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Auditing final exam (Summer 2014)

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Question;Question 1;Not yet answered;Marked out of 8.00;Flag questionQuestion 1;Not yet answered;Marked out of 8.00;Flag question;Question text;Which ASB balance assertion is of the most importance to;auditors for long-term liabilities?;Select one;a. Existence;b. Rights;Obligations;c. Valuation;d. Completeness;Question 2;Not yet answered;Marked out of 8.00;Flag question;Question text;Which of the following management assertions for long-term;liabilities is related to the ASB balance assertion of completeness?;Select one;a. All material;long-term liabilities are recorded.;b. Disclosures of;maturities for the next five years are accurate and adequate.;c. Terms;conditions, and restrictions relating to noncurrent debt are adequately;disclosed.;d. New long-term;liabilities and debt extinguishments are properly authorized.;Question 3;Not yet answered;Marked out of 8.00;Flag question;Question text;In the audit of notes payable, an auditor testing the ASB;balance assertion of accuracy and valuation most likely would;Select one;a. Select a sample;of notes payable and vouch cash receipt to the bank statement.;b. Read directors' and;finance committee's minutes for authorization of financing transactions.;c. Select a sample;of paid notes and trace interest expense to the general ledger account.;d. Select a sample;of paid notes and recalculate interest expense for the period under audit.;Question 4;Not yet answered;Marked out of 8.00;Flag question;Question text;During an audit of an entity's stockholders' equity;accounts, the auditor determines whether there are restrictions on retained;earnings resulting from loans, agreements, or state law. This audit procedure;most likely is intended to verify the ASB presentation and disclosure assertion;of;Select one;a. Completeness;b. Understandability;c. Occurrence.;d. Rights and;Obligations.;Question 5;Not yet answered;Marked out of 8.00;Flag question;Question text;In confirming with an outside agent, such as a financial;institution, that the agent is holding investment securities in the client's;name, an auditor most likely gathers evidence in support of ASB balance assertion;of existence and;Select one;a. Rights;obligations;b. Completeness;c. Valuation;d. Accuracy;Question 6;Not yet answered;Marked out of 8.00;Flag question;Question text;The focus of controls in the finance and investment cycle is;on;Select one;a. Physical security;of assets.;b. Prenumbered;documents;c. Computer controls;over transactions.;d. Proper;authorizations and competent personnel.;Question 7;Not yet answered;Marked out of 8.00;Flag question;Question text;Keeping track of securities owners for payment of interest;or dividends is usually done by the company's;Select one;a. Transfer Agent;b. Register;c. Broker;d. Treasurer;Question 8;Not yet answered;Marked out of 8.00;Flag question;Question text;Records of stock and bond certificates are usually;maintained by the company's;Select one;a. Treasurer;b. Transfer Agent;c. Chief Financial;Officer;d. Register;Question 9;Not yet answered;Marked out of 8.00;Flag question;Question text;A related party is a person or entity that;Select one;a. Is a member of;the company's management.;b. Does business;with the company.;c. Has a family tie;to a management member.;d. Can exert;significant influence over or be influenced by the company.;Question 10;Not yet answered;Marked out of 8.00;Flag question;Question text;To whom should written representations be addressed?;Paragraph;Path: p;Question 11;Not yet answered;Marked out of 7.00;Flag question;Question text;If auditors are appointed on January 3, 2012, the date of;the financial statements is December 31, 2012, the date of the auditors' report;is February 7, 2013 and the audit report release date is March 3, 2013, what is;the appropriate date of the written representations?;Paragraph;Path: p;Question 12;Not yet answered;Marked out of 8.00;Flag question;Question text;Orange Corporation was audited for the year ended December;31. The audit was completed on January 25, prior to the release of the report;auditors learned of a two-for-one stock split on February 1. If dual dating is;used, what are the proper dates for the auditors' reports?;Paragraph;Path: p;Question 13;Not yet answered;Marked out of 8.00;Flag question;Question text;Interim testing normally occurs between what two dates?;Select one;a. Date of the;financial statements and audit report release date.;b. End of the year;under audit and date of the auditors' report.;c. Beginning of the;year