Audit HW

In an integrated audit, which of the following must be communicated by management to the audit committee? Known Material Weaknesses and/or Known Significant Deficiencies (1) Yes Yes (2) Yes No (3) No Yes (4) No No

1

In an integrated audit, which of the following must the auditors communicate to the audit committee? Known Material Weaknesses and/or Known Significant Deficiencies (1) Yes Yes (2) Yes No (3) No Yes (4) No No

1

When issuing an unqualified audit report in a compliance attestation engagement, the CPA may report on: Management's Assertion and/or Subject Matter (1) Yes Yes (2) Yes No (3) No Yes (4) No No

1

In an integrated audit, which of the following lead(s) to an adverse opinion on internal control? Known Material Weaknesses and/or Known Significant Deficiencies (1) Yes Yes (2) Yes No (3) No Yes (4) No No

2

Management's documentation of internal control ordinarily should include information on: Controls Designed to Prevent Fraud and/or Controls Designed to Ensure Employee Personal Integrity (1) Yes Yes (2) Yes No (3) No Yes (4) No No

2

When issuing a qualified audit report in a compliance attestation engagement, the CPA may report on: Management's Assertion and/or Subject Matter (1) Yes Yes (2) Yes No (3) No Yes (4) No No

3

All corporate capital stock transactions should ultimately be traced to the: A. Minutes of the board of directors. B. Cash receipts journal. C. Cash disbursements journal. D. Numbered stock certificates.

A

An audit of internal control over financial reporting ordinarily assesses internal control: A. As of the last day of the fiscal period. B. As of the last day of the auditor's fieldwork. C. For the entire fiscal period. D. For the entire period plus the period of the auditor's fieldwork.

A

An audit of the balance in the accounts payable account is ordinarily not designed to: A. Detect accounts payable that are substantially past due. B. Verify that accounts payable were properly authorized. C. Ascertain the reasonableness of recorded liabilities. D. Determine that all existing liabilities at the balance sheet date have been recorded.principles.

A

An auditor most likely would inspect loan agreements under which an entity's inventories are pledged to support management's financial statement assertion of: A. Presentation and disclosure. B. Valuation or allocation. C. Existence or occurrence. D. Completeness.

A

An auditor usually obtains evidence of stockholders' equity transactions by reviewing the entity's: A. Minutes of board of directors meetings. B. Transfer agent's records. C. Canceled stock certificates. D. Treasury stock certificate book.

A

An important aspect of performing an audit in accordance with the Single Audit Act is to identify: A. Major federal financial assistance programs. B. Government generally accepted assertions. C. Federal supplemental requirements. D. Title determination sub-acts.

A

For effective internal control, the accounts payable department should compare the information on each vendor's invoice with the: A. Receiving report and the purchase order. B. Receiving report and the voucher. C. Vendor's packing slip and the purchase order. D. Vendor's packing slip and the voucher.

A

In a compliance attestation engagement, CPAs may address an organization's: Compliance with Specified Requirements and/or Internal Control over Compliance with Specific Laws and Regulations (1) Yes Yes (2) Yes No (3) No Yes (4) No No

A

In an audit of a sole proprietorship, a common difficulty is lack of: A. Segregation of personal net worth and business capital. B. Availability of the owner. C. Agreement as to the distribution between retained earnings and owners' capital. D. Proper measures of dividends.

A

In an audit, the valuation of year-end accounts payable is most likely addressed by: A. Confirmation. B. Examination of cash disbursements immediately prior to year-end. C. Examination of cash disbursements immediately subsequent to year-end. D. Analytical procedures applied to vouchers payable at year-end.

A

In the continuing audit of a manufacturing company of medium size, which of the following areas would you expect to require the least amount of audit time? A. Owners' equity. B. Revenue. C. Assets. D. Liabilities.

A

Operational auditing is primarily oriented toward: A. Future improvements to accomplish the goals of management. B. Ensuring the accuracy of the data in management's financial reports. C. Determination of the fairness of the entity's financial statements. D. Compliance with laws and regulations.

