Prenumbered documents are intended to help:
Prevent the failure to bill or record sales YES
Prevent duplicate billings or recordings of sales YES
One of the ways to eliminate nonsampling risk is through:
Proper supervision and instruction of the audit team
___ is the risk that an auditor will reach an incorrect conclusion because a sample is not representative of the population.
In systematic sample selection, the population size is divided by the number of sample items desired in order to determine the:
Which of the following statements is correct?
The use of inappropriate audit procedures is a significant cause of nonsampling risk
The risk which the auditor is willing to take in accepting a control as being effective when the true population exception rate is greater than a tolerable rate is the:
acceptable risk of assessing control risk too low
If an auditor, planning to use statistical sampling, is concerned with the number of a client's sales invoices that contain mathematical error, the auditor would most likely utilize:
sampling for attributes
In performing a review of a client's cash disbursements, an auditor uses systematic sample selection with a random start. The primary disadvantage of this technique is population items:
may occur in a systematic pattern, thus negating the randomness of the sample
Which of the following is not determined until after a sample is tested and evaluated?
Computed exception rate
Which of the following must be set prior to testing a sample?
Tolerable exception rate
If an auditor judgmentally selects a sample of one hundred items from a population and finds two exceptions, the auditor:
can conclude that the sample exception is 2%
Cutoff misstatements occur:
either by error or fraud
Auditors are often concerned with three aspects of internal controls related to the sales and collections cycle. Which of the following is not one of those controls?
Controls over acquisitions
Which of the following is likely to be determined first when performing tests of details for accounts receivable?
Accounts receivable in the aged trial balance agree with related master file amounts, and the total is correctly added and agrees with the general ledger
The most effective test of details of accounts receivable is the:
confirmation of accounts receivable
The most important aspect of evaluating the client's method of obtaining a reliable cutoff is to:
evaluate the client's control procedures around cutoff
A positive confirmation is more reliable evidence than a negative confirmation because:
follow-up procedures are performed if a response is not received from the debtor
An auditor should perform alternative procedures to substantiate the existence of accounts receivable when:
no reply to a positive confirmation request is received
Confirmation of accounts receivable balances primarily provides evidence concerning the:
existence of the balances
A procedure to test for a cash receipts cutoff error is:
tracing recorded cash receipts to bank deposits on the bank statement of a different period
Which of the following is the least important consideration in determining the sample size of confirmations?
The types of confirmations being sent; that is, positive or negative
For effective internal control, employees maintaining the accounts receivable subsidiary ledger should not also approve:
write-offs of customer accounts
When performing tests of controls and tests of transactions for sales, the auditor generally defines the population as:
all sales invoices for the year
Tolerable misstatements for overstatements and understatements:
may be different amounts
Monetary-unit sampling is not particularly effective at detecting:
What is the purpose of applying stratified sampling to a population?
To avoid items that may contain misstatements NO
To emphasize certain items and deemphasize others YES
Tolerable misstatement is used to:
Determine sample size NO
Select the sample NO
Evaluate results YES
Which of the following is not a likely item on which to apply stratification techniques?
customer names of account receivables
When errors are found, a common assumption in practice is to assume:
that the actual sample errors are representative of the population errors
While acceptable risk of incorrect acceptance is always important, the risk of incorrect rejection is important only when there is a ___ cost to increasing the sample size.
Which of the following is not a term relevant to sampling for tests of details?
Define the exception conditions
The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance under audit is greater than the tolerable misstatement is:
the acceptable risk of incorrect acceptance
Which of the following does not have to be considered in determining the initial sample size of a test of details?
acceptable risk of incorrect rejection
The receipt of goods and services in the normal course of business represents the date clients normally recognize:
The overall objective in the audit of accounts payable is to determine whether accounts payable:
is fairly and properly disclosed
The accounts payable department usually has responsibility for verifying the propriety of acquisitions by comparing the details on the:
purchase order, receiving report, and vendor's invoice
Which department should initiate a report when goods arrive from a vendor?
Failure to record the acquisition of goods is a violation of which audit objective?
The main focus taken by the auditor in verifying liability balances is on the discovery of:
understated or omitted liabilities
A failure to record acquisitions of goods most likely will affect all but which of the following?
Assume that during cutoff testing you determine that the last receiving report number for inventory was 24986. Which of the following receiving report numbers would you not expect to be included in inventory and accounts payable at year-end?
Under which of the following circumstances would it be advisable for the auditor to confirm accounts payable with creditors?
Creditor statements are not available and internal control over payables is unsatisfacotry
To test for cutoff errors which state liabilities, the auditor should trace, to vendors' invoices, the receiving reports issued:
Which of the following is NOT a condition for a contingent liability to exist?
The amount of the future payment is reasonably estimable
If a potential loss on a contingent liability is remote, the liability usually is:
neither accrued nor disclosed in footnotes
Whenever subsequent events are used to evaluate the amounts included in the statements, care must be taken to distinguish between conditions that existed at the balance sheet date and those that come into being after the end of the year. The subsequent information should not be incorporated directly into the statements if the conditions causing the change in valuation:
did not take place until after year-end
Which of the following procedures might be useful in discovering a contingent liability for a lawsuit that management is intentionally neglecting to disclose?
Analyzing legal expense and review invoices and statements from outside legal counsel
When should auditors generally assess a client's ability to continue as a going concern?
Throughout the entire audit process
Which of the following is not a matter that is typically included in the letter of representation obtained from an audit client?
Assessment of management's efficiency of decision making
Refusal by a client to prepare and sign the representation letter would require a(n):
Which of the following is not a purpose of the client letter of representation?
To impress upon the audit firm its responsibility for the audit
Which of the following auditing procedures is ordinarily performed last?
Obtaining a client representation letter
In connection with the annual audit, which of the following is not a "subsequent events" procedure?
Review available interim financial statements
Which of the following is NOT a reason why the auditor requests that the client provide a letter of representation?
It provides written documentation, which is a higher quality of evidence than management's oral responses to inquiries
An auditor's decision concerning whether or not to "dual date" the audit report based upon the auditor's willingness to:
extend auditing procedures and assume responsibility for a greater period of time
Compilation reports may be all but which of the following types?
Compilation with limited independence
Which of the following meets the attestation standards' definition of an examination?
An audit of the financial statements
A CPA firm can issue a compilation report:
even if it is not independent
The statement that "Nothing came to our attention which would indicate that these statements are not fairly presented" expresses which of the following?
Which of the following forms of review are permissible under SSARS?
Review without positive assurance (meaning its a negative assurance)
The quarterly reports submitted to the SEC by the client:
do not have to be audited, but the CPA firm which does the year-end audit must review the quarterly statements before they are submitted to the SEC
Reports on debt compliance and similar engagements may be issued as a separate report or as part of a report that expresses the auditor's opinion on the financial statements. When they are issued as a part of the report on the financial statements, it is done by:
adding a paragraph after the opinion paragraph
Which of the following is not one of the types of engagements and related forms of conclusions that are defined by the attestation standards?
An agreed-upon procedures engagement is one in which:
the auditor and management or a third party agree that the engagement will be limited to certain specific procedures
Which of the following procedures is not included in a review engagement of a nonpublic entity?
A study and evaluation of internal control