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ACC - Midterm Exam in Accounting Auditing

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Question;Question 1Question text__________risk is the term used to identify the risk that the client's financial statements may be materially false and misleading.Select one: a. Business b. Assessment c. Client d. InformationQuestion 2Question textIn chapter 1 of our text, the concept of management assertions was introduced. The audit objective that all the transactions and accounts presented in the financial statements represent real assets, liabilities, revenues, and expenses is related most closely to the PCAOB assertion of ________Select one: a. Existence or occurance b. Rights & Obligations c. Presentation & Disclosure d. CompletenessQuestion 3Question textThe audit objective that all transactions are recorded in the proper period is related most closely to the Audit Standards Board (ASB) transaction assertion of ____________. Select one: a. occurrence. b. completeness. c. accuracy. d. cutoff.Question 4Question textYou are an auditor on an engagement. You are performing cutoff tests designed to detect credit sales made before the end of the year that have been recorded in the subsequent year. This test is to provide assurance about the PCAOB assertion of __________Select one: a. Rights b. Completeness c. Presentation d. ExistenceQuestion 5Question textYou are an auditor at a public accounting firm. For one of your client?s, your firm issues an overall opinion that the financial statements present the financial condition, results of operations, and cash flows according to generally accepted accounting principles. This would be a(n) _____________________________ opinion. Select one: a. good b. qualified c. unqualified d. adverseQuestion 6Question textWhich of the following statements is true concerning the Public Company Accounting Oversight Board?Select one: a. It oversees the issuance of statements by the Financial Accounting Standards Board. b. It oversees the regulation of firms that audit public entities. c. It oversees the peer review of member firms of the Private Companies Practice Section. d. It oversees the preparation and grading of the Uniform CPA Examination.Question 7Question textYou are an auditor on an engagement. Which reporting options do you have if your client?s financial statements are not presented in accordance to GAAP? Select one: a. Qualified opinion or adverse opinion. b. Unqualified opinion or adverse opinion c. Unqualified opinion or disclaimer of opinion. d. Qualified opinion or disclaimer of opinion.Question 8Question textYou work at a large public accounting firm. The PCAOB came to your office to review your audit firm's system of quality control. This is referred to as a(n)_________ Select one: a. principles review b. quality review c. inspection d. peer reviewQuestion 9Question textRitten & Co. audits Hooks Corporation. Elton is the engagement partner on the audit with an office in Berkeley. Which of the following would not be considered a covered member? Select one: a. Allen, who is a tax partner and provided 50 hours of tax service to Hooks Company during the year of the audit with an office in San Francisco. b. John, who is a member of the attest engagement team with an office in San Francisco. c. Joan, a partner in Ritten & Company, with an office in San Francisco. d. Brad, a partner in Ritten & Company, with an office in Berkeley.Question 10Question textFor the last two years, Baker & Company has performed the financial statement audit of Zeo, a publicly traded company. Based on Sarbanes-Oxley, who is ultimately responsible for the independence of Baker & Company? Select one: a. Zeo's senior management. b. Zeo?s audit committee. c. Baker?s quality control partner. d. Baker?s engagement partner.Question 11Question textYou are an auditor on an engagement team.The probability that your team will give an inappropriate opinion on financial statements that are materially misstated can best be described as _______ Select one: a. inherent risk. b. audit risk. c. detection risk. d. control risk.Question 12Question textYou are an auditor on an engagement team assessing the risks of a new client. Your team has discovered ?significant risks? in this client.Your team should do all of the following except:Select one: a. Perform tests closer to year-end. b. Include more experienced auditors on the engagement. c. Inform the SEC d. Perform extended procedures.Question 13Question textYou are an auditor on an engagement team.The likelihood that material misstatements may have entered your client?s accounting system and not been detected and corrected by their internal controls is referred to as _______Select one: a. control risk b. inherent risk. c. detection risk. d. risk of material misstatement.Question 14Question textYou are an auditor on an engagement.You assess the risk of material misstatement at 0.70You want to achieve a 0.035 risk of failing to express a correct opinion on financial statements that are materially misstated. What detection risk do you plan to use for planning the remainder of the audit work? Select one: a..05 b..0245 c. 0 d. 20Question 15Question textYou work at a public accounting firm. You are in the process of planning an audit engage. You should establish specific audit objectives that relate primarily to the ________Select one: a. Financial statement assertions b. Timing of audit procedures. c. Selected audit techniques d. Cost-benefit of gathering techniques.Question 16Question textYou are working on an audit engagement. The purpose in auditing the information contained in your client?s pension footnote is most likely to obtain evidence concerning management's assertion about