A

Ordinarily, the most significant assertion relating to accounts payable is: A. Completeness. B. Existence. C. Presentation. D. Valuation

A

The auditors would be most likely to find unrecorded long-term liabilities by analyzing: A. Interest payments. B. Discounts on long-term liabilities. C. Premiums on long-term liabilities. D. Recorded long-term liability accounts.

A

The independence of the internal auditing department will most likely be assured if it reports to the: A. Audit committee of the board of directors. B. President. C. Controller. D. Treasurer.

A

The portion of internal control most directly related to a CPA's engagement to attest to compliance with laws and regulations is: A. Internal control over compliance. B. Internal control over financial reporting. C. Internal control over laws and regulations. D. Internal control over operations.

A

When a client uses paper stock certificates, an auditor is most likely to trace treasury stock purchase transactions to the: A. Numbered stock certificates on hand. B. Articles of incorporation. C. Year's interest expense. D. Minutes of the audit committee.

A

When a client uses paper stock certificates, canceled stock certificates should: A. Be defaced to prevent reissuance and attached to their corresponding stubs. B. Not be defaced but segregated from other stock certificates and retained in a canceled certificates file. C. Be destroyed to prevent fraudulent reissuance. D. Be defaced and sent to the secretary of state.

A

When auditing the statement of cash flows, which of the following would an auditor not expect to be a source of receipts and payments? A. Capitalization. B. Financing. C. Investing. D. Operations.

A

Which of the following is most likely to be considered a material weakness in internal control? A. Ineffective oversight of financial reporting by the audit committee. B. Restatement of previously issued financial statements due to a change in accounting principles. C. Inadequate controls over nonroutine transactions. D. Weaknesses in risk assessment.

A

A client erroneously recorded a large purchase twice. Which of the following internal control measures would be most likely to detect this error in a timely and efficient manner? A. Footing the purchases journal. B. Reconciling vendors' monthly statements with subsidiary payable ledger accounts. C. Tracing totals from the purchases journal to the ledger accounts. D. Sending written quarterly confirmation to all vendors.

B

A likely reason that consideration of client compliance with debt provisions is important to an audit is that violation of such debt provisions may affect the total recorded: A. Number of debt restrictions. B. Current liabilities. C. Long-term assets. D. Capital stock.

B

A possible loss, stemming from past events that will be resolved as to existence and amounts, is referred to as a(n): A. Analytical process. B. Loss contingency. C. Probable loss. D. Unasserted claim.

B

A transfer agent and a registrar are most likely to provide the auditor with evidence on: A. Restrictions on the payment of accounts payable. B. Shares issued and outstanding. C. Preferred stock liquidation value. D. Transfers occurring between management and related parties.

B

In performing a test of controls, the auditors vouch a sample of entries in the purchases journal to the supporting documents. Which assertion would this test of controls most likely test? A. Completeness. B. Existence. C. Valuation. D. Rights.

B

Subsequent to the issuance of the auditor's report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should next: A. Notify the board of directors that the auditor's report must no longer be associated with the financial statements. B. Determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information. C. Request that management disclose the effects of the newly discovered information by adding a footnote to subsequently issued financial statements. D. Issue revised pro forma financial statements taking into consideration the newly discovered information.

B

The audit procedure of confirmation is least appropriate with respect to: A. The trustee of an issue of bonds payable. B. Holders of common stock. C. Holders of notes receivable. D. Holders of notes payable.

B

The auditors' plan for the examination of long-term debt should include steps that require the: A. Verification of the existence of the bondholders. B. Examination of copies of debt agreements. C. Inspection of the accounts payable subsidiary ledger. D. Investigation of credits to the bond interest income account.

B

The organization that administers the Certified Internal Auditor program is the: A. American Institute of Certified Public Accountants—Certified Internal Auditor Division. B. The Institute of Internal Auditors. C. American Accounting Association D. Securities and Exchange Commission.

