Auditing Final

Management estimates the company's allowance for doubtful accounts as $200,000, and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000. The factual misstatement in this situation is: $0. $30,000. $40,000. $50,000.

$0.

A client company has not paid its 20X6 audit fees. According to the AICPA Code of Professional Conduct, in order for the auditor to be considered independent with respect to the 20X7 audit, the 20X6 audit fees must be paid before the: 20X6 report is issued. 20X7 fieldwork is started. 20X7 report is issued. 20X8 fieldwork is started.

20X7 report is issued.

A registrar/transfer agent system relating to capital stock is most likely used by: A small, nonpublic company. A large, publicly traded company. All companies must use this type of system. No companies use this system anymore.

A large, publicly traded company.

When an adverse opinion is expressed on the financial statements of a nonpublic company, the opinion paragraph should include a direct reference to: A note to the financial statements which discusses the basis for the opinion. The auditor's responsibility section of the audit report which discusses the basis for the opinion rendered. A separate basis for modification paragraph (section). The consistency in the application of generally accepted accounting principles.

A separate basis for modification paragraph (section).

For clients that distribute checks or cash payments and have significant payroll control weakness, which of the following audit procedures is aimed at determining whether every name on the company payroll is a bona fide employee actually on the job? A surprised observation of a paycheck distribution, while establishing the identity of each employee receiving payment. A test of payroll extensions. Analytical comparisons of budgeted to actual payroll expense. Comparison of payee names on canceled payroll checks with the payroll register.

A surprised observation of a paycheck distribution, while establishing the identity of each employee receiving payment.

Which of the following best describes the specific accounts payable that are selected for confirmation? Accounts with large balances. Accounts with zero balances. Accounts with a large amount of activity regardless of their balance. Accounts for which vendor statements are available.

Accounts with a large amount of activity regardless of their balance.

Which of the following forms of advertising would most likely be considered a violation of the AICPA Code of Professional Conduct? Advertising including the types of services offered and the standard fees for the services. Advertising including the experience of the firm's professional staff. Advertising including an indication that the firm has a close relationship with several tax court judges. Advertising including the percentage of the firm's staff that have CPA certificates.

Advertising including an indication that the firm has a close relationship with several tax court judges.

If group auditors make no reference to component auditors whose work they have relied on as a part of the basis for their report, the group auditors: Are not required to investigate the professional reputation of the component auditors. Are issuing an inappropriate report. Are assuming responsibility for the work of the component auditors. Are issuing a qualified opinion.

Are assuming responsibility for the work of the component auditors.

Accrued liabilities generally differ from accounts payable in that accrued liabilities: Are often based on estimates. Are usually confirmed at year-end. Depend upon the existence of a transaction for original recording of the account. Are never included in cost of goods sold.

Are often based on estimates.

The primary objective of analytical procedures used near the end of an audit is to: Obtain evidence from details tested to corroborate particular assertions. Identify areas that represent specific risks relevant to the audit. Assist the auditor when forming overall conclusions about the financial statements. Satisfy doubts when questions arise about a client's ability to continue in existence.

Assist the auditor when forming overall conclusions about the financial statements.

If, after issuing an audit report, the auditors find that they have failed to perform certain significant audit procedures they should first: Attempt to determine whether their report is still being relied upon by third parties. Notify regulatory agencies. Notify legal counsel. Wait until the beginning of the next year's audit to determine whether misstatements have occurred.

Attempt to determine whether their report is still being relied upon by third parties.

Independence is required of a CPA performing: Audits, but not any other professional services. Attestation services, but not other professional services. Attestation and tax services, but not other professional services. All professional services.

Attestation services, but not other professional services.

An audit report on a public company is least likely to include a paragraph titled: Auditor responsibility Basis for Opinion. Critical Audit Matters. Opinion on the Financial Statements.

Auditor responsibility

An example of an internal control weakness is to assign the payroll department the responsibility for: Preparing the payroll expense distribution. Preparing the payroll checks. Authorizing increases in pay. Preparing journal entries for payroll expense.

Authorizing increases in pay.