under audit and audit report release date.;d. Beginning of the;year under audit and date of the financial statements.;Question 14;Not yet answered;Marked out of 8.00;Flag question;Question text;Which party should request a letter regarding litigation;claims, and assessments from the client's attorney?;Select one;a. Attorney;b. Securities and;Exchange Commission or other regulatory body.;c. Client;d. Auditors;Question 15;Not yet answered;Marked out of 8.00;Flag question;Question text;Which of the following reporting options is available if the;client refuses to provide written representations to auditors?;Select one;a. Qualified opinion;or disclaimer of opinion.;b. Qualified or;adverse opinion;c. Unqualified or;qualified opinion;d. Disclaimer of;opinion or adverse opinion;Question 16;Not yet answered;Marked out of 8.00;Flag question;Question text;Why is it the client's decision to record adjustments to the;financial statements?;Select one;a. Auditors often do;not have sufficient client-specific expertise to record adjustments to the;financial statements;b. Having auditors;adjust the financial statements would impair independence with respect to the;client.;c. The financial;statements are the responsibility of the client's management.;d. The client will;ultimately suffer any losses related to misstated financial statements;Question 17;Not yet answered;Marked out of 8.00;Flag question;Question text;Subsequent events occur between which two dates?;Select one;a. Date of the;auditors' report and audit report release date.;b. Date of the;financial statements and audit report release date.;c. Date of the;financial statements and date of the auditors' report.;d. Audit report;release date and beginning of subsequent year's audit.;Question 18;Not yet answered;Marked out of 8.00;Flag question;Question text;Which of the following conditions or set of circumstances;would not ordinarily raise questions about the entity's ability to continue as;a going concern;Select one;a. Negative cash;flow from operations for each of the last three years.;b. Failure to meet;forecasted earnings per share.;c. Legal proceedings;that may have a significant negative impact on the entity.;d. Default on a loan;due in the previous year.;Question 19;Not yet answered;Marked out of 8.00;Flag question;Question text;Long and Short, CPAs, were auditing Island Corporation for;the year ended December 31, 2012. On January 11, 2013, a major customer of;Island Corporation declared bankruptcy as the result of an uninsured loss due;to a major fire in its warehouse on January 8, 2013. As a result, a material;accounts receivable from the customer was determined to be uncollectible. Long;and Short, CPAs, would expect the client to;Select one;a. Treat the loss as;a subsequent event and provide a footnote about the loss in the 2012 financial;statements;b. Treat the loss as;a subsequent event and adjust the 2012 financial statements to record the loss;on uncollectible accounts;c. File a lawsuit;against the customer in hopes of collecting some of the money owed to the;client;d. Record the loss;on uncollectible accounts as a routine transaction in the year 2013;Question 20;Not yet answered;Marked out of 8.00;Flag question;Question text;The _____________________________ paragraph of the auditors;report on the entity's financial statements indicates that an audit has been;conducted and identifies the financial statements the auditors examined.;Paragraph;Path: p;Question 21;Not yet answered;Marked out of 8.00;Flag question;Question text;When a scope limitation exists and the auditors have not;been able to obtain sufficient appropriate evidence on a particular account;balance or disclosure, the auditors must choose between a(n);opinion and a(n) _____________________________ of;opinion on the entity's financial statements.;Paragraph;Path: p;Question 22;Not yet answered;Marked out of 8.00;Flag question;Question text;When the auditors lack independence, a(n);opinion is issued on the fairness of the;entity's financial statements.;Paragraph;Path: p;Question 23;Not yet answered;Marked out of 8.00;Flag question;Question text;The scope paragraph of the standard report on the entity's;financial statements does not include the statement;Select one;a. "An audit;also includes assessing the accounting principles used and significant;estimates made by management....;b. "Those;standards require that we plan and perform the audit to obtain reasonable;assurance....;c. "In;conformity with accounting principles generally accepted in the United States;of America?.;d. "We believe;that our audits provide a reasonable basis for an opinion.;Question 24;Not yet