audit - gleim quiz 2 (100)
Independent CPAs perform audits on the financial statements of issuers. This type of auditing can best be described as
A discipline that attests to financial information presented by management.
Which of the following statements best explains why the CPA profession has found it essential to establish ethical standards and means for ensuring their observance?
A distinguishing mark of a profession is its acceptance of responsibility to the public.
An auditor's independence is most likely considered impaired if the auditor has
A joint, closely held business investment with the client that is material to the auditor's net worth.
When one auditor succeeds another, the auditor should request the
Client to authorize the predecessor auditor to allow a review of the predecessor auditor's audit documentation.
Which of the following factors would most likely cause an auditor not to accept a new audit engagement?
Concluding that the entity's management probably lacks integrity.
A CPA firm's quality control procedures pertaining to the acceptance of a prospective audit client would most likely include
Consideration of the business reputation of the client's principal owners, key management, related parties, and those charged with governance.
Ordinarily, the predecessor auditor permits the auditor to review the predecessor's audit documentation relating to
Contingencies: Yes B/S Accounts: Yes
An auditor most likely would make specific inquiries of the predecessor auditor regarding
Disagreements with management as to auditing procedures.
Which of the following factors most likely would lead a CPA to conclude that a potential audit engagement should be rejected?
It is unlikely that sufficient appropriate audit evidence is available to support an opinion on the financial statements.
Kar, CPA, is a staff auditor participating in the audit engagement of Fort, Inc. Which of the following circumstances most likely impairs Kar's independence?
Kar's sibling is the director of internal auditing for Fort.
A CPA firm would best provide itself reasonable assurance of meeting its responsibility to offer professional services that conform with professional standards by
Maintaining a comprehensive system of quality control that is suitably designed in relation to its organizational structure.
Users of an issuer's financial statements demand independent audits because
Management may not be objective in reporting.
The audit risk against which the auditor and those who rely on his or her opinion require reasonable protection is a combination of two separate risks at the assertion level. The first risk (consisting of inherent risk and control risk) is that balances, classes of transactions, or disclosures contain material misstatements. The second is that
Material misstatements that occur will not be detected by the audit.
Which one of the following statements is correct concerning the concept of materiality?
Materiality is a matter of professional judgment.
A financial statement audit is designed to
Obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error.
Which of the following most completely describes how independence has been defined by the accounting profession?
Possessing the ability to act with integrity and objectivity.
The audit work performed by each assistant should be reviewed to determine whether it was adequately performed and to evaluate whether the
Results are consistent with the conclusions to be presented in the auditor's report.
An auditor intends to use the work of an actuary. Under these circumstances, the auditor
Should assess the actuary's competence and objectivity.
Audit plans should be designed so that
The audit evidence gathered supports the auditor's conclusions.
All of the following are audit quality control requirements contained in the Sarbanes-Oxley Act of 2002 except
The audit report must be submitted to the Public Company Accounting Oversight Board prior to issuance.
Under which of the following circumstances would an auditor be considered to be using the work of a specialist?
The auditor engages a lawyer to interpret the provisions of a complex contract.
Which of the following factors should an external auditor obtain updated information about when assessing an internal auditor's competence?
The educational level and professional experiences of the internal auditor.
Which of the following factors most likely would cause a CPA to not accept a new audit engagement?
The prospective client is unwilling to make all financial records available to the CPA.
Which of the following is a definition of control risk?
The risk that a material misstatement will not be prevented or detected on a timely basis by the client's internal controls.
Analytical procedures are required for which of the following?
audit planning
The risk that an auditor's procedures will lead to the conclusion that a material misstatement does not exist in an account balance when, in fact, such misstatement does exist is
detection risk
A document in an auditor's audit documentation includes the following statement: "Our audit is subject to the inherent risk that material misstatements, if they exist, will not be detected." The above passage is most likely from a(n)
engagement letter
Which of the following rules of the AICPA Code of Professional Conduct must be observed only by a member who is in public practice?
independence
Which of the following combinations of audit procedures provides the least assurance?
inquiry and observation
A CPA who is not in public practice is obligated to follow which of the following rules of conduct?
integrity and objectivity
Which of the following is not considered an auditor's specialist?
internal auditor
An auditor strives to achieve independence in appearance to
maintain public confidence in the profession
Quality control policies and procedures should be relevant, adequate, effective, and complied with. This statement is most closely associated with the quality control element of
monitoring
Under the ethical standards of the profession, which of the following is a "permitted loan" regardless of the date it was obtained?
secured automobile loan
Which of the following ultimately determines the specific audit procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion?
the auditor's judgement
The Code of Professional Conduct contains Principles that guide all members of the AICPA. A commitment to act for the benefit of clients, creditors, investors, and others is most directly embodied in which Principle?
the public interest
