AUD Ch. 14 & 15

Define a management representation letter. A. A letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements and details of any verbal representations made by management during the course of the audit. B. A written statement by management provided to the auditor to confirm certain matters or to support other audit evidence. C. A letter from auditor informing management about concerns. D. A written statement containing details of any verbal representations made by management during the course of the audit.

A. A letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements and details of any verbal representations made by management during the course of the audit.

Define the emphasis of matter paragraph. A. A paragraph included in the auditor's report that is required by generally accepted auditing standards or is included at the auditor's discretion. B. A paragraph that identifies the statements being audited and states the auditor's opinion. C. A paragraph that states responsibilities and references registration with the Public Company Accounting Oversight Board (PCAOB). D. A paragraph that briefly explains the process of conducting an audit and that the PCAOB standards were followed.

A. A paragraph included in the auditor's report that is required by generally accepted auditing standards or is included at the auditor's discretion.

When a client has a going concern issue, _______. A. AU-C 570 The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern requires an emphasis-of-matter paragraph be added to the unmodified report, after the opinion paragraph B. AU-C 570 The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern requires an emphasis-of-matter paragraph be added to the unmodified report, before the opinion paragraph C. the auditor must notify the Securities and Exchange Commission (SEC) within ten business days D. the auditor should recommend a potential acquirer

A. AU-C 570 The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern requires an emphasis-of-matter paragraph be added to the unmodified report, AFTER the opinion paragraph

Define subsequent event A. Events occurring between the date of the financial statements and the date of the auditor's report. B. Events that provide evidence of conditions that arose after the date of the auditor's report. C. Events that provide evidence of conditions that arose after the date of the financial statements. D. Events that never require an adjustment to the financial statements but may require disclosure in the notes to the financial statements.

A. Events occurring between the date of the financial statements and the date of the auditor's report

Which of the following is NOT an example of a loss contingency? A. Payment of income taxes B. Income tax disputes C. Guarantees of debt of others D. Threat of expropriation of assets

A. Payment of income taxes

When is a disclaimer of opinion issued? A. When a scope limitation is material and pervasive B. When a scope limitation is material but not pervasive C. When a misstatement is material and pervasive D. When scope limitation is eliminated by alternative procedures

A. When a scope limitation is material and pervasive

A material weakness in internal control over financial reporting (ICFR) is defined as _______. A. a deficiency, or a combination of deficiencies, in internal control over financial reporting B. a single deficiency in internal control over financial reporting C. multiple deficiencies in internal control over financial reporting D. any account balance that the auditor has concluded is incorrect by more than a predetermined percentage

A. a deficiency, or a combination of deficiencies, in internal control over financial reporting

Which of the following is NOT a situation in which the auditor wants to draw users' attention to a material matter that is already presented and/or disclosed in the client's financial statements? A. A major disaster that may not have a significant impact on the company's financial situation B. Uncertainties relating to the future outcome of litigation C. Significant subsequent events D. Material transactions with related parties

A. a major disaster that may not have significant impact on the company's financial situation

A compilation engagement would be described as _______. A. a non-attest service B. an attest service C. an audit engagement D. an assurance service

A. a non-attest service

According to Generally Accepted Accounting Principles (GAAP), to meet the "going-concern" standard an entity must be viewed as capable of staying in business for ____________ after the date of the financial statements. A. a reasonable period of time B. six months C. nine months D. two years

A. a reasonable period of time

A written representation is _______. A. a written statement by management provided to the auditor to confirm certain matters or to support other audit evidence B. a written statement drafted by the internal audit function, and provided to the auditor to confirm certain matters or to support other audit evidence C. should be filed as part of court filings by the client, to confirm the details of the representing attorney D. a statement from the prior auditor, confirming there were no material misstatements found in prior audits

A. a written statement by management provided to the auditor to confirm certain matters or to support other audit evidence.

What is a written representation? A. A written statement by management provided to the auditor to confirm certain matters or to support other audit evidence. B. A letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements. C. A written statement containing details of any verbal representations made by management during the course of the audit. D. A letter from auditor to the management informing their concerns.

A. a written statement by management provided to the auditor to confirm certain matters or to support other audit evidence.

With respect to the going concern assumption, auditors also draw their own conclusions _______. A. about whether there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time B. about whether there is substantial doubt about the entity's ability to continue as a going concern for an indefinite period of time C. as to whether the client is likely to be a target for an acquisition by another company in the near future D. as to whether the client is likely to attempt to acquire another company in the near future

A. about whether there is a substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time

Type II subsequent events occur _______. A. after the date of the financial statements B. between the date of the financial statements and the date of the auditor's report C. at the date of the financial statements D. none of the above are correct

A. after the date of the financial statements

Which of the following defines a legal letter? A. An audit inquiry sent to a client's external and in-house legal counsel to obtain information about litigation, assessments, and claims. B. A letter comprising the auditor's report that is required by generally accepted auditing standards or is included at the auditor's discretion. C. A statement in which a CPA orders inquiry and analytical procedures to provide limited assurance that no material modifications should be made to the financial statements. D. An engagement in which a CPA applies accounting and financial expertise to assist management in the presentation of financial statements.

A. an audit inquiry sent to a client's external and in-house legal counsel to obtain information about litigation, assessments, and claims.

What is a Type 1 subsequent event? A. An event that provides evidence of conditions that existed at the date of the financial statements. B. An event occurring between the date of the financial statements and the date of the auditor's report. C. An event that provides evidence of conditions that arose after the date of the financial statements. D. An event that does not require an adjustment to the financial statements but may require disclosure in the notes to the financial statements.

A. an event that provides evidence of conditions that existed at the date of the financial statements

The financial accounting standards board (fasb) defines loss contingency as______________. A. an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur B. an existing condition or situation involving certainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur C. an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events fail to occur D. an existing condition or situation involving uncertainty as to possible gain that will ultimately be resolved when one or more future events occur or fail to occur

A. an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur.

What is a loss contingency? A. An existing condition or situation involving uncertainty to possible loss that will ultimately be resolved when one or more future events occur or fail to occur. B. An opinion expressed by the auditor when the auditor concludes that the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. C. Lack of confidence in the audit process that intended users place in the financial statements. D. A statement in the auditor's report that is required by generally accepted auditing standards.

A. an existing condition or situation involving uncertainty to possible loss that will ultimately be resolved when one or more future events occur or fail to occur.

