Apendix C Wrong Answers Flashcards Preview

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Flashcards in Apendix C Wrong Answers Deck (22):
0

When sales managers are recording fraudulent sales to receive larger commissions this would...

Increase sales and accounts receivable

Ultimately decreasing the accounts receivable turnover ratio

1

An economic downturn would...

Decrease cost of goods sold

2

What audit procedure is done to test the completeness assertion for accounts payable?

Examine invoices paid subsequent to year end and trace to
subsidiary ledger

3

What is the CPA's responsibility when, subsequent to issuing a report on audited financial statements, the CPA discovers that the accounts receivable process omitted a number of accounts, that in aggregate are material?

CPA should assess the importance of the omitted procedures to
audit opinion and attempt to perform omitted/alternative procedures

4

the CPA's responsibility when, subsequent to issuing a report on audited financial statements, the CPA discovers that the accounts receivable process omitted a number of accounts, that in aggregate are material. When should this be brought to the attention of the board and audit committee?

Subsequent to attempting to perform alternative procedures

5

An out of town client taking the audit engagement team out to dinner at a renowned local restaurant is...

Considered a reasonable gift and would not impair objectivity, integrity, or independence with respect to the audit.

6

An auditor takes the client's audit committee to Las Vegas for the weekend is...

A costly unreasonable gift

7

When an accountant compiles projected financial statements, the accountant's report should include a separate paragraph that...

Describes the limitations on the usefulness of the projection

8

Hypothetical assumptions are not...

Evaluated in a separate paragraph to the compilation report

9

What would a successor auditor ask the predecessor auditor to provide after accepting an audit engagement?

Inquiry on matters as review of working papers related to opening
Balances and consistency of application of accounting principles

10

1 Disagreements between predecessor auditor and management as to significant accounting policies and principles
2 the predecessor auditor's understanding of the reasons for the change of auditors and
3 facts known to the predecessor auditor that might bear on the integrity of management

All relate to a...

Potential successor's inquiries prior to accepting the engagement

11

Management assertion regarding account balances...4

1 rights and obligations
2 existence
3 completeness
4 valuation

12

Information processing is a...

Control activity, not a factor in the control environment

13

A factor in control environment under the Committee of Sponsoring Organizations' is...

Management's philosophy and operating style

14

Identify the purpose of an auditor designing test of details to ensure sufficient audit evidence 2

1 Test of details are used to limit detection risk

2 and provide assurance at the relevant assertion and account level

15

Overall response includes 4

1 more supervision during an audit
2 using more experienced staff
3 increasing scope of audit procedures
4 increasing unpredictability of further audit procedures

16

Further audit procedures...2

1 test of details of transactions, balances and disclosures

2 test of controls

17

The statement that no significant deficiencies exist may...

Not be included in a report or communicated to those charged with
Governance

18

No material weakness were identified may...

Be communicated to those charged with governance

19

Management has consulted with other accountants about accounting and auditing matters during period under audit, is...

Appropriate for auditor to communicate to those charged with governance

20

Substantially all disclosures required are included in financial statements, is this implied implicitly or stated explicitly in the compilation report?

Why?

Implicit

When disclosures are omitted, he report indicates this

21

The compilation is limited to presenting information that is the representation of management is...

Explicitly stated in the compilation report