answered;Marked out of 8.00;Flag question;Question text;If financial statements contain a material but nonpervasive;departure from generally accepted accounting principles, the auditors should;render a(n);Select one;a. Disclaimer of;opinion;b. Adverse opinion;with reference to departure.;c. Qualified opinion;with reference to departure.;d. Adverse opinion;with scope limitation reference.;Question 25;Not yet answered;Marked out of 8.00;Flag question;Question text;Auditors will issue an adverse opinion when;Select one;a. A qualified;opinion cannot be rendered because the auditors lack independence.;b. A severe scope;limitation has been imposed by the entity.;c. A violation of;generally accepted accounting principles is sufficiently material and pervasive;that a qualified opinion is not justified.;d. The entity's;ability to continue as a going concern is subject to substantial doubt.;Question 26;Not yet answered;Marked out of 8.00;Flag question;Question text;When auditors render an adverse opinion on the entity's;financial statements, the;Select one;a. Auditors do not;possess all necessary evidence.;b. Departures do not;need to be explained in the auditors' report.;c. Introductory and;scope paragraph should not be modified.;d. Auditors require;less evidence to support the opinion.;Question 27;Not yet answered;Marked out of 8.00;Flag question;Question text;You are an auditor on an engagement. You observe your client;take a physical count of their inventory.;What is the primarily purpose of this audit procedure?;Select one;a. Assist the client;in taking test counts of year-end inventory.;b. Determine whether;inventory contains obsolete goods.;c. Verify;independently the physical counts obtained by the client.;d. Test and observe;the client's physical count of inventory.;Question 28;Not yet answered;Marked out of 8.00;Flag question;Question text;You are an auditor on an engagement. You select an inventory;item on your client?s warehouse floor, test count it, and trace the count to;the final inventory compilation. You are most likely testing the PCAOB;assertion of;Select one;a. Completeness;b. Rights and;Obligations;c. Valuation;d. Existence;Question 29;Not yet answered;Marked out of 8.00;Flag question;Question text;You are an auditor on an engagement.;You select a product maintained in the finished goods;warehouse. You count the product and compare this amount with the amount to the;finished goods perpetual inventory subsidiary account. Which ASB balance;assertion are you most likely testing?;Select one;a. Existence;b. Rights and;Obligations;c. Completeness;d. Valuation;Question 30;Not yet answered;Marked out of 8.00;Flag question;Question text;Susan is an auditor on an engagement.;Susan would most likely make inquiries of production and;sales personnel concerning possible obsolete or slow-moving inventory to;support management's financial statement (PCAOB) assertion of;Select one;a. Existence or;occurrence;b. Rights and;obligations;c. Valuation or;allocation;d. Presentation and;disclosure;Question 31;Not yet answered;Marked out of 8.00;Flag question;Question text;Susan is an auditor on an engagement. Her client is a manufacture.;To determine her client's planned timing of production of a;product, she will review the;Select one;a. Sales forecast;b. Production plan;c. Purchases journal;d. Inventory reports;Question 32;Not yet answered;Marked out of 8.00;Flag question;Question text;You are an auditor on an engagement.;The risk that your own procedures will lead to the decision;that material misstatements do not exist in the financial statements when in;fact such misstatements do exist is _______ risk;Paragraph;Path: p;Question 33;Not yet answered;Marked out of 8.00;Flag question;Question text;The Sarbanes-Oxley Act of 2002 prohibits public accounting;firms from providing which of the following services to an audit client?;Select one;a. All of these;services are prohibited.;b. Valuation services.;c. Internal audit;services.;d. Bookkeeping;services.;Question 34;Not yet answered;Marked out of 8.00;Flag question;Question text;The Sarbanes-Oxley Act of 2002 generally prohibits public;accounting firms from;Select one;a. Auditing the firm's;own work on an audit client.;b. Providing tax;consulting to an audit client without audit committee approval.;c. All of these;activities are prohibited;d. Acting in a;managerial decision-making role for an audit client.;Question 35;Not yet answered;Marked out of 8.00;Flag question;Question text;The likelihood that material misstatements may have entered;the accounting system and not been detected and corrected by the client's;internal control is referred