_______ are used near the end of the audit to assist the auditor in forming an overall conclusion about whether the financial statements are consistent with the auditor's understanding of the entity. A. Analytical procedures B. Engagement procedures C. Quality control procedures D. Audit standards

A. analytical procedures

Which of the following is NOT a component of unmodified opinion for a private company audit? A. Auditor tenure B. Title C. Opinion paragraph D. Introductory paragraph

A. auditor tenure

When reference is made to a component auditor, which of the following paragraphs is modified to include the portion of the group financial statements that were audited by the component auditor? A. Auditor's responsibility paragraph B. Scope paragraph C. Going concern paragraph D. Emphasis-of-the-matter paragraph

A. auditor's responsibility paragraph

If a scope limitation is material, _______. A. auditors cannot state a conclusion without evidence to support the conclusion B. auditors should state a conclusion even without evidence to support the conclusion C. it is of no relevance to the financial statements and their users D. the auditor should immediately withdraw from the engagement

A. auditors cannot state a conclusion without evidence to support the conclusion

At the conclusion of the audit, _______. A. auditors typically revaluate materiality decisions made during the audit to ensure it is still appropriate based on the results of audit procedures B. auditors typically attempt to contact the prior auditor C. auditors may attempt to contact the client's legal counsel D. auditors ask management for recommendations on any needed adjustments to the accounts

A. auditors typically revaluate materiality decisions made during the audit to ensure it is still appropriate based on the results of audit procedures

The group engagement team _______. A. audits the parent company and is responsible for the overall audit strategy for all of the components B. audits the subsidiary company and is responsible for the overall audit strategy for all of the components C. has no responsibility for issuing an audit opinion D. is responsible for the fairness of the financial statements

A. audits the parent company and is responsible for the overall audit strategy for all of the components

Which of the following types of auditors perform audits of a component or subsidiary of the parent company? A. Component auditor B. Subsidiary auditor C. Individual auditor D. Auditing firm

A. component auditor

An auditor issues a modified audit opinion when the auditor _______. A. concludes the financial statements are not presented fairly in accordance with the applicable financial reporting framework because of one or more material misstatements B. concludes the financial statements are not presented fairly in accordance with the applicable financial reporting framework because of one or more immaterial misstatements C. is able to gather sufficient appropriate audit evidence to draw a conclusion as to the fair presentation of the financial statements D. is not able to gather sufficient appropriate audit evidence to draw a conclusion about the unfair presentation of the financial statements

A. concludes the financial statements are not presented fairly in accordance with the applicable financial reporting framework because of one or more material misstatements.

Audit standards require auditors to_____________________. A. conduct specific audit procedures to identify subsequent events that may occur up through the date of the auditor's report B. conduct specific audit procedures to identify subsequent events that may occur after the date of the auditor's report. C. apply optional use of analytical procedures to increase assurance levels related to subsequent events D. delegate auditing of subsequent events to the internal audit function

A. conduct specific audit procedures to identify subsequent events that may occur up through the date of the auditor's report

Which of the following refer(s) to accounting policies and practices that are most important to the portrayal of the company's financial condition and results and that require management's most difficult, subjective, or complex judgments? A. Critical accounting policies and practices B. Critical accounting estimates C. Critical accounting projections D. A disclosure agreement

A. critical accounting policies and practices

AS 1301 specifies that _______. A. critical accounting policies and practices and critical accounting estimates must be communicated to the audit committee B. significant and immaterial accounting policies and practices and critical accounting estimates must be communicated to the audit committee C. the auditor should bill audit clients at distinct phases of the audit process D. auditors should always consult with their own legal counsel before issuing an unmodified opinion

A. critical accounting policies and practices and critical accounting estimates must be communicated to the audit committee

Which component of an unqualified opinion defines the concept of internal control over financial reporting (ICFR) and states inherent limitations of ICFR? A. Definition and inherent limitations paragraph B. Paragraph referencing the financial statement audit C. Scope paragraph D. Basis for opinion paragraph

A. definition and inherent limitations paragraph

AU-C 560 and AS 2905 state the first step when responding to subsequently discovered facts is to_______. A. discuss the matter with the appropriate level of management and, if appropriate, those charged with governance B. discuss the matter with the appropriate level of management rather than those charged with governance C. issue a disclaimer of opinion, to avoid liability D. immediately notify the board of directors, and request the internal audit function investigate accordingly

A. discuss the matter with the appropriate level of management and, if appropriate, those charged with governance

If the auditor's opinion on the revised financial statements is different from the previously issued audit report, then a/an _______ should be added to the revised audit report. A. emphasis-of-matter paragraph B. going concern paragraph C. auditor's responsibility paragraph D. opinion paragraph

A. emphasis-of-matter paragraph

Which of the following paragraphs is placed after the opinion paragraph in the standard unmodified report, when applicable? A. Emphasis-of-matter paragraph B. Scope paragraph C. Opinion paragraph D. Auditor's responsibility paragraph

A. emphasis-of-matter paragraph

The audit process _______. A. enhances the degree of confidence that intended users place in the financial statements B. has no effect on the degree of confidence that intended users place in the financial statements C. decreases the degree of confidence that intended users place in the financial statements D. is unrelated to the degree of confidence that intended users place in the financial statements

A. enhances the degree of confidence that intended users place in the financial statements

It is the responsibility of the group engagement partner to_______. A. ensure the work completed by a component auditor meets the group engagement partner's requirements and standards. B. ensure the financial statements are free from error C. ensure the work completed by a prior auditor meets the group engagement partner's requirements and standards D. notify the appropriate supervisor of fraud being committed at the next level of management up from the individual

A. ensure the work completed by a component auditor meets the group engagement partner's requirements and standards

Subsequent events refer to_________. A. events occurring between the date of the financial statements and the date of the auditor's report B. events occurring before the financial statement date C. events occurring after the financial statement date D. events occurring after completion of the audit and issuance of the audit report

A. events occurring between the date of the financial statements and the date of the auditor's report.

The auditor's responsibility, as expressly stated in the audit report, is to _______. A. express an opinion on the financial statements B take responsibility for the financial statements C. make it clear that responsibility for the financial statements rests with the internal audit function D. make it clear that responsibility for the financial statements rests with the client's legal counsel

A. express an opinion on the financial statements

The purpose of an audit is to provide_______. A. financial statement users with an opinion by an independent auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework B. internal auditors with an opinion by the independent auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework C. management with assurance that they will be able to maximize profit and bonuses D. absolute assurance that the financial statement conform to GAAP

A. financial statement users with an opinion by an independent auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework

An example of a loss contingency includes______________. A. guarantees of debt of others B. collection of accounts receivable C. payment of accounts payable D. repurchasing outstanding shares

A. guarantees of debt of others

Auditors of public companies can perform a/an _______, which means performing the financial statement audit and the audit of the effectiveness of internal control over financial reporting (ICFR) at the same time. A. integrated audit B. internal audit C. compliance audit D. investigative audit

A. integrated audit

The most common user of a private company's financial statements____________________. A. is a bank or other lender B. are regulatory agencies such as the Internal Revenue Service (IRS) C. are competing companies D. are employees of the company

