Audit 3620 Practice Problems Questions
And Answers Latest Top Score.
Which of the following statements is not correct regarding the auditor's determination of
materiality?
A.) It is the smallest amount of misstatement that would probably influence the judgment
of a reasonable person relying upon the financial statements.
B.) Auditing standards require auditors to consider materiality in planning the audit.
C.) The planning level of materiality will normally be the larger of the amount considered
for the balance sheet versus the income statement.
D.) The appropriate financial statement base for computing materiality may vary based
on the nature of the client's business. - correct answer.The planning level of materiality
will normally be the larger of the amount considered for the balance sheet versus the
income statement.
Which of the following procedures is not customarily used by the auditors in determining
the existence of related parties?
A.) Evaluate the company's procedures for identifying and properly accounting for
related-party transactions.
B.) Inquire of appropriate management personnel as to the names of all related parties
and whether there were any transactions with these parties during the period.
C.) Inquire of customers, suppliers, and employees as to their knowledge of related-
party transactions.
D.) Review prior years' work papers for the names of known related parties. - correct
answer.Inquire of customers, suppliers, and employees as to their knowledge of related-
party transactions.
The risk that a company will not be able to meet its commitments is referred to as:
A.) risk of collapse.
B.) business risk.
C.) information risk.
D.) inherent risk. - correct answer.business risk.
,The CPA exam:
A.) has four sections.
B.) requires a peer review prior to a candidate admittance to the exam.
C.)must be taken by all who wish to work for a CPA firm.
D.) is administered and graded by the individual states. - correct answer.has four
sections.
Which of the following is not an example of an assurance service?
A.) Attesting to the reliability of a financial forecast.
B.) Audit of financial statements.
C.) Review of internal control over operations.
D.) Preparation of a tax return. - correct answer.Preparation of a tax return.
Which of the following is a type of attest engagement?
A.) Internal audit services.
B.) Consulting services.
C.) Tax advisory services.
D.) Agreed-upon procedures. - correct answer.Agreed-upon procedures.
The audit of an income tax return by an auditor of the Internal Revenue Service is
considered a (an):
A.) operational audit.
B.) internal audit.
C.) compliance audit.
D.) financial statement audit. - correct answer.compliance audit.
Some of the following criteria are essential to satisfactory performance in several
professions. Which one is unique to audit work by CPAs?
A.) Due professional care.
B.) Independence.
C.) Familiarity with a complex body of technical knowledge.
D.) General competence. - correct answer.Independence.
An effect of the Sarbanes-Oxley Act of 2002 was to:
A.) reduce the accounting profession's level of self-regulation.
B.) eliminate SEC involvement with sales of securities.
C.) reduce the circumstances in which one may file securities with the SEC.
D.) require periodic peer reviews of large CPA firms performed by the General
Accounting Office. - correct answer.reduce the accounting profession's level of self-
regulation.
Which of the following is an area in which the Public Company Accounting Oversight
Board is not empowered to establish or adopt standards?
A.) Quality Control.
B.) Accounting.
, C.) Auditing.
D.) Ethics. - correct answer.Accounting.
Independent auditors of the year 1900 differed from the auditors of today in that auditors
in 1900 were more concerned with:
A.)the accuracy of the balance sheet.
B.)internal control.
C.)minimizing income taxes.
D.)the validity of the income statement. - correct answer.the accuracy of the balance
sheet.
Senior auditors typically perform all of the following tasks, except:
A.) sign the audit report.
review the working papers
B.) prepared by staff assistants.
C.) supervise staff assistants.
D.) draft the audit report. - correct answer.sign the audit report.
review the working papers
Which of the following statements concerning auditor identification of client
noncompliance with laws is correct?
A.) An auditor's responsibility to detect noncompliance with laws that have an indirect
effect on the financial statements differs from that for laws that have a direct effect.
B.) An audit in accordance with generally accepted auditing standards normally includes
highly effective special substantive audit procedures specially designed to detect
noncompliance with laws that have an indirect but immaterial effect on the financial
statements.
C.) An auditor considers compliance with laws from the perspective of the reliability of
management's representations rather than their relation to audit objectives derived from
financial statement assertions.
D.) An auditor has no responsibility to detect client noncompliance with laws that have a
direct effect on the financial statements. - correct answer.An auditor's responsibility to
detect noncompliance with laws that have an indirect effect on the financial statements
differs from that for laws that have a direct effect.
Which of the following statement is most accurate in describing an auditor's
responsibility to detect errors and fraud?
A.) The auditor should consider the client's internal control, and design the audit to
provide reasonable assurance of detecting all errors and fraud.
B.) The auditor should assess the risk that errors and fraud may cause the financial
statements to contain material misstatements, and determine whether the necessary
controls are prescribed and are being followed.