to as;Select one;a. Risk of material;misstatement.;b. Inherent risk.;c. Control risk.;d. Detection risk.;Question text;Which ASB balance assertion is of the most importance to;auditors for long-term liabilities?;Select one;a. Existence;b. Rights;Obligations;c. Valuation;d. Completeness;Question 2;Not yet answered;Marked out of 8.00;Flag question;Question text;Which of the following management assertions for long-term;liabilities is related to the ASB balance assertion of completeness?;Select one;a. All material;long-term liabilities are recorded.;b. Disclosures of;maturities for the next five years are accurate and adequate.;c. Terms;conditions, and restrictions relating to noncurrent debt are adequately;disclosed.;d. New long-term;liabilities and debt extinguishments are properly authorized.;Question 3;Not yet answered;Marked out of 8.00;Flag question;Question text;In the audit of notes payable, an auditor testing the ASB;balance assertion of accuracy and valuation most likely would;Select one;a. Select a sample;of notes payable and vouch cash receipt to the bank statement.;b. Read directors' and;finance committee's minutes for authorization of financing transactions.;c. Select a sample;of paid notes and trace interest expense to the general ledger account.;d. Select a sample;of paid notes and recalculate interest expense for the period under audit.;Question 4;Not yet answered;Marked out of 8.00;Flag question;Question text;During an audit of an entity's stockholders' equity;accounts, the auditor determines whether there are restrictions on retained;earnings resulting from loans, agreements, or state law. This audit procedure;most likely is intended to verify the ASB presentation and disclosure assertion;of;Select one;a. Completeness;b. Understandability;c. Occurrence.;d. Rights and;Obligations.;Question 5;Not yet answered;Marked out of 8.00;Flag question;Question text;In confirming with an outside agent, such as a financial;institution, that the agent is holding investment securities in the client's;name, an auditor most likely gathers evidence in support of ASB balance assertion;of existence and;Select one;a. Rights;obligations;b. Completeness;c. Valuation;d. Accuracy;Question 6;Not yet answered;Marked out of 8.00;Flag question;Question text;The focus of controls in the finance and investment cycle is;on;Select one;a. Physical security;of assets.;b. Prenumbered;documents;c. Computer controls;over transactions.;d. Proper;authorizations and competent personnel.;Question 7;Not yet answered;Marked out of 8.00;Flag question;Question text;Keeping track of securities owners for payment of interest;or dividends is usually done by the company's;Select one;a. Transfer Agent;b. Register;c. Broker;d. Treasurer;Question 8;Not yet answered;Marked out of 8.00;Flag question;Question text;Records of stock and bond certificates are usually;maintained by the company's;Select one;a. Treasurer;b. Transfer Agent;c. Chief Financial;Officer;d. Register;Question 9;Not yet answered;Marked out of 8.00;Flag question;Question text;A related party is a person or entity that;Select one;a. Is a member of;the company's management.;b. Does business;with the company.;c. Has a family tie;to a management member.;d. Can exert;significant influence over or be influenced by the company.;Question 10;Not yet answered;Marked out of 8.00;Flag question;Question text;To whom should written representations be addressed?;Paragraph;Path: p;Question 11;Not yet answered;Marked out of 7.00;Flag question;Question text;If auditors are appointed on January 3, 2012, the date of;the financial statements is December 31, 2012, the date of the auditors' report;is February 7, 2013 and the audit report release date is March 3, 2013, what is;the appropriate date of the written representations?;Paragraph;Path: p;Question 12;Not yet answered;Marked out of 8.00;Flag question;Question text;Orange Corporation was audited for the year ended December;31. The audit was completed on January 25, prior to the release of the report;auditors learned of a two-for-one stock split on February 1. If dual dating is;used, what are the proper dates for the auditors' reports?;Paragraph;Path: p;Question 13;Not yet answered;Marked out of 8.00;Flag question;Question text;Interim testing normally occurs between what two dates?;Select one;a. Date of the;financial statements and audit report release date.;b. End of the year;under audit and date of the auditors' report.;c. Beginning of the;year under audit and audit report release date.;d. Beginning of the;year under audit and date of the financial statements.;Question 14;Not yet answered;Marked out of 8.00;Flag