A. is a bank or other lender

An emphasis-of-matter paragraph refers to when an auditor_______. A. issues an unmodified opinion but may include an additional paragraph in the report to draw attention to important information B. issues a disclaimer of opinion due to a scope limitation C. makes inquiries of the prior auditor relating to prior audit opinions issues D. makes inquiries of the legal auditor relating to prior audit opinions issues

A. issues an unmodified opinion but may include an additional paragraph in the report to draw attention to important information

Analytical procedures during risk assessment of a going concern _______. A. May identify negative trends such as working capital deficiencies, adverse key financial ratios, and decreasing cash flow from operations B. May identify positive trends such as working capital deficiencies, adverse key financial ratios, and decreasing cash flow from operations C. May identify only external matters that have occurred such as loss of a key franchise, loss of a principal customer, or work stoppages due to natural disaster D. May identify internal matters that have occurred such as legal proceedings

A. may identify negative trends such as working capital deficiencies, adverse key financial ratios, and decreasing cash flow from operations

At the end of the audit, which of the following is NOT reevaluated by the auditors? A. Misstatements found during the audit B. Materiality decisions made during the audit C. Inherent risk based on audit findings D. Fraud risk based on audit findings

A. misstatements found during the audit

If management determines the loss contingency is probable and an amount con be reasonably estimated, then the company _________________. A. must record a liability and a related expense or loss, and disclose the relevant details of the event in the notes to the financial statements B. must record an asset and a related expense or loss, and disclose the relevant details of the event in the notes to the financial statements C. must record a liability and a related depreciation expense or loss, and disclose the relevant details of the event in the notes to the financial statements

A. must record a liability and a related expense or loss, and disclose the relevant details of the event in the notes to the financial statements

If an internal control exception is identified, the auditor_______. A. must use their professional judgment to determine if the exception is a control deficiency, a significant deficiency, or a material weakness B. must use published frameworks to determine if the exception is a control deficiency, a significant deficiency, or a material weakness C. should notify the Securities and Exchange Commission (SEC) within 14 days D. should consider withdrawing from the engagement

A. must use their professional judgment to determine if the exception is a control deficiency, a significant deficiency, or a material weakness

A legal letter refers to a letter__________________. A. of inquiry sent to the client's legal counsel B. of inquiry sent to the prior auditor C. sent to the Securities and Exchange Commission to advise of questionable accounting practices D. sent to the client's internal audit function, questioning certain legal practices employed by the client

A. of inquiry sent to the client's legal counsel

The financial statements are prepared by client management______________. A. on the basis of conditions existing at year-end B. on the basis of conditions that existed at the beginning of the year C. on the basis of conditions existing throughout the year D. and sent to the Securities and Exchange Commission (SEC) for approval

A. on the basis of conditions existing at year end

The emphasis-of-matter paragraph is _______. A. placed after the opinion paragraph in the standard unmodified report. B. placed before the opinion paragraph in the standard unmodified report. C. placed with the opinion paragraph in the standard unmodified report. D. referred to in a separate report

A. placed after the opinion paragraph in the standard unmodified report

Attorneys and their clients have a ____________________, which means attorneys cannot talk about their client's cases to anyone without permission from the client. A. privileged relationship B. no permission agreement C. confidential rapport D. legal right

A. privileged relationship

The purpose of an audit is to _______. A. provide financial statement users with an opinion by an independent auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework B. provide internal auditors with an opinion by the external auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework C. provide absolute assurance that the financial statements conform to Generally Accepted Accounting Principles (GAAP) D. help management ensure yearly bonuses will be received

A. provide financial statement users with an opinion by an independent auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework.

A Type II subsequent event_____________. A. provides evidence of conditions that arose after the date of the financial statements B. provides evidence of conditions that arose before the date of the financial statements C. provides evidence of conditions that arose after the date of the auditor's report D. provides evidence of conditions that arose before the date of the auditor's report

A. provides evidence of conditions that arose after the date of the financial statements

According to PCAOB AS 2201, _______. A. publicly traded companies are required to have an audit of the effectiveness of internal control over financial reporting (ICFR) B. privately traded companies are required to have an audit of the effectiveness of internal control over financial reporting (ICFR) C. companies should provide clear note disclosures for any change in inventory method D. companies should clearly disclose which financial investments are being accounted for at fair value

A. publicly traded companies are required to have an audit of the effectiveness of internal control over financial reporting (ICFR)

In a financial statement audit, which level of assurance provides that no material modifications should be made to the financial statements for them to be in accordance with the applicable financial reporting framework? A. Reasonable assurance B. Limited assurance C. No assurance D. None of the answers are correct.

A. reasonable assurance

In which of the following engagements does the CPA provides limited assurance that no material modifications should be made to the financial statements for them to be in accordance with the applicable financial reporting framework? A. Review engagement B. Compilation engagement C. Audit engagement D. Material engagement

A. review engagement

Dual dating refers to when the auditor _______. A. shows two dates on the same audit report B. shows two dates on two different audit reports C. references last year's audit report concurrently with the current year report D. also includes the date that the internal control function issued their audit opinion

A. shows two dates on the same audit report

A/an _______ is an event that occurs between the date of the financial statements and the date of the auditor's report. A. subsequent event B. dual event date C. auditor's report event D. financial event

A. subsequent event

The written representation from management _______. A. supplements the inquiries made of management regarding subsequent events and the evidence gathered from audit procedures B. supplements the inquiries made of the auditor regarding subsequent events and the evidence gathered from audit procedures C. can be drafted by the auditor and signed by the internal audit function on behalf of management D. transfers legal liability for any financial statement errors to the auditor

A. supplements the inquiries made of management regarding subsequent events and the evidence gathered from audit procedures

Auditors should be alert to subsequent events_________________. A. that may occur between the date of the financial statements and the date of the auditor's report B. that may occur between the date of the auditor's report and the next balance sheet date C. and report all immaterial findings to the Securities and Exchange Commission D. as they are particularly important to the year-end closing process

A. that may occur between the date of the financial statements and the date of the auditor's report

When reference is made to a component auditor, _______. A. the auditor's responsibility paragraph is modified to indicate the portion of the group financial statements that were audited by the component auditor B. the auditor's responsibility paragraph is removed, and reference is made to the group financial statements that were audited by the component auditor C. liability for the fairness of the financial statements is transferred accordingly D. inherent risk will decrease accordingly

A. the auditor's responsibility paragraph is modified to indicate the portion of the group financial statements that were audited by the component auditor

Once auditors have gathered sufficient appropriate audit evidence, evaluated uncorrected misstatements, and completed the required communications with those charged with governance _______. A. the final step is to prepare and issue the independent auditor's report B. the final step is to confer with the client's legal counsel C. the audit report should be sent to the internal audit function for review D. the report should be sent to the SEC for modification and approval

