Adaptive Drill 1

Question 0

If management refuses a material inconsistency in other information, the auditor must report the matter to governance personnel and can either…3

Answer 0

1 withhold the auditor’s report

2 withdraw from the engagement

3 or do both

Question 1

If management refuses a material inconsistency in other information, the auditor must…

Answer 1

Report the matter to governance personnel

Question 2

Search for unrecorded liabilities, is least likely to…

Answer 2

Be performed before the balance sheet date

Question 3

Accounts receivable may be confirmed prior to the balance sheet date if…

Answer 3

The auditor concludes internal controls surrounding A/R are effective

Question 4

Inventory counts may be observed prior to year end if…2

Answer 4

1 the client maintains perpetual inventory records and

2 controls surrounding those records are effective

Question 5

With respect to special purpose financial statements, if such statements constrain items for which GAAP would require disclosure, the financial statements may…

Answer 5

Provide the relevant disclosure that would be required for those
Items in GAAP presentation

Question 6

what does GAAS provides for presenting…2

Answer 6

1 Qualitative disclosures in special purpose format

2 but no requirements for quantitative disclosures along with it

Question 7

Precision is a statistical measure of the maximum likely difference between the sample estimate and the true but unknown population total, and is directly related to…

Answer 7

Materiality

Question 8

Precision or confidence interval represents the…

Answer 8

Range of values within which the true but unknown population
Total will fall

Question 9

In a group audit, which of the following parties is responsible for obtaining an understanding of the component auditor?

Answer 9

Group engagement team

Question 10

Although the group engagement partner is responsible for final approval, the group engagement partner is not involved in…

Answer 10

Not involved in obtaining an understanding of the component

auditor

Question 11

Which of the following is the authoritative body designated to promulgate attestation standards?

Answer 11

Auditing Standards Board

Question 12

An auditor is required by the second standard of fieldwork to…

Answer 12

Obtain an understanding of the client’s internal control structure

Question 13

An auditor is required by the second standard of fieldwork to obtain an understanding of the client’s internal control structure, which includes…3

Answer 13

1 control environment

2 accounting system

3 control procedures

Question 14

When an auditor assesses control risk at the maximum level, the auditor is required to document the auditor’s…2

Answer 14

1 understanding of client’s internal control structure and

2 his conclusions about assessed level of control risk

Question 15

If the auditor decides to assess control risk at the maximum…

Answer 15

The basis for that conclusion does not have to be documented

Question 16

If the auditor decides to assess control risk at less than the maximum…

Answer 16

The basis of conclusion must be documented

Question 17

2 services a CPA may perform in carrying out a consulting service for a client

Answer 17

1 review of client prepared business plan

2 preparation of information for obtaining financing

Question 18

Types of consulting services:

Give an example of consultations

Answer 18

Review client’s business plan

Question 19

Types of consulting services:

Give an example of product services

Answer 19

Supplying computer software

Question 20

Types of consulting services:

Give an example of advisory services

Answer 20

Analysis of client’s accounting system

Question 21

Types of consulting services:

Give an example of support services

Answer 21

Provide staff for computer programming

Question 22

Types of consulting services:

Give an example of implementation services

Answer 22

Installing a new computer system

Question 23

Types of consulting services:

Give an example of transaction services

Answer 23

Preparing information to obtain financing

Question 24

When an independent CPA is associated with the financial statements of a publicly held entity, but has not audited or reviewed such statements, the appropriate form of report issued must include...

Answer 24

A disclaimer of opinion

Question 25

When an independent CPA is associated with the financial statements of a publicly held entity, but has not audited or reviewed such statements, the appropriate form of report issued must include a disclaimer of opinion. The disclaimer may...2

Answer 25

1 accompany the unaudited financial statements or 2 be placed directly on them

Question 26

If a CPA begins an audit and then discovers that he/she lacks the professional competence necessary to successfully complete the engagement, the CPA should...2

Answer 26

1 inform the client and 2 recommend another CPA who possesses the necessary competence

Question 27

If a CPA begins an audit and then discovers that he/she lacks the professional competence necessary to successfully complete the engagement, the CPA should inform the client and recommend another CPA who possesses the necessary competence. The withdrawing CPA may...

Answer 27

Still collect a fee for the services provided

Question 28

To best ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditor should review and test the...

Answer 28

Purchase cut-off procedures

Question 29

Purchase cutoff procedures are designed to determine that...

Answer 29

Items Actually received in inventory have been included in the Proper period

Question 30

A key element of an other-matter paragraph is that...

Answer 30

It involves communication of a matter that is not presented or disclosed in the financial statements or notes

Question 31

An auditor may communicate reportable conditions...

Answer 31

During an audit or after an audit's completion

Question 32

Reportable conditions are...

