ACCT 580

One of the factors that impacts auditor performance is _______. audit standards ethical standards regulations legislation firm policy and procedures all of the above

all of the above

An example of an incentive or pressure that increases the risk of fraud is: the client operates in a highly competitive industry. the client has a history of reporting losses. a significant percentage of management pay is tied to earnings. All of these answer choices are correct.

all of these answer choices are correct

Auditors can only provide reasonable assurance that the financial statements are presented fairly because: sampling techniques are used to gather evidence. some items in the financial statements are subjective. an audit must be completed in a reasonable amount of time. All of these answer choices are correct.

all of these answer choices are correct

When gaining an understanding of the client, the auditor will consider: related party identification. the appropriateness of the client's system of internal controls to mitigate identified business risks. controls over the technology used to process and store data electronically. All of these answer choices are correct.

all of these answer choices are correct

What happens if an independence threat appears to be insurmountable? The audit firm should contact the State Board of Accountancy so they can make a press release to discourage other accountants from taking the engagement. The audit firm should take the engagement and continue to make certain that safeguards are put in place to limit or remove those threats. The audit firm should make certain that safeguards are put in place to limit or remove those threats. An audit firm should decline the offer to be the auditor of a prospective client or resign from the audit of an existing client.

an audit firm should decline the offer to be the auditor of a prospective client or resign from the audit of an existing client.

Which factors would likely increase an auditor's concern pertaining to risk of fraudulent financial reporting? Excessive amount of liquid assets that could easily be converted to cash. Management participation in selection of accounting methods and principles. Low profitability/growth with respect to competitors in the same industry. An extremely confusing and overly complex institutional structure, with blurred lines of authority.

an extremely confusing and overly complex institutional structure, with blurred lines of authority

An indicator that the auditor might need to adopt extended audit procedures would be best evidenced by __________. an unusual fluctuation in gross profit margin last year a new competitor has entered the client's industry the client's current ratio has decreased slightly net sales is increasing approximately 3% per year

an unusual fluctuation in gross profit margin last year

An attitude of professional skepticism means: the auditor is independent of the client. the auditor can rely on past experience to determine current risk of fraud. any indicator of fraud is properly investigated. the auditor can rely on management assertions.

any indicator of fraud is properly investigated

Operational (performance) audits are useful because they: include a comprehensive audit. are concerned with the economy, efficiency, and effectiveness of an organization's activities. involve gathering evidence to determine whether the entity under review has followed the rules, policies, procedures, laws, or regulations with which they must conform. ensure companies pay appropriate taxes.

are concerned with the economy, efficiency, and effectiveness of an organization's activities

Client closing procedures: are routine transactions that do not impact audit risk. are the responsibility of those charged with governance who must ensure that transactions are recorded in the correct accounting period. affect expense accounts only. affect balance sheet accounts only.

are the responsibility of those charged with governance who must ensure that transactions are recorded in the correct accounting period

Companies use profitability measures to assess performance and to: assess their ability to compete. maintain consistency in operations each month. measure their ability to pay short term debts on time. measure their ability to pay long term debts on time.

assess their ability to compete

Examination of internal controls is a service that comes under _______ services, which fall under _______ services. attestation; audit attestation; assurance acceptable; assurance assurance; attestation

attestation; assurance

The risk assessment phase of an audit does not include: audit execution and reporting. identification of factors that may affect the risk of a material misstatement in the financial statements. gaining an understanding of the client. development of an audit strategy and a risk and materiality assessment.

audit execution and reporting

MNE and Associates is auditing Blanchard Company. MNE has decided to use 5% of income (earnings) before income tax as a benchmark. If income (earnings) before income tax was $33 million, what would be the amount of planning materiality? $660,000 $31.43 million $34.65 million $1.65 million

$1.65 million

Suppose auditors assess inherent risk and control risk as low, 25% and 8% respectively. If auditors want to keep audit risk relatively low at 5%, then what is detection risk? .05 or 5% 2.50 or 250% 2.00 or 200% .02 or 2%

.05 or 5%

Auditors want a low audit risk of 5% and a low detection risk of 5%. In order to achieve this, what will inherent risk and control risk have to be? 100% for both 1% for inherent risk and 100% for control risk The risks cannot be determined because there is not enough information. 1% for both

100% for both

According to the profession's ethical standards, an auditor would be considered independent in which of the following instances? An employee of the auditor donates service as treasurer of a charitable organization that is a client. A professional employee, who does not work on the audit, has a spouse who is a marketing manager for an audit client. The client owes the auditor fees for two consecutive annual audits. The auditor is also an attorney who advises the client as its general counsel.

