Audit Exam 2 Questions with All Correct Answers
Which of the following factors would most likely cause an auditor not to accept a new audit engagement? - Answer Concluding that the entity's management probably lacks integrity
An auditor's engagement letter most likely would include a statem...
Audit Exam 2 Questions with All
Correct Answers
Which of the following factors would most likely cause an auditor not to accept a new
audit engagement? - Answer ✔ Concluding that the entity's management probably lacks
integrity
An auditor's engagement letter most likely would include a statement regarding -
Answer ✔ Managements responsibility to provide certain written representations to the
auditor
Which of the following factors most likely would lead a CPA to conclude that a potential
audit engagement should not be accepted? - Answer ✔ It is unlikely that sufficient
appropriate evidence is available to support an option on the F/S
Which of the following factors most likely would cause a CPA to decline to accept a new
audit engagement? - Answer ✔ Management is unwilling to permit inquiry of its legal
counsel
A precondition for an audit most likely is not present when management - Answer ✔
Refuses to acknowledge its responsibility for the fair presentation of the f/s in
accordance w/ the applicable reporting framework
The concept of materiality is least important to an auditor when considering the -
Answer ✔ Effects of a direct financial interest in the client on the CPAs independence
Under the ethical standards of the profession, which of the following investments by a
CPA in a corporate client is an indirect financial interest? - Answer ✔ An investment
held through a regulated mutual fund
An auditor's independence is considered impaired if the auditor has - Answer ✔ A joint,
closely held business investment with the client that is material to the auditor's net worth
Kar, CPA, is a staff auditor participating in the audit engagement of Fort, Inc. Which of
the following circumstances most likely impairs Kar's independence? - Answer ✔ Kar's
sibling is the director of internal auditing for Fort
, According to the standards of the profession, which of the following circumstance will
prevent a CPA performing audit engagements from being independent - Answer ✔
Employment of the CPAs spouse as a client's director of internal control
According to the ethical standards of the profession, a CPA's independence would most
likely be impaired if the CPA - Answer ✔ Contracted with a client to supervise the clients
office personnel
On June 1, yr 1, a CPA obtained a $100,000 personal loan form a financial institution
client for whom the CPA provided compilation services.... - Answer ✔ Yes, because the
CPA was not required to be independent when the loan was granted
Under the ethical standards of the profession, which of the following positions would be
considered a position of significant influence in an audit client? - Answer ✔ A policy-
making position in the clients finance division
Which activity performed as non attest services for a nonpublic client impairs a CPAs
independence - Answer ✔ determining which recommendations for improving internal
controls should be implemented
An accountant has an immaterial direct financial interest in a nonpublic entity. The
accountant is - Answer ✔ Not independent and may not perform a review
Which of the following statements reflects an auditors responsibility for detecting fraud
and errors? - Answer ✔ An auditor should design the audit to provide reasonable
assurance of detecting fraud and errors that are material to the F/S.
Which of the following statements describes why a properly planned and performed
audit may not detect a material misstatement due to fraud? - Answer ✔ Audit procedure
that are effective for detecting an error may be ineffective for detecting fraud that is
concealed through collusion
What is the primary objective of the fraud brainstorming session? - Answer ✔ Assess
the potential for material misstatement due to fraud
Because of the risk of material misstatement, an audit of financial statements in
accordance with generally accepted auditing standards should be planned and
performed with an attitude of - Answer ✔ Professional skepticism
In every audit, the members of the audit team should discuss the potential for material
misstatement due to fraud. This discussion - Answer ✔ Includes brainstorming about
how assets can be misappropriated
During the consideration of fraud in a financial statement audit, the auditor should
identify and assess risks that may result in material misstatements due to fraud. This
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