02 Jan Agreed-upon procedures

DeVry ACCT444 Week 1 Quiz latest october 2016

1. Question :

(TCO 3) The organization that is responsible for providing oversight for auditors of public companies is called the _____

Auditing Standards Board.

American Institution of Public Accountants.

Accounting Oversight Board.

Public Company Accounting Oversight Board.

Question 2. Question :

(TCO 1) Which one of the following is not a field work standard?

Adequate planning and supervision

Due professional care

Understand the entity and its environment, including internal control

Sufficient appropriate audit evidence

Question 3. Question :

(TCO 1) An independent auditor must have which of the following?

A pre-existing and well-informed point of view with respect to the audit

Technical training that is adequate to meet the requirements of a professional

A background in many different disciplines

Question 4. Question :

(TCO 1) Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n) _____

accounting and bookkeeping service.

attestation service.

assurance service.

tax service.

Question 5. Question :

(TCO 1) Which of the following statements is incorrect regarding the SEC’s partner rotation rules?

All audit partners must rotate off the audit engagement after 5 years.

Small firms may be exempted from the partner rotation requirement.

The lead and concurring partners are subject to a 5-year time out period.

Other audit partners are subject to a 2-year time out period.

Question 6. Question :

(TCO 3) The concept of materiality would be least important to an auditor when considering the

adequacy of disclosure of a client’s illegal act.

discovery of weaknesses in a client’s internal control.

effects of a direct financial interest in the client on the CPA’s independence.

decision whether to use positive or negative confirmations of accounts receivable.

Question 7. Question :

(TCO 3) An auditor strives to achieve independence in appearance to

maintain public confidence in the profession.

be in a position to offer other services to the client.

comply with the generally accepted accounting principles.

maintain a biased mental attitude.

Question 8. Question :

(TCO 3) Several months after an unqualified audit report was issued, the auditor discovered the financial statements were materially misstated. The client’s CEO agrees that there are misstatements, but refuses to correct them. She claims that confidentiality prevents the CPA from informing anyone.

The CEO is correct and the auditor must maintain confidentiality.

The CEO is incorrect, but because the audit report has been issued, it is too late.

The CEO is correct, but to be ethically correct the auditor should violate the confidentiality rule and disclose the error.

Question 9. Question :

(TCO 1) Which of the following statements is correct concerning an auditor’s responsibilities regarding financial statements?

An auditor may not draft an entity’s financial statements based on information from management’s accounting system.

The adoption of sound accounting policies is an implicit part of an auditor’s responsibilities.

An auditor’s responsibilities for audited financial statements are confined to the expression of the auditor’s opinion.

Question 10. Question :

(TCO 1) Which of the following items impairs independence under U.S. ethics standards but does not necessarily impair independence under the IFAC Code of Ethics for Professional Accountants?

An immaterial direct financial interest in an audit client

Employment at a client of an immediate family member of the engagement partner in a key accounting position

The auditor also provides internal audit outsourcing services

Contingent fee arrangements for audit engagements

DeVry ACCT444 Week 2 Quiz latest october 2016

1. Question :

(TCO 4) If a CPA firm is being sued for common law fraud by a third party based on materially false financial statements, which of the following is the best defense the accountants could assert?

A disclaimer contained in the engagement letter

Lack of privity

Non-negligent performance

Contributory negligence on the part of the client

Question 2. Question :

(TCO 4) “Absence of reasonable care that can be expected of a person is a set of circumstances” defines

pecuniary negligence.

gross negligence.

extreme negligence.

ordinary negligence.

Question 3. Question :

(TCO 4) A third-party beneficiary is one that

has failed to establish legal standing before the court.

does not have privity of contract and is unknown to the contracting parties.

does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract.

may establish legal standing before the court after a contract has been consummated.

Question 4. Question :

(TCO 4) Tort actions against CPAs are more common than breach of contract actions because

there are more torts than contracts.

the burden of proof is on the auditor rather than on the person suing.

the person suing need prove only negligence.

the amounts recoverable are normally larger.

Question 5. Question :

(TCO 4) If the auditor believes that the financial statements are not fairly stated or is unable to reach a conclusion because of insufficient evidence, the auditor

should withdraw from the engagement.

should request an increase in audit fees so that more resources can be used to conduct the audit.

has the responsibility of notifying financial statement users through the auditor’s report.

should notify regulators of the circumstances.

Question 6. Question :

(TCO 3) Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements?

The auditor commonly examines a sample, rather than the entire population of transactions.

Accounting presentations contain complex estimates, which involve uncertainty.

Fraudulently prepared financial statements are often difficult to detect.

Auditors believe that reasonable assurance is sufficient in the vast majority of cases.

