Question 1

Which of the following procedures would an auditor most likely perform while evaluating audit findings at the conclusion of an audit?

Accepted Answer

A)  Obtain assurance from the entity's attorney that all material litigation has been disclosed in the financial statements.
B)  Verify the clerical accuracy of the entity's proof of cash and its bank cutoff statement.
C)  Determine whether reportable conditions have been corrected.
D)  Calculate an estimate the total of uncorrected misstatements in the financial statements.E) A) and B)
F) A) and D)

Question 2

Authorization of which of the following is least likely to be found during a review of the minutes of the board of directors?

Accepted Answer

A)  Dividends.
B)  New debt issuance.
C)  New bank accounts.
D)  Write-off of trade accounts receivable.E) B) and D)
F) A) and D)

Question 3

Analytical procedures are often used for verification of income statement accounts.

Accepted Answer

A) True 
 B)False

Question 4

The purpose of segregating the duties of distributing payroll checks and hiring personnel is to:

Accepted Answer

A)  Separate the custody of assets from the accounting for those assets.
B)  Establish clear lines of authority and responsibility.
C)  Separate duties within the accounting function.
D)  Separate the authorization of transactions from the custody of related assets.E) None of the above
F) A) and C)

Question 5

The auditors' primary means of obtaining corroboration of management's information concerning litigation is a:

Accepted Answer

A)  Letter of audit inquiry to the client's lawyer.
B)  Letter of corroboration from the auditor's lawyer upon review of the legal documentation.
C)  Confirmation of claims and assessments from the other parties to the litigation.
D)  Confirmation of claims and assessments from an officer of the court presiding over the litigation.E) B) and D)
F) A) and D)

Question 6

Which of the following statements ordinarily is not included among the written client representations made by the chief executive officer and the chief financial officer?

Accepted Answer

A)  "Sufficient audit evidence has been made available to the auditor to permit the issuance of an unqualified opinion."
B)  "There are no unasserted claims or assessments that our lawyer has advised us are probable of assertion and must be disclosed."
C)  "We have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities."
D)  "No events have occurred subsequent to the balance sheet date that would require adjustment to,or disclosure in,the financial statements."E) A) and B)
F) A) and C)

Question 7

Which of the following is not a procedure normally performed while completing the audit of a public company?

Accepted Answer

A)  Obtain a lawyer's letter.
B)  Obtain a representations letter.
C)  Perform an overall review using analytical procedures.
D)  Update internal control questionnaire.E) None of the above
F) C) and D)

Question 8

An example of an internal control weakness is to assign the human resource department responsibility for:

Accepted Answer

A)  Maintaining time cards.
B)  Hiring personnel.
C)  Authorizing deductions from pay.
D)  Interviewing employees for jobs.E) None of the above
F) C) and D)

Question 9

Which of the following ledger accounts would be least likely to be analyzed in detail by auditors?

Accepted Answer

A)  Miscellaneous revenue.
B)  Professional fees.
C)  Supplies expense.
D)  Repairs and maintenance.E) All of the above
F) A) and B)

Question 10

In evaluating whether there is a sufficiently low probability of material misstatement in the financial statements,the auditors accumulate:

Accepted Answer

A)  Factual misstatements in the financial statements.
B)  Judgmental misstatements in the financial statements.
C)  Factual and judgmental misstatements in the financial statements.
D)  Factual,judgmental and projected misstatements and an allowance for undetected misstatements in the financial statements.E) A) and B)
F) A) and C)

Question 11

Effective internal control over the payroll function would include which of the following?

Accepted Answer

A)  Total time recorded on time clock cards should be reconciled to job reports by employees responsible for those specific jobs.
B)  Payroll department employees should be supervised by the management of the personnel department.
C)  Payroll department employees should be responsible for maintaining employee personnel records.
D)  Total time spent on jobs should be compared with total time indicated on time clock punch cards.E) B) and D)
F) B) and C)

Question 12

To minimize the opportunities for fraud,unclaimed cash payroll should be:

Accepted Answer

A)  Deposited in a safe deposit box.
B)  Held by the payroll custodian.
C)  Deposited in a special bank account.
D)  Held by the controller.E) A) and B)
F) A) and C)

Question 13

Auditors should perform audit procedures relating to subsequent events?

Accepted Answer

A)  Through year-end.
B)  Through issuance of the audit report.
C)  Through the date of the audit report.
D)  For a reasonable period after year-end.E) C) and D)
F) All of the above

Question 14

The proper use of prenumbered termination forms by the payroll department should provide assurance that all:

Accepted Answer

A)  Uncashed payroll checks were issued to employees who have not been terminated.
B)  Personnel files are kept up to date.
C)  Employees who have not been terminated receive their payroll checks.
D)  Terminated employees are removed from payroll.E) A) and D)
F) A) and C)

Question 15

Which of the following types of matters do not generally require disclosure in the financial statements?

Accepted Answer

A)  General risk contingencies.
B)  Commitments.
C)  Loss contingencies.
D)  Liabilities to related parties.E) All of the above
F) A) and D)

Question 16

Subsequent events that provide additional evidence as to conditions that existed at the balance sheet date may result in adjusting journal entries.