For a particular entity's financial statements to be presented fairly in conformity with generally accepted accounting principles, it is not required that the principles selected: Be appropriate in the circumstances for the particular entity. Reflect transactions in a manner that presents the financial statements within a range of acceptable limits. Present information in the financial statements that is classified and summarized in a reasonable manner. Be applied on a basis consistent with those followed in the prior year.

Be applied on a basis consistent with those followed in the prior year.

When no independent stock transfer agent is employed and the corporation issues its own stocks and maintains stock records, canceled stock certificates should: Be defaced to prevent reissuance and attached to their corresponding stubs. Not be defaced but segregated from other stock. Be destroyed to prevent fraudulent reissuance. Be defaced and sent to the Secretary of State.

Be defaced to prevent reissuance and attached to their corresponding stubs.

Which of the following procedures would an auditor most likely perform while evaluating audit findings at the conclusion of an audit? Obtain assurance from the entity's attorney that all material litigation has been disclosed in the financial statements. Verify the clerical accuracy of the entity's proof of cash and its bank cutoff statement. Determine whether reportable conditions have been corrected. Calculate an estimate the total of uncorrected misstatements in the financial statements.

Calculate an estimate the total of uncorrected misstatements in the financial statements.

When an auditor finds a debit to accounts payable, which of the following accounts is most likely to be credited? Accounts Receivable. Accrued liabilities. Cash. Cost of goods sold.

Cash.

Which of the following is prohibited by the AICPA Code of Professional Conduct? Advertising in a general newspaper to attract clients. Auditing a competitor of the current audit client. Charging and accepting a contingent fee for a financial statement review engagement. Purchasing a product and reselling that product at a higher price.

Charging and accepting a contingent fee for a financial statement review engagement.

Which of the following is an analytical procedure that should be applied to the income statement? Select sales and expense items and trace amounts to related supporting documents. Ascertain that the net income amount in the statement of cash flows agrees with the net income amount in the income statement. Obtain from the proper client representatives, the beginning and ending inventory amounts that were used to determine costs of sales. Compare the actual revenues and expenses with the corresponding figures of the previous year and investigate significant differences.

Compare the actual revenues and expenses with the corresponding figures of the previous year and investigate significant differences.

Which of the following assertions is of principle concern to the auditors in the examination of accounts payable? Existence. Completeness. Valuation. Authorization.

Completeness.

Which of the following is not a procedure that is designed to provide evidence about the existence of loss contingencies? Obtaining a lawyers' letter. Confirming accounts payable. Reviewing the minutes of board of directors' meetings. Review correspondence with banks.

Confirming accounts payable.

When an auditor of a nonpublic company has concluded there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time beyond the date the financial statements will be released (1/26/X2), the auditor's responsibility includes: Preparing prospective financial information to verify whether management's plans can be effectively implemented. Projecting conditions and events from one year prior to this year's date (12/31/X0) to 12/31/X1. Issuing an adverse or negative assurance opinion, depending upon materiality, due to the possible effects on the financial statements. Considering the adequacy of disclosure about the entity's possible inability to continue as a going concern.

Considering the adequacy of disclosure about the entity's possible inability to continue as a going concern.

For audit purposes, a corporation's articles of incorporation are normally: Copied and placed on the owners' equity lead schedule. Copied and placed in the permanent file. Confirmed with the transfer agent. Ignored since they are not normally considered to be related to the internal control structure.

Copied and placed in the permanent file.

To minimize the opportunities for fraud, unclaimed cash payroll should be: Deposited in a safe deposit box. Held by the payroll custodian. Deposited in a special bank account. Held by the controller.

Deposited in a special bank account.

The primary reason for preparing a reconciliation between interest-bearing obligations outstanding during the year and interest expense presented in the financial statements is to: Evaluate internal control over securities. Determine the validity of prepaid interest expense. Ascertain the reasonableness of imputed interest. Detect unrecorded liabilities.

Detect unrecorded liabilities.

The confirmation of accounts payable is most closely associated with: Assertion risk. Detection risk. Inherent risk. Relative risk.

Detection risk.

A CPA reviews a client's payroll procedures. The CPA would consider internal control to be less than effective if a payroll department supervisor was assigned the responsibility for: Reviewing and approving time reports for subordinate employees. Distributing payroll checks to employees. Hiring subordinate employees. Initiating requests for salary adjustments for subordinate employees.