B

When confirming accounts payable, the approach is most likely to be one of: A. Selecting the accounts with the largest balances at year-end, plus a sample of other accounts. B. Selecting the accounts of companies with whom the client has previously done the most business, plus a sample of other accounts. C. Selecting a random sample of accounts payable at year-end. D. Confirming all accounts.

B

Which of the following is defined as a weakness in internal control that allows a reasonable possibility of a misstatement that is material? A.Control deficiency. B. Material weakness. C. Reportable condition. D. Significant deficiency.

B

Which of the following procedures is least likely to be completed before the balance sheet date? A. Confirmation of receivables. B. Search for unrecorded liabilities. C. Observation of inventory. D. Review of internal accounting control over cash disbursements.

B

An auditor accepted an engagement to audit the 20X8 financial statements of EFG Corporation and began the fieldwork on September 30, 20X8. EFG gave the auditor the 20X8 financial statements on January 17, 20X9. The auditor completed the audit on February 10, 20X9, and delivered the report on February 16, 20X9. The client's representation letter normally would be dated: A. December 31, 20X8. B. January 17, 20X9. C. February 10, 20X9. D. February 16, 20X9.

C

As compared to an audit in accordance with GAAS, an audit in accordance with Generally Accepted Government Auditing Standards requires the auditors to: A. Use a lower level of materiality. B. Perform additional tests of internal control. C. Issue an additional report on compliance with laws and regulations and internal control. D. Fulfill all of the above requirements.

C

The auditors can best verify a client's bond sinking fund transactions and year-end balance by: A. Recomputation of interest expense, interest payable, and amortization of bond discount or premium. B. Confirmation with individual holders of retired bonds. C. Confirmation with the bond trustee. D. Examination and count of the bonds retired during the year.

C

The auditors identified a material weakness in internal control in August. The client was informed and the client corrected the material weakness prior to year-end (December 31); the auditors concluded that management eliminated the material weakness prior to year-end. The appropriate audit report on internal control is: A. Adverse. B. Qualified. C. Unqualified. D. Unqualified with explanatory language relating to the material weakness.

C

The search for unrecorded liabilities for a public company includes procedures usually performed through the: A. Day the audit report is issued. B. End of the client's year. C. Date of the auditors' report. D. Date the report is filed with the SEC.

C

To determine that each voucher is submitted and paid only once, when a payment is approved, supporting documents should be canceled by the: A. Authorized members of the audit committee. B. Accounting department. C. Individual who signs the checks. D. Chief executive officer.

C

When performing an operational audit, the purpose of a preliminary survey is to: A. Determine the objective of the activity to be audited. B. Determine the scope of the audit. C. Identify areas that should be included in the audit program. D. All of the above.

C

Which of the following bodies promulgates standards for audits of federal financial assistance programs? A. Governmental Accounting Standards Board. B. Financial Accounting Standards Board. C. Government Accountability Office. D. Governmental Auditing Standards Board.

C

Which of the following events occurring on January 5, 20X2, is most likely to result in an adjusting entry to the 20X1 financial statements? A. A business combination. B. Early retirement of bonds payable. C. Settlement of litigation. D. Plant closure due to a strike.

C

Which of the following is least likely to be an audit objective for debt? A. Determine the existence of recorded debt. B. Establish the completeness of recorded debt. C. Determine that the client has rights to receive proceeds relating to the redemption of debt. D. Determine that the valuation of debt is in accordance with generally accepted accounting principles.

C

Which of the following is most likely to be an audit objective in the audit of owners' equity? A. Establish that recorded owners' equity includes all long-term debt and equity balances. B. Determine that common stock is valued at current market value. C. Determine that the presentation and disclosure of owners' equity are appropriate. D. Determine that the existence of recorded owner's equity is in conformity with equity accounting rule valuations.

C

Which of the following is most likely to be considered a Type 1 subsequent event? A. A business combination completed after year-end, but for which negotiations began prior to year-end. B. A strike subsequent to year-end due to employee complaints about working conditions that originated two years ago. C. Customer checks deposited prior to year-end but determined to be uncollectible after year-end. D. Introduction of a new line of products after year-end for which major research had been completed prior to year-end.

