1. If the expected deviation rate exceeds the tolerable deviation rate, the auditor is most likely to A. Have a large sample size. B. Set control risk at the maximum without sampling. C. Set control risk at the minimum without sampling. D. Pick a lower risk of assessing control risk too low to increase sample size. 2. Auditors who prefer statistical to judgmental sampling believe that the principal advantage of statistical sampling flows from its unique ability to A. Define the precision required to provide audit satisfaction. B. Mathematically measure uncertainty. C. Establish conclusive audit evidence with decreased audit effort. D. Promote a more legally defensible procedural approach. 3. In non-statistical sampling for tests of controls, increasing the desired confidence level results in a A. Higher tolerable deviation rate. B. Lower expected deviation rate. C. Larger sample size. D. Smaller sample size. 4. In PPS, population size is A. The dollar balance in an account. B. The number of items in an account. C. Unrelated to sample size. D. Included in the denominator of the formula to determine sample size. 5. When conducting fieldwork for a physical inventory, an auditor cannot perform which of the following steps using a generalized audit software package? A. Observing inventory. B. Selecting sample items of inventory. C. Analyzing data resulting from inventory. D. Recalculating balances in inventory reports. 6. If auditors conducting attributes sampling found that the client deviated from a prescribed control in nine of the first 10 items examined, the auditor is most likely to A. Increase sample size. B. Increase the computed upper deviation rate. C. Decrease the tolerable deviation rate. D. Stop the test and increase control risk. 7. PPS sampling should not be used if A. The population includes several large items. B. The auditor expects overstatement errors. C. Many errors are expected. D. No items in the account have zero balances. 8. The risk of incorrect acceptance and the risk of assessing control risk too low relate to the A. Preliminary estimates of materiality levels. B. Allowable risk of tolerable error. C. Efficiency of the audit. D. Effectiveness of the audit. 9. In parallel simulation, actual client data are reprocessed using an auditor software program. An advantage of using parallel simulation, instead of performing tests of controls without a computer, is that A. The test includes all types of transaction errors and exceptions that may be encountered. B. The client's computer personnel do not know when the data are being tested. C. There is no risk of creating potentially material errors in the client's data. D. The size of the sample can be greatly expanded at relatively little additional cost. 10. A primary advantage of using generalized audit packages in the audit of an advanced computer system is that it enables the auditor to A. Substantiate the accuracy of data through self-checking digits and hash totals. B. Utilize the speed and accuracy of the computer. C. Verify the performance of machine operations which leave visible evidence of occurrence. D. Gather and store large quantities of supportive evidential matter in machine readable form 11.A limitation on the scope of an audit sufficient to preclude an unqualified opinion will usually result when management A. Presents financial statements that are prepared in accordance with the cash receipts and disbursements basis of accounting. B. States that the financial statements are not intended to be presented in conformity with generally accepted accounting principles. C. Does not make the minutes of the board of directors? meetings available to the auditor. D. Asks the auditor to report on the balance sheet and not on the other basic financial statements. 12. Which of the following procedures most likely would not be included in a review engagement of a nonpublic entity? A. Inquiring about subsequent events. B. Considering whether the financial statements conform with GAAP. C. Assessing control risk. D. Obtaining a management representation letter 13. A CPA?s report on agreed-upon procedures related to an entity?s compliance with specified requirements should contain A. An acknowledgment of responsibility for the sufficiency of the procedures. B. An opinion about whether the entity complied with specified requirements. C. A statement of limitations on the use of the report. D. Negative assurance that control risk has not been assessed. 14. A CPA should not express negative or limited assurance in a standard A. Review report on financial statements of a nonpublic entity. B. Comfort letter on financial information included in a registration statement of a public entity. C. Compilation report on financial statements of a nonpublic entity. D. Review report on interim financial statements of a public entity 15. An auditor?s decision concerning whether to dual date the audit report is based upon the auditor?s willingness to A. Accept responsibility for subsequent events. B. Assume responsibility for events subsequent to the issuance of the auditor?s report. C. Permit inclusion of a footnote captioned: event (unaudited) subsequent to the date of the auditor?s report. D. Extend auditing procedures 16. When there has been a change in accounting principles, but the effect of the change on the comparability of the financial statements is not material, the auditor should A. Refer to the change in an explanatory paragraph. B. Refer to the change in the opinion paragraph. C. Not refer to consistency in the auditor?s report. D. Explicitly concur that the change is preferred. 17. The objective of the consistency standard is to provide assurance that A. There are no variations in the format and presentation of financial statements. B. Substantially different transactions and events are not accounted for on an identical basis. C. The comparability of financial statements between periods is not materially affected by changes in accounting principles without disclosure. D. The auditor is consulted before material changes are made in the application of accounting principles. 18. The AICPA Code of Professional Conduct requires compliance with accounting principles promulgated by the body designated by the AICPA Council to establish such principles. The pronouncements considered officially established accounting principles include all of the following except A. APB Opinions. B. Interpretations issued by the FASB. C. AICPA Issues Papers. D. AICPA Accounting Research Bulletins. 19. What is an auditor?s reporting responsibility concerning information accompanying the basic financial statements in an auditor-submitted document? A. The auditor should report on the accompanying information only if it contains obvious material misstatements. B. The auditor should report on the accompanying information only if the auditor did not participate in its preparation. C. The auditor should report on all the accompanying information included in the document. D. The auditor should report on the accompanying information only if the auditor participated in its preparation. 20. Grant Company?s financial statements adequately disclose uncertainties that concern future events, the outcome of which are not susceptible to reasonable estimation. The auditor?s report should include A. An unqualified opinion. B. An adverse opinion. C. An ?except for? qualified opinion. D. A ?subject to? qualified opinion. 21. Under which of the following circumstances may audited financial statements contain a note disclosing an event occurring after the balance sheet date that is labeled unaudited? A. When the event occurs after completion of field work and before issuance of the auditor?s report. B. When the subsequent event requires adjustment of the financial statements. C. When audit procedures with respect to the event were not performed by the auditor. D. When the event occurs between the date of the auditor?s original report and the date of the reissuance of the report 22. In the first audit of a new client, an auditor was able to extend auditing procedures to gather sufficient evidence about consistency. Under these circumstances, the auditor should A. Not refer to consistency in the auditor?s report. B. State that the consistency standard does not apply. C. Not report on the client?s income statement. D. State that the accounting principles have been applied consistently. 23. Which of the following requires recognition in the auditor?s report as to consistency? A. Changing the presentation of prepaid insurance from inclusion in other assets to disclosing it as a separate line item. B. Division of the consolidated subsidiary into two subsidiaries that are both consolidated. C. Changing the salvage value of an asset. D. Changing the companies included in combined financial statements. 24. If management declines to present supplementary information required by GAAP, the auditor should express A. An unqualified opinion with an additional explanatory paragraph. B. An adverse opinion. C. A qualified opinion with an explanatory paragraph. D. An unqualified opinion 25. If the auditor obtains satisfaction with respect to the accounts receivable balance by alternative procedures because it is impracticable to confirm accounts receivable, the auditor?s report should be unqualified and could be expected to A. Refer to a footnote that discloses the alternative procedures. B. Disclose in the opinion paragraph that confirmation of accounts receivable was impracticable. C. Disclose that alternative procedures were used because of a client-imposed scope limitation. D. Not mention the alternative procedures.
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