Question 7. Question :

(TCO 3) In the fraud triangle, fraudulent financial reporting and misappropriation of assets

share little in common.

share most of the same risk factors.

share the same three conditions.

share most of the same conditions.

Question 8. Question :

(TCO 3) Fraudulent financial reporting may be accomplished through the manipulation of

assets.

liabilities.

revenues.

all of the above.

Question 9. Question :

(TCO 3) Which of the following is a factor that relates to incentives to misappropriate assets?

Significant accounting estimates involving subjective judgments

Significant personal financial obligations

Management’s practice of making overly aggressive forecasts

High turnover of accounting, internal audit and information technology staff

Question 10. Question :

(TCO 3) Which of the following characteristics is most likely to heighten an auditor’s concern about the risk of material misstatements, due to fraud in an entity’s financial statements?

Employees who handle cash receipts are not bonded.

The entity’s industry is experiencing declining customer demand.

Internal auditors have direct access to the board of directors and the entity’s management.

The board of directors is active in overseeing the entity’s financial reporting policies.

DeVry ACCT444 Week 3 Quiz latest october 2016

1. Question :

(TCO 6) The distinction between physical examination of assets and examination of documents is dependent on the item being examined. If the object being examined has no inherent value, the evidence is called

documentation.

physical examination.

confirmation.

none of the above.

Question 2. Question :

(TCO 6) Analytical procedures are

diagnostic tests of financial information that may not be classified as evidential matter.

calculations of financial information made by a computer.

substantive tests of financial information made by a study and comparison of relationships among data.

statistical tests of financial information designed to identify areas requiring intensive investigation.

Question 3. Question :

(TCO 6) Which of the following statements regarding analytical procedures is not correct?

The definition of analytical tests emphasizes a comparison of client’s data to GAAP.

Analytical procedures are required on all audits.

Analytical procedures can be used as substantive tests.

For certain accounts with small balances, analytical procedures alone may be sufficient evidence.

Question 4. Question :

(TCO 6) Which of the following statements about confirmation is true?

Confirmations are expensive and so are often not used.

Confirmations may inconvenience those asked to supply them, but they are widely used.

Confirmations are sometimes not reliable and so auditors use them only as necessary.

None of the above statements are true.

Question 5. Question :

(TCO 7) Analytical procedures used in planning an audit should focus on identifying

Student Answer: material weaknesses of internal control.

the predictability of financial data from individual transactions.

the various assertions that are embodied in the financial statements.

areas that may represent specific risks relevant to the audit.

Question 6. Question :

(TCO 7) A measure of the auditor’s assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client’s internal control is

acceptable audit risk.

control risk.

inherent risk.

statistical risk.

Question 7. Question :

(TCO 7) Which of the following is not correct regarding the communications between successor and predecessor auditors?

The burden of initiating the communication rests with the predecessor auditor.

The burden of initiating the communication rests with the successor auditor.

The predecessor auditor must receive their former client’s permission prior to divulging information to the successor auditor.

The predecessor auditor may choose to provide a limited response to a successor auditor.

Question 8. Question :

(TCO 8) The preliminary judgment about materiality is the _____ amount by which the auditor believes the statements could be misstated and still not affect the decisions of reasonable users.

minimum

maximum

mean average

median average

Question 9. Question :

(TCO 8) When auditors allocate the preliminary judgment about materiality to account balances, the materiality allocated to any given account balance is referred to as

the materiality range.

the error range.

tolerable materiality.

tolerable misstatement.

Question 10. Question :

(TCO 8) Why do auditors establish a preliminary judgment about materiality?

To determine the appropriate level of audit experience required for the work

So that the client can know what records to make available to the auditor

To plan the appropriate audit evidence to accumulate and develop an overall audit strategy

None of the above

DeVry ACCT444 Week 4 Quiz latest october 2016

Question 1. Question :

(TCO 5) Which of the following is responsible for establishing internal controls for a public company?

Management

Financial statement auditors

Management and auditors

Committee of Sponsoring Organizations

Question 2. Question :

(TCO 5) Sarbanes-Oxley requires management to issue an internal control report that includes two specific items. Which of the following is one of these two requirements?

A statement that management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting

A statement that management and the board of directors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting

A statement that management, the board of directors, and the external auditors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting

None of the above

Question 3. Question :

(TCO 5) Which of the following activities would be least likely to strengthen a company’s internal control?

Separating accounting from other financial operations

Maintaining insurance for fire and theft

Fixing responsibility for the performance of employee duties

Carefully selecting and training employees

Question 4. Question :

(TCO 5) Internal controls can never be regarded as completely effective. Even if company personnel could design an ideal system, its effectiveness depends on the

adequacy of the computer system.

proper implementation by management.

ability of the internal audit staff to maintain it.

competency and dependability of the people using it.

Question 5. Question :

(TCO 5) Which of the following is not one of the levels of an absence of internal controls?