A. the final step is to prepare and issue the independent auditor's report

If auditors determine there is substantial doubt about the entity continuing as a going concern, _______. A. the next step is to obtain information about management's plans to mitigate or minimize the adverse effects of the situation B. the next step is to obtain information about the auditor's plans to mitigate or minimize the adverse effects of the situation C. they should immediately issue an adverse opinion and withdraw from the engagement D. the auditors should immediately invoice the client for the cost of the audit and request payment within 30 days

A. the next step is to obtain information about management's plans to mitigate or minimize the adverse effects of the situation

What is the going concern assumption? A. The viability of an entity to remain in business for the foreseeable future B. The period of time required by the applicable financial reporting framework C. The responsibility to perform any audit procedures D. An overall conclusion on the audit drawn by auditors

A. the viability of an entity to remain in business for the foreseeable future

If management determines there is substantial doubt about continuing as a going concern, _______. A. then management must make a note disclosure about the circumstances, including any plans management may have to mitigate the situation. B. then management must make list an estimated loss contingency in the financial statements about the circumstances, including any plans management may have to mitigate the situation. C. nothing should be disclosed in the notes to the financial statements until management is reasonably certain it will be an issue D. then future debt issues will likely enjoy lower interest rates

A. then management must make a note disclosure about the circumstances, including any plans management may have to mitigate the situation.

If the client has a going concern issue, _______. A. then management must make a note disclosure about the circumstances, including any plans management may have to mitigate the situation B. then the internal auditors must make a note disclosure about the circumstances, including any plans management may have to mitigate the situation C. then the external auditors must make a note disclosure about the circumstances, including any plans management may have to mitigate the situation D. the auditor should recommend that management begin the liquidation process to dissolve the firm

A. then management must make a note disclosure about the circumstances, including any plans management may have to mitigate the situation.

If the group engagement partner wants to name the component audit firm, then_______. A. he/she must receive permission from the component auditor, and the component auditor's report on the subsidiary must be presented together with the auditor's report on the group financial statements B. he/she must receive permission from the component auditor, and the prior auditor's report on the subsidiary must be presented together with the auditor's report on the group financial statements C. he or she is free to do so D. management must provide permission accordingly

A. they must receive permission from the component auditor, and the component auditor's report on the subsidiary must be presented with the auditor's report on the group financial statements.

If the auditors withdraw from an engagement, _______. A. they will inform the appropriate level of management or those charged with governance and provide reasons for the withdrawal B. they will inform the appropriate level of management only and will provide reasons for the withdrawal C. the auditor should immediately cease communication with the client, and refer them to another auditor D. they are not entitled to receive compensation for services performed

A. they will inform the appropriate level of management or those charged with governance and provide reasons for the withdrawal.

Auditors must use their professional judgment _______. A. to distinguish if a misstatement or scope limitation is just material or pervasively material B. to distinguish if a misstatement or scope limitation is just immaterial or pervasively material C. to determine if the firm has the ability to pay the auditor for services rendered D. in selecting the client's audit committee

A. to distinguish is a misstatement or scope limitation is just material or pervasively material

A/an _______ is presented by the auditor to indicate that the financial statements are in accordance with the applicable financial reporting framework. A. unmodified opinion B. modified opinion C. unqualified opinion D. audit opinion

A. unmodified opinion

The nature of the specific procedures performed for the subsequent events review _______. A. will depend on the individual circumstances of each client B. should be uniform across all clients, to increase consistency C. should be agreed with management, with respect to areas to focus audit resources and effort D. will be determined and handled by the internal audit function

A. will depend on the individual circumstances of each client.

An engagement quality control reviewer _______. A. will review selected areas of working papers prior to the issuance of the audit report B. will review all areas of working papers prior to the issuance of the audit report C. is typically a person with minimal audit expertise and experience D. should be appointed by the client

A. will review selected areas of working papers prior to the issuance of the audit report

An engagement quality control reviewer _______. A. will review selected areas of working papers prior to the issuance of the audit report B. will review all areas of working papers prior to the issuance of the audit report C. should be impartial and chosen by the client's senior management D. should be chosen from a different audit firm

A. will review selected areas of working papers prior to the issuance of the audit report

Who considers whether work has been performed in accordance with appropriate audit standards? A. Working paper reviewer B. Engagement partner C. Quality control reviewer D. Audit partner

A. working paper reviewer

Whether auditors choose to dual date or extend the end of fieldwork, they must obtain a/an _______ from management. A. written representation letter B. management representation letter C. auditing representation letter D. auditor's report date letter

A. written representation letter

The audit report represents the _______. A. beginning of the audit process B. "end product" of the financial statement audit C. "end product" of the internal audit review and audit D. opinion of management with respect to the fairness and accuracy of the financial statements

B. "end product" of the financial statement audit

Engagement of a component auditor requires an emphasis-of-a-matter paragraph? A. True B. False

B. False

A form 10-K refers to______________> A. A form filed with the Securities and Exchange Commission (SEC) relating to changing of senior management B. a firm's audited financial statements, sent to the SEC C. a firm only filed with the SEC by privately traded companies D. certain required income statement disclosures

B. a firm's audited financial statements, sent to the sec.

A type I subsequent event should____________. A. not require an adjustment to the financial statements B. always require an adjustment to the financial statements C. be disclosed in the notes to the financial statements only D. should be referred to management to determine disclosure requirements

B. always require an adjustment to the financial statements

When a client has a going concern issue, .AU-C 570 The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern requires an _______. A. emphasis-of-matter paragraph be added to the unmodified report, before the opinion paragraph B. an emphasis-of-matter paragraph be added to the unmodified report, after the opinion paragraph C. an explanatory paragraph be added to the unmodified report, after the opinion paragraph D. an explanatory paragraph be added to the unmodified report, before the opinion paragraph

B. an emphasis-of-matter paragraph be added to the unmodified report, after the opinion paragraph.

A type I subsequent event refers to_______________. A. an event that occurred after the date of the financial statements B. an event that most likely occurred before the date of the financial statements C. a contingent event, that may or may not occur D. an event that is typified by debit entries to contra-revenue accounts

B. an event that most likely occurred before the date of the financial statements

During the risk response phase, _______. A. all analytical procedures have been conducted B. analytical procedures can be used, but are not required, as a substantive test to gather audit evidence C. analytical procedures can be used, and are required, as a substantive test to gather audit evidence D. the auditor should begin testing internal control

B. analytical procedures can be used, but are not required, as a substantive test to gather audit evidence

When the results of substantive procedures identify misstatements, _______. A. the auditors refer the misstatements to the prior auditor for correction B. auditors consider whether the misstatements may be indicative of the need to re-evaluate inherent risk, control risk or fraud risk C. auditors consider whether the misstatements may be indicative of the need to re-evaluate inherent risk only D. auditors consider whether the misstatements may be indicative of the need to re-evaluate control risk only

B. auditors consider whether the misstatements may be indicative of the need to re-evaluate inherent risk, control risk, or fraud.