Distributing payroll checks to employees.

The concept of materiality would be least important to an auditor when considering the: Total value of the account being audited. Adequacy of disclosure of a client's illegal act. Discovery of weaknesses in a client's internal control. Effects of a direct financial interest in the client upon the CPA's independence.

Effects of a direct financial interest in the client upon the CPA's independence

A common audit procedure in the audit of payroll transactions involves tracing selected items from the payroll journal to employee time cards that have been approved by supervisory personnel. This procedure is designed to provide evidence in support of the audit proposition that: Only bonafide employees worked and their pay was properly computed. Jobs on which employees worked were charged with the appropriate labor cost. Internal control relating to payroll disbursements are operating effectively. Employees worked the number of hours for which their pay was computed.

Employees worked the number of hours for which their pay was computed.

Which of the following is the most important consideration of an auditor when examining the stockholders' equity section of a client's balance sheet? Changes in the capital stock account are verified by an independent stock transfer agent. Stock dividends and/or stock splits during the year under audit were approved by the stockholders. Stock dividends are capitalized at par or stated value on the dividend declaration date. Entries in the capital stock account can be traced to a resolution in the minutes of the board of directors' meetings.

Entries in the capital stock account can be traced to a resolution in the minutes of the board of directors' meetings.

Which of the following procedures is least likely in the audit of capital stock? Examine all outstanding stock certificates for completeness. Account for the proceeds from stock issues. Reconcile shares outstanding with the general ledger. Evaluate compliance with stock option plans.

Examine all outstanding stock certificates for completeness.

Which of the following tests of details most likely would help an auditor determine whether accounts payable have been misstated? Examining reported purchase returns that appear too low. Examining vendor statements for amounts not reported as purchases. Search for customer-returned goods that were not reported as returns. Reviewing bank transfers recorded as cash received from customers.

Examining vendor statements for amounts not reported as purchases.

An auditor's decision concerning whether or not to "dual-date" the audit report is based upon the auditor's willingness to: Extend auditing procedures. Accept responsibility for year-end adjusting entries. Permit inclusion of a note captioned: event (unaudited) subsequent to the date of the auditor's report. Assume responsibility for resolving all events subsequent to the issuance of the auditor's report.

Extend auditing procedures.

Specific misstatement in one of a client's 2,000 accounts receivable is referred to as a(n): Multiple Choice Extrapolation difference. Factual misstatement. Redundancy effect misstatement. Projected misstatement.

Factual misstatement.

Competence as a certified public accountant includes all of the following except: Having the technical qualifications to perform an engagement. Possessing the ability to supervise and to evaluate the quality of staff work. Guaranteeing the accuracy of the work performed. Consulting others if additional technical information is needed.

Guaranteeing the accuracy of the work performed.

Material loss contingencies should be recorded in the financial statements if available information indicates it is probable that a loss had been sustained prior to the balance sheet date and the amount of such loss can be reasonably estimated. For a public company these considerations will affect the audit report as follows: If a loss meets these criteria, the auditor may issue an unqualified opinion but is required to point out the contingency in an explanatory paragraph of the report. If a loss meets these criteria and is disclosed in the financial statement notes, the auditor may issue an unqualified opinion, but is required to point out the contingency in an explanatory paragraph of the report. If a loss meets these criteria and is disclosed in the financial statement notes, the auditor may issue an unqualified opinion, but should consider adding an explanatory paragraph as a means of emphasizing the disclosure. If a loss is probable but the amount cannot be reasonably estimated and is disclosed in the notes to the financial statements, the auditor may issue an unqualified opinion.

If a loss is probable but the amount cannot be reasonably estimated and is disclosed in the notes to the financial statements, the auditor may issue an unqualified opinion.