And Answers Latest Top Score.
Which of the following statements is not correct regarding the auditor's determination of
materiality?
A.) It is the smallest amount of misstatement that would probably influence the judgment
of a reasonable person relying upon the financial statements.
B.) Auditing standards require auditors to consider materiality in planning the audit.
C.) The planning level of materiality will normally be the larger of the amount considered
for the balance sheet versus the income statement.
D.) The appropriate financial statement base for computing materiality may vary based
on the nature of the client's business. - correct answer.The planning level of materiality
will normally be the larger of the amount considered for the balance sheet versus the
income statement.
Which of the following procedures is not customarily used by the auditors in determining
the existence of related parties?
A.) Evaluate the company's procedures for identifying and properly accounting for
related-party transactions.
B.) Inquire of appropriate management personnel as to the names of all related parties
and whether there were any transactions with these parties during the period.
C.) Inquire of customers, suppliers, and employees as to their knowledge of related-
party transactions.
D.) Review prior years' work papers for the names of known related parties. - correct
answer.Inquire of customers, suppliers, and employees as to their knowledge of related-
party transactions.
The risk that a company will not be able to meet its commitments is referred to as:
A.) risk of collapse.
B.) business risk.
C.) information risk.
D.) inherent risk. - correct answer.business risk.
,The CPA exam:
A.) has four sections.
B.) requires a peer review prior to a candidate admittance to the exam.
C.)must be taken by all who wish to work for a CPA firm.
D.) is administered and graded by the individual states. - correct answer.has four
sections.
Which of the following is not an example of an assurance service?
A.) Attesting to the reliability of a financial forecast.
B.) Audit of financial statements.
C.) Review of internal control over operations.
D.) Preparation of a tax return. - correct answer.Preparation of a tax return.
Which of the following is a type of attest engagement?
A.) Internal audit services.
B.) Consulting services.
C.) Tax advisory services.
D.) Agreed-upon procedures. - correct answer.Agreed-upon procedures.
The audit of an income tax return by an auditor of the Internal Revenue Service is
considered a (an):
A.) operational audit.
B.) internal audit.
C.) compliance audit.
D.) financial statement audit. - correct answer.compliance audit.
Some of the following criteria are essential to satisfactory performance in several
professions. Which one is unique to audit work by CPAs?
A.) Due professional care.
B.) Independence.
C.) Familiarity with a complex body of technical knowledge.
D.) General competence. - correct answer.Independence.
An effect of the Sarbanes-Oxley Act of 2002 was to:
A.) reduce the accounting profession's level of self-regulation.
B.) eliminate SEC involvement with sales of securities.
C.) reduce the circumstances in which one may file securities with the SEC.
D.) require periodic peer reviews of large CPA firms performed by the General
Accounting Office. - correct answer.reduce the accounting profession's level of self-
regulation.
Which of the following is an area in which the Public Company Accounting Oversight
Board is not empowered to establish or adopt standards?
A.) Quality Control.
B.) Accounting.
, C.) Auditing.
D.) Ethics. - correct answer.Accounting.
Independent auditors of the year 1900 differed from the auditors of today in that auditors
in 1900 were more concerned with:
A.)the accuracy of the balance sheet.
B.)internal control.
C.)minimizing income taxes.
D.)the validity of the income statement. - correct answer.the accuracy of the balance
sheet.
Senior auditors typically perform all of the following tasks, except:
A.) sign the audit report.
review the working papers
B.) prepared by staff assistants.
C.) supervise staff assistants.
D.) draft the audit report. - correct answer.sign the audit report.
review the working papers
Which of the following statements concerning auditor identification of client
noncompliance with laws is correct?
A.) An auditor's responsibility to detect noncompliance with laws that have an indirect
effect on the financial statements differs from that for laws that have a direct effect.
B.) An audit in accordance with generally accepted auditing standards normally includes
highly effective special substantive audit procedures specially designed to detect
noncompliance with laws that have an indirect but immaterial effect on the financial
statements.
C.) An auditor considers compliance with laws from the perspective of the reliability of
management's representations rather than their relation to audit objectives derived from
financial statement assertions.
D.) An auditor has no responsibility to detect client noncompliance with laws that have a
direct effect on the financial statements. - correct answer.An auditor's responsibility to
detect noncompliance with laws that have an indirect effect on the financial statements
differs from that for laws that have a direct effect.
Which of the following statement is most accurate in describing an auditor's
responsibility to detect errors and fraud?
A.) The auditor should consider the client's internal control, and design the audit to
provide reasonable assurance of detecting all errors and fraud.
B.) The auditor should assess the risk that errors and fraud may cause the financial
statements to contain material misstatements, and determine whether the necessary
controls are prescribed and are being followed.