Accepted Answer

A) True 
 B)False

Question 17

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:

Accepted Answer

A)  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.
B)  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.
C)  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.
D)  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.E) B) and C)
F) A) and B)

Question 18

An auditor's decision concerning whether or not to "dual-date" the audit report is based upon the auditor's willingness to:

Accepted Answer

A)  Extend auditing procedures.
B)  Accept responsibility for year-end adjusting entries.
C)  Permit inclusion of a note captioned: event (unaudited) subsequent to the date of the auditor's report.
D)  Assume responsibility for resolving all events subsequent to the issuance of the auditor's report.E) C) and D)
F) All of the above

Question 19

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:

Accepted Answer

A)  $0.
B)  $30,000.
C)  $40,000.
D)  $50,000.E) A) and C)
F) A) and B)

Question 20

Which of the following auditing procedures is ordinarily performed last?

Accepted Answer

A)  Reading of the minutes of the directors' meetings.
B)  Confirming accounts payable.
C)  Obtaining a management representation letter.
D)  Testing of the purchasing function.E) C) and D)
F) None of the above

Exam 16: Auditing Operations and Completing the Audit

Which of the following procedures would an auditor most likely perform while evaluating audit findings at the conclusion of an audit?

Correct Answer
verified

Which of the following is not a procedure normally performed while completing the audit of a public company?

Correct Answer
verified

Which of the following ledger accounts would be least likely to be analyzed in detail by auditors?

Correct Answer
verified

Correct Answer
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Authorization of which of the following is least likely to be found during a review of the minutes of the board of directors?

Correct Answer
verified

Which of the following types of matters do not generally require disclosure in the financial statements?

Correct Answer
verified

The proper use of prenumbered termination forms by the payroll department should provide assurance that all:

Correct Answer
verified

The purpose of segregating the duties of distributing payroll checks and hiring personnel is to:

Correct Answer
verified

Subsequent events that provide additional evidence as to conditions that existed at the balance sheet date may result in adjusting journal entries.

Correct Answer
verified

The auditors' primary means of obtaining corroboration of management's information concerning litigation is a:

Correct Answer
verified

An example of an internal control weakness is to assign the human resource department responsibility for:

Correct Answer
verified

Which of the following auditing procedures is ordinarily performed last?

Correct Answer
verified

An auditor's decision concerning whether or not to "dual-date" the audit report is based upon the auditor's willingness to:

Correct Answer
verified

Analytical procedures are often used for verification of income statement accounts.

Correct Answer
verified

In evaluating whether there is a sufficiently low probability of material misstatement in the financial statements,the auditors accumulate:

Correct Answer
verified

Effective internal control over the payroll function would include which of the following?

Correct Answer
verified

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:

Correct Answer
verified

Auditors should perform audit procedures relating to subsequent events?

Correct Answer
verified

To minimize the opportunities for fraud,unclaimed cash payroll should be:

Correct Answer
verified

Which of the following statements ordinarily is not included among the written client representations made by the chief executive officer and the chief financial officer?

Correct Answer
verified

Exam 16: Auditing Operations and Completing the Audit

Which of the following procedures would an auditor most likely perform while evaluating audit findings at the conclusion of an audit?

Correct AnswerverifiedShow Answer

Which of the following is not a procedure normally performed while completing the audit of a public company?

Correct AnswerverifiedShow Answer

Which of the following ledger accounts would be least likely to be analyzed in detail by auditors?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Authorization of which of the following is least likely to be found during a review of the minutes of the board of directors?

Correct AnswerverifiedShow Answer

Which of the following types of matters do not generally require disclosure in the financial statements?

Correct AnswerverifiedShow Answer

The proper use of prenumbered termination forms by the payroll department should provide assurance that all:

Correct AnswerverifiedShow Answer

The purpose of segregating the duties of distributing payroll checks and hiring personnel is to:

Correct AnswerverifiedShow Answer

Subsequent events that provide additional evidence as to conditions that existed at the balance sheet date may result in adjusting journal entries.

Correct AnswerverifiedShow Answer

The auditors' primary means of obtaining corroboration of management's information concerning litigation is a:

Correct AnswerverifiedShow Answer

An example of an internal control weakness is to assign the human resource department responsibility for:

Correct AnswerverifiedShow Answer

Which of the following auditing procedures is ordinarily performed last?

Correct AnswerverifiedShow Answer

An auditor's decision concerning whether or not to "dual-date" the audit report is based upon the auditor's willingness to:

Correct AnswerverifiedShow Answer

Analytical procedures are often used for verification of income statement accounts.

Correct AnswerverifiedShow Answer

In evaluating whether there is a sufficiently low probability of material misstatement in the financial statements,the auditors accumulate:

Correct AnswerverifiedShow Answer

Effective internal control over the payroll function would include which of the following?

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Auditors should perform audit procedures relating to subsequent events?

Correct AnswerverifiedShow Answer

To minimize the opportunities for fraud,unclaimed cash payroll should be:

Correct AnswerverifiedShow Answer

Which of the following statements ordinarily is not included among the written client representations made by the chief executive officer and the chief financial officer?

Correct AnswerverifiedShow Answer

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