Select one: a. Presentation and disclosure. b. Existence c. Rights and obligations. d. ValuationQuestion 17Question textYou are on an engagement team (integrated audit) for a client.Your team's responsibility would not include _____Select one: a. Designing your client's internal controls. b. Documenting an understanding of your client's internal controls. c. Assessing the effectiveness of your client's internal controls. d. Communicating internal control deficiencies.Question 18Question textYou are on an engagement team for a public client.After obtaining an understanding of your client's financial reporting control activities, you would next ____Select one: a. Assess the final control risk. b. Document the understanding obtained c. Test the client's control activities. d. Plan the remainder of the audit work.Question 19Question textYou are on an engagement team for a public client.You have assessed control risk at the maximum level. You will most likely___Select one: a. perform a great deal of additional tests of controls b. perform substantive tests at an interim date c. perform a great deal of substantive testing during the audit d. perform more audit procedures using internal evidenceQuestion 20Question textYou are auditor on an engagement team for a client.The probability that your conclusion based on a sample might be different from the conclusion based on the entire population identifies the concept of _____________ risk.Select one: a. nonsampling risk b. confidence levels c. nonstatistical sampling d. sampling riskQuestion 21Question textYou are auditor on an engagement team for a client. One of your team members wants to know more about ?nonsampling risk?. After you explain the concept of nonsampling risk, you provide an example. From the options below, what would be an example of nonsampling risk?Select one: a. None of the above results in nonsampling risk. b. Intentionally omitting several items in the population from examination. c. Making a mistake in recording sample results. d. Selecting a nonrepresentative sample.Question 22Question textYou are auditor on an audit engagement.Why would you be more concerned with the risk of assessing control risk too low rather than the risk of assessing control risk too high? Select one: a. The risk of assessing control risk too low cannot be measured by the auditor during the sampling process. b. The risk of assessing control risk too high is not a type of sampling risk. c. The risk of assessing control risk too low may result in the auditor's failing to perform sufficient substantive procedures d. The risk of assessing control risk too low exposes the auditor to an efficiency loss.Question 23Question textYou are auditor on an engagement.While performing an audit of accounts receivable, you found that the sample results supported the conclusion that the accounts receivable balance was materially misstated. However the balance was, in fact, not materially misstated. This situation illustrates the risk of ____Select one: a. Assessing control risk too high b. Incorrect rejection c. Incorrect acceptance d. Assessing control risk too lowQuestion 24Question textYou are auditor on an engagement.For one your procedures, you conclude that the account balance is not materially misstated when, in fact, it is materially misstated. This is referred to as the_________Select one: a. risk of incorrect rejection b. risk of assessing control risk too high. c. risk of assessing control risk too low. d. risk of incorrect acceptanceQuestion 25Question textYou are an auditor on an engagement. After examining sample items and classifying items as deviations, you divide the number of deviations by the sample size. You have just calculated the _________Select one: a. Expected populated deviation rate b. Risk of underreliance c. Sample rate of deviation d. Tolerable rate of deviationQuestion 26Question textYou are an auditor on an engagement. In performing attributes sampling, you can conclude that the control is functioning as intended if the _____________ is less than or equal to ____________. Select one: a. tolerable rate of deviation, expected population deviation rate b. expected population deviation rate, tolerable rate of deviation. c. upper limit rate of deviation, tolerable rate of deviation. d. tolerable rate of deviation, upper limit rate of deviation.Question 27Question textYou are an auditor on an engagement testing controls.The upper limit rate of deviation exceeds the tolerable rate of deviation. How should you proceed?Select one: a. Increase the planned effectiveness of substantive procedures. b. Reject the account balance as being fairly stated. c. Accept the account balance as being fairly stated. d. Not increase the planned effectiveness of substantive procedures.Question 28Question textThe _________is the amount at which an item would be recorded assuming no mistakes in judgment or incorrect applications of generally accepted accounting principles were made. Select one: a. Expected error b. Audited value c. Tolerable misstatement d. Recorded valueQuestion 29Question textYou are an auditor on an engagement. You are using monetary unit sampling (MUS) to audit an inventory of $3,000,000 composed of 6,000 items. A sample size of 500 was determined and a tolerable misstatement of $20,000 was established. The sampling interval would be _____________Select one: a. $500 b. $5,000 c. $6,000 d. $20,000Question 30Question textYou are an auditor on an engagement. If your client's account was recorded at $45,000, the audited value was $30,000, and the sampling interval was $30,000, the projected misstatement would be ___________Select one: a. $10,000 b. $20,000 c. $15,000 d. $30,000

 

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