CPA Firm A has performed most of the audit of Consolidated Company's financial statements and qualifies as the group auditor. CPA Firm B did the remainder of the work. Firm A wishes to assume full responsibility for Firm B's work. Which of the following statements is correct? Such assumption of responsibility violates the profession's standards. In such circumstances, when appropriate requirements have been met, Firm A should issue a standard unmodified opinion on the financial statements. In such circumstances, when appropriate requirements have been met, Firm A should issue an unmodified opinion on the financial statements but should make appropriate reference to Firm B in the audit report. CPA firm A should normally qualify its audit report on the basis of the scope limitation involved when another CPA firm is involved.

In such circumstances, when appropriate requirements have been met, Firm A should issue a standard unmodified opinion on the financial statements.

Which of the following procedures most likely would assist an auditor in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern? Performing cutoff tests of sales transactions with customers with long-standing receivable balances. Evaluating the entity's procedures for identifying and recording related party transactions. Inspecting title documents to verify whether any real property is pledged as collateral. Inquiring of the entity's legal counsel about litigation, claims, and assessments.

Inquiring of the entity's legal counsel about litigation, claims, and assessments.

Which of the following is a general purpose financial reporting framework? Generally accepted auditing standards. Auditing Standards of the Public Company Accounting Oversight Board. International Standards of Auditing. International Financial Reporting Standards.

International Financial Reporting Standards.

Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events? Determine whether inventory ordered before the year-end was included in the physical count. Inquire about payroll checks that were recorded before year-end but cashed after year-end. Investigate changes in capital stock recorded after year-end. Review tax returns prepared by management after year-end.

Investigate changes in capital stock recorded after year-end.

The auditors include an emphasis-of-matter paragraph in a nonpublic company audit report with an unmodified opinion in order to emphasize that the entity being reported upon is a subsidiary of another business enterprise. The inclusion of this paragraph: Is appropriate and would not negate the unmodified opinion. Is considered a qualification of the opinion. Is a violation of generally accepted reporting standards if this information is disclosed in notes to the financial statements. Necessitates a revision of the opinion paragraph to include the phrase "with the foregoing explanation."

Is appropriate and would not negate the unmodified opinion.

A basis for modification paragraph in the audit of the financial statements of a nonpublic company: Is only included with qualified, adverse, or disclaimers of opinion. Is presented only in audit reports with unmodified opinions. Has a section title: Emphasis-of-Matter. Must be included in all nonpublic company audit reports.

Is only included with qualified, adverse, or disclaimers of opinion.

When financial statements are affected by a material departure from generally accepted accounting principles, the auditors should: Issue an unmodified opinion with a basis for modification paragraph. Withdraw from the engagement. Issue an "except for" qualification or an adverse opinion. Issue an "except for" qualification or a disclaimer of opinion.

Issue an "except for" qualification or an adverse opinion.

The auditor will most likely perform extensive tests for possible understatement of: Multiple Choice Revenues. Assets. Liabilities.

Liabilities.

The auditor will most likely perform extensive tests for possible understatement of: Revenues. Assets. Liabilities. Capital.

Liabilities.

Which of the following is least likely to result in an adverse opinion? Change in accounting principle. Limitation in the scope of the audit. Uncertainty. Related party transaction.

Limitation in the scope of the audit.

With respect to issuance of an audit report which is dual-dated for a subsequent event occurring after the completion of fieldwork but before issuance of the auditors' report, the auditors' responsibility for events occurring subsequent to the date of the audit report is: Extended to include all events occurring until the date of the last subsequent event referred to. Limited to the specific event referred to. Limited to all events occurring through the date of issuance of the report. Extended to include all events occurring through the date of submission of the report to the client.

Limited to the specific event referred to.

Hall accepted an engagement to audit the year 1 financial statements of XYZ Company. XYZ completed the preparation of the year 1 financial statements on February 13, year 2, and Hall began the audit work on February 17, year 2. Hall completed the audit work on March 24, year 2, and completed the report on March 28, year 2. The client's representation letter normally would be dated: February 13, year 2. February 17, year 2. March 24, year 2. March 28, year 2.

March 24, year 2.

Which of the following is a control procedure that is usually applied to accounts payable? Periodic confirmation of accounts payable. Mailing statements to vendors detailing their account. Periodic aging of accounts payable. Matching invoices with receiving documents before disbursements are authorized.

Matching invoices with receiving documents before disbursements are authorized.