Major deficiency

Material weakness

Significant deficiency

Control deficiency

Question 6. Question :

(TCO 10) Which of the following is not a benefit of using IT-based controls?

Ability to process large volumes of transactions

Ability to replace manual controls with computer-based controls

Reduction in misstatements due to consistent processing of transactions

Over-reliance on computer-generated reports

Question 7. Question :

(TCO 10) Programmers should do all but which of the following?

Test programs for proper performance

Evaluate legitimacy of transaction data input

Develop flowcharts for new applications

Programmers should perform each of the above

Question 8. Question :

(TCO 10) Which of the following is least likely to be used in obtaining an understanding of client general controls?

Examination of system documentation

Inquiry of client personnel (e.g. key users)

Observation of transaction processing

Reviews of questionnaires completed by client IT personnel

Question 9. Question :

(TCO 10) Auditors should evaluate the _____ before evaluating application controls because of the potential for pervasive effects.

input controls

control environment

processing controls

general controls

Question 10. Question :

(TCO 10) Which of the following is not a category of an application control?

Processing controls

Output controls

Hardware controls

Input controls

DeVry ACCT444 Week 5 Quiz latest october 2016

1. Question :

(TCO 6) Tests of controls may include which of the following types of evidence?

Observation

Reperformance

Inquiries

All of the above

Question 2. Question :

(TCO 6) Which of the following is not a direct result of performing analytical procedures?

Identify areas of potential misstatements.

Reduce detailed audit risk.

Understand the client’s business.

Identify specific errors in the accounts.

Question 3. Question :

(TCO 6) Ending account balances may be audited through the use of which of the following types of audit procedures?

Tests of details of balances

Analytical procedures

Tests of controls

Both A and B are correct

Question 4. Question :

(TCO 6) Which of the following represents an incorrect pairing of a type of audit test and evidence?

Procedures to obtain an understanding of internal controls—documentation

Analytical procedures—ratio analysis

Substantive tests of transactions—confirmation

Tests of details of balances—physical examination

Question 5. Question :

(TCO 6) In the context of an audit of financial statements, substantive tests are audit procedures that

may be eliminated under certain conditions.

are designed to discover significant subsequent events.

may be either tests of transactions, tests of balances, or analytical tests.

will increase proportionately with the auditor’s reliance on internal control.

Question 6. Question :

(TCO 9) The use of prenumbered sales invoices is meant to prevent

the failure to bill or record sales.

duplicate billings and recording of sales.

both A and B are correct.

neither A nor B is correct.

Question 7. Question :

(TCO 9) The auditor is concerned with authorization of sales transactions at three key points. Which of the following is not one of those points?

Credit authorization

Shipment of inventory to customers

Sales commission calculation

Sales prices

Question 8. Question :

(TCO 9) To achieve good internal control, which department should perform the activities of matching shipping documents with sales orders and preparing daily sales summaries?

Billing

Shipping

Credit

Payables

Question 9. Question :

(TCO 9) An auditor needs to determine whether all customers of an electric utility company are being billed. The auditor should test from the

sales register to the accounts receivable ledger.

sales register to the meter department records.

accounts receivable ledger to the sales ledger.

meter department records to the sales register.

Question 10. Question :

(TCO 9) A key internal control in the sales and collection cycle is the separation of duties between cash handling and record keeping. The objective most directly associated with this control is to verify that

cash receipts recorded in the cash receipts journal are reasonable.

cash receipts are properly classified.

recorded cash receipts result from legitimate transactions.

existing cash receipts are recorded.

DeVry ACCT444 Week 6 Quiz latest october 2016

Question 1. Question :

(TCO 9) The exception rate the auditor will permit in the population and still be willing to reduce the assessed level of control risk is called the

tolerable exception rate.

estimated population exception rate.

acceptable risk of overreliance.

sample exception rate.

Question 2. Question :

(TCO 9) A sample in which every possible combination of items in the population has an equal chance of constituting the sample is a

random sample.

statistical sample.

judgment sample.

representative sample.

Question 3. Question :

(TCO 9) To determine if a sample is truly representative, an auditor must

conduct multiple samples of the same population.

never use sampling because of the expense involved.

audit the entire population.

perform none of the above.

Question 4. Question :

(TCO 9) Cutoff misstatements can occur for

sales.

sales returns and allowances.

cash collections.

any of the above.

Question 5. Question :

(TCO 9) Auditing standards require auditors to confirm accounts receivable with some exceptions. Which of the following is not one of the exceptions allowed by auditing standards?

The accounts receivable balance is comprised of several very large customer balances.

Accounts receivable are immaterial.

Response rates are likely to be very low.

The combined level of inherent risk and control risk are low and other substantive evidence can be obtained.

