1. A confirmation is used to: A. verify a representation from a third party.
2. An auditor would issue an adverse opinion if: A. the statements taken as a whole do not fairly present the financial condition and results of operations of the company.
3. An internal auditor is likely to be more concerned with __________ than the external auditor. A. the efficiency of operations
4. An investor is reading the financial statements of the Stankey Corporation and observes that the statements are accompanied by an auditor’s unqualified report. From this, the investor may conclude that: A. any disputes over significant accounting issues have been settled to the auditor’s satisfaction.
5. Analytical procedures used in planning an audit should focus on identifying: A. areas that may represent specific risks relevant to the audit.
6. Based on conversations with the owner-manager of an audit client, the auditor ascertained that the company’s primary motivation is to avoid paying income taxes. Based on this motivation, which account balance assertion for ending inventory will the auditor be most concerned about verifying? A. Completeness.
7. Preliminary engagement activities include: A. performing background checks on top management.
8. The accuracy of information included in footnotes accompanying the audited financial statements issued by a company whose shares are traded on a stock exchange is the primary responsibility of: A. the company’s management.
9. The authoritative body designed to promulgate standards concerning a CPA’s association with audited financial statements of an entity that is required to file financial statements with the SEC is the: A. public company accounting oversight board.
10. The sufficiency of evidence refers to the quality of audit evidence. A. False
11. Typically, an external auditor first gets supervisory experience at what level of authority? A. Senior.
12. When obtaining an understanding of the entity and its environment, the auditor should obtain an understanding of internal controls primarily to: A. identify areas of relatively high risk of misstatement and plan the audit accordingly.
13. Which of the following best describes the concept of audit risk? A. The risk that the auditor will provide a “clean” opinion on financial statements that are, in fact, materially misstated.
14. Which of the following best describes why an independent auditor is asked to express an opinion on the fair presentation of financial statements? A. The opinion of an independent party is needed because a company is not likely to be considered objective with respect to its own financial statements.
16. Which of the following is NOT a requirement of the Sarbanes-Oxley Act? A. A certain number of hours, which is based on the size of the company being audited, must be spent on each audit engagement.
17. Which of the following is true with respect to the auditor’s report? A. The report indicates that the company’s financial statements were audited in accordance with applicable auditing standards.
18. Which of the following presumptions is correct about the reliability of audit evidence? A. An effective internal control system provides more reliable audit evidence.
19. Which of the following statements about the study of auditing is NOT true? A. The study of auditing focuses on learning the rules, techniques, and computations required to analyze financial statements.
20. Which of the following would best be described as an assurance service? A. Offering an opinion concerning the accuracy of statements made on an entity’s website relating to its online privacy policies.
21. Which one of the following statements best describes the concept of materiality? A. Materiality is largely a matter of professional judgment.
22. You are concerned with unrecorded transactions in the purchasing cycle. Which audit procedure are you most likely to use when auditing purchases? A. Tracing vendor invoices to accounting records.
23. Your audit client is under intense pressure to meet an earnings target. Which transaction assertion for transactions within the purchasing process are you most concerned with? A. Completeness.
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