What is the auditing?
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AUDIT TEST 70
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AUDIT TEST What is the auditing? the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Confirmation of truthfulness of economic information the results of internal examinations of financial and accounting matters to a company’s top-level management. What is the COSO? International Financial Reporting Standards Generally Accepted Accounting Principles Committee of Sponsoring Organizations of the Treadway Commission The final stage in auditing process? Fraud detection Audit report Error correction The meaning of the assurance service? independent professional service that improves the quality of information for decision makers service that provides legal representation in dispute service that helps companies improve their internal control How many categories does attestation services fall into? 5 4 3 What type of audit evaluates the efficiency and effectiveness of any part of an organization’s operating procedures and methods? Compliance audit Operational audit Financial statement audit Which of the following is not a phase of the audit process? Preliminary assessment Planning Retirement Who is responsible for preparing the financial statements that are audited? Independent auditors The audit committee The company's management What is a compliance audit? An audit that evaluates an organization's financial reporting processes and controls An audit that evaluates a company's adherence to laws and regulations An audit that focuses on a specific financial transaction What is a financial statement audit? An audit determines whether the auditee is following specific procedures, rules, or regulations set by some higher authority An audit that evaluates a company's adherence to laws and regulations An audit that evaluates a company's IT systems The underlying reason for a code of professional conduct for any profession is: that it provides a safeguard to keep unscrupulous people out. that it allows licensing agencies to have a yardstick to measure deficient behavior. the need for public confidence in the quality of service of the profession. Which of the following statements is true when the CPA has been engaged to perform an audit of financial statements? The CPA firm is engaged and paid by the client; therefore, the firm has primary responsibility to be an advocate for the client. The CPA firm is engaged and paid by the client, but the primary beneficiaries of the audit are those who rely on the financial statements The CPA firm has primary responsibility to the FASB. Which of the following is(are) true concerning the Ethical Principles of the Code of Professional Conduct? 1.They identify ideal conduct. 2.They are general ideals and difficult to enforce. 1 and 2 1 only 2 only Which of the following is not one of the four parts of the AICPA's Code of Professional Conduct? principles definitions interpretations According to the Principles section of the Code of Professional Conduct, all members: should be independent in fact and in appearance at all times. in public practice should be independent in fact and in appearance at all times. in public practice should be independent in fact and in appearance when providing auditing and other attestations services. Which of the following statements best describes the enforceability of the Interpretations of the Rules of Conduct? The Interpretations are not enforceable. The Interpretations are enforceable. The Interpretations are not enforceable, but a practitioner must justify departure from them. Of the four parts of the AICPA's Code of Professional Conduct, which part is enforceable? Ethical Rulings Rules of Conduct Interpretations Ethical Rulings are: I. Explanations relating to broad hypothetical circumstances. II. Not enforceable, but one must justify departure. III. Explanations relating to specific factual circumstances. I and II II and III I and III The AICPA's Code of Professional Conduct requires independence for all: attestation engagements. services performed by accountants in public practice accounting and auditing services performed. The Code of Professional Conduct is established by the membership of the AICPA, and the Interpretations of the Rules of Conduct are prepared by the: Financial Accounting Standards Board Securities and Exchange Commission. Professional Ethics Executive Committee of the AICPA. A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the: Inherent risk Acceptable audit risk Statistical risk A measure of the auditor’s assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client’s internal control is called: Control risk Acceptable risk Inherent risk In what order should the following steps occur? Assess client business risk Understand the client’s business and industry Perform preliminary analytical procedures Assess acceptable audit risk 4,2,3,1 2,1,3,4 2,4,1,3 The auditor uses knowledge gained from the understanding of the client’s business and industry to assess: Client business risk Control risk Inherent risk When an auditor decides there is higher inherent risk for an account, one potential effect is that more audit evidence will be required for that account. True False As acceptable audit risk is decreased, the likely cost of conducting an audit increases. True False A 100 % audit risk is complete certainty. True False Initial audit planning involves four matters. Which of the following