If controls are weak,________________. A. auditors will perform less substantive testing as a result B. auditors will increase the control risk assessment and perform additional substantive tests to detect material misstatements C. auditors will decrease the control risk assessment and perform additional substantive tests to detect material misstatements D. auditors will increase the control risk assessment and perform fewer substantive tests to detect material misstatements

B. auditors will increase the control risk assessment and perform additional substantive tests to detect material misstatements.

A scope limitation in regards to an audit of internal control over financial reporting (ICFR) occurs when the auditors_______. A. are able to audit all of a client's accounts without issue B. cannot perform planned procedures to gather sufficient appropriate evidence regarding the design and effectiveness of a client's internal controls C. cannot perform planned procedures to gather sufficient appropriate evidence regarding the design and effectiveness of a client's financial statements D. have not been prepaid for audit services, and is unable to collect the associated receivable

B. cannot perform planned procedures to gather sufficient appropriate evidence regarding the design and effectiveness of a client's internal controls.

Generally, a written representation _______. A. is sufficient evidence to issue an unmodified audit report B. complements other audit procedures that were performed and generally does not provide sufficient appropriate audit evidence on its own C. replaces other audit procedures that were performed and generally does provide sufficient appropriate audit evidence on its own D. should be drafted by the client's legal counsel and signed with the auditor

B. complements other audit procedures that were performed and generally does not provide sufficient appropriate audit evidence on its own.

The date of the auditor's report should be the _______. A. same date as the financial statement date B. date of the completion of fieldwork C. date the audit report is sent to the SEC for approval D. date the auditor receives the audit report from the internal auditors

B. date of the completion of fieldwork

AU-C 700 Forming an Opinion and Reporting on Financial Statements defines an unmodified opinion as the opinion expressed by the_______. A. internal auditor when the auditor concludes the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework B. external auditor when the auditor concludes the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework C. external auditor when the auditor concludes the financial statements are presented fairly, in all material and immaterial respects, in accordance with the applicable financial reporting framework D. external auditor when the auditor concludes the financial statements are presented fairly, in all material respects, in accordance with the international financial reporting standards

B. external auditor when the auditor concludes the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

Audit reports tend to be _______. A. very different, depending on the company being audited B. fairly standard with respect to wording and paragraphs C. standard for companies within an industry, but varying between industries D. very different, with respect to wording and paragraphs

B. fairly standard with respect to wording and paragraphs

A form 8-K is used____________. A. to file a company's audited financial statements B. for management to report a change of auditors, and the reason for the change C. for management to report a change of internal auditors, and the reason for the change D. to disclose fraudulent transactions that have occurred within a company to the Securities and Exchange Commission (SEC)

B. for management to report a change of auditors, and the reason for the change

Large publicly traded companies are under great scrutiny________________. A. from the SEC only B. from both the public and the SEC C. from the public only D. from the internal audit function

B. from both the public and the SEC

With respect to management's disclosure required for going concern issues, _______. A. if management determines that the disclosure is fairly presented in accordance with the applicable financial reporting framework, then an unmodified auditor's report can still be issued B. if auditors determine that the disclosure is fairly presented in accordance with the applicable financial reporting framework, then an unmodified auditor's report can still be issued C. the auditor should advise management that they are now unable to issue an unmodified audit opinion D. the auditor should advise management that they are now unable to issue a modified audit opinion

B. if auditors determine that the disclosure is fairly presented in accordance with the applicable financial reporting framework, then an unmodified auditor's report can still be issued.

Companies typically present their financial statements _______. A. to show the most recent year only B. in comparative form, which means showing two consecutive years of balance sheets and three consecutive years of the income statement, statement of cash flows, and statement of stockholders' equity C. in standard form, which means showing three consecutive years of balance sheets and three consecutive years of the income statement, statement of cash flows, and statement of stockholders' equity D. only to those entities who have expressed an interest in scrutinizing them

B. in comparative form, which means showing two consecutive years of balance sheets and three consecutive years of the income statement, statement of cash flows, and statement of stockholder's equity.

The going concern assumption _______. A. is not the responsibility of the auditor, and should be left to management to determine B. is a fundamental principle in the preparation of the financial statements C. is the legal responsibility of the auditor D. relates to the comparability and verifiability of a firm's financial statements

B. is a fundamental principle in the preparation of the financial statements

The management representation letter _______. A. can sometimes serve as a substitute for certain audit procedures that were not able to be performed B. is a letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements C. is a letter from the auditor to management acknowledging management's responsibility for the preparation of the financial statements D. should only be sent to the client's legal counsel; not directly to the client

B. is a letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements

The management representation letter _______. A. can sometimes be used as a substitute for the gathering of audit evidence B. is not a substitute for obtaining sufficient, appropriate evidence regarding the financial statements through other audit procedures C. can replace analytical procedures conducted as part of the audit, but cannot replace the audit of internal control D. can replace the audit of internal control conducted as part of the audit, but cannot replace the analytical procedures

B. is not a substitute for obtaining sufficient, appropriate evidence regarding the financial statements through other audit procedures.

In regard to subsequent facts, the auditor _______. A. has no responsibility B. is responsible for making reasonable efforts to detect any material subsequent facts C. is responsible for making reasonable efforts to detect any immaterial subsequent facts D. is only responsible for material events occurring before the balance sheet date

B. is responsible for making reasonable efforts to detect any material subsequent facts

If a misstatement is considered material, _______. A. it should have no bearing on financial statement users and the decisions they make B. it could affect decisions that users make if the users are made aware of the misstatement C. it should not affect decisions that users make if the users are made aware of the misstatement D. an auditor should immediately issue an adverse opinion

B. it could affect decisions that users make if the users are made aware of the misstatement

Type II subsequent events are those events that________________. A. likely occurred before the financial statement date B. likely occurred after the financial statement date C. are unlikely to require adjustment to the financial statements D. should be reported to the Securities and Exchange Commission (SEC)

B. likely occurred after the financial statement date,

When an adverse opinion is issued regarding internal control over financial reporting (ICFR), the auditor _______. A. maintains that the company has fairly reported its financial statements in accordance with Generally Accepted Accounting Principles (GAAP) B. makes a clear statement that the company has not maintained effective internal control for the period under audit C. makes a clear statement that the company has maintained effective internal control for the period under audit D. is not entitled to receive full compensation for services rendered during the audit

B. makes a clear statement that the company has not maintained effective internal control for the period under audit

When an adverse opinion is issued regarding internal control over financial reporting (ICFR), the auditor_______. A. opines that the company has fairly reported its financial statements in accordance with Generally Accepted Accounting Principles (GAAP) B. makes a clear statement that the company has not maintained effective internal control for the period under audit C. makes a clear statement that the company has maintained effective internal control for the period under audit D. is not entitled to receive full compensation for services rendered during the audit

