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0

When an auditor decides to confirm A/R balances rather than individual invoices, it most likely would be beneficial to include with the confirmations...

Client prepared statements of account that shoe the details of the account balances

1

An auditor concludes that a substantive auditing procedure considered necessary during the prior period's audit was omitted. Which of the following factors would most likely cause the auditor promptly to apply the omitted procedures?

Omission of procedure impairs auditor's present ability to support previously expressed opinion

2

If properly disclosed in the financial statements, which of the following would ordinarily cause an accountant to modify his or her standard compilation of review report?
1) uncertainty about entity's ability to continue as a going concern
2) inconsistency in application of accounting principles

Neither

3

An accountant's report on a review of pro forma financial information should include a...

Reference to the financial state,nets from which the historical
Financial information is derived

4

After making inquiries about credit granting policies, an auditor selects a sample of sales transactions and examines evidence of credit approval. This test of controls most likely supports management's financial statement assertion of...

Valuation or allocation

5

When a CPA examines a client's projected financial statements, the CPA's report should...

State that the CPA performed procedures to evaluate management's assumptions

6

An auditor's inquiries of management disclosed that the entity recently invested in a series of energy derivatives to hedge against the risks associated with fluctuating oil prices. Under these circumstances the auditor should...

Examine the contracts for possible risk exposure and the need to recognize losses

7

An auditor's procedures indicate a lower than expected return on an equity method investment. This situation would most likely be caused by...

An error recording excess amortization

8

An auditor used test data to verify the existence of controls in a certain computer program. Even though the program performed well on the test, the auditor may still have concern that...

The program tested is the same one used in regular production
Runs

9

An auditor's letter issued on significant deficiencies relating to a entity's internal control observed during a financial statement audit should...

Indicate that the audit's purpose was to report on the FS
and not provide assurance on internal control

10

Which of the following is an element of a CPA firm's quality control system that should be considered in establishing its quality control policies and procedures?

Assigning personnel to engagements

11

An auditor examining inventory most likely would use variables sampling rather than attributes sampling to...

Estimate whether the dollar amount of inventory is reasonable

12

The personnel that were involved in the booking the transaction would...

Not be considered in understanding the business rationale of the transaction

13

The existence of subsequent events does not...

2) so no...

Impair independence

2) no modification regarding independence is necessary for a compilation report

14

An auditor observes the mailing of monthly statements to a client's customers and reviews evidence of follow up on errors reported by the customers. This test of controls most likely is performed to support management's financial statement assertion of...

Existence

15

The primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor with...

Knowledge necessary for audit planning

16

After the report release date...

Additions may be made

17

An auditor must communicate...

2) to those in charge with governance through...

Any matter of independence

2) written communication

18

Which of the following is the primary reason that many auditor's hesitate to use embedded audit modules?

Auditors are required to be involved in the system design of the application to be monitored

19

A CPA is required to comply with the provisions of Statements on Standards for Attestation Engagements (SSAE) when engaged to...

Review MD&A prepared pursuant to rules and regulations adopted
By the SEC

20

Application controls pertain to...

Processing of individual applications in an IT environment

21

An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when...

Sample rate of deviation + allowance for sampling risk
exceeds the tolerable rate

22

When an accountant is engaged to report on subject matter or presentation based on measurement or disclosure criteria contained in contractual agreements or regulatory provisions he should...

2) Why?

Restrict the report

2) because it may be misunderstood by those who are not
adequately informed of the basis, assumptions or purpose of presentation

23

On receiving a client's bank cutoff statement, an auditor is most likely would trace...

Prior year checks listed in the cutoff statement to the year end outstanding checklist

24

When an accounting application is processed by computer, an auditor cannot verify the reliable operating of programmed controls by...2

Manually reperforming, as of a point in time, the processing of
Input data

And comparing the simulated results to the actual results

25

Investigate changes in capital stock recorded after year end is...

A procedure an auditor would likely perform to obtain evidence
About the occurrence of subsequent events

26

Analytical procedures have the highest level of evidence when they use...

Direct predictable relationships within financial statements

27

Which of the following procedures would the principal auditor most likely perform after deciding to make reference to another CPA who audited a subsidiary of the entity?

Make inquiries about the professional reputation and independence
of the other CPA

28

To be effective, analytical procedures in the overall review stage of an audit engagement should be performed by which of the following?

A manager or partner who has a comprehensive knowledge of the client's business and industry

29

Ineffective general controls by themselves...

2) however they can...

Do not cause misstatements

2) permit applications controls to operate improperly and allow misstatements to occur

30

The independent auditor's Procedures performed in assessing the risk of material misstatement...

May be affected by work of internal auditors

31

For effective internal control, the accounts payable department generally should...

Establish the agreement of the vendor's invoice with the receiving
report and purchase order

32

Allows the relative frequency of an interval to be determined by knowing only the mean and the standard deviation

Normal distribution

33

Measures the extent to which the values of the items are spread about the mean

Standard deviation

34

If a major customer files for bankruptcy. What is the journal entry?

Bad debt exp (operating exp.). Xxx
Allow. For doubtful accts. xxx

35

The internal control questionnaires, flowcharts and narratives are part of the understanding of internal control and are also prepared prior to field work. However these may be expanded to answer questions that arise or collect additional information and therefore are...

Never finalized until fieldwork is performed to some extent

36

Updating the prior year's written audit program should...

Be performed prior to the beginning of fieldwork on a continuing
Client

37

Confirmation is the process of obtaining a...

2) from...

Direct communication

A third party

38

Rights and obligations as well as presentation and disclosure can...

Be addressed by confirmations

39

"Nonresponses do not provide audit evidence about the financial statement assertions being addressed." This statement describes a drawback of which type of confirmation?

Positive confirmations

40

Which type of confirmation runs the risk of the third party signing it and returning it without verifying that the information is correct?

Positive confirmation request