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Corresponds to CLO 1 (a) In which one of the following instances would an auditor issue..




Question;1.Corresponds to CLO 1 (a) In which one of the;following instances would an auditor issue an adverse opinion? (Points: 5);Management declines to present earnings per;share in the income statement. There is;substantial doubt about the entity's ability to continue as a going concern. There is;a material dollar misstatement that overshadows the entire financial;statement. The;client does not allow the auditor to send confirmations to its three largest;clients.;Question;2. 2.Corresponds to CLO 1 (a) In which one of the following;instances would an auditor most likely issue a disclaimer of opinion?;(Points: 5);Management will not sign a management;representation letter. Management declines to provide a statement;of cash flow. The;auditor is independent of the client. The;auditor is unable to confirm receivables but performs alternative procedures.;Question;3. 3.Corresponds to CLO 1 (b) In which one of the following;instances would an auditor most likely issue a standard unqualified;opinion? (Points: 5);Management's disclosures are missing or;inadequate. There is;substantial doubt about the entity's ability to continue as a going concern. There is;a significant limitation on the scope of the engagement. There is;an immaterial deviation from GAAP related to capitalizing repairs.;Question;4. 4.Corresponds to CLO 1 (b) In which one of the following;instances would an auditor not issue a disclaimer of opinion? (Points: 5);The;auditors are not invited to the periodic inventory at year end. There are;significant misstatements in the financial statements. There is;a significant limitation on the scope of the engagement. There is;insufficient evidence for the auditor to form an opinion on the fairness of;the financial statements.;Question;5. 5.Corresponds to CLO 1 (c) The division of responsibility;between the reporting company's management and the auditor firm is set forth;in the (Points: 5);scope;paragraph. introductory paragraph. notes to;the financial statements. opinion;paragraph.;Question;6. 6.Corresponds to CLO 1 (c) An accounting service that involves;performing inquiry and analytical procedures to provide a reasonable basis;for expressing limited assurance that there are no material modifications;that should be made to the financial statements for them to be in;conformity with GAAP is best know as (Points: 5);a;compilation. an audit. a review. an agreed;upon procedure.;Question;7. 7.Corresponds to CLO 1 (d) Leon Frank, CPA performs an audit of;RedHen, Inc., which keeps its financial statements on the tax basis of;accounting. Leon is aware of this fact and audits the financial statements;on the criteria of the tax basis. This type of an engagement (Points: 5);is not;accepted by the AICPA. is an;audit that will cause the issuance of a special report. is;actually just a compilation. is only;performed by tax accountants who do not provide attest services.;Question;8. 8.Corresponds to CLO 1 (d) When the CPA is not independent with;respect to a compilation client, the CPA must (Points: 5);not;accept the engagement. include a;separate paragraph in the report stating the lack of independence. change;the engagement to a review engagement. issue a;disclaimer.;Question;9. 9.Corresponds to CLO 2 (a) The major components of an;organization's internal controls consists of all of the following except;(Points: 5);risk;assessment. control;environment. control;activities. control;risk;Question;10. 10.Corresponds to CLO 2 (a) Which of the following is a;detective control designed to detect the occurrence of a misstatement?;(Points: 5);access;controls. edit;controls. reconciliations. all of;the above are detective controls.;Question;11. 11.Corresponds to CLO 2 (b) A component of COSO's internal;control system concerns the process that provides feedback on the;effectiveness of the other components of internal control. This component;is called: (Points: 5);information and communication. monitoring. control;activities. risk;assessment.;Question;12. 12.Corresponds to CLO 2 (b) When control risk is assessed as;high the auditor needs to: (Points: 5);perform;more tests of controls. perform;more direct testing of account balances. perform;significantly fewer tests of controls. perform;significantly less testing of account balances.;Question;13. 13.Corresponds to CLO 2 (c) In order to further understand;internal control, an auditor may use inquiry methods by: (Points: 5);interviewing key employees to gain further;insight into the internal control environment. observing;the safeguarding of assets by checking locked doors and safes. tracing a;transaction from the boundary of the organization through to the final;reporting. documenting thoroughly the internal control;through the use of narratives.;Question;14. 14.Corresponds to CLO 2 (c) An auditor's test of transaction;processing whereby the auditor is evaluating both the operation and;effectiveness of controls and the correctness and completeness of processing;and posting to an account balance is: (Points: 5);a test of;controls. a;substantive test. a;dual-purpose test. an;analytical review procedure.;Question;15. 