B. makes a clear statement that the company has not maintained effective internal control form the period under audit

Responsibility for evaluating the going concern assumption in accordance with the applicable financial reporting framework rests with _______. A. the auditor B. management C. the internal audit function D. the clients legal counsel

B. management

When a material weakness is identified, the auditor should _______. A. presume that a material misstatement exists in the financial statements B. not presume that a material misstatement occurred in the financial statements C. immediately request the internal audit function conduct a full review of the control issue D. proceed with issuing an unmodified opinion

B. not presume that a material misstatement occurred in the financial statements

If management revises the financial statements due to subsequently discovered facts, auditors should_______. A. perform no further audit procedures on the changes made by management B. perform audit procedures on the changes made by management C. always issue a qualified opinion with respect to the changes D. issue a scope limitation, even if they are able to audit the changes

B. perform audit procedures on the changes made by management

Adverse opinions on the effectiveness of internal control are_______. A. commonplace among larger companies B. rare for large, well-established companies C. never seen in practice D. routinely seen in practice

B. rare for large, well-established companies

The responsibility for the financial statements rests_______. A. jointly with the auditor and management B. solely with management C. with the internal audit function D. solely with the external auditor

B. solely with management

The individual responsible for the audit engagement, its performance, and for the auditor's report that is issued on behalf the firm is _______. A. the senior audit manager B. the audit partner C. the Chief Executive Officer (CEO) of the client firm D. the Chief Financial Officer (CFO) of the client firm

B. the audit partner

A material misstatement occurs when _______. A. management incorrectly calculate profitability ratios B. the client departs from the applicable financial reporting framework C. the client abides with the applicable financial reporting framework D. the auditor does not receive the agreed upon compensation from the firm

B. the client departs from the applicable financial reporting framework

An unmodified opinion is expressed by_______. A. the internal audit function upon concluding the financial statements are fairly represented B. the external auditor when the auditor concludes the financial statements are presented fairly, in all material respects C. the external auditor when the auditor concludes the financial statements are presented fairly, in all material and immaterial respects D. management when the auditor concludes the financial statements are presented fairly, in all material respects

B. the external auditor when the auditor concludes the financial statements are presented fairly, in all material and immaterial respects

The assumption that relates to the entity continuing in business for the foreseeable future is called _______. A. the entity assumption B. the going concern assumption C. the solvency assumption D. the liquidity assumption

B. the going concern assumption

After considering management's plans, if auditors determine there is substantial doubt about the entity's ability to continue as a going concern, _______. A. the auditor should consider withdrawing from the engagement B. the next steps are to consider the possible effects on the financial statements and on the auditor's report C. the next steps are to consider the possible effects on the financial statements and on the internal auditor's report D. the auditor should attempt to locate alternative lines of debt and equity capital for the client

B. the nest steps are to consider the possible effects on the financial statements and on the auditor's report

If auditors determine there is substantial doubt about the entity continuing as a going concern, _______. A. then the auditor should immediately notify the Securities and Exchange Commission (SEC) B. the next step is to obtain information about management's plans to mitigate or minimize the adverse effects of the situation C. the next step is to obtain information about the auditor's plans to mitigate or minimize the adverse effects of the situation. D. the next step is to ensure the client is immediately billed for all services performed, to ensure payment

B. the next step is to obtain information about management's plans to mitigate or minimize the adverse effects of the situation

If more than one component auditor was used to audit multiple subsidiaries, _______. A. then the audit report should not be relied upon B. then the portion of the client audited by all component auditors can be aggregated together and expressed as one-dollar amount or percentage C. then the portion of the client audited by all prior auditors can be aggregated together and expressed as one-dollar amount or percentage D. control risk will increase accordingly

B. then the portion of the client audited by all component auditors can be aggregated together and expressed as one-dollar amount or percentage

An example of a scenario which would cause the auditors to modify the opinion on internal control would be _______. A. hiring of a new Chief Operating Officer B. there is a restriction on the scope of the auditor's work C. there is a restriction on the scope of the prior auditor's work D. certain analytical procedures conducted yield expected results

B. there is a restriction on the scope of the auditor's work.

Whether auditors choose to dual date the audit report, or extend the end of fieldwork, _______. A. their liability with respect to the financial statements remains the same B. they must request written representation from management as of the new date of the auditor's report C. they must request written representation from the internal auditors as of the new date of the auditor's report D. no further representations should be requested of management

B. they must request written representation from management as of the new date of the auditor's report

Auditors report fraud _______. A. to the Securities and Exchange Commission (SEC) within 72 hours B. to a level of management at least one level above the level where the fraud occurred C. directly to the manager that is suspected of involvement in the fraud D. to the level below where the auditor suspects the fraud is occurring

B. to a level of management at least one level above the level where the fraud occured

Showing comparative financial statements helps users _______. A. to calculate a definite future stock price B. to analyze the company's financial condition and profitability C. spot potential problems in the most recent years note disclosures D. understand the difference between basic and diluted earnings per share

B. to analyze the company's financial condition and profitability

Final analytical procedures are intended A. to corroborate audit evidence obtained during the audit only B. to corroborate audit evidence obtained during the audit, and to confirm the financial statements are consistent with the auditor's revised expectations based on evidence evaluated during the audit C. to refute audit evidence obtained during the audit, and to confirm the financial statements are consistent with the auditor's revised expectations based on evidence evaluated during the audit D. to corroborate audit evidence obtained during the audit, and to confirm the financial statements are inconsistent with the auditor's revised expectations based on evidence evaluated during the audit.

B. to corroborate audit evidence obtained during the audit, and to confirm the financial statements are consistent with the auditor's revised expectations based on evidence evaluated during the audit

The group engagement partner typically decides to reference the work completed by the component auditor in the audit report _______. A. when management requests that the audit firm do so B. when the subsidiary audited by the component auditor is a material amount of the group financial statements C. when the subsidiary audited by the component auditor is an immaterial amount of the group financial statements D. when the group auditor requests the inclusion of their firm on the audit report

B. when the subsidiary audited by the component auditor is a material amount of the group financial statements

With respect to the issuance of an audit report, the level of materiality will determine_______. A. how much the auditor charges for services rendered B. which modified opinion should be issued, if any C. which unmodified opinion should be issued D. which type of adverse opinion should be issued

B. which modified opinion should be issued, if any

A component auditor is typically_______. A. another audit partner in the same office B. a different partner at a different office of the same firm C. a different accounting firm that audits a component or subsidiary of the parent company D. a different accounting firm that audits a component of the subsidiary company

C. a different accounting firm that audits a component or subsidiary of the parent company

Which statement defines a Type 1 subsequent event? A. An event that provides evidence of conditions that arose after the date of the financial statements B. An event that provides evidence of unreported earnings that arose after the date of the financial statements. C. An event that provides evidence of conditions that existed at the date of the financial statements. A Type I event requires an adjustment to the financial statements. D. An event that provides evidence of conditions that did not exist at the date of the financial statements. A Type I event requires an adjustment to the financial statements.