is not one of these? Develop an overall audit strategy Request that bank balances be confirmed. Schedule engagement staff and audit specialists. When dealing with audit risk: Audit risk should not a factor when determining if a new client should be accepted Audit with a low acceptable audit risk generally result in lower audit fees If the auditor concludes that acceptable audit risk is low, but the client is till acceptable, the auditor may still accept the engagement but increase audit fee. The purpose of an engagement letter is to: Document the CPA firm’s responsibility to external users of the audited financial statements. Document the terms of the engagement. Notify the audit staff of an upcoming engagement so that personnel scheduling can be facilitated. Auditors are responsible for determining whether financial statements are materially misstated, so upon discovering a material misstatement they must bring it to the attention of: Regulators The client shareholders The client Determining materiality requires professional judgment. Trues False Why do auditors establish a preliminary judgment about materiality? To determine the appropriate level of staff to assign to the audit So that the client can know what records to make available to the auditor To help plan the appropriate evidence to accumulate If an auditor establishes a relatively high level for materiality, then the auditor will: accumulate more evidence than if a lower level had been set. accumulate less evidence than if a lower level had been set. accumulate approximately the same evidence as would be the case were materiality lower. The preliminary judgment about materiality and the amount of audit evidence accumulated are _______ related Directly Inversely Indirectly Which of the following is the primary basis used to decide materiality for a for-profit entity? Net sales Net assets Net income before tax Auditing standards ________ that the basis used to determine the preliminary judgement about materiality be documented in the audit files Permit do not allow require Which of the following statements is not correct? Materiality is a relative rather than an absolute concept. The most important base used as the criterion for deciding materiality is total assets. Qualitative factors as well as quantitative factors affect materiality. When setting a preliminary judgment about materiality: more evidence is required for a low dollar amount than for a high dollar amount. less evidence is required for a low dollar amount than for a high dollar amount. the same amount of evidence is required for either low or high dollar amounts. Auditors generally allocate the preliminary judgment about materiality to the: balance sheet only. income statement only. income statement and balance sheet. Which of the following is responsible for establishing a private company’s internal control? Management. Management and auditors Committee of Sponsoring Organizations Which of the following is not one of the three primary objectives of effective internal control? Which of the following is not one of the three primary objectives of effective internal control? Which of the following is not one of the three primary objectives of effective internal control? Which of the following is not one of the three primary objectives of effective internal control? Which of the following is not one of the three primary objectives of effective internal control? Two key concepts that underlie management’s design and implementation of internal control are: Two key concepts that underlie management’s design and implementation of internal control are: Two key concepts that underlie management’s design and implementation of internal control are: Which of the following is not one of the three primary objectives of effective internal control? Reliability of financial reporting Assurance of elimination of business risk. Efficiency and effectiveness of operations Internal controls can never be considered as absolutely effective because: not all organizations have internal audit departments. controls are designed to prevent and detect only material misstatements. their effectiveness is limited by the competency and dependability of employees. Which of the following is responsible for establishing internal controls for a public company? Which of the following is responsible for establishing internal controls for a public company? Management and auditors. Committee of Sponsoring Organizations Management. An act of two or more employees to steal assets or misstate records is frequently referred to as: An act of two or more employees to steal assets or misstate records is frequently referred to as: collusion. a material weakness. a control deficiency. The initial presumption in the audit of a public company is that control risk is: low. moderate. High The auditor’s study of a public company’s internal control is: a)required by GAAS. b) required by the AICPA. c) required by the Sarbanes-Oxley Act Even with the most effectively designed internal control, the auditor must obtain auditevidence, beyond testing the controls, for every: Transaction material financial statement account. financial statement account. Which of the following is not one of the levels of an absence of internal controls? Major deficiency. Material weakness. Significant deficiency. Which of the following is not a likely procedure to support the operating effectiveness of internal controls? Which of the following is not a