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Multiple Choice Accounting Chapter 1




Multiple Choice Accounting;Chapter 1;Multiple Choice;REQUIRED: Indicate the best answer choice for each of the following.;1.;Of the following entities, which one is not associated with the public accounting profession?;a.;state boards of accountancy;b.;the FASB;c.;state societies;d.;practice units;e.;the CASB;2.;When providing audit services, the CPA is expected to be;a.;independent of the client.;b.;an advocate for the client.;c.;an advocate for the general public.;d.;indifferent to the effect of the financial statements and the audit report.;e.;able to make managerial decisions for the client.;3.;Which one of the following is the service in which the CPA firm issues a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party?;a.;consulting service;b.;attest service;c.;accounting service;d.;compilation service;e.;examination service;4.;An audit that involves obtaining and evaluating evidence about the efficiency and effectiveness of an entity?s operating activities in relation to specified objectives is a(n);a.;internal audit.;b.;external audit.;c.;operational audit.;d.;compliance audit.;e.;financial statement audit.;5.;Which one of the following types of services offered by a CPA is not an attest service?;a.;examination;b.;review;c.;performing agreed-upon procedures;d.;audit;e.;accounting;6.;The use of negative assurance in a report by a CPA associated with a set of financial statements would be appropriate only in;a.;examinations.;b.;reviews.;c.;agreed-upon procedures.;d.;reviews and agreed-upon procedures.;e.;audits.;Chapter 5;True/False;REQUIRED: For each of the following items, indicate whether it is (T) True or (F) False. For those marked ?False,? identify the error(s) and indicate the change or changes that are needed to make the statement true.;1.;The existence or occurrence assertion, by its nature, extends only to physical assets such as cash and inventory.;2.;The completeness assertion relates primarily to possible overstatements in the financial statements.;3.;The rights and obligations assertion pertains only to balance sheet components.;4.;Reasonableness of management?s accounting estimates is covered by the existence or occurrence assertion.;5.;When sampling is used, the auditors must project unknown misstatements on the population as a whole.;6.;In the professional standards, audit risk is defined as the risk that the auditor will appropriately modify his or her opinion on financial statements that do not contain a material misstatement.;7.;Assertions regarding consistency in the application of accounting principles are included in assertions about completeness.;8.;The existence assertion pertains to whether items included in inventory are valid but does not extend to whether the reported dollar amount is the correct amount for the inventory items.;9.;Understandability is defined as the quality of information that allows users to perceive its significance.;10.;Business risks are the operational approaches by which management intends to achieve its objectives.;11.;The performance of tests of controls is required in a financial statement audit.;12.;Substantive tests provide evidence as to the fairness of management?s financial statement assertions.;13.;The final key element of the audit involves communication of findings.;14.;The primary communication of audit findings is contained in the auditor?s report on financial statements.;15.;CPAs normally use engagement letters to describe the scope of services and fee arrangements.;Chapter Six;Matching 6-2;Listed below are the eight types of corroborating evidence.;A.;Analytical Evidence;B.;Documentary Evidence;C.;Electronic Evidence;D.;Confirmations;E.;Mathematical Evidence;F.;Physical Evidence;G.;Written Representations;H.;Oral Evidence;Following is a list of examples.;REQUIRED: Using the letters given above, indicate the type of corroborating evidence that relates to each listed example.;1.;Client representation letters;2.;Cancelled checks;3.;Confirmation of lease terms from lessor;4.;Explanation of accounting treatment;5.;Comparison of client balances with budgets;6.;Examination of inventories;7.;Evidence created through electronic means;8.;Recalculation of journal totals;Chapter 8;True/False;REQUIRED: For each of the following items, indicate whether it is (T) True or (F) False. For those marked ?False,? identify the error(s) and indicate the change or changes that are needed to make the statement true.;1.;Material misstatement is not possible for individual accounts with balances below the auditor's preliminary judgment about materiality.;2.;Many auditors make the allocation of materiality on the basis of the balance sheet account balances alone.;3.;Materiality should be allocated to the various accounts in proportion to their recorded balances.;4.;As more materiality is allocated to an account, the amount of audit work on that account increases.;5.;Analytical procedures are defined as ?evaluations of financial information made by a study of plausible relationships among financial data components.?;6.;The allocation of the preliminary estimate of materiality may not be revised once the fieldwork is begun.;7.;In