ACAUD MCQs Chapter 18

d. document the assistant auditor's position and how the difference of opinion was resolved.

A different opinion concerning accounting and auditing matters relative to a particular phase of the audit arises between an assistant auditor and the auditor responsible for the engagement. After appropriate consultation, the assistant auditor asks to be disassociated from the resolution of the matter. The working papers would probably: a. remain silent on the matter since it is an internal matter of the auditing firm. b. note that the assistant auditor is completely dissociated from responsibility for the auditor's opinion. c. document the additional work required, since all disagreements of this type will require expanded substantive testing. d. document the assistant auditor's position and how the difference of opinion was resolved.

d. support the auditors' opinion.

A primary purpose of the audit working papers is to: a. aid the auditors in adequately planning their work. b. provide a point of reference for future audit engagements. c. support the underlying concepts included in the preparation of the basic financial statements. d. support the auditors' opinion.

d. engagement letter.

A written understanding between the auditor and the client concerning the auditor's responsibility for the discovery of illegal acts is usually set forth in a(an) a. client representation letter. b. letter of audit inquiry. c. management letter. d. engagement letter.

b. a statement of financial position account during the entire period under audit, tying together the beginning and ending balances

An analysis schedule is designed to show the activity in a. a statement of financial position account at the end of the period under audit. b. a statement of financial position account during the entire period under audit, tying together the beginning and ending balances c. an income statement account at the end of the period under audit. d. an income statement account during the entire period under audit, tying together the beginning and ending balances.

a. Current file evidence working papers.

An audit working paper that shows the detailed evidence and procedures regarding the balance in the accumulated depreciation account for the year under audit will be found in the: a. Current file evidence working papers. b Permanent file working papers. c. Administrative working papers in the current file. d. Planning memorandum in the current file.

d. only at the beginning of the audit.

An auditor should examine the minutes of board of directors' meetings: a. through the date of the financial statements. b. through the date of the audit report. c. on a test basis. d. only at the beginning of the audit.

b. to change material credit balances in accounts receivable accounts to accounts payable accounts.

An example of a reclassification of entry would be an entry a. to reduce inventory when client failed to write down its obsolete, raw materials. b. to change material credit balances in accounts receivable accounts to accounts payable accounts. c. to increase the allowance for doubtful accounts when it was discovered that a customer had filed for bankruptcy protection d. to increase the income tax liability account when it was discovered that client would be in a higher tax bracket than originally estimated.

d. designed to meet the circumstances and the auditors' needs on each engagement.

Audit working papers should be: a. kept on the client's premises to allow client access to them for reference purposes. b. the primary support for the financial statements being examined. c. considered as part of the client's accounting records that is retained by the auditors. d. designed to meet the circumstances and the auditors' needs on each engagement.

d. the papers are transferred as a result of a CPA selling his/her practice to another CPA firm.

Ordinarily, the working papers cannot be provided to someone else without the express permission of the client unless a. the papers are subpoenaed by a court. b. the papers are used as part of a PICPA quality review program. c. the papers are requested as evidence in a PICPA Trial Board hearing. d. the papers are transferred as a result of a CPA selling his/her practice to another CPA firm.

c. of a historical or continuing nature pertinent to the current audit.

Permanent files contain all the data a. about the most recent audits. b. about the current audit and financial statements. c. of a historical or continuing nature pertinent to the current audit. d. of a historical or continuing nature about the client.

d. financial statements but not in the general ledger.

Reclassification entries are recorded in the a. sales journal. b. cash receipts journal. c. general journal. d. financial statements but not in the general ledger.

d. lead schedule.

The audit working paper that reflects the major components of an amount reported in the financial statements is the a. interbank transfer schedule. b. carryforward schedule. c. supporting schedule. d. lead schedule.

c. a copy of the financial statements.

The current file of the auditor's working papers generally should include a. a flowchart of the internal controls. b. organization charts. c. a copy of the financial statements. d. copies of bond and note indentures.

c. a copy of the financial statements.

The current file of the auditor's working papers generally should include a. a flowchart of the internal controls. b. organization charts. c. a copy of the financial statements. d. copies of the bond and note indentures.

a. supporting schedules.

The largest portion of the auditor's working papers are tie a. supporting schedules. b. adjusting and reclassification entries. c. lead schedules. d. working trial balance.

d. a copy of the engagement letter.

The permanent section of the auditor's working papers generally should include a. time and expense reports. b. names and addresses of all audit staff personnel on the engagement. c. a copy of key customer confirmations. d. a copy of the engagement letter.

d. narrative description of the client's internal control structure.

The permanent tile section of the working papers that is kept for each audit client most likely contains a. review notes pertaining to questions and comments regarding the audit work performed. b. a schedule of time spent on the engagement by each individual auditor. c. correspondence with the client's legal counsel concerning pending litigation. d. narrative description of the client's internal control structure.

d. provide a trail for the auditor and the reviewer.