15.Corresponds to CLO 2 (d) Which of the following is not true;of internal control as defined by COSO? (Points: 5);it is;narrower than internal control over financial reporting. it is a;process that includes all elements of internal control working together. it;includes all the people in the organization. it starts;at the top of the organization in setting a tone.;Question;16. 16.Corresponds to CLO 2 (d) Which of the following is not true;of the concepts that are embodied in the COSO framework of internal;control? (Points: 5);Internal;control relates to the organization's objectives. The six;components of internal control are logically and operationally intertwined. Internal;control applies across all activities of the organization. All of;the above are important concepts;Question;17. 17.Corresponds to CLO 3 (a) Why will the external auditor typically;interview the internal audit department as it relates to its risk-based;approach? (Points: 5);To;appropriately change internal controls. To;comment on the deficiency of internal audit control. To;understand and assess management risk processes. To;perform effective analytical procedures.;Question;18. 18.Corresponds to CLO 3 (a) Which is a primary limitation of;the audit risk model? (Points: 5);The audit;risk model does not adequately consider external forces on the client;organization. Components of audit risk are treated as;independent variables even though many interdependencies exist between them. The audit;technology achieves approximate precision outside of a mathematical model. Control;risk must be adjusted at the hands of the auditor, not by an arbitrary;estimation.;Question;19. 19.Corresponds to CLO 3 (b) Janie Jones, CPA is proposing on a;prospective audit engagement for White Mountain Enterprises. After;obtaining written permission of White Mountain, Janie is required to;perform what procedure prior to accepting it as a new client? (Points: 5);Provide;full disclosure of fees that will be billed to White Mountain. Contact;the former auditor to ensure all disagreements have been resolved. Contact;the former auditor about certain matters of interest in Janie's decision to;accept White Mountain as a client. Contact;the former auditor to determine if all fees have been paid, the change in;auditors have been approved and integrity issues have been overcome.;Question;20. 20.Corresponds to CLO 3 (b) Which of the following will an;auditor most likely discuss with the former auditors of a potential client;prior to acceptance? (Points: 5);Integrity;of management. Reasons;for changing audit firms. Disagreements with management regarding;accounting principles. All of;the above must be discussed.;Question;21. 21.Corresponds to CLO 3 (c) What is the most important purpose;that is achieved by having an auditor write a formal engagement letter that;is signed by the client? (Points: 5);Documented proof of auditor responsibility;for financial statements in accordance with GAAP. Multiple;degrees of legal separation of the client from the auditor. A;locking-in of fees and timetable that must be adhered to by the client. A;communication and clarification of the responsibilities and expectations of;the auditor and the client.;Question;22. 22.Corresponds to CLO 3 (c) What is the primary difference;between financial reporting risk and audit risk? (Points: 5);The;application of accounting principles. Responsibilities of the respective parties;involved. Demands;of users of financial statements. Risks of;being sued by third parties.;Question;23. 23.Corresponds to CLO 3 (d) The auditor commences to understand;the client and related risks of the organization for what purpose? (Points;5);To;determine the audit opinion that will be issued. To;determine the appropriate understanding of internal controls by management. To;determine the detection of audit procedures in the period under audit. To;determine whether the auditor has sufficient knowledge to perform the;engagement/audit.;Question;24. 24.Corresponds to CLO 3 (d) In determining audit risk, the;auditor decides how much risk will be taken on by the firm. Which of the;following is correct regarding this decision by the auditor? (Points: 5);The;auditor may decide to intentionally render an inappropriate opinion. The;auditor may decide not to take the audit engagement. The;auditor may decide to accept audit risk at 100%. The;auditor may decide that engagement risk is an appropriate measure of audit;risk.;Question;25. 25.Corresponds to CLO 4 (a) Audits of financial statements are;valuable to the detection of fraud because: (Points: 5);Auditors;are not required to seek out and find all fraud. Auditors;expect that management will make them aware of any fraud in the financial;statements. Society;expects that the auditor will ensure that financial statements have not been;materially misstated due to fraud. Society;realizes that some fraud is not capable of being discovered by auditors.;Question;26. 26.Corresponds to CLO 4 (a) Detection of fraud is integral to;the audit function. The best reason for this is that: (Points: 5);unless;auditors can provide assurance that the financial statements are free of;material misstatements due to fraud, there is no justification for the audit;function. the AICPA;has mandated that the auditor take on more responsibility than previously;required because of management's demand for fraud finding. it is the;responsibility of the auditor to provide internal control over a client;organization sufficient to discover or prevent fraud from occurring. auditor;fraud is a large concern of shareholders and the audit committee must;continually monitor the auditors to ensure they are not misstating financial;statements.;Question;27. 