A professional employee, who does not work on the audit, has a spouse who is a marketing manager for an audit client.

Under the AICPA ethics rules on independence, which of the following individuals would not be a covered member? A partner in the same office as the lead partner who provides no services to the audit client. A tax partner in another office who provides 9 hours of tax services to the audit client. A consulting manager in another office who provides 100 hours of non-audit services to the audit client. A partner in another office who evaluates partner performance and compensation, but provides no services to the audit client.

A tax partner in another office who provides 9 hours of tax services to the audit client.

A CPA works at a firm and also maintains a private practice as an expert witness for intellectual property cases. While at an audit client's office, he overhears a telephone conversation about a patent dispute and offers his services. When he takes the expert witness job, this position creates what type of threat to his professional ethics? Advocacy threat Familiarity threat Self-review threat Self-interest threat

Advocacy Threat

A CPA would violate the AICPA rule on integrity and objectivity if: a CPA in industry knowingly misrepresented the earnings of the company he worked for. a CPA in public practice represented both the buyer and seller in helping the parties negotiate the sale (purchase) of a business. a CPA who was an audit staff member subordinated his or her judgment to that of the audit partner. all of the answers are violations of the AICPA rule on integrity and objectivity

All of the answers are violations of the AICPA rule on integrity and objectivity.

Which of the following statements is true about interpretations of the AICPA Code of Professional Conduct? Interpretations are strictly enforceable by the AICPA in a disciplinary matter. An AICPA member who departs from an interpretation has the burden of justifying a departure in any disciplinary hearing. Interpretations are not enforceable by the AICPA in a disciplinary matter. Interpretations are strictly enforceable by the AICPA and all state boards of accountancy in a disciplinary matter.

An AICPA member who departs from an interpretation has the burden of justifying a departure in any disciplinary hearing.

Without the consent of the client, a CPA should not disclose confidential client information contained in working papers to a: voluntary quality control review board. federal court that has issued a valid subpoena. CPA firm that is a likely successor auditor. disciplinary body created under state statute.

CPA firm that is a likely successor auditor

The only licensed accounting professionals in the United States are: Certified Internal Auditors Chartered Accountants Certified Public Accountants Certified Fraud Examiners

Certified Public Accountants

What is the applicable financial reporting framework in the U.S. known as? IFRS GAAS GAAP The Internal Revenue Code

GAAP

Which of the following organizations issues auditing standards for the audits of public companies? PCAOB. SEC. ASB. COSO.

PCAOB

Which section of the AICPA Code of Professional Conduct includes ethical rules for members in public practice? Part I Part II Part III Some other section

Part 1

The AICPA Code of Professional Conduct can be found online and is organized in four sections. Which section is first? Foreword about AICPA membership. Preface applicable to all members. Part I on ethical rules. Introduction to the History of the Code of Conduct.

Preface applicable to all members

How does a small firm resolve the conflict of interest issue in a divorce case? They do not need to resolve the conflict of interest in the case of a divorce. Resign from the engagement. Using separate engagement teams in providing tax services to both parties. Provide tax services to only one of the two parties.

Provide tax services to only one of the two parties

If a stockholder sues a CPA for common law fraud based on false statements contained in the financial statements audited by the CPA, which of the following is the CPA's best defense? The auditor followed GAAS. The stockholder lacks privity to sue. There was contributory negligence of the client. The CPA did not financially benefit from the alleged fraud.

The auditor followed GAAS

When a plaintiff is suing the auditor for damages under Rule 10(b)-5 of the 1934 Securities Act, which of the following is not part of the plaintiff's burden of proof? The financial statements contained a material, factual misrepresentation or omission. The auditor was negligent. The plaintiff relied on the financial statements. Damages were suffered as a result of reliance on the financial statements.

The auditor was negligent

Which of the following is not a characteristic of an assurance service? The engagement is conducted by an independent professional. The service lends credibility to information. The subject matter is limited to financial information. The service is useful for decision makers.

