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ACCT 408 In-Class ECO Final Study Guide

Terms in this set (30)

T/F If an auditor increases thee tolerable deviation rate from 6% to 7%, the sample size would decrease
True
T/F The component of the audit risk model most closely associated with attributes sampling is control risk
True
T/F The risk of incorrect rejection and the risk of under-reliance relate to the efficiency of the audit
True
T/F Tolerable misstatement has a direct relationship with sample size in a variables sampling application
False
The set of items about which a conclusion is made in a sampling application is referred to as a
a. Sampling unit
b. Sample
c. Population unit
d. Population
d. Population
When using sampling for substantive tests of details, the auditor is required to do all but which of the following?
a. Determine the tolerable misstatement
b. Project sample misstatement results to the population
c. Compute the sample standard deviation
d. Select a representative sample
c. Compute the sample standard deviation
The probability that an auditor's conclusion based on a sample might be different from the conclusion based on the entire population identifies the concept of
a. Confidence levels
b. Non-sampling risk
c. Non-statistical sampling
d. Sampling risk
d. Sampling risk
Which of the following types of sampling applications can appropriately be used under generally accepted auditing standards?
a. Statistical sampling: Yes; Nonstatistical sampling: Yes
b. Statistical sampling: Yes; Nonstatistical sampling: No
c. Statistical sampling: No; Nonstatistical sampling: Yes
d. Statistical sampling: No; Nonstatistical sampling: No
a. Statistical sampling: Yes; Nonstatistical sampling: Yes
Which of the following characteristics of substantive procedures is most closely associated with the use of sampling?
a. Nature of further audit procedures
b. Timing of further audit procedures
c. Extent of further audit procedures
d. All of these are closely associated with the use of sampling
c. Extent of further audit procedures
Which of the following sampling risks is associated with the use of variables sampling?
a. Risk of underreliance: Yes; Risk of incorrect rejection: Yes
b. Risk of underreliance: Yes; Risk of incorrect rejection: No
c. Risk of underreliance: No; Risk of incorrect rejection: Yes
d. Risk of underreliance: No; Risk of incorrect rejection: No
c. Risk of underreliance: No; Risk of incorrect rejection: Yes
T/F Analytical procedures are required to be used in the completion phase of the audit
True
T/F As part of the going concern assessment, the auditors should consider management's plan to mitigate any concern about the company's ability to continue as a gong concern
True
T/F The auditor will send a letter to all attorneys the client has done business with in the last year asking for information regarding ongoing litigation
False
The primary objective of analytical procedures used near the end of an audit is to:
a. Obtain evidence from details tested to corroborate management assertions
b. Obtain evidence on the validity of the assessment of control risk
c. Identify areas that represent specific risks relevant to the audit
d. Assist auditors in evaluating the overall financial statement presentation
d. Assist auditors in evaluating the overall financial statement presentation
The auditing standards regarding subsequently discovered facts refers to knowledge obtained after:
a. The date the fieldwork began
b. The date of the auditor's report
c. The date of the financial statements
d. The date interim audit work was complete
b. The date of the auditor's report
If auditors are appointed on January 3, 2021, the date of the financial statements is December 31, 2021, the date of the auditors' report is February 7, 2022, and the audit report release date is March 3, 2022, what is the appropriate date of the written representations?
a. January 3, 2021
b. December 31, 2021
c. February 7, 2022
d. March 3, 2022
c. February 7, 2022
A subsequent event is an event that occurs between the: _______________ and _______________.
Date of the financial statements; date of the auditor's report
Interim testing occurs between the: _______________ and _______________.
Beginning of the year under audit; the date of the financial statements
What is an example of a subsequent event that would require disclosure in the footnotes (but not an adjustment to the financial statements)?
A natural disaster occurs between the date of the financial statements and the date of the auditor's report causing a material amount of damage to the client's assets
For the going concern assessment, the auditor's responsibility is to evaluate whether there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time. A reasonable period of time is defined as a period of time not to exceed one year from:
The audit report release date
T/F When an auditor is lacking independence, an adverse opinion should be issued
False
T/F The audit opinion of a public company should addressed to the company's CEO
False
T/F A material and pervasive scope limitation would result in a disclaimer of an opinion
True
T/F If the auditor uses alternative procedures to mitigate a scope limitation and decides to issue an unmodified opinion on the financial statements, they should reference the alternative procedures in an explanatory paragraph
False
If a company's external auditor expresses an unmodified opinion as a result of the audit of the company's financial statements, readers of the audit report can assume that:
a. The external auditor found no fraud
b. The company is financially sound and the financial statements are accurate
c. Internal control is effective
d. Material issues about the application of accounting principles were resolved to the satisfaction of the external auditor
d. Material issues about the application of accounting principles were resolved to the satisfaction of the external auditor
Auditors who are reporting on financial statements that contain a material departure from generally accepted accounting principles should:
a. Express a qualified or adverse opinion
b. Require the departure is adequately disclosed in a footnote and express an unmodified opinion
c. Disclaim an opinion
d. Express a qualified opinion or disclaimer of opinion
a. Express a qualified or adverse opinion
Independent auditors must consider whether the entity has the ability to continue as a going concern. If a substantial doubt exists but disclosure is adequate and no other basis exists for modifying the report, the auditors would normally:
a. Disclaim an opinion
b. Express an unmodified opinion with an emphasis of matter paragraph
c. Qualify the opinion
d. Express an adverse opinion
b. Express an unmodified opinion with an emphasis of matter paragraph
An auditor may not express a qualified opinion when:
a. A scope limitation prevents the auditor from completing an important audit procedure
b. The auditor's report refers to the work of a specialist
c. An accounting principle at variance with the applicable financial reporting framework is used
d. The auditor lack independence with respect to the audited entity
d. The auditor lack independence with respect to the audited entity
A public company's financial statements should be accompanied by all of the following reports except the:
a. Auditor's report on internal control over financial reporting
b. Management's report on internal control over financial reporting
c. Auditor's report on financial statements and related disclosures
d. Management's report on financial statements and related disclosures
d. Management's report on financial statements and related disclosures
Under which of the following conditions can a disclaimer of opinion never be issued?
a. The entity's going-concern problems are material and pervasive
b. The entity does not allow the auditors access to evidence about important accounts
c. The auditors own stock in the entity
d. The auditors have determined that the entity uses an inventory costing method that is inconsistent with GAAP.
d. The auditors have determined that the entity uses an inventory costing method that is inconsistent with GAAP.
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