question

Which of the following factors most likely would cause a CPA to decide not to accept a new audit engagement?

answer

Management's disregard of its responsibility to maintain an adequate internal control environment.

question

what organization is responsible for setting auditing standards for audits of publicly-traded companies in the us

answer

PCAOB

question

which best describes the general character of the three pcaob generally accepted auditing standards that are classified as standards of field work

answer

the criteria of audit planning and evidence gathering

question

becasue of the risk of material misstatement, an audit of financial statement in accordance with generally accepted auditing standards should be planned and performed with an attitude of

answer

professional skepticism

question

which of the following is not a requirement of the sarbanes oxley act.

answer

a certain number of hours which is based on the size of the company being audited must be spent on each audit engagement

question

Which of the following factors would be of least importance to an auditor in determining how much reliance can be placed on the work of internal auditors?

answer

The nature of the audit software documentation used by the internal auditors.

question

the three pcaob general standards are concerned with

answer

independence,adequte training and due professional care

question

Which of the following would most likely indicate the existence of related parties?

answer

Borrowing money at an interest rate substantially below the prevailing market rate of interest.

question

Tests of controls include all of the following except:

answer

Analytical procedures.

question

The main diffrence between sas and au is

answer

sas are issued by the asb and au are issued by the pcaob

question

Which of the following would NOT be a typical supervisory activity for an audit?

answer

Review the work of other engagement team members.

question

Which of the following statement regarding the pcaob is incorrect a)it is a public selector,nonprofit corporation b)it is overseen by sec c)it sets standards for public company d)it has delegated all of its standard-setting authority to the AICPA

answer

d)it has delegated all of its standard-setting authority to the AICPA

question

to provide for the greatest degree of independence in performing internal audit activities, the internal audit function most likely should report to the

answer

corporate controller

question

According to the text, the first step in applying materiality to an audit is

answer

To determine a materiality level for the overall financial statements.

question

which of the following arranges the general types of audit test in the order they are normally performed in an audit

answer

risk assessment procedures,test of controls, and substantive procedures

question

For which laws and regulations does the auditor have the same responsibility as that for errors and fraud?

answer

Laws and regulations that have a direct and material effect on the financial statements.

question

to emphasize auditor independence from management publicly traded corporations are required to

answer

have the independent auditor report to an audit committee to independent member of the board of directors.

question

For which laws and regulations does the auditor have the same responsibility as that for errors and fraud?

answer

Laws and regulations that have a direct and material effect on the financial statements.

question

When establishing an understanding with the entity regarding the terms of the engagement, all of the following should be discussed, except:

answer

The agreed upon limits on auditor liability for an improper audit.

question

The preliminary engagement activities include all of the following except:

answer

Ensure that there is an independent audit committee.

question

A dual-purpose test is

answer

A procedure that serves as both a test of control and a substantive test of transactions.

question

The existence of audit risk is recognized by the statement in the auditor's standard report that the:

answer

Auditor obtains reasonable assurance about whether the financial statements are free of material misstatements.

question

Which of the following factors would an auditor least likely consider when assessing the inherent risk associated with sales transactions?

answer

The nature of the credit authorization process.

question

The risk that an auditor's procedures will lead to a conclusion that a material misstatement in an account balance does not exist when, in fact, a misstatement does exist, is known as:

answer

Detection risk.

question

One of your clients recently upgraded its accounting system from a medium-scale general ledger package to a complex state-of-the-art enterprise resource planning system. This installation took place over the last nine months of the entity's fiscal year and is nearly 100% complete by the balance sheet date. Which of the following best describes the main affect of this event on the audit risk model for the current year?

answer

It will likely increase the risk of material misstatement.

question

Which of the following would be classified as an error?

answer

A) Misinterpretation by management of facts that existed when the financial statements were prepared.

question

Which of the following factors is least likely to represent an opportunity to commit fraud?

answer

Operating losses make a hostile takeover imminent

question

The auditor obtains an understanding of the entity and its environment by performing all of the following assessment procedures except:

answer

Compute the level of detection risk.

question

Which of the following statements is false as it relates to the auditor's responsibility to document the risk assessment?

answer

The level of risk must be set quantitatively (i.e., inherent risk is 60%).

question

Which of the following is not one of the three conditions that are generally present when fraud occurs?

answer

Collusion

question

Audit risk is typically considered and assessed: A) At the assertion level. B) At the account balance level. C) For the financial statements as a whole. D) All of the above.

answer

All of the above.

question

If risk of material misstatement is higher than originally anticipated, the auditor may respond by:

answer

Increasing supervision.

question

If the auditor determines that a material misstatement may be due to fraud, the auditor should do all of the following except:

answer

Alert the authorities

question

Which of the following represents a factual misstatement?

answer

A misstatement found by the auditor that is due to incorrect pricing on a sales invoice.

question

If acceptable audit risk is set at low and the assessed risk of material misstatement is high, then detection risk must be:

answer

low

question

The disclosure of fraud to parties other than the entity's senior management and its audit committee ordinarily would be precluded by the auditor's ethical or legal obligations of confidentiality. However, the auditor has a duty to disclose the information to parties outside the entity in all of the following circumstances except:

answer

C) A Wall Street analyst inquiry regarding future profit projections.

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