The subject matter is limited to financial information

MNE and Associates used the benchmark of 5% of income (earnings) before income tax and came up with $9.5 million as their planning materiality for Garden, Inc. MNE also determined that planning materiality using a benchmark of 1% total assets resulted in $23 million. How should MNE decide which planning materiality amount to use? The auditors would average the two amounts because the use of two benchmarks provides greater precision. The auditors would use the smaller amount in order to keep with the principle of conservatism. Ultimately, the auditors must use their professional judgment to decide on the planning materiality amount, along with qualitative factors in the final assessment. The auditors would use the largest amount in order to detect larger material misstatements.

Ultimately, the auditors must use their professional judgment to decide on the planning materiality amount, along with qualitative factors in the final assessment.

A CPA who is a "covered person" purchased stock in a client corporation and placed it in a trust as an educational fund for the CPA's minor child. The trust securities were not material to the CPA but were material to the child's personal net worth. Would the independence of the CPA be considered impaired with respect to the client? Yes, because the stock would be considered a direct financial interest and, consequently, materiality is not a factor. Yes, because the stock would be considered an indirect financial interest that is material to the CPA's child. No, because the CPA would not be considered to have a material indirect financial interest in the client. No, because the CPA would not be considered to have a direct financial interest in the client.

Yes, because the stock would be considered a direct financial interest and, consequently, materiality is not a factor.

Which of the following best describes the independence requirements for a close relative of a covered member? A close relative cannot hold a key position with an audit client. A close relative cannot have an immaterial, direct investment in an audit client. A close relative cannot have an immaterial, indirect investment in an audit client. A close relative cannot have a loan from an audit client.

a close relative cannot hold a key position with an audit client

What type of audit provides an opinion by the auditor about whether the financial statements are presented fairly in accordance with an applicable financial reporting framework? A financial statement audit A compliance audit An operational audit An audit on the effectiveness of ICFR

a financial statement audit

Which two audits does an integrated audit combine? A compliance audit and an audit of the effectiveness of ICFR A financial statement audit and a compliance audit A financial statement audit and an audit of the effectiveness of ICFR A performance audit and an environmental audit

a financial statement audit and an audit of the effectiveness of ICFR

A significant risk is an identified and assessed risk of material misstatement that, in the auditor's judgment, requires special audit consideration. Which of the following would be classified as a significant risk? A risk related to a transaction that involves a recording error, but was not intentional, like a fraud. A risk related to transactions for a simple operating lease, like you sign when you rent an apartment. A risk related to a significant economic or accounting development. A risk that does not involve a related party transaction.

a risk related to a significant economic or accounting development

AU-C 200.A22, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards states auditors should be skeptical if certain situations arise. Which situation is NOT included in those that AU-C 200.A22 presents? A situation indicates that there is the need for fewer audit procedures. Audit evidence recently gathered is contradictory to other evidence previously gathered. Conditions are observed that indicate evidence of possible fraud. New information brings into question the reliability of client documents or responses to auditor inquiries.

a situation indicates that there is the need for fewer audit procedures

Which of the following is true of assurance services? The intended user is an independent Certified Public Accountant qualified to perform the auditing service. Both attestation and auditing services fall under the term of assurance services. The term information refers to subject matter that is an entire system, not standalone data. The services are performed by someone who was involved with the creation of the information.

both attestation and auditing services fall under the term of assurance services

An assurance service that determines whether the entity has conformed with regulations, rules or processes is a (an): compliance audit. financial statement audit. internal audit. operational audit.

compliance audit

Which of the following issues arises when taxes are not properly distributed to the parties involved in a divorce case? Conflict of interest Legal liability Misrepresentation of fact Gross negligence

conflict of interest

When gaining an understanding of the client at the industry level, the auditor will: consider the level of demand for the goods provided by companies in the industry. determine if the client has centralized or decentralized operations. assess the amount of faulty goods the client returns to suppliers. determine if the client has a simple or complex capital structure.

consider the level of demand for the goods provided by companies in the industry

All of the following are reasons why users would demand an audit of financial statements except: complexity. remoteness. cost. reliability.

cost

Management is responsible for which of the following? Preparing financial statements in accordance with the appropriate auditing standards. Designing, implementing, and maintaining internal control relevant to the preparation of the financial statements. Using professional skepticism in the preparation of the financial statements. Issuing an opinion on whether the financial statements are presented fairly in accordance with the appropriate financial reporting framework.

designing, implementing, and maintaining internal control relevant to the preparation of the financial statements

Which component of audit risk can the auditor control? Inherent risk. Detection risk. Control risk. Financial risk.