C

Which of the following is not a typical question asked during a walk-through? A. Have you ever been asked to override the process or controls? B. What do you do when you find an error? C. What is the largest fraudulent transaction you ever processed? D. What kind of errors have you found?

C

Which of the following is the best way for the auditors to determine that every name on a company's payroll is that of a bona fide employee presently on the job? A. Examine human resources records for accuracy and completeness. B. Examine employees' names listed on payroll tax returns for agreement with payroll accounting records. C. Make a surprise observation of the company's regular distribution of paychecks on a test basis. D. Visit the working areas and verify that employees exist by examining their badge or identification numbers.

C

A material weakness is a control deficiency (or combination of control deficiencies) that results in a reasonable possibility that a misstatement of at least what amount will not be prevented or detected? A. Any amount greater than zero. B. A greater amount than zero, but an amount that is at least inconsequential. C. A greater amount than inconsequential. D. A material amount.

D

A procedure that involves tracing a transaction from origination through the company's information systems until it is reflected in the company's financial report is referred to as a(n): A. Analytical analysis. B. Substantive test. C. Test of a control. D. Walk-through.

D

As a result of analytical procedures, the independent auditors determine that the gross profit percentage has declined from 30 percent in the preceding year to 20 percent in the current year. The auditors should: A. Express an opinion that is qualified due to the inability of the client company to continue as a going concern. B. Evaluate management's performance in causing this decline. C. Require note disclosure. D. Consider the possibility of a misstatement in the financial statements.

D

Auditor confirmation of accounts payable balances at the balance sheet date maybe unnecessary because: A. This is a duplication of cutoff tests. B. Accounts payable balances at the balance sheet date may not be paid before the audit is completed. C. Correspondence with the audit client's attorney will reveal all legal action by vendors for nonpayment. D. There is likely to be other reliable external evidence available to support the balances.

D

Internal auditing can best be described as: A. An accounting function. B. A compliance function. C. An activity primarily to detect fraud. D. A control function.

D

The least likely approach in auditing management's estimate relating to an accrued liability is to: A. Independently develop an estimate of the amount to compare to management's estimate. B. Review and test management's process of developing the estimate. C. Review subsequent events or transactions bearing on the estimate. D. Send confirmations relating to the estimate.

D

Which of the following is least likely to be considered a substantive procedure relating to payroll? A. Investigate fluctuations in salaries, wages, and commissions. B. Test computations of compensation under profit sharing for bonus plans. C. Test commission earnings. D. Test whether employee time reports are approved by supervisors.

D

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities? A. Examine confirmation requests returned by creditors whose accounts appear on a subsidiary trial balance of accounts payable. B. Examine unusual relationships between monthly accounts payable balances and recorded purchases. C. Examine a sample of invoices a few days prior to and subsequent to year-end to ascertain whether they have been properly recorded. D. Examine selected cash disbursements in the period subsequent to year-end.

D

Which of the following need not be included in management's report on internal control under Section 404(a) of the Sarbanes-Oxley Act of 2002? A. A statement that the company's auditors have issued an audit report on management's assertion. B. An identification of the framework used for evaluating internal control. C. Management's assessment of the effectiveness of internal control. D. Management's acknowledgment of its responsibility to establish and maintain internal control that detects all significant deficiencies.

D

Which of the following procedures is most likely to be included near completion of an audit? A. Obtaining an understanding of internal control. B. Confirmation of receivables. C. Observation of inventory. D. Performing analytical procedures.

D

Which of the following questions would an auditor most likely include on an internal control questionnaire for notes payable? A. Are assets that collateralize notes payable critically needed for the entity's continued existence? B. Are two or more authorized signatures required on checks that repay notes payable? C. Are the proceeds from notes payable used for the purchase of noncurrent assets? D. Are direct borrowings on notes payable authorized by the board of directors?

D