An attorney responding to an auditor as a result of the client's letter of audit inquiry may appropriately limit the response to: Items which have high probability of being resolved to the client's detriment. Asserted claims and pending or threatened litigation. Legal matters subject to unsettled points of law, uncorroborated information, or other complex judgments. Matters to which the attorney has given substantive attention in the form of legal consultation or representation.

Matters to which the attorney has given substantive attention in the form of legal consultation or representation.

An auditor obtains evidence of stockholders' equity transactions for a publicly traded company by reviewing the entity's: Minutes of board of directors meetings. Registrar's record of interbank transfers. Canceled stock certificates. Treasury stock certificate book.

Minutes of board of directors meetings.

An auditor wishes to perform tests of controls on a client's cash disbursements relating to accounts payable. If the control procedures leave no audit trail of documentary evidence, the auditor most likely will test the procedures by: Confirmation and observation. Observation and inquiry. Analytical procedures and confirmation. Inquiry and analytical procedures.

Observation and inquiry.

Which of the following auditing procedures is ordinarily performed last? Reading of the minutes of the directors' meetings. Confirming accounts payable. Obtaining a management representation letter. Testing of the purchasing function.

Obtaining a management representation letter.

Which of the following manipulations would understate accounts payable on the financial statements? Overstatement of purchases. Closing the cash disbursements journal prior to year-end. Leaving the cash receipts journal open after year-end. Omission of expenses

Omission of expenses

Auditors may choose not to confirm accounts payable because: Confirmation obtains evidence identical to that obtained by cutoff tests. Other reliable external evidence to support the balances is likely to be available. A reading of the corporate minutes reveals that confirmation is unnecessary. The balances due will have changed between the year-end and the date of confirmation.

Other reliable external evidence to support the balances is likely to be available.

Which of the following summarizes the threshold at which auditors are required to request management to record any identified factual misstatements that are: Material. Material or immaterial. Significant deficiencies. Other than trivial.

Other than trivial.

Which of the following is not a broad category of threat to auditor independence? Familiarity. Positive work relationship. Financial self interest. Undue Influence.

Positive work relationship.

It would be appropriate for the payroll accounting department to be responsible for which of the following functions? Approval of employee time records. Maintenance of records of employment, discharges, and pay increases. Preparation of periodic governmental reports as to employees' earnings and withholding taxes. Distribution of paychecks to employees.

Preparation of periodic governmental reports as to employees' earnings and withholding taxes.

Contingency fee based pricing of accounting services is: Always strictly prohibited in public accounting practice. Never restricted in public accounting practice. Prohibited for clients for whom attestation services are provided. Considered an act discreditable to the profession.

Prohibited for clients for whom attestation services are provided.

When a client declines to disclose essential information in the financial statements or notes, the auditor of the financial statements should: Provide the information in the audit report, if practicable, and qualify the opinion because of a limitation on the scope of the audit. Provide the information in the audit report, if practicable, and qualify the opinion because of a departure from GAAP. Issue a disclaimer of opinion because the client has interfered with the auditor's function of assessing the adequacy of disclosure. Issue an unmodified opinion, but inform the reader by including the omitted information in the audit report.

Provide the information in the audit report, if practicable, and qualify the opinion because of a departure from GAAP.

Which of the following is an authoritative body that the AICPA Code of Professional Conduct authorizes to promulgate auditing and attestation standards? Auditing Standards Commission. Financial Accounting Standards Board. International Accounting Standards Board. Public Company Accounting Oversight Board.

Public Company Accounting Oversight Board.

For a large publicly traded client, the auditors' examination of capital stock accounts will not normally include: Analysis of capital stock accounts. Confirmation of shares issued with the independent registrar. Accounting for the proceeds of major stock issues. Reconciliation of a stock certificate book with the general ledger.

Reconciliation of a stock certificate book with the general ledger.

When the auditors select a sample from the vouchers payable register at the end of the period and trace them to underlying documents, the auditors are gathering evidence primarily to support that: Recorded obligations were paid. Incurred obligations were recorded in the correct period. Recorded obligations occurred prior to year-end. Cash disbursements were recorded as incurred obligation.

Recorded obligations occurred prior to year-end.