detection risk

When the auditor is considering the risk of material misstatement, they will attempt to identify major risks, determine how these risks could relate to fraud or error, consider the importance of the risks, and ______. attempt to immediately resolve any identified risks notify management of these risks determine who is responsible for each identified risk determine the probability that the identified risks might result in material misstatements

determine the probability that the identified risks might result in material misstatements

When gaining an understanding of the client's sources of financing, the auditor: is not interested in debt covenants because most debt contracts are the same. ignores the relative reliance on debt versus equity funding because that is a management decision, not an audit issue. determines if the client is meeting principal and interest payments when they are due. determines if the client is writing off uncollectible accounts receivable.

determines if the client is meeting principal and interest payments when they are due

If after discussing a potential subordination of judgment threat with a supervisor, a CPA does not feel that the matter is resolved, what should he or she do? Discuss his or her concerns with the appropriate higher level(s) of management within the CPA's firm. Immediately ask HR to reassign him or her. Contact the AICPA about the problem. Start looking for a new position at another firm.

discuss his or her concerns with the appropriate higher level(s) of management within the CPA's firm

What should a CPA do if he/she concludes a difference of opinion with an audit supervisor regarding an on-going audit engagement may result in a material misrepresentation of fact or a violation of professional standards? Obtain more training. Quit the job. Search for a certification that focuses on material misrepresentations. Discuss his or her concerns with the supervisor.

discuss his or her concerns with the supervisor

Starr Corp. approved a plan of merger with Silo Corp. One of the determining factors in approving the merger was the strong financial statements of Silo, which were audited by Cox & Co., CPAs. Starr had engaged Cox to audit Silo's financial statements. While performing the audit, Cox failed to discover material fraud, which subsequently caused Starr to suffer substantial losses. For Cox to be liable under common law under the Ultramares decision, Starr, at a minimum, must prove that Cox: acted recklessly or with a lack of reasonable grounds for belief. failed to exercise due care. was grossly negligent. was a party to the fraud.

failed to exercise due care

Risks of material misstatement that are associated with a client's IT system include all of the following except: failure to accrue for a contingent liability. a terminated employee who is still able to log on to the client's IT system. the installation of new software that still needs modifications to operate as needed. no schedule for backing up data.

failure to accrue for a contingent liability

The Price-earnings (PE) ratio could best be defined as __________. closely related to the dividend discount model value of the stock on the open market how much a stockholder is willing to pay per dollar of earnings what dividend percentage payout the stock pays

how much a stockholder is willing to pay per dollar of earnings

Auditors of publicly traded companies are required to perform a(an) ________ for their clients. compliance audit integrated audit internal audit operational audit

integrated audit

The audit strategy known as the predominantly "substantive approach": is appropriate when internal controls are very strong. requires the auditor to conduct extensive control testing. means the auditor will spend minimum effort testing the client's system of internal controls. means the auditor will conduct some interim testing and minimal year-end account-balance testing.

means the auditor will spend minimum effort testing the client's system of internal controls

An audit committee of a publicly traded company should be composed of: executive and non-executive members of the board of directors. the CFO and two other board members who are also shareholders. the audit partner, the CFO, and a shareholder. members of the board of directors who are independent directors.

members of the board of directors who are independent directors

Analytical procedures: cannot be performed on interim data. are not affected by different accounting methods between the client and other members of the industry. must take into account seasonal variation in the client's business. are only useful if the client's variation from budget is low.

must take into account seasonal variation in the client's business

The essence of the due care standard is that the auditor should not be guilty of: bias. fraud. errors in judgment. negligence.

negligence

In which section of the AICPA Code of Professional Conduct could you find the definitions to concepts mentioned in the Code? Part I Part II Part III Preface applicable to all members

preface applicable to all members

Pressures of time and money may affect the audit due to all of the following EXCEPT ________. clients want to issue their financial statements by a certain date pressures within the CPA firm to complete all audits on a timely basis to avoid incurring costs that may not be recovered clients refusing to pay additional fees for additional audit effort and time pressures by shareholders to find all misstatements in the financial reports

pressures by shareholders to find all misstatements in the financial reports

Which of the following equals earnings per share (EPS)? Cost of sales divided by average inventory Operating cash flow divided by outstanding shares Market price per share divided by earnings per share Profit divided by weighted average common stock shares issued

profit divided by weighted average common stock shares issued

The role of COSO is to: establish financial accounting and reporting standards. establish auditing standards for private companies. prepare and grade the CPA exam. provide guidance in the area of internal control and risk management.