practice, the allocation of materiality is normally done without heavy reliance on the subjective judgment of the auditor.;8.;In developing analytical procedures, the reliability of budget data is independent of the assumptions used in their preparation or the care used in compiling the budgeted amounts.;9.;Analytical models that compare financial data with underlying nonfinancial data are usually less effective than analytical models that compare current year?s financial data with last year?s financial data.;10.;Relationships among data may be expected to continue in the absence of known conditions to the contrary.;Chapter 11;True/False;REQUIRED: For each of the following items, indicate whether it is (T) True or (F) False. For those marked ?False,? identify the error(s) and indicate the change or changes that are needed to make the statement true.;1.;An auditor will normally plan to perform tests of controls only if it has been determined that effective internal controls have been placed in operation.;2.;Public company auditors must test controls related to all significant financial statement assertions.;3.;Assessing control risk is the process of evaluating the effectiveness of an entity?s internal control in preventing or detecting material misstatement in the financial statements.;4.;Internal control risk assertions are made for internal controls as a whole, not for individual assertions.;5.;The auditor may base an assessment of control risk on the evidence collected while obtaining an understanding of internal controls.;Multiple Choice;REQUIRED: Indicate the best answer choice for each of the following.;1.;Which of the following is not one of the four basic functions of every transaction?;a.;Consideration.;b.;Recording.;c.;Initiation.;d.;Execution.;e.;Delivery and/or receipt.;2.;Which of the following necessary controls would address potential misstatement arising from a voucher being paid twice?;a.;Periodic independent bank reconciliations.;b.;Electronic cancellation of vouchers and supporting information when a check is issued.;c.;Separate duties for approving payment vouchers and sighing checks.;d.;The computer compares the sum of checks issued with the entry to cash disbursements.;e.;Only authorized personnel are permitted to run the cash disbursements program and handle checks.;3.;Which of the following tests of controls would be most effective in testing controls designed to prevent checks from being issued or recorded for the wrong amount?;a.;Observation of bank reconciliations.;b.;Observation of segregation of duties.;c.;Computer assisted audit techniques such as test data to test computer application control.;d.;Observe documents being marked or cancelled as ?paid?.;e.;Documentation of general controls over access to computer programs and documentation.;4.;?A significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected? is the definition of;a.;a material weakness.;b.;a significant deficiency.;c.;a control deficiency.;d.;a material misstatement.;e.;an internal control deficiency.;5.;Which of the following statements is true about an auditor?s responsibility to communicate with respect to a public company?s internal controls?;a.;The auditor will issue an adverse report on the effectiveness of internal controls if a material weakness in internal controls over financial reporting exists.;b.;Auditors are required to communicate all significant deficiencies in internal control to management but not necessarily to the audit committee.;c.;Auditors are required to communicate all significant deficiencies in internal control to the audit committee but not necessarily to management.;d.;The difference between a material weakness and a significant deficiency is inconsequential.;e.;The auditor?s judgment is based on either the likelihood of the misstatement or on the potential magnitude of the misstatement.;6.;The nature of tests of controls relates to the type of evidence obtained. Which of the following is not an example of a type of evidence relevant to tests of controls?;a.;Inquiries of entity personnel.;b.;Inspection of documents.;c.;Observation of application of the control.;d.;Inspection of signatures indicating performance of the control.;e.;Reperformance of the application of the control by entity personnel.;Chapter 13;True/False;REQUIRED: For each of the following items, indicate whether it is (T) True or (F) False. For those marked ?False,? identify the error(s) and indicate the change or changes that are needed to make the statement true.;1.;Audit sampling in substantive tests is subject to both sampling risk and nonsampling risk.;2.;Judgment is not required when the auditor uses statistical sampling.;3.;Audit sampling applies to control risk and detection risk.;4.;Tolerable misstatement is the minimum misstatement that can exist in an account before it is considered materially misstated.;5.;In determining sample size in nonstatistical sampling, the auditor should consider the same factors used in statistical sampling.;6.;Nonstatistical sampling is becoming the norm for tests of controls.;7.;Nonstatistical sampling is most effective for larger populations.


Paper#28723 | Written in 18-Jul-2015

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