27.Corresponds to CLO 4 (b) Which of the following is not an;example of a type of defalcation? (Points: 5);A;warehouse employee takes home two units of electronic entertainment inventory;each week without authorization. The;president of the company utilizes the organization's cash to add a floor to;her 15,000 square foot house. The chief;financial officer of the company falsely adds $20 million to the accounts;receivable and revenue accounts. The;treasurer of the company makes an unauthorized wire transfer from the;organization's bank to a personal account in Grand Cayman.;Question;28. 28.Corresponds to CLO 4 (b) Which of the following best;represents financial statement fraud? (Points: 5);The;transfer agent issues 40,000 shares of the company's stock to a friend;without authorization by the board of directors. The;controller of the company decreases a contingent liability by $3 million;because the company will otherwise miss analysts' expectations this quarter. The;in-house attorney receives payments from the French government for negotiating;the development of a new plant in Paris. The;accounts receivable clerk covers up the theft of cash receipts by writing off;older receivables without authorization.;Question;29. 29.Corresponds to CLO 4 (c) The shareholders of a bank sue Joe;Bush, CPA, for malpractice due to an audit failure that preceded the;insolvency of the bank. The jury determines that Bush is 20 percent at;fault and the bank management is 80 percent at fault. Bush is fully;insured. Under joint and several liability, Bush will pay which of the;following? (Points: 5);between;20 percent and 100 percent of the damages. 100;percent of the damages. 50;percent of the damages. 80;percent of the damages.;Question;30. 30.Corresponds to CLO 4 (c) A reasonable cause for action;against the auditor for breach of contract may include all of the following;except which of the following? (Points: 5);violating;client confidentiality. withdrawing from an audit engagement;without justification. failure;to provide the audit report on time. failure;to discover an immaterial error.;Question;31. 31.Corresponds to CLO 4 (d) The Securities Act of 1933;regulates which of the following? (Points: 5);The;initial registration of all corporations with the federal government. The;initial registration of all corporations with state governments. Corporations to file registration;statements when reselling prior issues to the public. Corporations to file registration;statements when issuing new securities to the public.;Question;32. 32.Corresponds to CLO 4 (d) The Securities Exchange Act of 1934;places the burden of proof on which of the following parties? (Points: 5);third-party plaintiff. attorney;defendant. auditor;defendant. client;plaintiff.;Question;33. 33.Corresponds to CLO 5 (a) All of the following are pervasive;computer controls except: (Points: 5);Planning;and controlling the data processing function. Controlling access to equipment, data, and;programs. Ensuring;data is accessible to management on a timely basis. Controlling applications development and;changes to programs.;Question;34. 34.Corresponds to CLO 5 (a) A company may have information;systems that use automated procedures to (Points: 5);test the;validity of transactions increase;the rate of return on an investment determine;which customer provides the highest quality product initiate;record, process, and report transactions;Question;35. 35.Corresponds to CLO 5 (b) Computerized internal controls are;reliable because (Points: 5);computers;prevent people from entering erroneous data computers;guarantee that output information is correct computers;perform tasks consistently computers;create their own supporting documents the;computer will not "forget" or get "tired" both A;and C both B;and D both C;and E;Question;36. 36.Corresponds to CLO 5 (b) Which of the following is not an;element of a computerized information system? (Points: 5);hardware e-mail documentation personnel;d. data;Question;37. 37.Corresponds to CLO 5 (c) Which of the following is not an;element of a computerized information system? (Points: 5);hardware software documentation internet;access data;Question;38. 38.Corresponds to CLO 5 (c) Which of the following is not an;element of a computerized information system? (Points: 5);hardware software documentation personnel search;capabilities;Question;39. 39.Corresponds to CLO 5 (d) Which of the following is not an;element of a computerized information system? (Points: 5);laptops software documentation personnel data;Question;40. 40.Corresponds to CLO 5 (d) To understand the relevant internal;controls of the company, the auditor should understand the following areas;of the company: (Points: 5);the;management environment the auditor's;risk assessment process the;information system including the business processes relevant for internal;controls how the;company communicates internal control roles and responsibilities how the;company has responded to risks arising from IT


Paper#37784 | Written in 18-Jul-2015

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