ACC 547 Final
Which of the following is the best way for the auditors to determine that every name on a company's payroll is that of a bona fide employee presently on the job? 1). Examine human resources records for accuracy and completeness. 2). Examine employees' names listed on payroll tax returns for agreement with payroll accounting records. 3). Make a surprise observation of the company's regular distribution of paychecks on a test basis. 4). Visit the working areas and verify that employees exist by examining their badge or identification numbers.
3
A public accounting firm would least likely be considered in violation of the AICPA independence rules in which of the following instances? 1). A partner's checking account, which is fully insured by the Federal Deposit Insurance Corporation, is held at a financial institution for which the public accounting firm performs attest services. 2). A manager of the firm donates services as vice president of a charitable organization that is an audit client of the firm. 3). An attest client owes the firm fees for this and last year's annual engagements. 4). A covered member's dependent son owns stock in an attest client.
1
In an audit report on combined financial statements, reference to the fact that a portion of the audit was performed by a component auditor is: 1). Not to be construed as a qualification, but rather as a division of responsibility between the two CPA firms. 2). Not in accordance with generally accepted auditing standards. 3). A qualification that lessens the collective responsibility of both CPA firms. 4). An example of a dual opinion requiring the signatures of both auditors.
1
The aggregated misstatement in the financial statements is made up of: Factual, Projected, Judgmental 1). Yes, Yes, Yes 2). Yes, Yes, No 3). No, Yes, No 4). No, Yes, Yes
1
Which of the following is implied when a CPA signs the preparer's declaration on a federal income tax return? 1). The return is not misleading based on all information of which the CPA has knowledge. 2). The return is prepared in accordance with generally accepted accounting principles. 3). The CPA has audited the return. 4). The CPA maintained an impartial mental attitude while preparing the return.
1
Which of the following is not prohibited by the AICPA Code of Professional Conduct? 1). Advertising in newspapers. 2). Payment of commission to obtain an audit client. 3). Acceptance of a contingent fee for a review of financial statements. 4). Engaging in discriminatory employment practices.
1
Which of the following must be obtained in a review of a nonpublic company? Engagement Letter; Representation Letter 1). Yes; Yes 2). Yes; No 3). No; Yes 4). No; No
1
Which of the following ordinarily involves the addition of an emphasis-of-matter paragraph to an audit report? 1). A consistency modification. 2). An adverse opinion. 3). A qualified opinion. 4). Part of the audit has been performed by component auditors.
1
A CPA who is not independent may perform which of the following services for a nonpublic company? Compilation; Review 1). Yes; Yes 2). Yes; No 3). No; Yes 4). No; No
2
If a CPA performs an audit recklessly, the CPA will be liable to third parties who were unknown and not foreseeable to the CPA for: 1). strict liability for all damages incurred 2). gross negligence 3). either ordinary or gross negligence 4). breach of contract
2
In cases of breach of contract, plaintiffs generally have to prove all of the following, except: 1). the CPAs had a duty 2). the CPAs made a false statement 3). the client incurred losses related to the CPAs' performance 4). the CPAs breached their duty
2
The auditors' report should be dated as of the date the: 1). Report is delivered to the client. 2). Auditors have accumulated sufficient evidence. 3). Fiscal period under audit ends. 4). Peer review of the working papers is completed.
2
A material departure from generally accepted accounting principles will result in auditor consideration of: 1). Whether to issue an adverse opinion rather than a disclaimer of opinion. 2). Whether to issue a disclaimer of opinion rather than a qualified opinion. 3). Whether to issue an adverse opinion rather than a qualified opinion. 4). Nothing, because none of these opinions is applicable to this type of exception.
3
An audit report for a public client indicates that the financial statements were prepared in conformity with: 1). Generally accepted auditing standards (United States). 2). Standards of the Public Company Accounting Oversight Board (United States). 3). Generally accepted accounting principles (United States). 4). Generally accepted accounting principles (Public Company Accounting Oversight Board).
3
An auditor accepted an engagement to audit the 20X8 financial statements of EFG Corporation and began the fieldwork on September 30, 20X8. EFG gave the auditor the 20X8 financial statements on January 17, 20X9. The auditor completed the audit on February 10, 20X9, and delivered the report on February 16, 20X9. The client's representation letter normally would be dated: 1). December 31, 20X8. 2). January 17, 20X9. 3). February 10, 20X9. 4). February 16, 20X9.
3
The search for unrecorded liabilities for a public company includes procedures usually performed through the: 1). Day the audit report is issued. 2). End of the client's year. 3). Date of the auditors' report. 4). Date the report is filed with the SEC.
3
Under the Securities and Exchange Act of 1934, auditors and other defendants are faced with: 1). joint liability 2). joint and several liability 3). proportionate liability 4). limited liability
3
What type or types of audit opinion are appropriate when financial statements are materially and pervasively misstated? Qualified Adverse 1). Yes Yes 2). Yes No 3). No Yes 4). No No
3
When performing a review of a nonpublic company, which is least likely to be included in auditor inquiries of management members with responsibility for financial and accounting matters? 1). subsequent events 2). significant journal entries and other adjustments 3). communications with related parties 4). unusual or complex situations affecting the financial statements
3
When the matter is properly disclosed in the financial statements, the likely result of substantial doubt about the ability of the client to continue as a going concern is the issuance of which of the following audit opinions? Qualified Unmodified with Emphasis-of-Matter 1). Yes Yes 2). Yes No 3). No Yes 4). No No
3
Which of the following elements is most frequently necessary to hold CPA liable to a client? 1). acted with scienter or guilty knowledge 2). was not independent of the client 3). failed to exercise due care 4). did not use an engagement letter
3
Which of the following events occurring on January 5, 20X2, is most likely to result in an adjusting entry to the 20X1 financial statements? 1). A business combination. 2). Early retirement of bonds payable. 3). Settlement of litigation. 4). Plant closure due to a strike.