Question 6. Question :

(TCO 9) For most audits, inherent risk for accounts receivable is moderate or low except for which balance-related audit objectives?

Timing and realizable value

Completeness and existence

Existence and accuracy

Realizable value and cutoff

Question 7. Question :

(TCO 9) An auditor should perform alternative procedures to substantiate the existence of accounts receivable when

no reply to a positive confirmation request is received.

no reply to a negative confirmation request is received.

collectibility of receivables is in doubt.

pledging of the receivables is probable.

Question 8. Question :

(TCO 9) When auditors sample for tests of details of balances, the objective is to determine

whether the account balance being audited is fairly stated.

whether the transactions being audited are free of misstatements.

whether the controls being tested are operating effectively.

whether the transactions and account balances being audited are fairly stated.

Question 9. Question :

(TCO 9) Sampling risk maybe controlled by

reducing down the sample size.

using only random sampling.

using the sample technique most appropriate for the population.

using audit software.

Question 10. Question :

(TCO 9) The acceptable risk of incorrect acceptance is most related to

audit efficiency.

audit results.

audit effectiveness.

None of the above

DeVry ACCT444 Week 7 Quiz latest october 2016

1. Question :

(TCO 2) When a misstatement in the financial statements exists, but is unlikely to affect the decisions of a reasonable user, it would be appropriate to issue

an unqualified opinion.

a qualified opinion.

an adverse opinion.

a disclaimer of opinion.

Question 2. Question :

(TCO 2) When a client has not applied GAAP consistently from the prior year to the current year, the auditor does not concur with the appropriateness of the change, and the change in GAAP has a material effect on the financial statements, the auditor should issue a(n)

disclaimer.

adverse opinion.

unqualified opinion.

qualified opinion.

Question 3. Question :

(TCO 2) When qualifying an opinion because of an insufficiency of audit evidence, an auditor should refer to the situation in the:

Auditor’s Responsibility Paragraph

Notes to the Financial Statements

Yes

Yes

Auditor’s Responsibility Paragraph

Notes to the Financial Statements

Yes

No

Auditor’s Responsibility Paragraph

Notes to the Financial Statements

No

Yes

Auditor’s Responsibility Paragraph

Notes to the Financial Statements

No

No

Question 4. Question :

(TCO 2) Jules, CPA, is reporting on comparative financial statements, but Shah, CPA conducted the previous year’s audit. Which of the following is not true in this situation?

Dual dating may be used to indicate the appropriate dates for each audit.

If Shah’s report is not presented, an other-matter paragraph should be included to describe this situation.

If Shah’s report was qualified due to a scope limitation, Jules may still issue an unmodified opinion on the current year’s financial statements.

If Shah’s report will be presented, management will need to provide a representation letter to Shah.

Question 5. Question :

(TCO 11) Which of the following is not a purpose of the client letter of representation?

To impress upon the audit firm its responsibility for the audit

To impress upon management its responsibility for the financial statement assertions

To remind management of potential misstatements or omissions in the financial statements

To document the responses from management to inquiries about various aspects of the audit

Question 6. Question :

(TCO 2) Under U.S. auditing standards, when an auditor believes there is substantial doubt about the ability of an entity to continue as a going concern, all of the following should be included in the audit documentation, except:

The conditions that gave rise to the substantial doubt.

The auditor’s conclusion about whether substantial doubt remains or is alleviated.

Management’s conclusion regarding whether substantial doubt remains or is alleviated.

The effect of the auditor’s conclusion on the auditor’s report.

Question 7. Question :

(TCO 2) Which of the following statements is a basic element of the auditor’s report under U.S. auditing standards?

The disclosures provide reasonable assurance that the financial statements are free of material misstatement.

The auditor evaluated the overall internal control.

An audit includes evaluating significant estimates made by management.

The financial statements are consistent with those of the prior period.

Question 8. Question :

(TCO 11) The audit step most likely to reveal the existence of contingent liabilities is

a review of vouchers paid during the month following the year-end.

accounts payable confirmations.

mortgage-note confirmation.

an inquiry directed to legal counsel.

Question 9. Question :

(TCO 2) In which type of report would you read the following statement: “We believe that our examination provides a reasonable basis for our opinion.”?

Review

Audit

Examination

Agreed-upon procedures

Question 10. Question :

(TCO 2) Which of the following reporting options is least likely with regard to supplementary information that is required by GAAP?

The auditor’s report on the financial statements includes an other-matter paragraph stating that the auditor has applied the required procedures.

A disclaimer of opinion is issued on supplementary information.

The auditor’s report on the financial statements includes both an opinion on the supplementary information and a statement restricting the use of the report.

The auditor’s report on the financial statements includes an opinion regarding whether the supplementary information is fairly stated in all material respects in relation to the financial statements taken as a whole.