C. an event that provides evidence of conditions that existed at the date of the financial statements. A type 1 event requires an adjustment to the financial statements.

Material misstatements discovered during the audit _______. A. are a basis for the auditor to immediately issue a scope limitation B. are discussed with the client's legal counsel only, and usually they make the recommended adjustment to correct the misstatement C. are discussed with management, and usually management makes the recommended adjustment to correct the misstatement D. require a note disclosure in the financial statements

C. are discussed with management, and usually management makes the recommended adjustment to correct the misstatement.

The responses to the inquiries that auditors have made of management throughout the course of the audit _______. A. are recorded in the client's permanent file B. are confidential and not shared with senior management C. are documented in the auditor's working papers D. are sent to the prior auditor to be checked for prior year consistency

C. are documented in the auditor's working papers

When fraud is discovered, _____________. A. auditors should immediately contact the Securities and Exchange Commission (SEC) B. auditors should determine the amounts involved, and then decide whether to report the fraud to management C. auditors gather sufficient appropriate evidence to support their conclusion D. the matter should immediately be referred to the internal audit function

C. auditors gather sufficient appropriate evidence to support their conclusion.

When evaluating the effect of uncorrected misstatements, _______. A. only quantitative factors are considered B. only qualitative factors are considered C. both quantitative and qualitative factors are considered D. neither quantitative and qualitative factors are considered

C. both quantitative and qualitative factors are considered

The portion of the consolidated financial statements audited by the component auditor _______. A. is expressed in dollar amounts only B. must be expressed in terms of percentages of total assets only C. can be expressed in dollar amounts or percentages of total assets, total revenues, or other appropriate criteria D. should not be relied on to the same extent as the group auditor

C. can be expressed in dollar amounts or percentages of total assets, total revenues, or other appropriate criteria

Auditors should carefully consider which of the following assertions for loss contingencies? A. Existence B. Presentation and disclosure C. Completeness D. Rights and obligations

C. completeness

If an auditor wishes to draw attention to important information that is already presented or disclosed in the financial statements, the auditor would include a _______. A. qualified opinion B. disclaimer of opinion C. emphasis-of-matter paragraph D. scope limitation paragraph

C. emphasis-of-matter paragraph

The audit process _______. A. can typically take up to a year B. is aimed primarily at creditors C. enhances the degree of confidence that intended users place in the financial statements D. decreases the degree of confidence that intended users place in the financial statements

C. enhances the degree of confidence that intended users place in the financial statements

FASB ASC Topic 450, Contingencies, provides accounting guidance for_______________. A. the accounting treatment for intangible assets B. depreciable methods for property, plant and equipment C. events, or potential events, that create uncertainty for a company D. business combinations

C. events, or potential events, that create uncertainty for a company

A management representation letter is a letter _______. A. that is sent from the auditor to management, and then signed off on by the client's legal counsel B. that is sent from management to the auditor, and then signed off on by the client's legal counsel C. from management to the auditor acknowledging management's responsibility for the preparation of the financial statements D. from the auditor to management acknowledging management's responsibility for the preparation of the financial statements

C. from management to the auditor acknowledging management's responsibility for the preparation of the financial statement

A review engagement _______. A. comes under the umbrella of non-attest services B. comes under the umbrella of assurance services C. is an attest engagement performed on the financial statements of a private company client D. is virtually identical to an audit of a client's financial statements

C. is an attest engagement performed on the financial statements of a private company client

In the audit report, the auditor states that another party is responsible for the preparation of the financial statements. This party is _______. A. the internal auditor B. the client's legal counsel C. management D. the SEC

C. management

A key factor in determining which type of modified report to issue is _______. A. objectivity B. independence C. materiality D. existence

C. materiality

The outcome of litigation _______. A. is usually decided relatively quickly B. does not affect the auditor C. may be highly uncertain, and the circumstances may change over the course of a long court battle that spans several years D. may be highly certain, and the circumstances may change over the course of a long court battle that spans several years

C. may be highly uncertain, and the circumstances may change over the course of a long court battle that spans several years

The group engagement partner__________. A. shares joint responsibility with management for the fairness and accuracy of the financial statements B. has sole responsibility for the fairness and accuracy of the financial statements C. must decide whether to refer to the audit of a component auditor in the auditor's report on the group financial statements D. must decide whether to refer to the audit of a prior auditor in the auditor's report on the group financial statements

C. must decide whether to refer to the audit of a component auditor in the auditor's report on the group financial statements

An unmodified auditor's report is _______. A. an indication that a firm is financially successful B. an indicator that the firm's stock price may be about to drop C. not an indication the company is successful financially, but rather an indication the company has followed accounting standards as dictated by the applicable financial reporting framework D. an indication the company is successful financially, but not an indication the company has followed accounting standards as dictated by the applicable financial reporting framework

C. not an indication the company is successful financially, but rather an indication the company has followed accounting standards as dictated by the applicable financial reporting framework.

The financial statements are prepared by client management_____________. A. based on beginning of year financial conditions B. for formal review and issuance of an audit opinion by the internal auditors C. on the basis of conditions existing at year-end, which would be December 31 for a calendar year entity D. on the basis of conditions existing at year-end, which should always be December 31

C. on the basis of conditions existing at year-end, which would be December 31 for a calendar year entity

With respect to the going concern assumption, under Generally Accepted Accounting Principles (GAAP), a reasonable period of time is _______. A. considered to be 90 days B. considered to be 180 days C. one year from the date the client issues financial statements D. two years from the date the client issues financial statements

C. one year from the date of the client issues financial statements

If a loss contingency is reasonably possible or the amount cannot be reasonably estimated,__________________. A. disclosure should occur in both the financial statements and the notes to the financial statements B. disclosure should occur in the financial statements only C. only a disclosure in the notes is required D. then no disclosure is required

C. only a disclosure in the notes is required

An integrated audit is defined as _______. A. an audit of a client's financial statements B. an audit of a client's system of internal control C. performing the financial statement audit and the audit of the effectiveness of internal control over financial reporting (ICFR) at the same time D. both the external and internal auditors performing the financial statement audit

C. performing the financial statement audit and the audit of effectiveness of internal control over financial reporting (ICFR) at the same time.