Which of the following is least likely to be considered an act discreditable to the accounting profession? Disclosing confidential client information. Failure to comply with federal laws regarding the filing of tax returns. Knowingly disclosing CPA exam questions. Refusing to provide the client with copies of working papers the client prepared for the auditor.

Refusing to provide the client with copies of working papers the client prepared for the auditor.

Which of the following procedures would an auditor most likely perform prior to the balance sheet date? Review subsequent events. Perform search for unrecorded liabilities. Send inquiry letter to client's legal counsel. Review detail and test significant travel and entertainment expenses.

Review detail and test significant travel and entertainment expenses.

During its fiscal year, a company issued, at a discount, a substantial amount of first-mortgage bonds. When performing audit work in connection with the bond issue, the independent auditor should: Confirm the existence of the bondholders. Review the minutes for authorization. Trace the net cash received from the issuance to the bond revenue account. Inspect the records maintained by the bond trustee.

Review the minutes for authorization.

Which of the following audit procedures is best for identifying unrecorded trade accounts payable? Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payable applies to the prior period. Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether they are supported by receiving reports. Examining unusual relationships between monthly accounts payable balances and recorded cash payments. Reconciling vendors' statements to the file of receiving reports to identify items received just prior to the balance sheet date.

Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payable applies to the prior period.

If a CPA violates the AICPA Code of Professional Conduct, the AICPA Trial Board may do all of the following, except: Multiple Choice Admonish the offending member. Suspend the offending member. Expel the offending member. Revoke the offending member's CPA certificate.

Revoke the offending member's CPA certificate.

Which of the following is not a broad category of safeguards that mitigate or eliminate threats to independence? Safeguards created by the profession, legislation, or regulation. Safeguards created to assure proper training within both the client and attest environment. Safeguards implemented by the attest client. Safeguards implemented by the firm, including policies and procedures to implement professional and regulatory requirements.

Safeguards created to assure proper training within both the client and attest environment.

In auditing the balance sheet, most revenue and expense accounts are also audited. Which accounts are most likely to be audited when auditing Accounts Receivable? Sales and Cost of Goods Sold. Interest and Bad Debt Expense. Sales and Bad Debt Expense. Interest and Cost of Goods Sold.

Sales and Bad Debt Expense.

The purpose of segregating the duties of distributing payroll checks and hiring personnel is to: Separate the custody of assets from the accounting for those assets. Establish clear lines of authority and responsibility. Separate duties within the accounting function. Separate the authorization of transactions from the custody of related assets.

Separate the authorization of transactions from the custody of related assets.

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued? Sale of long-term debt or capital stock. Loss of a plant as a result of a flood. Major purchase of a business which is expected to double the sales volume. Settlement of litigation in excess of the recorded liability.

Settlement of litigation in excess of the recorded liability.

The auditor would be least likely to be concerned about internal control as it relates to: Land and buildings. Common stock. Shareholder meetings. Minutes of board of directors' meetings.

Shareholder meetings.

The auditors' search for unrecorded liabilities is completed: During an interim period. At the balance sheet date. Subsequent to the balance sheet date. At any time during the examination.

Subsequent to the balance sheet date.

Which of the following best describes the auditors' approach to the audit of accrued liabilities? Test computations. Confirmation. Observation. A low planned assessed level of control risk.

Test computations.

Which of the following organizations issue international ethics standards for auditors? The AICPA. The IFAC. The SEC. The FASB.

The IFAC.

Auditors must communicate internal control "significant deficiencies" to: The audit committee. The shareholders. The SEC. The Federal Trade Commission.

The audit committee.

Bond transactions are normally confirmed with: Individual holders of retired bonds. Recomputation procedures performed using interest expense. The bond trustee. Comparisons of retired bonds with those outstanding.

The bond trustee.

Internal control over bonds payable is best when: The company utilizes the services of a bond trustee. The company segregates approval from issuance of the bonds. Bonds are countersigned by two officers. Bonds are serially numbered.

The company utilizes the services of a bond trustee.

