Question 1

The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to

Accepted Answer

A)  the auditor.
B)  management.
C)  both management and the auditor equally.
D)  management for the statements and the auditor for the notes.E) B) and C)
F) A) and C)

Question 2

The auditor's first course of action when an illegal act is uncovered should be to immediately notify the appropriate authorities,including but not limited to,law enforcement and the Securities and Exchange Commission.

Accepted Answer

A) True 
 B)False

Question 3

Below are five audit procedures,all of which are tests of transactions associated with the audit of the sales and collection cycle.Also below are the six general transaction-related audit objectives and the five management assertions.For each audit procedure,indicate (1)its audit objective,and (2)the management assertion being tested.
  
1.Vouch recorded sales from the sales journal to the file of bills of lading.
(1)________
(2)________
2.Compare dates on the bill of lading,sales invoices,and sales journal to test for delays in recording sales transactions.
(1)________
(2)________
3.Account for the sequence of prenumbered bills of lading and sales invoices.
(1)________
(2)________
4.Trace from a sample of prelistings of cash receipts to the cash receipts journal,testing for names,amounts,and dates.
(1)________
(2)________
5.Examine customer order forms for credit approval by the credit manager.
(1)________
(2)________

Accepted Answer

1.(1)A (2)V
2.(1)F (...

Question 4

Listed below are several accounts listed from a company's trial balance.Next to each account put the letter corresponding to the transaction cycle used to audit the account.
S = Sales and collection cycle I = Inventory and warehousing cycle
A = Acquisition and payment cycle C = Capital acquisition and repayment cycle
P = Payroll and personnel cycle
1.________ Sales returns and allowances 5.________ Salaries and commissions
2.________ Capital stock 6.________ Cost of goods sold
3.________ Buildings 7.________ Trade accounts receivable
4.________ Notes payable 8.________ Rent

Accepted Answer

1.S,2.C,3....

Question 5

The cycle approach to auditing

Accepted Answer

A)  ties to the way transactions are recorded in journals and then summarized in the general ledger and financial statements.
B)  cannot combine transactions recorded in different journals with the general ledger balances that result from those transactions.
C)  is the only way of segmenting an audit.
D)  assumes that each account has two or more cycles associated with it.E) B) and C)
F) B) and D)

Question 6

If there is collusion among management,the chance a normal audit would uncover such acts is

Accepted Answer

A)  very low.
B)  very high.
C)  zero.
D)  none of the above.E) B) and C)
F) None of the above

Question 7

An auditor has a duty to

Accepted Answer

A)  provide reasonable assurance that material misstatements will be detected.
B)  be a guarantor of the fairness in the statements.
C)  be equally responsible with management for the preparation of the financial statements.
D)  be an insurer of the fairness in the statements.E) A) and B)
F) A) and C)

Question 8

When developing the audit objectives,the first step is to divide the financial statements into cycles.

Accepted Answer

A) True 
 B)False

Question 9

Briefly explain each management assertion related to account balances at period end.

Accepted Answer

•Existence.Assets,liabilities,and equity...

Question 10

Which of the following statements best describes the auditor's responsibility regarding the detection of fraud?

Accepted Answer

A)  The auditor is responsible for the failure to detect fraud only when such failure clearly results from nonperformance of audit procedures specifically described in the engagement letter.
B)  The auditor is required to provide reasonable assurance that the financial statements are free of both material errors and fraud.
C)  The auditor is responsible for detecting material financial statement fraud,but not a material misappropriation of assets.
D)  The auditor is responsible for the failure to detect fraud only when an unqualified opinion is issued.E) All of the above
F) C) and D)

Question 11

An auditor should recognize that the application of auditing procedures may produce evidence indicating the possibility of errors of fraud and therefore should

Accepted Answer

A)  plan and perform the engagement with an attitude of professional skepticism.
B)  not rely on internal controls that are designed to prevent or detect errors or fraud.
C)  design audit tests to detect unrecorded transactions.
D)  extend the work to audit the majority of the recorded transactions and records of an entity.E) A) and B)
F) All of the above

Question 12

When reporting identified or suspected noncompliance,

Accepted Answer

A)  the auditor must report inconsequential noncompliance to the audit committee.
B)  the auditor should communicate all material noncompliance matters to those charged with governance.
C)  any intentional noncompliance must be reported to local law enforcement.
D)  all noncompliance,whether material or not,must result in a disclaimer of opinion.E) A) and D)
F) All of the above

Question 13

Audits are expected to provide a higher degree of assurance for the detection of material frauds than is provided for an equally material error.

Accepted Answer

A) True 
 B)False

Question 14

When an auditor knows that an illegal act has occurred,she must

Accepted Answer

A)  report it to the proper governmental authorities.
B)  consider the effects on the financial statements,including the adequacy of disclosure.
C)  withdraw from the engagement.
D)  issue an adverse opinion.E) C) and D)
F) A) and B)

Question 15

The auditors determine which disclosures must be presented in the financial statements.