question;Question text;Which party should request a letter regarding litigation;claims, and assessments from the client's attorney?;Select one;a. Attorney;b. Securities and;Exchange Commission or other regulatory body.;c. Client;d. Auditors;Question 15;Not yet answered;Marked out of 8.00;Flag question;Question text;Which of the following reporting options is available if the;client refuses to provide written representations to auditors?;Select one;a. Qualified opinion;or disclaimer of opinion.;b. Qualified or;adverse opinion;c. Unqualified or;qualified opinion;d. Disclaimer of;opinion or adverse opinion;Question 16;Not yet answered;Marked out of 8.00;Flag question;Question text;Why is it the client's decision to record adjustments to the;financial statements?;Select one;a. Auditors often do;not have sufficient client-specific expertise to record adjustments to the;financial statements;b. Having auditors;adjust the financial statements would impair independence with respect to the;client.;c. The financial;statements are the responsibility of the client's management.;d. The client will;ultimately suffer any losses related to misstated financial statements;Question 17;Not yet answered;Marked out of 8.00;Flag question;Question text;Subsequent events occur between which two dates?;Select one;a. Date of the;auditors' report and audit report release date.;b. Date of the;financial statements and audit report release date.;c. Date of the;financial statements and date of the auditors' report.;d. Audit report;release date and beginning of subsequent year's audit.;Question 18;Not yet answered;Marked out of 8.00;Flag question;Question text;Which of the following conditions or set of circumstances;would not ordinarily raise questions about the entity's ability to continue as;a going concern;Select one;a. Negative cash;flow from operations for each of the last three years.;b. Failure to meet;forecasted earnings per share.;c. Legal proceedings;that may have a significant negative impact on the entity.;d. Default on a loan;due in the previous year.;Question 19;Not yet answered;Marked out of 8.00;Flag question;Question text;Long and Short, CPAs, were auditing Island Corporation for;the year ended December 31, 2012. On January 11, 2013, a major customer of;Island Corporation declared bankruptcy as the result of an uninsured loss due;to a major fire in its warehouse on January 8, 2013. As a result, a material;accounts receivable from the customer was determined to be uncollectible. Long;and Short, CPAs, would expect the client to;Select one;a. Treat the loss as;a subsequent event and provide a footnote about the loss in the 2012 financial;statements;b. Treat the loss as;a subsequent event and adjust the 2012 financial statements to record the loss;on uncollectible accounts;c. File a lawsuit;against the customer in hopes of collecting some of the money owed to the;client;d. Record the loss;on uncollectible accounts as a routine transaction in the year 2013;Question 20;Not yet answered;Marked out of 8.00;Flag question;Question text;The _____________________________ paragraph of the auditors;report on the entity's financial statements indicates that an audit has been;conducted and identifies the financial statements the auditors examined.;Paragraph;Path: p;Question 21;Not yet answered;Marked out of 8.00;Flag question;Question text;When a scope limitation exists and the auditors have not;been able to obtain sufficient appropriate evidence on a particular account;balance or disclosure, the auditors must choose between a(n);opinion and a(n) _____________________________ of;opinion on the entity's financial statements.;Paragraph;Path: p;Question 22;Not yet answered;Marked out of 8.00;Flag question;Question text;When the auditors lack independence, a(n);opinion is issued on the fairness of the;entity's financial statements.;Paragraph;Path: p;Question 23;Not yet answered;Marked out of 8.00;Flag question;Question text;The scope paragraph of the standard report on the entity's;financial statements does not include the statement;Select one;a. "An audit;also includes assessing the accounting principles used and significant;estimates made by management....;b. "Those;standards require that we plan and perform the audit to obtain reasonable;assurance....;c. "In;conformity with accounting principles generally accepted in the United States;of America?.;d. "We believe;that our audits provide a reasonable basis for an opinion.;Question 24;Not yet answered;Marked out of 8.00;Flag question;Question text;If financial statements contain a material but nonpervasive;departure from generally accepted accounting