The form of attestation that provides the highest form of assurance is a(n):
D. Examination
Audits of financial statements include an expression of a conclusion about which of the following financial statement characteristics?
B. Reliability
A review of company's fin state by a CPA firm:
B. Is designed to provide limited assurance.
The Sarbanes Oxley Act included provisions establishing the:
B. Public Company Accounting Oversight Board.
In performing a financial statement audit, which of the following would an auditor be least likely to consider?
D. Quality of management's business decisions
Which of the following is not considered a type of audit?
D. Sufficiency audit
Internal auditors are most likely to issue a report on which of the following?
D. Internal Control
With which of the following is the AICPA least concerned?
A. Standards guiding the conduct of internal auditors
If an auditor had a substantial stock investment in a client that they were auditing, which of the following would be true?
C. The auditor would lack independence
The attest function:
A. Includes the preparation of a written report of the CPA's findings.
GAAP are distinguished from GAAS in that:
A. GAAP - principles for presentation of the financial statements/underlying transactions, GAAS are standards auditors follow when conduct an audit.
When GAAS does not provide "hard/fast rules," they provide subject guides which allow auditors to:
C. Use adequate professional judgment when applying the standards.
The Sarbanes-Oxley Act requires that auditors of certain large publicly traded companies in the US perform an integrated audit that includes providing an audit report on a company's internal control and which of the following?
D. Use adequate professional judgment when applying the standards.
B. Financial statements
Which of follow is not underlying premise of audit relating to mgmt.'s response to provide an auditor?
C. Provide inner-connectivity to all operating databases used during the previous three periods
The auditors provide an opinion on whether the financial statements are presented in accordance with the:
A. Applicable financial reporting framework
The primary difference between financial statement errors and fraud is that:
A. Errors are unintentional mistakes or omissions, while fraud involves intentional misstatements.
Auditors responsibility for identifying "direct effect: illegal acts differs from their responsibility for detecting
D. Other illegal acts
When the Statements on Auditing Standards use the word "must" relating to a requirement, it means that the auditor:
B. Must fulfill the req when it is possible
The level of assurance provided by an audit of detecting a material misstatement is referred to as:
C. Reasonable assurance
Which of the following is not a function of the Public Company Accounting Oversight Board?
B. Promulgate accounting principles
If financial statements are not fairly presented on an overall basis, the most likely type of audit opinion will be a(n):
C. Adverse opinion
Professional skepticism includes a questioning mind and a(n):
A. Critical assessment of audit evidence
Ethical dilemmas generally involve situations in which the:
D. Welfare of one or more individuals is affected by another's decision.
Which of the following forms of organization is most likely to restrict the personal liability of CPAs not involved on a particular audit that their firm has conducted.
B. Limited liability partnership
Which of the following is correct concerning the AICPA Conceptual Framework for intendant standards?
B. Applies when the Code of Professional Conduct does not directly address a threat to independence.
Which of the following is not considered by the AICPA Conceptual Framework for Independent Standards Board category of threat to auditor independence?
D. safeguards
A CPA's investment in the stock of an audit client is considered a(n):
D. Direct financial interest which impairs independence regardless of amount
Which of the following statements are true with respect to the SECs concept of indendence when auditors both prepare financial statements and audits those financial statements for a client?
A. The auditor is not independent
In which circumstance is a CPA firm's independence most likey to be impaired?
B. Spouse of a staff member on the audit has an immaterial common stock investment in the audit client
Which of the following partners is least likely considered a "covered member" for purposes of audit of Company A, performed by the Chicago office of a national CPA firm?
B. A parent in the San Diego office of CPA firm who maintains small, immaterial investment in Company A.
Which of the following is a correct statement concerning the Sarbanes-Oxley Act of 2002?
D. Make performance of nonattestation service related to financial information system and design and implementation for audit clients unlawful.
Contingency fee based pricing of accounting services is:
B. Prohibited if associated with the type of audit opinion received.
Which of the following best describes the passing of confidential information from a client to its auditor, that information:
C. Is not legally protected and can be subpoenaed by a federal court.
Which of the following is a correct statement concerning a publicly traded company that purchases the practice of a public accy firm?
A. It must separate performance of attestation service and allow them to perform by remaining "shell" public accy firm it has purchased (or by another public accy firm)
Which of the following is not a component of audit risk?
B. Sufficiency Risk
Which type of risk does an auditor have control over through substantive auditing procedures?