provide guidance in the area of internal control and risk management

Which of the following statements is false regarding related parties? Management should have controls in place for identifying related parties. Related party transactions do not have to be disclosed if they are conducted at "arm's length." A subsidiary company is considered a related party. The presence of related parties is considered a fraud risk factor.

related party transactions do not have to be disclosed if they are conducted at "arm's length"

The audit strategy known as "reliance on controls approach": means the auditor will conduct extensive year-end accountbalance testing. means the auditor will spend minimum effort testing the client's system of internal controls. requires the auditor to conduct extensive control testing. is appropriate when internal controls are minimal.

requires the auditor to conduct extensive control testing

In a small CPA firm, if the firm provides tax services to both parties who subsequently begin divorce proceedings, it is customary to do what? Use separate engagement teams in providing tax services to the husband and to the wife, who are provided clear policies and procedures on maintaining confidentiality. Provide only consulting services to both parties. Resign providing tax services to one of the two parties in a divorce to remain free of any conflict of interest. Engage in a background check on both parties.

resign providing tax services to one of the two parties in a divorce to remain free of any conflict of interest.

If new information comes to light that would cause the auditor to establish a different level of planning materiality, then the auditor _______. follow the auditing standards that recommend an appropriate percentage of total assets as a benchmark for planning materiality for all companies have management of the company select the appropriate benchmark for planning materiality issue a qualified opinion as part of the audit report should examine the information and make adjustments to materiality as needed

should examine the information and make adjustments to materiality as needed

If an auditor is attempting to access the long-term viability of the client firm as a going concern, the auditor should attempt to calculate _________. price-earnings multiples weighted average cost of capital solvency ratios liquidity ratios

solvency ratios

Inherent risk related to closing procedures would generally be increased when _______. staff assigned to deal with closing procedures are relatively inexperienced no errors and omissions are located when auditing the closing process a client is found to have strong closing procedures, and sound internal control practices relating to closing the closing process is relatively straightforward

staff assigned to deal with closing procedures are relatively inexperienced

Martin Inc. is being audited by the firm MNE and Associates. MNE's auditors decide that $100 million is the planning materiality and $50 million is the appropriate performance materiality at the account level. If all of Martin's account balances are below $50 million, the auditors will: to perform detailed audit procedures on the accounts because the sum of Martin's accounts is greater than $50 million. end audit procedures, both detailed and on controls, because performance materiality has reduced the probability that the sum of immaterial and/or undetected misstatements in the financial statements is less than materiality for the financial statements as a whole. still perform detailed some audit procedures on the account because the immaterial misstatements can be material in aggregate. check the auditing standard guidelines for the determination of performance materiality.

still perform detailed some audit procedures on the account because the immaterial misstatements can be material in aggregate.

Common uses of analytical procedures include all of the following except: risk identification during the risk assessment stage. testing account balances derived from estimates during the risk response stage. overall assessment of financial statements at the final review stage of the audit. test of internal controls.

test of internal controls

Which of the following is a negative factor influencing client acceptance and retention with respect to competence issues? There are significant regulatory reporting requirements with close monitoring by regulators. The client has a weak accounting system with few internal controls. The audit firm has conflict of interest issues that cannot be resolved prior to client acceptance. The audit firm does not have the affiliation with specialists to meet client needs.

the audit firm does not have the affiliation with specialists to meet client needs

Obtaining positive results from testing controls means that: the auditor can plan to reduce the reliance on detailed substantive testing of transactions and account balances. no substantive testing is required. materiality will be set at a low dollar amount. the auditor can completely rely on a client's system of internal controls.

the auditor can plan to reduce the reliance on detailed substantive testing of transactions and account balances.

When gaining an understanding of the client, the auditor will identify the geographic location of the client because: more centralized clients are harder to control. the auditor will only visit one location to assess processes and procedures. the auditor may plan to use staff from affiliated offices to visit overseas locations. more decentralized clients are easier to control.

the auditor may plan to use staff from affiliated offices to visit overseas locations

If a prospective new audit client does not allow the auditor to contact its existing auditor: the auditor should consider that a negative factor on the integrity of client management. the auditor should contact the existing auditor anyway because it is their duty. the existing auditor should contact the new auditor to tell them all about the client. the auditor should respect the prospective client's right to privacy.

the auditor should consider that a negative factor on the integrity of client management

Which of the following is an example of a qualitative materiality factor? The client installed a new security system to protect the building. Inventory represents 40% of current assets. Total salaries expense is greater than 5% of income before taxes. The client is experiencing a slowdown in sales and is struggling to pay vendors on time.