The primary reason auditors cross-index their working papers is to a. give the working papers of a professional appearance. b. explain the use of tick marks. c. provide an explanation of the audit steps performed. d. provide a trail for the auditor and the reviewer.

c. the primary means of documenting that an adequate audit was conducted in accordance with Standards on Auditing.

The working papers are a. the property of client. b. property of the auditor although prepared by client. c. the primary means of documenting that an adequate audit was conducted in accordance with Standards on Auditing. d. used primarily as a basis for the partners to review and reward the work of the managers seniors, and staff.

b. the auditor, even including those prepared by client for auditor.

The working papers prepared during the engagement are the property of a. the auditor, but do not include the working papers prepared by client for the auditor. b. the auditor, even including those prepared by client for auditor. c. the client. d. the auditor and client jointly.

c. The auditors' judgment about their independence with regard to the client.

When planning an audit, which of the following is not a factor that affects auditors' decisions about the quantity, type, and content of audit working papers? a. The auditors' need to document compliance with financial reporting standards. b. The existence of new sales contracts important for the client's business. c. The auditors' judgment about their independence with regard to the client. d. The auditors' judgments about materiality.

b. working papers adequately support the audit findings, conclusions, and reports.

When reviewing working papers, an audit supervisor will be concerned primarily with determining whether the a. audit programs have been carried out without deviation. b. working papers adequately support the audit findings, conclusions, and reports. c. working papers reflect adherence to budget constraints. d. auditing department's standard formats and tick marks have been used consistently.

d. Estimated audit fee agreed upon between the client and the auditor

Which of the following does not affect the form and content of working papers? a. Nature and complexity of the business b. Form of the auditor's report c. Specific audit methodology and technology used in the course of the audit. d. Estimated audit fee agreed upon between the client and the auditor

d. Lead schedules.

Which of the following eliminates voluminous details from the auditor's working trial balance by classifying and summarizing similar or related items? a. Account analyses. b. Supporting schedules. c. Control accounts. d. Lead schedules.

a. The timing and the number of personnel to be assigned to the engagement.

Which of the following is not a factor that affects the independent auditors judgment as to the quality, type, and content of working papers? a. The timing and the number of personnel to be assigned to the engagement. b. The nature of the financial statements, schedules, or other information upon which the auditor is reporting. c. The need for supervision of the engagement. d. The nature of the auditors', report.

b. An audit program setting forth in detail the procedures necessary to accomplish the engagement's objectives.

Which of the following is required documentation in an audit in accordance with Standards on Auditing? a. A flowchart or narrative of the accounting system describing the recording and classification of transactions for financial reporting. b. An audit program setting forth in detail the procedures necessary to accomplish the engagement's objectives. c. A planning memorandum establishing the timing of the audit procedures and coordinating the assistance of entity personnel. d. An internal control questionnaire identifying policies and procedures that ensure the achievement of specific objectives.

d. The audit program.

Which of the following items would not normally be included, in whole or in part, in the auditor's permanent file on a client? a. The articles of incorporation and by-laws. b. Analyses of accounts such as long-term debt and stockholders equity. c. Organization charts and internal control questionnaires. d. The audit program.

d. Basis in choosing the members of the audit engagement team.

Which of the following need not be documented in the working papers as required by PSA 230? a. Audit evidence obtained, the audit procedures applied and the testing performed have provided sufficient competent evidential matter to afford a reasonable basis for an opinion. b. The work has been adequately planned and supervised. c. A sufficient understanding of the internal control structure had been obtained to plan the audit and to determine the nature, timing and extent of tests to be performed. d. Basis in choosing the members of the audit engagement team.

d. The auditor should review correspondence with banks, other lending institutions, attorneys, and governmental agencies.

Which of the following statements most accurately summarizes the auditor's responsibility for reviewing the client's correspondence files? a. The auditor should review all correspondence for items relevant to the audit. b. The auditor should not review any correspondence, to do so would waste time more productively spent on gathering other evidence. c. The auditor should apply statistical selection techniques to draw a random sample of correspondence for review. d. The auditor should review correspondence with banks, other lending institutions, attorneys, and governmental agencies.

d. The accounting manual

Which of the following would not be included in the auditor's working papers? a. A time budget for the various audit areas. b. The results of the preceding year's audit. c. Descriptive information about the internal control structure d. The accounting manual

c. designed to meet the circumstances of the particular engagement.

Working papers that record the procedures used by the auditor to gather evidence should be a. considered the primary support for the financial statements being examined. b. viewed as the connecting link between the books of account and the financial statements c. designed to meet the circumstances of the particular engagement. d. destroyed when the audited entity ceases to be a client.

c. designed to meet the circumstances of the particular engagement.

Working papers that record the procedures used by the auditor to gather evidence should be a. considered the primary support for the financial statements being examined. b. viewed as the connecting link between the books of account and the financial statements. c. designed to meet the circumstances of the particular engagement. d. destroyed when the audited entity ceases to be a client.