principles, the auditors should;render a(n);Select one;a. Disclaimer of;opinion;b. Adverse opinion;with reference to departure.;c. Qualified opinion;with reference to departure.;d. Adverse opinion;with scope limitation reference.;Question 25;Not yet answered;Marked out of 8.00;Flag question;Question text;Auditors will issue an adverse opinion when;Select one;a. A qualified;opinion cannot be rendered because the auditors lack independence.;b. A severe scope;limitation has been imposed by the entity.;c. A violation of;generally accepted accounting principles is sufficiently material and pervasive;that a qualified opinion is not justified.;d. The entity's;ability to continue as a going concern is subject to substantial doubt.;Question 26;Not yet answered;Marked out of 8.00;Flag question;Question text;When auditors render an adverse opinion on the entity's;financial statements, the;Select one;a. Auditors do not;possess all necessary evidence.;b. Departures do not;need to be explained in the auditors' report.;c. Introductory and;scope paragraph should not be modified.;d. Auditors require;less evidence to support the opinion.;Question 27;Not yet answered;Marked out of 8.00;Flag question;Question text;You are an auditor on an engagement. You observe your client;take a physical count of their inventory.;What is the primarily purpose of this audit procedure?;Select one;a. Assist the client;in taking test counts of year-end inventory.;b. Determine whether;inventory contains obsolete goods.;c. Verify;independently the physical counts obtained by the client.;d. Test and observe;the client's physical count of inventory.;Question 28;Not yet answered;Marked out of 8.00;Flag question;Question text;You are an auditor on an engagement. You select an inventory;item on your client?s warehouse floor, test count it, and trace the count to;the final inventory compilation. You are most likely testing the PCAOB;assertion of;Select one;a. Completeness;b. Rights and;Obligations;c. Valuation;d. Existence;Question 29;Not yet answered;Marked out of 8.00;Flag question;Question text;You are an auditor on an engagement.;You select a product maintained in the finished goods;warehouse. You count the product and compare this amount with the amount to the;finished goods perpetual inventory subsidiary account. Which ASB balance;assertion are you most likely testing?;Select one;a. Existence;b. Rights and;Obligations;c. Completeness;d. Valuation;Question 30;Not yet answered;Marked out of 8.00;Flag question;Question text;Susan is an auditor on an engagement.;Susan would most likely make inquiries of production and;sales personnel concerning possible obsolete or slow-moving inventory to;support management's financial statement (PCAOB) assertion of;Select one;a. Existence or;occurrence;b. Rights and;obligations;c. Valuation or;allocation;d. Presentation and;disclosure;Question 31;Not yet answered;Marked out of 8.00;Flag question;Question text;Susan is an auditor on an engagement. Her client is a manufacture.;To determine her client's planned timing of production of a;product, she will review the;Select one;a. Sales forecast;b. Production plan;c. Purchases journal;d. Inventory reports;Question 32;Not yet answered;Marked out of 8.00;Flag question;Question text;You are an auditor on an engagement.;The risk that your own procedures will lead to the decision;that material misstatements do not exist in the financial statements when in;fact such misstatements do exist is _______ risk;Paragraph;Path: p;Question 33;Not yet answered;Marked out of 8.00;Flag question;Question text;The Sarbanes-Oxley Act of 2002 prohibits public accounting;firms from providing which of the following services to an audit client?;Select one;a. All of these;services are prohibited.;b. Valuation services.;c. Internal audit;services.;d. Bookkeeping;services.;Question 34;Not yet answered;Marked out of 8.00;Flag question;Question text;The Sarbanes-Oxley Act of 2002 generally prohibits public;accounting firms from;Select one;a. Auditing the firm's;own work on an audit client.;b. Providing tax;consulting to an audit client without audit committee approval.;c. All of these;activities are prohibited;d. Acting in a;managerial decision-making role for an audit client.;Question 35;Not yet answered;Marked out of 8.00;Flag question;Question text;The likelihood that material misstatements may have entered;the accounting system and not been detected and corrected by the client's;internal control is referred to as;Select one;a. Risk of material;misstatement.;b. Inherent risk.;c. Control risk.;d. Detection risk.

 

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