the client is experiencing a slowdown in sales and is struggling to pay vendors on time

Which of these scenarios would cause the auditor to initiate special planning procedures? Not all assets belonging to the company have been properly asset tagged. Management are forthright in their dealings with the auditors. The client's inventory contains very specialized, hard to value items. The client recently repurchased outstanding stock.

the client's inventory contains very specialized, hard to value items

What is the appropriate date for an audit report? The date the auditors were hired. The date of the balance sheet. The conclusion of the gathering of evidence for the audit. The date required by regulators.

the conclusion of the gathering of evidence for the audit

A key aspect of the "concern for the public interest" definition of a professional is: the level of professional expertise of the professional. the unique ability of CPAs to sign attest reports. the fact that there are situations where professionals must put the interest of society ahead of the interest of their clients or their own well-being. the incorporation of this definition into the Sarbanes-Oxley Act of 2002.

the fact that there are situations where professionals must put the interest of society ahead of the interest of their clients or their own well-being.

In the conceptual framework to the AICPA Code of Professional Conduct, a self-interest threat is: the threat that a CPA will not act with objectivity because the CPA's interests are opposed to the client's interests. the threat that a CPA will take on the role of client management or otherwise assume management responsibilities. the threat that a CPA will promote a client's interests or position to the point that the CPA's objectivity or independence is compromised. the threat that a CPA could benefit, financially or otherwise, from an interest in, or a relationship with, a client or persons associated with the client.

the threat that a CPA could benefit, financially or otherwise, from an interest in, or a relationship with, a client or persons associated with the client

Which statement is correct as to financial statement audit reports for public versus private companies? There is no distinction between standard reports for the audit of financial statements, regardless of whether the company is private or public. There is a standard report for the audit of private company financial statements but none for auditing public company financial statements. There is a standard report for the audit of public company financial statements but none for auditing private company financial statements. There is a standard report for the audit of public company financial statements and a standard report for the audit of private company financial statements.

there is a standard report for the audit of public company financial statements and a standard report for the audit of private company financial statements

Which of the following beliefs will narrow the audit expectation gap? The auditor is providing complete assurance. The auditor is guaranteeing the future viability of the entity. There is no guarantee the auditor will find all material fraud, should fraud have occurred. An unmodified audit opinion is an indicator of complete accuracy of the financial statements.

there is no guarantee the auditor will find all material fraud, should fraud have occurred.

One of the elements necessary to recover damages if there has been a material misstatement in a registration statement filed pursuant to the Securities Act of 1933 is that: there was a material false or misleading statement in the financial statements. issuer failed to exercise due care in connection with the sale of the securities. the plaintiff knew the auditor. issuer and plaintiff were in privity of contract with each other.

there was a material false or misleading statement in the financial statements

The function of internal audit is determined by: the external auditor. the IIA. those charged with governance and management. the government.

those charged with governance and management

An auditor will identify accounts and related assertions at risk of material misstatement: to plan the audit to focus on those accounts. after writing the audit report. after testing internal controls. to eliminate audit risk.

to plan the audit to focus on those accounts

The audit expectation gap occurs when: auditors perform their duties appropriately and satisfy users' demands. user beliefs do not align with what professional standards and regulations expect of auditors. inspections of audits ensure that auditing standards have been applied correctly and the standards are at the level that satisfy users' demands. the public is well educated about auditing.

user beliefs do not align with the professional standards and regulations expect of auditors.

Which of the following is true of the influence of significant accounts and classes of transactions on inherent risk? When the account has high volume of transactions, the inherent risk is low. When determination of account balance is objective, the inherent risk is low. When the determination of an account balance is subjective, the inherent risk is low. When the transactions are routine and relatively homogenous, the inherent risk is high.

when determination of account balance is objective, the inherent risk is low

When can a spouse that works for an attestation client still participate in an employee benefit plan that includes employee stock ownership plans or employee stock option plans? There are no restrictions. As long as the CPA firm approves every stock-related plan. When the benefits are offered equitably to a majority of similar employees. When the benefits are offered equitably to all similar employees.

when the benefits are offered equitably to all similar employees

Should the client have internal controls in place to ensure related parties are being identified? Yes, and the client is required to disclose them. Yes, but the client in under no obligation to disclose them. None of these answer choices are correct. No, not necessarily.

yes, and the client is required to disclose them