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Ch 1-4 Becker Questions
Which of the following best describes why an independent auditor is asked to express an opinion on the fair presentation of financial statements? a.) It is difficult to prepare financial statements that fairly present a company's financial position, operations, and cash flows without the expertise of an independent auditor b.) It is management's responsibility to seek available independent aid in the appraisal of the financial information shown in its financial statements c.) The opinion of an independent party is needed because a company may not be objective with respect to its own financial statements d.) It is a customary courtesy that all stockholders of a company receive and independent report on management's stewardship of the affairs of the business. - ANS>c.) The opinion of an independent party is needed because a company may not be objective with respect to its own financial statements
Which of the following professional services is an attestation engagement? a.) A consulting service engagement to provide computer-processing advice to a client b.) An engagement to report on compliance with statutory requirements c.) An income tax engagement to prepare federal and state tax returns d.) The preparation of financial statements from a client's financial records - ANS>b.) An engagement to report on compliance with statutory requirements Which of the following attributes is likely to be unique to the audit work of CPAs as compared to the work performed by practitioners of other professions? a.) independence b.)competence c.) due professional care d.) complex body of knowledge - ANS>a.) independence
concentrates on seeking aspects of operations in which waste could be reduced by the introduction of controls Compliance auditing often extends beyond audits leading to the expression of opinions on the fairness of financial presentation and includes audits of efficiency, economy, effectiveness , as well as? a.) accuracy b.) evaluation c.) adherence to specific rules or procedures d.) internal control - ANS>c.) adherence to specific rules or procedures Which of the following is considered an assurance engagement? a.) bookkeeping b.) preparation c.) compilation d.) audit - ANS>d.) audit Which of the following engagements is most likely to be considered an operational audit?
a.) the auditor evaluates the organization's efficiency in processing payments b.) the auditor examines information presented in an entity's financial statements to determine whether the financial statements are presented fairly in accordance with the applicable financial reporting framework c.) The auditor determines whether the organization is following provisions of laws and regulations d.) the auditor assists the client in preparation of financial statements - ANS>a.) the auditor evaluates the organization's efficiency in processing payments In a financial statement audit, the auditor obtains a reasonable level of assurance about whether the financial statements are free of material misstatement in order to express an opinion. In order to obtain reasonable assurance the auditor must, a.) have prior experience in the industry in which the audit client operates b.) examine all documents available that support the financial statements
What is the general character of the responsibilities characterized by the performance principles? a.) the competence, independence, and professional care of persons performing the audit b.) criteria for the content of the auditor's report on financial statements and related footnote disclosures c.) The criteria of audit planning and evidence gathering d.) The need to maintain an independence in mental attitude in all matters pertaining to the audit - ANS>c.) The criteria of audit planning and evidence gathering The nature and extent of a CPA firm's quality control policies and procedures depend on? - ANS>The CPA firm's size The nature of the CPA firm's practice Cost- benefit considerations
Which of the following are elements of a CPA firm's quality control that should be considered in establishing its quality control policies and procedures? - ANS>Human resources monitoring engagement performance One of a CPA firm's basic objectives is to provide professional services that conform with professional standards. Reasonable assurance of achieving this basic objective is provided through? a.) a system of quality control b.) a system of peer review c.) continuing professional education d.) compliance with GAAP - ANS>a.) a system of quality control An auditor of an entity subject to the rules of the SEC must conduct the financial statement audit in accordance with? - ANS>PCAOB standards Which of the following provides authoritative guidance for the auditor of a nonpublic company? a.) an article in the journal of accountancy that discusses new audit requirements
