Modules for Audit Exam 4

According to Sarbanes-Oxley, the audit committee must pre-approve all audit and non-audit services. This can be done

Case-by-case basis: Yes; Through established policies: Yes; Delegating the responsibility: No

Audit techniques that take full advantage of big data offer the potential to improve?

Audit Efficiency: YES Audit Effectiveness: YES

Which of the following best describes the scope of audit and compilation engagements compared to a review engagement?

Audit: Greater than the review Compilation: Less than the review

In which of the following engagements would an accountant be required to be independent of the client?

Complication: No Preparation: No

Which of the following are key issues that the auditor faces when assessing a client's data? Data Completeness Data format Data Integrity Data Collection Data Accuracy

Data Completeness Data format Data Integrity Data Accuracy

Select the proper order in performing Audit Data Analytics: I.Evaluate the results and conclude on whether the purpose and specific objectives of performing the ADA have been achieved II.Consider the relevance and reliability of the data used III.Plan the ADA IV.Perform the ADA V. Access and prepare the data for purposes of the ADA

III, V, II, IV, I

When accountants are not independent, which of the following reports can they issue: a. compilation report on historical financial statements. b. standard unmodified audit report on historical financial statements. c. examination report on a financial forecast. d. examination of internal control over financial reporting for an issuer.

a. compilation report on historical financial statements.

Which of the following would occur during the planning stage of Audit Data Analytics? a.Auditor must determine the nature, timing, and extent of the work that will be completed as part of the ADA. b.Auditor can conclude that no additional risk of material misstatement is present in population items. c.Auditors may need to subject client systems to reliability testing. d.Auditor must consider whether the data has a logical connection to the purpose of the audit procedure.

a.Auditor must determine the nature, timing, and extent of the work that will be completed as part of the ADA.

Which of the following is true of audit data analytics? a.It is used gain insights and improve audit quality b.It is most appropriate when used on unpredictable relationships c.It is typically performed on a small sample of the population d.All of these choices are correct.

a.It is used gain insights and improve audit quality

Which of the following agencies issues independence rules for the auditors of public companies? a.Public Company Accounting Oversight Board (PCAOB). b.Financial Accounting Standards Board (FASB). c.AICPA Accounting and Review Services Committee (ARSC). d.Government Accountability Office (GAO).

a.Public Company Accounting Oversight Board (PCAOB).

A CPA's legal license to practice public accounting can be revoked by the a.State board of accountancy b.Auditing Standard Board. c.State society of CPAs. d.American Institute of Certified Public Accountants.

a.State board of accountancy

Auditors are interested in having independence in appearance because a.They want the public at large to have confidence in the profession. b.They want to impress the public with their independence in fact. c.They need to comply with the fundamental principles of GAAS. d.Audits should be planned and properly supervised.

a.They want the public at large to have confidence in the profession.

The phrase "Trust services" refers to: a.WebTrust and SysTrust Services. b.XBRL and SysTrust Services. c.WebTrust and XBRL Services. d.All AICPA designated assurance services.

a.WebTrust and SysTrust Services.

What is the appropriate name for an assurance service provided by a CPA regarding a client's commercial Internet site with reference to the principles of privacy, security, processing integrity, availability, and confidentiality? a.WebTrust. b.SysTrust. c.XBRL. d.WebSecure.

a.WebTrust.

The conclusions provided in an accountants' report on an agreed-upon procedures engagement are in the form of a(n): a.limited assurance. b.summary of findings. c.opinion. d.no conclusions are provided in an agreed-upon procedures engagement.

b.summary of findings.

Which of the following is not a reason for data cleansing? a.Fields that should contain dates may have letters b.Data may be too large in volume c.Fields may contain data outside preset acceptable values d.All of the above are reasons for data cleansing

b.Data may be too large in volume

Which of the following is not a typical problem found by auditors when cleansing client data for the purposes of performing an ADA? a.Some fields may be empty and thus cause errors during analysis. b.Some fields may not be sorted in numerical order and require sorting for identification of outliers. c.Some date fields may contain letters or be in the wrong format. d.Some fields may have country-specific differences such as currency.

b.Some fields may not be sorted in numerical order and require sorting for identification of outliers.

What agency has the ultimate authority in defining independence for public companies? a.The AICPA b.The SEC c.The Department of Justice d.The U.S. Congress

b.The SEC

What is the primary objective of analytical procedures performed during the planning stages of an audit? a.To identify existing material misstatements b.To identify unusual or unexpected relationships c.To uncover management fraud d.All of these choices are correct.

b.To identify unusual or unexpected relationships

Which of the following pairings of engagements and levels of assurance is not correct? a. Examination engagement; Opinion b. Review engagement; Limited assurance c. Agreed-upon procedures engagement; Limited assurance d. Compilation engagement; No assurance

c. Agreed-upon procedures engagement; Limited assurance

Which of the following would not be considered when planning an Audit Data Analytic (ADA)? a.Determine the overall purpose and specific objectives of the ADA b.Determine the relevant financial statement assertions c.Determine the sample of the population to be analyzed d.All of the above would be considered during the planning of an ADA

c.Determine the sample of the population to be analyzed

Which of the following is not a restriction placed on audit partners by Sarbanes-Oxley? a.Limits engagement partners to a five-year term as the engagement partner. b.Limits other partners associated with the engagement to a seven-year term. c.Engagement partners must review nonaudit work to ensure that independence has not been compromised. d.Partners that engage in selling services, other than audit, review, and attestation services, to an audit client are not independent with respect to that client.

c.Engagement partners must review nonaudit work to ensure that independence has not been compromised.

