1) To obtain reasonable assurance about whether the financial statements as a whole are free frommaterial misstatement, the auditor must fulfill several performance responsibilities, including A) obtaining sufficient, appropriate audit evidence. .B) exercising professional judgment .C) verifying that all audit work is performed by a CPA with a minimum of three years'experience. D) providing an opinion on the financial statements 4 points QUESTION 2 2) When assessing the risk of material misstatements in the financial statements, A. company management is responsible for determining materiality levels. B. the auditor must understand the client's business and industry. C. GAAS specifies in detail how much and what types of evidence the auditor needs to obtain. D. inadequate internal control procedures will mitigate client business risk 4 points QUESTION 3 In order to properly plan and perform an audit, an important fact for both the auditor and the clientto understand is that A. the purpose of an audit is to prevent fraud B. management is responsible for the preparation of the financial statements C. management can restrict the auditor's access to important information relevant to thefinancial statements D. the internal control policies and procedures are developed by the auditors
QUESTION 1
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1) To obtain reasonable assurance about whether the financial statements as a whole are free frommaterial misstatement, the auditor must fulfill several performance responsibilities, including
A) obtaining sufficient, appropriate audit evidence.
.B) exercising professional judgment
.C) verifying that all audit work is performed by a CPA with a minimum of three years'experience.
D) providing an opinion on the financial statements
4 points
QUESTION 2
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2) When assessing the risk of material misstatements in the financial statements,
A. company management is responsible for determining materiality levels.
B. the auditor must understand the client's business and industry.
C. GAAS specifies in detail how much and what types of evidence the auditor needs to obtain.
D. inadequate internal control procedures will mitigate client business risk
4 points
QUESTION 3
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In order to properly plan and perform an audit, an important fact for both the auditor and the clientto understand is that
A. the purpose of an audit is to prevent fraud
B. management is responsible for the preparation of the financial statements
C. management can restrict the auditor's access to important information relevant to thefinancial statements
D. the internal control policies and procedures are developed by the auditors
4 points
QUESTION 4
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Ray the owner of a small company asked Holmes a CPA to conduct an audit of the company'srecords for the purpose of obtaining a loan. The audit was to be completed in two weeks and if theloan was obtained Holmes would receive a bonus.. Holmes accepted the engagement immediately.By accepting thiss engagement immediately Holmes was in vio;ation of which principle
A. Performance
B. Responsibilities
C. Reporting
D. None of the above
4 points
QUESTION 5
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In the scenario outlined in previous question Holmes agreeing to a Bonus arrangement was aviolation of which principle
A. Reporting
B. Responsibilities
C. Performance
D. None of the above
4 points
QUESTION 6
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What category of audit report will be issued if the auditor concludes that the financial statementsare not fairly presented?
A. qualified
B. adverse
C. standard unmodified opinion
D. disclaimer
4 points
QUESTION 7
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An audit of historical financial statements most commonly includes the
A. income statement, the statement of
cash flows , and the statement of networking capital B. balance sheet, income statement, statement of cash flows, and the statement of changes instockholders' equity
C. balance sheet, statement of
retained earnings , and the statement of cash flowsD. statement of cash flows, balance sheet, and the statement of retained earnings
4 points
QUESTION 8
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Examples of unmodified opinions which contain modified wording (without adding anemphasis-of-matter paragraph) include
A. lack of consistent application of GAAP.
B. substantial doubt about the audited company (or the entity) continuing as a going concern
C. the lack of consistent application of generally accepted accounting principles.
D. reports involving other auditors
4 points
QUESTION 9
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Which of the following is least likely to cause uncertainty about the ability of an entity to continueas a going concern?
A. The entity has working capital deficiencies
B. The entity has lost a major customer.
C. The entity is suing a competitor for a minor patent infringement.
D. The entity has significant recurring operating losses
4 points
QUESTION 10
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As a result of management's refusal to permit the auditor to physically examine inventory, theauditor must depart from the unmodified opinion audit report because
A. the scope of the audit has been restricted
B. the scope of the audit has been restricted by circumstances beyond either the client's orauditor's control.
C. the financial statements have not been audited in accordance with GAAS
D. the financial statements have not been prepared in accordance with GAAP.
4 points
QUESTION 11
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An adverse opinion is issued when the auditor believes
A. the auditor is not independent.
B. some parts of the financial statements are materially misstated or misleading.
C. the financial statements would be found to be materially misstated if an investigation wereperformed.
D. the overall financial statements are so materially misstated that they do not present fairly thefinancial position or results of operations and cash flows in conformity with GAAP
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