Exam 2 Menti

Question 1

which of the following would most likely cause a CPA to not accept a new client?

Answer 1

the client is not willing to make all financial records available

Question 2

the scope and nature of an auditor’s contractual obligation is set forth in the:

Answer 2

engagement letter

Question 3

which concern is usually so serious that an auditor might conclude that a financial statement audit cannot be conducted?

Answer 3

the integrity of management is suspect

Question 4

the use of analytical procedures is required during the _______ and ______ stages

Answer 4

planning and completion

Question 5

true/false
the use of analytical procedures is required during substantive testing

Answer 5

false

Question 6

audit documentation provides evidence that:

Answer 6

the audit was performed in accordance with GAAS

Question 7

detection risk differs from control and inherent risk in that detection risk:

Answer 7

can be changed at the auditor’s discretion

Question 8

as the acceptable level of detection risk increases an auditor may:

Answer 8

decrease substantive testing

Question 9

an auditor assess control risk because:

Answer 9

it affects the level of detection risk the auditor may accept

Question 10

what would an auditor most likely use to determine their preliminary judgement about materiality?

Answer 10

the entity’s annualized financial statements

Question 11

when an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor would:

Answer 11

increase the extent of tests of details

Question 12

an audit plan cannot be finalized until:

Answer 12

understanding of the entity and its environment has been completed

Question 13

what procedure should an auditor most likely include in the planning of an audit of financial statements?

Answer 13

determining the need for specialized skills

Question 14

which risk increases when substantive analytical procedures are performed at an interim date?

Answer 14

detection risk

Question 15

some account balances are the results of complex calculations. the susceptibility to material misstatements in these types of accounts is defined as:

Answer 15

inherent risk

Question 16

what is a factor in the control environment?

Answer 16

management’s philosophy and operating style

Question 17

what is a component of internal control?

Answer 17

risk assessment

Question 18

what does not reduce the need for sufficient appropriate evidence?

Answer 18

a lower acceptable level of detection risk

Question 19

a rectangle on a flowchart typically depicts:

Answer 19

computerized process

Question 20

the responsibility to establish, maintain, and monitor internal controls is:

Answer 20

mangagement’s

Question 21

audit evidence has to be _______ according to audit standards

Answer 21

appropriate

Question 22

what is an inherent limitation in internal control?

Answer 22

faulty human judgement

Question 23

to obtain audit evidence about control risk, an auditor selects from a variety of techniques including:

Answer 23

inquiry

Question 24

which risk is not a component of internal control?

Answer 24

inherent risk

Question 25

what provides the least assurance about the effectiveness of an internal control activity?

Answer 25

preparation of a system flowchart

Question 26

true/false
as part of understanding internal control, an auditor is required to obtain knowledge about the operating effectiveness of internal control

Answer 26

false

Question 27

the auditor relies on _________ to reduce the risk that the audit will not detect material misstatements

Answer 27

substantive tests

Question 28

an auditor discovered a material weakness in internal control. the auditor will most likely express an:

Answer 28

adverse opinion on internal controls