In which of the following circumstances would a covered member be considered independent when performing the audit of the financial statements of a new client for the year ended December 31, 20X3? The covered member resigned on January 17, 20X3 from the board of directors of the client, prior to accepting the new audit engagement. The covered member continues to hold an immaterial indirect financial interest in the client. The covered member continues to serve as a trustee for the client's pension plan and has the authority to make investment decisions. The covered member's spouse owns an immaterial amount of shares of common stock in the client.

The covered member continues to hold an immaterial indirect financial interest in the client.

PCAOB Form AP involves disclosure of: The engagement partner for the audit. Audit firm's liability for accounts payable to the audit client. Names of all staff members on the audit. Audit client executives.

The engagement partner for the audit.

Which of the following is least likely to be included in a public company audit report with an unqualified opinion? A section on critical matters. The name of the engagement partner. A title with the word "Independent." A basis for opinion paragraph.

The name of the engagement partner.

In the audit of the allocation of income for a partnership, the auditors would be most interested in reviewing: Federal Partnership Law. State Partnership Law. Board of directors minutes. The partnership agreement.

The partnership agreement.

Which of the following is not a difference between the audit report of a nonpublic and public company? The public company report includes the word "Registered" in the title. The public company report refers to standards of the PCAOB. The public company report has an additional paragraph referring to the client's fraud prevention procedures. The public company report is more likely to refer to a critical audit matter.

The public company report has an additional paragraph referring to the client's fraud prevention procedures.

Which of the following would most likely be an appropriate addressee for an audit report? The shareholders of the corporation whose financial statements were examined. A third party who requested that a copy of the audit report be sent to her. The president of the corporation whose financial statements were examined. The chief financial officer.

The shareholders of the corporation whose financial statements were examined.

In which of the following circumstances would an auditor of financial statements be most likely to express an adverse opinion? The statements are not in conformity with FASB requirements regarding goodwill impairment. Information comes to the auditor's attention that raises substantial doubt about the entity's ability to continue in existence. The chief executive officer refuses the auditor access to minutes of board of directors' meetings. Tests of controls show that the entity's internal control is so poor that it cannot be relied upon.

The statements are not in conformity with FASB requirements regarding goodwill impairment.

Effective internal control over the payroll function would include which of the following? Total time recorded on time clock cards should be reconciled to job reports by employees responsible for those specific jobs. Payroll department employees should be supervised by the management of the personnel department. Payroll department employees should be responsible for maintaining employee personnel records. Total time spent on jobs should be compared with total time indicated on time clock punch cards.

Total time spent on jobs should be compared with total time indicated on time clock punch cards.

Operating control over check signing normally should be the responsibility of the: Secretary. Chief accountant. Vice-president of marketing. Treasurer.

Treasurer.

When the auditors discover an understatement of liabilities, they would most likely also expect to find an: Understatement of assets. Understatement of owners' equity. Overstatement of expenses. Understatement of revenues.

Understatement of assets.

Which of the following is not a procedure normally performed while completing the audit of a public company? Obtain a lawyer's letter. Obtain a representations letter. Perform an overall review using analytical procedures. Update internal control questionnaire.

Update internal control questionnaire.

The term "except for" in an audit report is: Used in an adverse opinion. No longer considered appropriate. Used in a qualified opinion. Used for an unmodified opinion when an emphasis-of-matter paragraph is added.

Used in a qualified opinion.

Which of the following statements is correct? Client prepared records (e.g., the general ledger) may be retained by the CPA until fees due to the CPA are received. CPA working papers are the joint property of the CPA and the client. Working papers prepared by the auditor solely for the engagement need not be returned to the client. CPA working papers that include copies of client's records are not available to third parties under any circumstances.

Working papers prepared by the auditor solely for the engagement need not be returned to the client.

Authorization of which of the following is least likely to be found during a review of the minutes of the board of directors? Dividends. New debt issuance. New bank accounts. Write-off of trade accounts receivable.

Write-off of trade accounts receivable.

A nonpublic client has provided required supplementary information with its audited financial statements. The auditor's proper reporting responsibility includes: other-matter paragraph should be added to the audit report. A separate report should be issued on the required supplementary information. An adverse opinion on the required supplementary information. The required supplementary information should not be referred to.

other-matter paragraph should be added to the audit report.