c.) a statement explaining management's responsibilities for the financial statements d.) the signature of the engagement partner - ANS>d.) the signature of the engagement partner The date of the CPA's opinion on the financial statements of the client should be the date of the? a.) completion of all important audit procedures b.) closing of the clients books c.) finalization of the terms of the audit engagement d.) submission of the report to the client - ANS>a.) completion of all important audit procedures If a principal auditor decides to refer in his or her report to the audit of another auditor, he or she is required to disclose the? a.) name of the other auditor b.) nature of the inquiry into the other auditor's professional standing and extent of the review of the other auditor's work c.) reasons for being unwilling to assume responsibility for the other auditor's work
d.) portion of the financial statements audited by the other auditor - ANS>d.) portion of the financial statements audited by the other auditor An entity changed from the straight-line method to the declining- balance method of depreciation for all newly acquired assets. This change has no material effect on the current year's financial statements but is reasonably certain to have a substantial effect in later years. If the change is disclosed in the notes to the financial statements the auditor should issue a report with a(n): a.) unmodified opinion b.) qualified opinion c.) unmodified opinion with explanatory paragraph d.) qualified opinion with explanatory paragraph regarding consistency - ANS>a.) unmodified opinion When the financial statements are fairly stated but the auditor concludes there is substantial doubt whether the client can continue in existence, the auditor should issue a? a.) adverse opinion b.) qualified opinion only c.) unmodified opinion
d.) indicate situations in which there are material departures from the standards - ANS>d.) indicate situations in which there are material departures from the standards An auditor who qualified an opinion because of an insufficiency of audit evidence should refer to the scope limitation in the a.) auditor's responsibility paragraph b.) opinion paragraph c.) notes to the financial statements - ANS>b.) opinion paragraph As compared to an unmodified opinion, an opinion qualified due to a material departure from GAAP would? a.) include an extra paragraph, following the opinion paragraph b.) indicate that, except for the problem notes, the financial statements are presented fairly c.) include a slight modification to the introductory paragraph d.) include a slight modification to the auditor's responsibility paragraph
- ANS>b.) indicate that, except for the problem notes, the financial statements are presented fairly
What is the meaning of the rule that requires the auditor to be independent? a.) the auditor must be without bias with respect to the client under audit b.) The auditor must adopt a critical attitude during the audit c.) The auditor's sole obligation is to third parties d.) The auditor may have a direct ownership interest in the client's business if it is not material - ANS>a.) the auditor must be without bias with respect to the client under the audit Which of the following services can be offered to public company audit clients under SEC requirements and SOX? a.) Tax services for executives involved in financial reporting b.) internal audit outsourcing c.) Tax planning not involving tax shelters d.) Bookkeeping and other accounting services - ANS>c.) Tax planning not involving tax shelters An auditor strives to achieve independence in appearance to a.) comply with auditing standards related to audit performance b.) become independent in fact
b.) Disclosing confidential information in compliance with a subpoena issued by a court c.) Disclosing confidential information in order to properly discharge the CPA's responsibilities in accordance with the profession's standards d.) Disclosing confidential information during an AICPA authorized peer review - ANS>a.) Disclosing confidential information to another accountant interested in purchasing the CPA's practice A CPA's retention of client records as a means of enforcing payment of an overdue audit fee is an action that is a.) not addressed by the AICPA code of professional conduct b.) acceptable if sanctioned by the state laws c.) prohibited under the AICPA rules of conduct d.) a violation of generally accepted auditing standards - ANS>c.) prohibited under the AICPA rules of conduct The concept of materiality would be least important to an auditor when considering the? a.) adequacy of disclosure of a client's illegal act b.) discovery of weakness in a client's internal control structure
c.) effects of a direct financial interest in the client on the CPA's independence d.) types of evidence to use in testing accounts receivable - ANS>c.) effects of a direct financial interest in the client on the CPA's independence According to the profession's ethical standards, which of the following events may justify a departure from GAAP? a.) new legislation b.)conflicting industry practices c.) evolution of a new form of business transaction - ANS>a. and c.) new legislation and evolution of a new form of business transaction Which of the following is not a provision of the SOX-2002 act? a.) The auditor of an issuer may not provide internal audit outsourcing services for the issuer b.) Audit documentation must be maintained for five years c.) The lead and reviewing partners must rotate off the audit after 5 years d.) Tax services must be preapproved by the audit committee - ANS>b.) Audit documentation must be maintained for five years