3
Which of the following is least likely to result in inclusion of an emphasis-of-matter paragraph in an audit report? 1). The company is a component of a larger business enterprise. 2). An unusually important significant event. 3). A decision not to confirm accounts receivable. 4). A risk or uncertainty.
3
Which of the following is most likely to be considered a Type 1 subsequent event? 1). A business combination completed after year-end, but for which negotiations began prior to year-end. 2). A strike subsequent to year-end due to employee complaints about working conditions which originated two years ago. 3). Customer checks deposited prior to year-end, but determined to be uncollectible after year-end. 4). Introduction of a new line of products after year-end for which major research had been completed prior to year-end.
3
Which of the following is not typically performed when the auditors are performing a review of client financial statements? 1). analytical procedures applied to financial data 2). inquiries about significant subsequent events 3). confirmation of accounts receivable 4). obtaining an understanding of accounting principles followed in the client's industry
3
A CPA issued an unqualified opinion on the financial statement of a company that sold common stock in a public offering subject to the Securities Act of 1933. Based on a misstatement in the financial statement, the CPA is being sued by an investor who purchased shares of this public offering. Which of the following represents a viable defense? 1). the investor has NOT proved fraud or negligence by the CPA 2). the investor did NOT actually rely upon the false statement 3). the CPA detected the false statement after the audit date 4). the false statement is immaterial in the overall context of the financial statements
4
As a result of analytical procedures, the independent auditors determine that the gross profit percentage has declined from 30 percent in the preceding year to 20 percent in the current year. The auditors should: 1). Express an opinion that is qualified due to the inability of the client company to continue as a going concern. 2). Evaluate management's performance in causing this decline. 3). Require note disclosure. 4). Consider the possibility of a misstatement in the financial statements.
4
Assume that the opinion paragraph of an auditors' report begins as follows: "With the explanation given in Note 6, . . . the financial statements referred to above present fairly. . ." This is: 1). An unmodified opinion. 2). A disclaimer of opinion. 3). An "except for" opinion. 4). An improper type of reporting.
4
Which of the following is not a covered member for an attest engagement under Rule 101 of the AICPA Code of Professional Conduct? 1). An individual assigned to the attest engagement. 2). A partner in the office of the partner in charge of the attest engagement. 3). A manager who is in charge of providing tax services to the attest client. 4). A partner in the national office of the firm that performs marketing services.
4
Which of the following procedures is most likely to be included in the final review stage of an audit? 1). Obtain an understanding of internal control. 2). Confirmation of receivables. 3). Observation of inventory. 4). Perform analytical procedures.
4
which of the following is least likely to be considered a substantive procedure relating to payroll? 1). Investigate fluctuations in salaries, wages, and commissions. 2). Test computations of compensation under profit sharing for bonus plans. 3). Test commission earnings. 4). Test whether employee time reports are approved by supervisors
4
In which of the following situations would a public accounting firm have violated the AICPA Code of Professional Conduct in determining its fee? 1). A fee is based on whether or not the public accounting firm's audit report leads to the approval of the client's application for bank financing. 2). A fee is to be established at a later date by the Bankruptcy Court. 3). A fee is based upon the nature of the engagement rather than upon the actual time spent on the engagement. 4). A fee is based on the fee charged by the client's former auditors.
1
The auditors who wish to draw reader attention to a financial statement note disclosure on significant transactions with related parties should disclose this fact in: 1). An emphasis-of-matter paragraph to the auditors' report. 2). A footnote to the financial statements. 3). The body of the financial statements. 4). The "summary of significant accounting policies" section of the financial statements.
1
Under common law, the CPAs who were negligent may mitigate some damages to a client by proving: 1). contributory negligence 2). the CPAs' fee was not material 3). the CPAs were not competent to accept the engagement 4). the CPAs' negligence was caused by the fact that they had too much work
1
When auditing the statement of cash flows, which of the following would an auditor not expect to be a source of receipts and payments? 1). Capitalization. 2). Financing. 3). Investing. 4). Operations.
1
A nonpublic change in accounting principles that the auditors believe is not justified is likely to result in which of the following types of audit opinions? Qualified Unmodified with Emphasis-of-Matter 1). Yes Yes 2). Yes No 3). No Yes 4). No No
2
A possible loss, stemming from past events that will be resolved as to existence and amounts, is referred to as a(n): 1). Analytical process. 2). Loss contingency. 3). Probable loss. 4). Unasserted claim.
2
An audit report for a public client indicates that the audit was performed in accordance with: 1). Generally accepted auditing standards (United States). 2). Standards of the Public Company Accounting Oversight Board (United States). 3). Generally accepted accounting principles (United States). 4). Generally accepted accounting principles (Public Company Accounting Oversight Board).
2
Subsequent to the issuance of the auditor's report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should next: 1). Notify the board of directors that the auditor's report must no longer be associated with the financial statements. 2). Determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information. 3). Request that management disclose the effects of the newly discovered information by adding a footnote to subsequently issued financial statements. 4). Issue revised pro forma financial statements taking into consideration the newly discovered information.
2