likely procedure to support the operating effectiveness ofi nternal controls? Inquiry of client personnel Observation of control-related activities. Completing an internal control questionnaire. Which of the following best defines fraud in a financial statement auditing context? Fraud is an unintentional misstatement of the financial statements. Fraud is an intentional misstatement of the financial statements. Fraud is either an intentional or unintentional misstatement of the financial statements, depending on materiality. Companies may intentionally understate earnings when income is high to create a reserve of "earnings" that may be used in future years to increase earnings. This practice is known as: performance-based management. asset management. earnings management. _______is fraud that involves theft of an entity's assets. Misappropriation of assets Fraudulent financial reporting Income smoothing Who is most likely to perpetrate fraudulent financial reporting? members of the board of directors management of the company the internal Misappropriation of assets is normally perpetrated by: members of the board of directors. employees at lower levels of the organization. management of the company. Which of the following is not a factor that relates to opportunities to commit fraudulent financial reporting? Lack of controls related to the calculation and approval of accounting estimates. Ineffective oversight of financial reporting by the board of directors. Management's practice of making overly aggressive forecasts. Fraud is more prevalent in smaller businesses and not-for-organizations because it is more difficult for them to maintain: adequate separation of duties. adequate compensation. adequate financial reporting standards. Which of the following is a factor that relates to incentives or pressures to commit fraudulent financial reporting? Significant accounting estimates involving subjective judgments. Excessive pressure for management to meet debt repayment requirements. Management's practice of making overly aggressive forecasts. Which of the following is not a factor that relates to opportunities to misappropriate assets? Inadequate internal controls over assets. Presence of large amounts of cash on hand. Adverse relationships between management and employees. Which of the following is a factor that relates to incentives to misappropriate assets? Significant accounting estimates involving subjective judgments. Significant personal financial obligations. Management's practice of making overly aggressive forecasts. The objective of an audit of the financial statements is an expression of an opinion on: the fairness of the financial statements in all material respects. the accuracy of the financial statements. the accuracy of the annual report. If the auditor believes that the financial statements are not fairly stated or is unable to reach a conclusion because of insufficient evidence, the auditor: should withdraw from the engagement. should request an increase in audit fees so that more resources can be used to conduct the audit. has the responsibility of notifying financial statement users through the auditor's report. Auditors accumulate evidence to: defend themselves in the event of a lawsuit. reach a conclusion about the fairness of the financial statements. determine if the financial statements are correct. The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to: the auditor. management. both management and the auditor equally. The auditor's best defense when material misstatements are not uncovered is to have conducted the audit: in accordance with generally accepted auditing standards. as effectively as reasonably possible. in a timely manner. Which of the following statements is the most correct regarding errors and fraud? An error is unintentional, whereas fraud is intentional. Frauds occur more often than errors in financial statements. Errors are always fraud and frauds are always errors. When an auditor believes that an illegal act may have occurred, the auditor should first: obtain an understanding of the nature and circumstances of the act. consult with legal counsel or others knowledgeable about the illegal act. discuss the matter with the audit committee. Fraudulent financial reporting is most likely to be committed by whom? Line employees of the company Outside members of the company's board of directors Company management The concept of reasonable assurance indicates that the auditor is: not responsible for the fairness of the financial statements. not a guarantor of the correctness of the financial statements. responsible only for issuing an opinion on the financial statements. When comparing the auditor's responsibility for detecting employee fraud and for detecting errors, the profession has placed the responsibility: more on discovering errors than employee fraud. more on discovering employee fraud than errors. equally on discovering errors and employee fraud. 48. Even with the most effectively designed internal control, the auditor must obtain audit evidence, beyond testing the controls, for every: Even with the most effectively designed internal control, the auditor must obtain audit evidence, beyond testing the controls, for every: Even with the most effectively designed internal control, the auditor must obtain audit evidence, beyond testing the controls, for every: Download 33.68 Kb. Do'stlaringiz bilan baham: 
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