Answer 32

Matters coming to the auditor's attention that, in his judgement Should be communicated to audit committee

Question 33

Reportable conditions are matters coming to the auditor's attention that, in his judgement, should be communicated to audit committee because...

Answer 33

They represent significant deficiencies in the design and operation Of internal control structure

Question 34

Storehouse A has 10,000 inventory items Storehouse B has 5,000 inventory items If the CPA had used sampling with replacement, the ratio of A to B would...

Answer 34

Have been 1:1

Question 35

Storehouse A has 10,000 inventory items Storehouse B has 5,000 inventory items If the CPA had used sampling without replacement, the ratio of A to B would...

Answer 35

Be a slight difference in sample size between A and B, because Of finite population correction factor Resulting in ratio of more than 1:1 but less than 2:1

Question 36

Give an example of a situation that is a violation of client confidentiality under the AICPA Code of professional conduct.

Answer 36

Member whose practice is primarily bankruptcy discloses a client's Name

Question 37

When an auditor submits a document containing financial statements to a client or others, the auditor has a responsibility to...

Answer 37

Report on all information included in document

Question 38

If the auditor-submitted document contains info that is presented outside the basic financial statements that is not required for those financial statements to be presented in accordance with GAAP, such as investment and property presented for purposes of additional analysis, the auditor must...

Answer 38

Express an opinion on the accompanying information

Question 39

If the auditor-submitted document contains info that is presented outside the basic financial statements. When reporting on this information, the measurement of materiality is...

Answer 39

The same as that used in forming an opinion on basic financial Statements taken as a whole

Question 40

The primary purpose of a generalized computer audit program is to allow the auditor to...

Answer 40

Independently process and verify client electronic data processing records

Question 41

Which body ordinarily has the authority to suspend or revoke a CPA's license to practice public accounting?

Answer 41

A state board of accountancy

Question 42

What is a necessary condition for a practitioner to accept an attest engagement to examine and report on an entity's internal control structure over financial reporting?

Answer 42

Management presents its written assertion about the effectiveness Of the internal control structure

Question 43

AT 400 states that a practitioner may examine and report on management's assertion about the effectiveness of an entity's internal control structure if the following conditions are met: Management accepts responsibility for...

Answer 43

Effectiveness of entity's internal control structure

Question 44

AT 400 states that a practitioner may examine and report on management's assertion about the effectiveness of an entity's internal control structure if the following conditions are met: Management evaluates the effectiveness of entity's internal control structure using...

Answer 44

Reasonable control criteria

Question 45

AT 400 states that a practitioner may examine and report on management's assertion about the effectiveness of an entity's internal control structure if the following conditions are met: Sufficient evidential matter exists or...

Answer 45

Could be developed to support management's evaluation

Question 46

AT 400 states that a practitioner may examine and report on management's assertion about the effectiveness of an entity's internal control structure if the following conditions are met: Management presents its written assertion about the effectiveness of the entity's internal control structure based upon...

Answer 46

The control criteria referred to in its report

Question 47

A confidence level of 95% indicates that a...

Answer 47

Good system of internal control has been determined by means of A sample

Question 48

A confidence level of 95% indicates that a good system of internal control has been determined by means of a sample. Having met that test, the auditor could...

Answer 48

Place much less reliance on substantive tests

Question 49

An auditor makes separate compliance and substantive tests in the accounts payable area which has good internal control. If the auditor uses statistical sampling for both of these tests, the confidence level established for substantive tests is normally...

Answer 49

Less than that for tests of compliance

Question 50

Control risk should be assessed in terms of...

Answer 50

Financial statement assertions

Question 51

Assessing control risk is the process of...

Answer 51

Evaluating the effectiveness of an entity's internal control structure In preventing or detecting material misstatements in FS assertions

Question 52

Communication regarding fraud or an illegal act may be...

Answer 52

Oral or written If the communication is oral, the audit should document it

Question 53

Known misstatements (2 part definition)

Answer 53

1 Specific misstatements identified during the audit arising from incorrect selection or application of accounting principles 2 misstatements of facts identified

Question 54

3 examples of known misstatements

Answer 54

1 unrecorded liability related to services rendered by vendor During period under audit 2 misstatements arising from mistakes in gathering or processing Data 3 misstatements arising from misinterpretation of facts

Question 55

Likely misstatements (2 part definition)

Answer 55

Misstatements that arise from difference between mgt's and auditor's judgement That auditor considers unreasonable

Question 56

2 judgements an independent auditor cannot share responsibility with an internal auditor

Answer 56

1 assessment of inherent risk 2 assessment of control risk

Question 57

"The objective of our audit is to express an unqualified opinion on the financial statements although it is possible that facts or circumstances encountered may preclude us from expressing an unqualified opinion." What is the most likely source of this statement?

Answer 57

Auditor's engagement letter