An integrated audit refers to _______. A. integrating the opinion of the prior auditor into the current year audit B. allowing the firm's legal counsel to amend the audit report as they see fit C. performing the financial statement audit and the audit of the effectiveness of internal control over financial reporting (ICFR) at the same time D. only auditing the financial statements, with no procedures extended to the system of internal control

C. performing the financial statement audit and the audit of the effectiveness of internal control over financial reporting (ICFR) at the same time

Attorneys and their clients have a_____________________. A. confidential relationship B. fiduciary relationship C. privileged relationship D. legal relationship

C. privileged relationship

AR-C 80, Compilation Engagements _______. A. provides guidance on materiality thresholds B. assists the auditor with respect to fee arrangements C. provides guidance for the performance of a compilation engagement D. provides guidance for the performance of an audit engagement

C. provides guidance for the performance of a compilation agreement

At the conclusion of a compilation engagement, _______. A. the auditor provides a verbal report to management only B. the auditor attests to the accuracy and fairness of the financial statements C. the CPA provides a written compilation report to the client D. the auditor uses the compilation report to assist the client in raising funds in capital markets

C. the CPA provides a written compilation report tot he client

In a compilation engagement, _______. A. an internal auditor reviews the client firm's filings with the Securities and Exchange Commission (SEC) for compliance and accuracy B. the CPA will assist management in the presentation of financial statements and will provide assurance as to whether the financial statements are presented fairly in accordance with the applicable financial reporting framework C. the CPA will assist management in the presentation of financial statements but will not provide assurance as to whether the financial statements are presented fairly in accordance with the applicable financial reporting framework D. the current and prior auditors will jointly determine the fairness and conformity of a client's financial statements

C. the CPA will assist management in the presentation of financial statements but will not provide assurance as to whether the financial statements are presented fairly in accordance with the applicable financial reporting framework.

An example of a Type 1 subsequent event would be_______________. A. a sudden change in senior management after the financial statement date B. a filing with the Securities and Exchange Commission (SEC) of an amended form 10K after the financial statement date C. the bankruptcy of a client's customer after year-end as a result of poor financial condition that existed as of the balance sheet date D. the bankruptcy of a client's customer after year-end as a result of poor financial condition that existed after the balance sheet date

C. the bankruptcy of a client's customer after year-end as a result of poor financial condition that existed as of the balance sheet date

If the auditors decide to issue a modified auditor's report due to doubt about an entity's ability to continue as a going concern _______. A. the report should always be adverse B. the report should always be a disclaimer of opinion C. the matter should be communicated with those charged with governance D. the should be communicated to the client's legal counsel for disclosure to senior management

C. the matter should be communicated with those charged with governance

If the auditor's opinion on the revised financial statements is different from the previously issued audit report, _______. A. a disclaimer of opinion should be issued B. a scope limitation should be issued C. then an emphasis-of-matter paragraph should be added to the revised audit report after the opinion paragraph. D. then a management opinion paragraph should be added to the revised audit report after the opinion paragraph

C. then an emphasis-of-matter paragraph should be added to the revised audit report after the opinion paragraph

Auditors communicate significant findings or issues from the audit to those charged with governance _______. A. typically at the beginning of the audit B. typically during the audit C. typically towards the end of the audit D. via the client's legal counsel

C. typically towards the end of the audit

Governance structures will _______. A. typically be the same for each client B. typically be the same within an industry C. typically vary by client D. be determined by auditor recommendations

C. typically vary by client

A compilation engagement is _______. A. an audit of the financial statements, whereby an auditor expresses an opinion on the financial statements B. an audit of the system of internal control, whereby an auditor expresses an opinion on the system of internal control C. when an accounting firm assists management in the presentation of financial statements but does not audit, review, nor provide assurance as to whether the financial statements are presented fairly. D. when an audit firm assists management in the presentation of financial statements and attempts to provide assurance as to whether the financial statements are presented fairly

C. when an accounting firm assists management in the presentation of financial statements but does not audit, review, nor provide assurance as to whether the financial statements are presented fairly

The actual analytical procedures performed at the end of an audit _______. A. should always be the same for every client in order to increase uniformity of audits B. will depend on senior managements preferences C. will depend on auditor judgment and may vary by client D. will depend on auditor judgment but should be the same for each client

C. will depend on auditor judgment and may vary by client

The final step for the auditor to perform with respect to doubts about an entity's ability to remain a going concern is to communicate_______. A. all relevant findings to the internal audit function B. all relevant findings to common stockholders C. with those charged with governance D. with all preferred stockholders

C. with those charged with governance

Specific audit procedures to identify subsequent events include_____________. A. obtaining an understanding of how management identifies subsequent events B. reading the client's subsequent interim financial statements, if available, and other data such as budgets and cash flow forecasts C. inquiring of the client's legal counsel regarding litigation, claims, and assessments D. All of these answer choices are correct.

D. All of these answer choices are correct

Characteristics of a pervasive misstatement or scope limitation are as follows: A. It is not confined to specific elements, accounts, or items of the financial statements B. If it is confined, it represents or could represent a substantial portion of the financial statements C. In the context of disclosures, it is fundamental to users' understanding of the financial statements D. All of these answer choices are correct

D. all of these answer choices are correct

Which of the following characteristics exist in critical accounting communications? A. the nature of the estimate is material due to the levels of subjectivity B. judgment is necessary to account for highly uncertain matters or the susceptibility of such matters to change C. the impact of the estimate on financial condition or operating performance is material D. All of these answer choices are correct.

D. all of these answer choices are correct

An emphasis-of-matter paragraph in regards to revised financial statements should include _______. A. the date of the auditor's previous report B. the type of opinion previously expressed C. the key reasons for a different opinion, if there are two different opinions D. all of these answer choices are correct

D. all of these choices are correct

An example of a factor that mitigates doubts about an entity's ability to continue as a going concern would be _______. A. a letter of guarantee from a parent company B. the ability to raise additional funds through the issuance of more stock C. the ability to sell an unprofitable segment of the business D. All of these examples are mitigating factors.

D. all of these examples are mitigation factors.

Performing audit procedures after the end of fieldwork _______. A. has no impact on the date of the audit report B. automatically extends the date of the audit report by 90 days C. automatically extends the date of the audit report by 30 days D. impacts the dating of the audit report

D. impacts the dating of the audit report

Determining the likelihood of a loss contingency occurring and trying to estimate a reasonable amount for a future loss________________. A. should be determined by the client's legal counsel B. should be determined solely by the external auditor C. should be determined solely by the internal auditor D. involves significant judgment by management

D. involves significant judgment by management

Companies typically present their financial statements in comparative form, which means showing ______. A. three consecutive years of balance sheets and four consecutive years of the income statement, statement of cash flows, and statement of stockholders' equity B. two consecutive years of balance sheets and two consecutive years of the income statement, statement of cash flows, and statement of stockholders' equity C. the last fiscal year's balance sheet income statement, statement of cash flows, and statement of stockholders' equity D. two consecutive years of balance sheets and three consecutive years of the income statement, statement of cash flows, and statement of stockholders' equity.

D. two consecutive years of balance sheets and three consecutive years of the income statement, statement of CF, and the statement of stockholder's equity