Which of the following would probably not be considered an "act discreditable to the profession"? a.Filing a fraudulent tax return for a client in a severe financial difficulty. b.Failing to file the CPA's own tax return. c.Numerous moving traffic violations. d.Refusing to hire Asian Americans in an accounting practice.

c.Numerous moving traffic violations.

Accountants are permitted to express limited assurance in which of the following reports? a.Standard unmodified report on audited financial statements. b.Compilation report on unaudited financial statements. c.Review report on unaudited financial statements. d.Adverse opinion on audited financial statements.

c.Review report on unaudited financial statements.

For documentation of an ADA to be considered sufficient, all the following should be recorded except? a.Who reviewed work performed within the output of the ADA. b.Who performed the work and created the output of the ADA. c.The process used to produce the data examined. d.Identifying characteristics of specific items or matters tested.

c.The process used to produce the data examined.

Many individuals are apprehensive about using the Internet to purchase items. This apprehension mainly arises from users' concerns about: a.the reliability of computer technology. b.the time delays in Internet purchases. c.a lack of security for information transmitted over the Internet. d.the lack of CPA involvement in Internet company financial information.

c.a lack of security for information transmitted over the Internet.

The first step of planning an ADA is: a.select techniques and tools used for performing the ADA. b.document the objective of the ADA. c.determine the overall purpose and specific objectives of the ADA d.select the ADA that is best suited for the purpose.

c.determine the overall purpose and specific objectives of the ADA

Attestation engagements include: a.only examinations. b.examinations and assurance services. c.examinations, reviews, and agreed-upon procedures. d. examinations, reviews, compilations, agreed-upon procedures, and assurance services.

c.examinations, reviews, and agreed-upon procedures.

When documenting an Audit Data Analytic (ADA), an experienced auditor with no prior connection to the engagement should be able to understand all these elements of the ADA except: a.results of procedures performed and evidence obtained. b.nature, timing, and extent of procedures performed. c.the software used in performing the ADA. d.conclusions reached and significant judgments made.

c.the software used in performing the ADA.

A review of unaudited financial statements consists of: a. Conducting internal control evaluation and obtaining written representations. b. Conducting inquiry of management and documenting internal controls. c. Performing analytical procedures and determining compliance with laws and regulations. d. Conducting inquiry of management, performing analytical procedures, and obtaining written representations.

d. Conducting inquiry of management, performing analytical procedures, and obtaining written representations.

Which of the following best describes what audit data analytics are? a.Discovering and analyzing patterns in data b.Identifying anomalies in data c.Extracting useful information in data d.All of these choices are correct.

d.All of these choices are correct.

Audit independence in fact is most clearly lost when a.A public accounting firm audits competitor companies in the same industry (e.g., Coca-Cola and Pepsi). b.An audit team fails to discover the client's misleading omission of disclosure about permanent impairment of asset values. c.A public accounting firm issues a standard unmodified report, but the reviewing partner fails to notice that the assistant's observation of inventory was woefully incomplete. d.An auditor agrees to the argument made by the client's financial vice president that deferring losses on debt refinancing is in accordance with generally accepted accounting principles.

d.An auditor agrees to the argument made by the client's financial vice president that deferring losses on debt refinancing is in accordance with generally accepted accounting principles.

Which aspect of data is not important for data used in Audit Data Analytics (ADA)? a.Reliability b.Relevance c.Completeness d.None of these choices are correct

d.None of these choices are correct

An auditor imports a client's purchasing cycle transactions for the purposes of testing authorization controls. Which of the following is true regarding the implementation of this audit data analytic? a.The use of statistical sampling in the performance of the ADA increases the auditor's confidence. b.The use of ADA for purchasing transactions often significantly increases audit risk relative to traditional auditing procedures. c.A disadvantage of implementation is the increased costs associated with ADA. d.Testing can be more efficiently conducted across 100% of transactions.

d.Testing can be more efficiently conducted across 100% of transactions.

Based on Sarbanes-Oxley, who is ultimately responsible for the independence of the external auditor? a.The CPA firm's engagement partner. b.The CPA firm's quality control partner. c.The client's senior management. d.The audit committee.

d.The audit committee.

Under Sarbanes-Oxley and PCAOB rules, ensuring that the auditor is independent in appearance is the responsibility of a.Senior management. b.The PCAOB. c.The public accounting firm. d.The audit committee.

d.The audit committee.

An assurance service is defined as a service that: a.reduces the risk in management decision making. b.expands auditing services to nonfinancial information. c.reviews unaudited financial information. d.improves the quality of information for decision makers. e.reduces the risk in management decision making.

d.improves the quality of information for decision makers.