B. Detection Risk
Which type of risk does the management of a company have the most control over in the short term?
A. Control Risk
Which of the following descriptions best describes inherent risk?
D. The possibility that a material misstatement will occur in any given account before considering internal control.
Further audit procedures include:
B. Test of controls
Which of the following is a basic procedure used in an audit?
A. Substantive procedures
Auditors must gather "sufficient appropriate audit evidence" to support their audit opinion. Which of the following is least likely to serve as a subject for performing other audit procedures?
D. Obtaining a representation letter signed by top management.
The type of transactions that ordinarily have a high inherent risk because they involve management judgments or assumptions are referred to as:
D. Estimation transactions
Which of the following ordinarily is considered the weakest form of evidence?
D. Replies by company employees to auditor oral inquires.
Which method of analytical procedure analysis is most useful because many expenses, such as COGS, might be expected to bear a predictable relationship to net sales?
C. Vertical analysis
One type of analytical procedure is trend analysis. Which of the following is the best example of trend analysis?
D. Comparison of inventory levels over the past 3 years
Which of the following is not one of the primary approaches auditors use when evaluating the reasonableness of accounting estimates?
D. Comparison of inventory levels over the past 3 years
Audit documentation relating to the A company audit should be sufficient to allow which type of auditor to understand the audit work performed?
A. An experienced auditor
Documentation may not be deleted from the working papers after the:
C. Documentation completion date
Adequate planning and design of an audit is necessary for an auditor to restrict which type of audit risk?
B. Detection Risk
B&M auditors accepted as the auditors of (3W). What are B&M's responsibilities with regard to contacting 3W's predecessor auditors?
A. B&M should attempt to communicate with the predecessor auditors and ask how accounting policy disagree with 3W
An engagement letter is best described as which of the following?
C. A letter from the auditor to company mgmt. specifies responses of both company and auditors in completing audit and the timing for its completion.
Materiality can best be described as which of the following?
D. Materiality is the amount at which judgments based on the financial statements may be altered.
Which of the following is least likely to be required on an audit?
A. Make a legal determination of whether fraud has occurred.
Which of the following is most likely to be an overall response to fraud risks identified in an audit?
D. Use less predictable audit procedures
Which of the following is most likely to be presumed to represent a fraud risk on an audit?
C. Improper revenue recognition
Which of the following is least likely to be included in an auditor's inquire of management while obtaining information to identify the risks of material misstatement due to fraud?
A. Are financial reporting operations controlled by and limited to one location?
An audit plan is a:
C. Document provides overview of company and a general plan for the audit work to be accompanied, timing of the work, and other matters of concern to the audit
Which state describes interaction of the systems and substantive approaches in the audit plan?
B. The systematic approach focuses on testing controls if effective, while the substantive approach is the detailed testing of specific accounts for accuracy.
Tracing from source documents to journals most directly addresses which financial statement assertion
C. Completeness
Internal control is primarily established within a company to do which of the following?
C. Provide reasonable assurance that the company's objective will be achieved
Provide reasonable assurance with respect to which of the following is not required under the internal control provisions of the Foreign Corrupt Practices Act?
D. Access to assets is limited to members of management
Which of the following is considered a control environment factor by the COSO definition of internal control
A. Integrity and ethical values
Billy responsible for custody of the fixed goods in warehouse. If this company wishes to maintain a strong internal control, which of the following response are incompatible with his primary job?
B. He is responsible for the accounting records for all receipts/shipments of goods from the warehouse
Which of the following is least likely when an auditor performs an integrated audit of a public company's financial statements?
A. Issuing an audit report on internal control over financial reporting
B. Issuing an audit report on the financial statement
C. Omitting tests of controls for several major accounts
D. Performing tests of internal control design effectiveness.
Omitting tests of controls for several major accounts
Which of the following describes the functionality of a fidelity bond?
B. An insurance policy that covers theft by a bonded employee
Tests of controls are used to test whether controls are:
A. Operating effectively
Tests of controls are least likely to include
A. Inquiries of appropriate client vendors
Which of the following is most likely to be considered an inherent limitation of a client's internal control?
C. Human Errors
Which of the following is one of the most fundamental and effective controls?
C. Segregation of incompatible duties across several people
Control risk is most likely to be assessed at a level below the maximum when?
B. Tests of controls have been performed
The results of the consideration of internal control are least likely to affect the auditors' decisions pertaining to:
