Adaptive Drill 2

Question 0

In an audit of a special purpose framework, the auditor is required to obtain agreement of management that it acknowledges and understands its responsibility. In this case, the agreement of management should not include…

Answer 0

Required GAAP disclosures

Question 1

In an audit of a special purpose framework, the auditor is required to obtain agreement of management that it acknowledges and understands its responsibility. In this case, the auditor is required to obtain agreement as to…

Answer 1

Any additional disclosures beyond those specifically required

Question 2

What is the primary objective of probability proportional to sample size?

Answer 2

To identify overstatement errors

Question 3

PPS does not identify…

Answer 3

Zero and negative balances

Question 4

If the auditor expects to include an emphasis of matter or other matter paragraph in the auditor’s report, what should the auditor do?

Answer 4

Communicate with those charged with governance

Question 5

If the auditor expects to include an emphasis of matter or other matter paragraph in the auditor’s report, the auditor should communicate with those charged with governance regarding the…2

Answer 5

Expectation and proposed wording of the paragraph

Question 6

Which areas of professional responsibility should be observed by a CPA not in public practice? 3

Answer 6

1 objectivity

2 integrity

3 free of conflicts of interest

Question 7

Independence is not required of a CPA…

Answer 7

Not in public practice

Question 8

What computer assisted auditing technique allows fictitious and real transactions to be processed together without client operating personnel being aware of the testing process?

Answer 8

Integrated test facility

Question 9

Integrated test facility is a method of testing programmed controls by…

Answer 9

Creating a small subsystem within the regular EDP system

Question 10

Test data approach involves…

Answer 10

Dummy transactions prepared and processed by auditor using

The client’s computer program

Question 11

A CPA is not required to turn over…

Answer 11

His working papers to a client

Question 12

A CPA is not required to turn over his working papers to a client, because…

Answer 12

The working papers are the property of the CPA, not the client

Question 13

A CPA that leaves an engagement is required to allow the client…

2) but the CPA has no obligation to…2

Answer 13

Access the working papers compiled representing the client

2) give them to the client or share them with prospective auditors

Question 14

What internal control would most likely reduce the risk of diversion of customer receipts by an entity’s employees?

Answer 14

A bank lockbox system

Question 15

When a bank lock box system is used, customers, in effect, send…

Answer 15

Their remittances directly to the bank

Question 16

When a bank lock box system is used, customers, in effect, send their remittances directly to the bank thus…

Answer 16

Eliminating the possibility of employees misappropriating those
Cash receipts

Question 17

Depositing cash receipts daily will not by itself…

Answer 17

Reduce risk of misappropriated cash receipts

Question 18

A CPA may be engaged to examine and report on management’s written assertion about the effectiveness of an entity’s internal control structure. Management may present its written assertion either…2

Answer 18

1 in a separate report that will accompany CPA’s report or

2 in representation letter to the CPA

Question 19

A CPA may be engaged to examine and report on management’s written assertion about the effectiveness of an entity’s internal control structure. If management presents its assertion in a representation letter, the CPA should…

Answer 19

Should restrict the use of report to management and others

Within the entity

Question 20

Program (or process) change controls would be classified as…

Answer 20

General controls

Question 21

Application controls are classified as either…3

Answer 21

1 input controls

2 processing controls

3 output controls

Question 22

The accountant would be required to perform analytical procedures designed to identify relationships that appear to be unusual in a review engagement, but not in…

Answer 22

A compilation engagement

Question 23

Obtaining an understanding of internal controls involves…2

Answer 23

1 evaluating the design of a control within the audited company

2 determining if a control has been implemented within the audited
Company

Question 24

Implementation of a control means that...2

Answer 24

The control exists and the entity is using it

Question 25

Understanding controls that exist in the audited company's industry is...

Answer 25

Not part of obtaining an understanding of internal controls

Question 26

An auditor is required to establish an understanding with a client regarding the services to be performed for each engagement. This understanding generally includes...

Answer 26

auditor's responsibility for ensuring that the audit committee is aware of any significant deficiencies that come to auditor's attention

Question 27

The understanding with the client regarding services to be performed during an engagement includes: That the objective of the audit is...

Answer 27

The expression of an opinion on the financial statements

Question 28

The understanding with the client regarding services to be performed during an engagement includes: Includes the responsibilities of management for...

Answer 28

The financial statements

Question 29

The understanding with the client regarding services to be performed during an engagement includes: Responsibilities of management for financial statements include...

Answer 29

adjusting FS to correct material misstatements

Question 30

The understanding with the client regarding services to be performed during an engagement includes: Management is responsible for establishing and...

Answer 30

Maintaining effective internal control

Question 31

The understanding with the client regarding services to be performed during an engagement includes: Management is responsible for ensuring that...

Answer 31

Entity complies with laws applicable to its activities

Question 32

The understanding with the client regarding services to be performed during an engagement includes: Management is responsible for making all...

Answer 32

Financial records available to auditor

Question 33

The understanding with the client regarding services to be performed during an engagement includes: Management is responsible for providing an auditor with...

Answer 33

A letter confirming representations made to auditor during the Audit

Question 34

The understanding with the client regarding services to be performed during an engagement includes: Auditor's responsibility to conduct the audit in accordance...

Answer 34

With GAAS

Question 35

The understanding with the client regarding services to be performed during an engagement includes: Auditor's responsibility to obtain an understanding of...2

Answer 35

1 Internal control sufficient to plan the audit and 2 determine the nature, timing and extent of audit procedures

Question 36

An auditor determines that the entity is presenting certain supplementary financial disclosures of pension information that are required by the GASB. Under these circumstances the auditor should...

Answer 36

Compare the required supplementary info for consistency with Audited financial statements

Question 37

The auditor should apply the following procedures to required supplementary info: Make inquiries of management regarding...

Answer 37

Measurement and presentation of info

Question 38

The auditor should apply the following procedures to required supplementary info: Compare the info for consistency with...3

Answer 38

1 management's responses to inquiries 2 audited financial statements 3 other knowledge obtained during the audit

Question 39

The auditor should apply the following procedures to required supplementary info: Consider adding the supplementary info to...

Answer 39

Management's respresentations

Question 40

The auditor should apply the following procedures to required supplementary info: Apply any other prescribed...

Answer 40

Additional procedures

Question 41

Which of the following is an engagement attribute for an audit of an entity that processes most of its financial data in electronic form without any paper documentation?

Answer 41

Performance of audit tests on a continual basis

Question 42

It may be possible to test completeness of processing in an entity that processes most of its financial data in electronic form...

Answer 42

Only at various times throughout the year

Question 43

Assessing control risk below the maximum is not required to...

Answer 43

Have a reasonable basis for extending audit conclusions from | An interim date to the balance sheet date

Question 44

If the auditor assesses control risk at the maximum during the remaining period, he or she should consider whether the...

Answer 44

Effectiveness of certain of the substantive tests to cover that period Will be impaired

Question 45

What is a disadvantage for an entity that keeps micro computer files rather than manually prepared files?

Answer 45

It is usually easier for unauthorized persons to access and alter The files

Question 46

When an entity keeps microcomputer-prepared data files, to prevent the risk of unauthorized persons getting access both...

Answer 46

Physical and logical access controls are required

Question 47

Manually prepared files only need to be secured...

Answer 47

Physically

Question 48

The use of a microcomputer can...

Answer 48

Decrease the random errors associated with processing similar transactions in different ways

Question 49

Microcomputer recorded transactions can be easily downloaded and compared with...

Answer 49

Physical count of assets

Question 50

Preventative controls are usually...

Answer 50

More cost beneficial than detective controls

Question 51

Preventative controls are policies and procedures which are...

Answer 51

Part of the process itself (internal controls)

Question 52

Preventative controls place restrictions on and require...

Answer 52

Documentation of employee activities to reduce occurrence of | Errors/deviations

Question 53

Preventative controls prevent errors...

Answer 53

Before they occur

Question 54

Preventative controls are included in both...2

Answer 54

1 general accounting controls and 2 accounting transaction (application) controls

Question 55

While preventative controls are usually more costly then detective controls, preventative controls are considered to be...

Answer 55

More cost beneficial

Question 56

Give 2 examples of detective controls

Answer 56

feedback and feedforward controls

Question 57

Preventative controls are considered to be more cost beneficial than detective controls because they are...3

Answer 57

1 more effective 2 easier to implement 3 minimize time delays

Question 58

Example of preventative controls being more cost beneficial than detective controls

Answer 58

It's better to prevent a $10 million embezzlement than discover it After it has already occurred and the employee left the country

Question 59

For going concern considerations, international audit standards include a time horizon of...

Answer 59

At least, but not limited to 12 months

Question 60

PCAOB standards limit the foreseeable future for going concern consideration for..l

Answer 60

Up to 12 months

Question 61

Which set of auditing standards include a time horizon of at least 12 months, but not limited to 12 months in the area of going concern? 1 US PCAOB Auditing standards 2 International Standards on Auditing (ISAs)

Answer 61

International Standards on Auditing (ISAs) only

Question 62

PCAOB Auditing Standard state that an integrated audit of internal control over financial reporting and the financial statements, the auditor should design his testing of controls to accomplish the objectives of both audits simultaneously to obtain sufficient evidence the support the...2

Answer 62

1 auditor's opinion on internal control over financial reporting as Of year end and 2 auditor's control risk assessments for purposes of audit of FS

Question 63

Risk assessment procedures include...4

Answer 63

1 inquiries of management and others within entity 2 analytical procedures 3 observation and inspection 4 info from sources outside the entity

Question 64

What control can an entity use to prevent or detect sending of an invoice for shipped goods that is not recorded in the sales journal?

Answer 64

Daily sales summaries are compared with control totals of invoices

Question 65

A comparison of daily sales summaries with control totals of invoices would detect...

Answer 65

Differences between total sales made and recorded

Question 66

A comparison of daily sales summaries with control totals of invoices, is an example of...

Answer 66

An independent check used as a control

Question 67

A sale that has not been recorded will result in a...

Answer 67

Sales summary that does not include certain sales invoices

Question 68

The risk of material misstatement has increased due to business factors. What does this cause the auditor to do?

Answer 68

The auditor normally increases the extent of audit procedures as RMM increases

Question 69

What is the best assertion or assertions involved when an auditor is concerned about overstatement or understatement of revenues?

Answer 69

Valuation, completeness, cutoff

Question 70

Describe the assertion involved when the auditor is concerned about overstatement or understatement of revenues: Valuation is concerned with...

Answer 70

Recording the proper amounts or values

Question 71

Describe the assertion involved when the auditor is concerned about overstatement or understatement of revenues: Completeness relates to whether or not...

Answer 71

All transactions have been recorded that should have been recorded

Question 72

Describe the assertion involved when the auditor is concerned about overstatement or understatement of revenues: Cutoff is concerned with...

Answer 72

Whether transactions have been recorded in the correct accounting Period

Question 73

If you wish to reduce the substantive procedures performed to support the assertion of cutoff as it relates to revenue, what might you do?

Answer 73

Testing controls allows auditor to assess control risk, which may Lead to lowering control risk

Question 74

What substantive procedure might you decide to perform to audit the assertion of cutoff for revenue?

Answer 74

Inquiry can be used as a substantive procedure

Question 75

For PPS calculations, when does taint error exist?

Answer 75

Exists when accounts are overstated (BV is greater than AV) Doesn't exist when understated (AV is greater than BV)

Question 76

In PPS, when a BV = $500 and an AV = $0 and the sampling interval is $1,000, what is the projected misstatement?

Answer 76

$1,000 = (500-0/500) x 1,000