Accepted Answer

A) True 
 B)False

Question 16

One of the characteristics of professional skepticism is_______,which is a desire to investigate beyond the obvious.

Accepted Answer

A)  self-esteem
B)  an interpersonal understanding
C)  a search for knowledge
D)  a questioning mindsetE) A) and D)
F) A) and C)

Question 17

Two overriding considerations affect the many ways an auditor can accumulate evidence: 1. Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility.
2)  Cost of accumulating evidence should be minimized.
In evaluating these considerations

Accepted Answer

A)  the first is more important than the second.
B)  the second is more important than the first.
C)  they are equally important.
D)  it is impossible to prioritize them.E) A) and B)
F) All of the above

Question 18

The auditor is determining that the correct selling price was used for billing and that the quantity of goods shipped was the same as the quantity billed.She is gathering evidence about which transaction-related audit objective?

Accepted Answer

A)  existence
B)  completeness
C)  accuracy
D)  cut-offE) A) and D)
F) None of the above

Question 19

In comparing management fraud with employee fraud,the auditor's risk of failing to discover the fraud is

Accepted Answer

A)  greater for management fraud because managers are inherently more deceptive than employees.
B)  greater for management fraud because of management's ability to override existing internal controls.
C)  greater for employee fraud because of the higher crime rate among blue collar workers.
D)  greater for employee fraud because of the larger number of employees in the organization.E) B) and D)
F) C) and D)

Question 20

If a client has violated federal tax laws,

Accepted Answer

A)  the auditor must notify the IRS.
B)  and the amount is significant,the auditor should communicate with those charged with governance.
C)  the noncompliance generally will not impact the financial statements.
D)  the auditor does not need to evaluate the effects of the noncompliance on other aspects of the audit.E) A) and D)
F) B) and D)

Exam 6: Audit Responsibilities and Objectives

The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to

Correct Answer
verified

One of the characteristics of professional skepticism is_______,which is a desire to investigate beyond the obvious.

Correct Answer
verified

Audits are expected to provide a higher degree of assurance for the detection of material frauds than is provided for an equally material error.

Correct Answer
verified

An auditor should recognize that the application of auditing procedures may produce evidence indicating the possibility of errors of fraud and therefore should

Correct Answer
verified

If a client has violated federal tax laws,

Correct Answer
verified

Which of the following statements best describes the auditor's responsibility regarding the detection of fraud?

Correct Answer
verified

Two overriding considerations affect the many ways an auditor can accumulate evidence: 1. Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility. 2) Cost of accumulating evidence should be minimized. In evaluating these considerations

Correct Answer
verified

An auditor has a duty to

Correct Answer
verified

The cycle approach to auditing

Correct Answer
verified

When developing the audit objectives,the first step is to divide the financial statements into cycles.

Correct Answer
verified

When reporting identified or suspected noncompliance,

Correct Answer
verified

In comparing management fraud with employee fraud,the auditor's risk of failing to discover the fraud is

Correct Answer
verified

The auditor is determining that the correct selling price was used for billing and that the quantity of goods shipped was the same as the quantity billed.She is gathering evidence about which transaction-related audit objective?

Correct Answer
verified

Briefly explain each management assertion related to account balances at period end.

Correct Answer
verified
•Existence.Assets,liabilities,and equity...
View Answer

Correct Answer
verified
1.(1)A (2)V
2.(1)F (...
View Answer

If there is collusion among management,the chance a normal audit would uncover such acts is

Correct Answer
verified

The auditor's first course of action when an illegal act is uncovered should be to immediately notify the appropriate authorities,including but not limited to,law enforcement and the Securities and Exchange Commission.

Correct Answer
verified

When an auditor knows that an illegal act has occurred,she must

Correct Answer
verified

Correct Answer
verified
1.S,2.C,3....
View Answer

The auditors determine which disclosures must be presented in the financial statements.

Correct Answer
verified

Exam 6: Audit Responsibilities and Objectives

The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to

Correct AnswerverifiedShow Answer

One of the characteristics of professional skepticism is_______,which is a desire to investigate beyond the obvious.

Correct AnswerverifiedShow Answer

Audits are expected to provide a higher degree of assurance for the detection of material frauds than is provided for an equally material error.

Correct AnswerverifiedShow Answer

An auditor should recognize that the application of auditing procedures may produce evidence indicating the possibility of errors of fraud and therefore should

Correct AnswerverifiedShow Answer

If a client has violated federal tax laws,

Correct AnswerverifiedShow Answer

Which of the following statements best describes the auditor's responsibility regarding the detection of fraud?

Correct AnswerverifiedShow Answer

Two overriding considerations affect the many ways an auditor can accumulate evidence: 1. Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility. 2) Cost of accumulating evidence should be minimized. In evaluating these considerations

Correct AnswerverifiedShow Answer

An auditor has a duty to

Correct AnswerverifiedShow Answer

The cycle approach to auditing

Correct AnswerverifiedShow Answer

When developing the audit objectives,the first step is to divide the financial statements into cycles.

Correct AnswerverifiedShow Answer

When reporting identified or suspected noncompliance,

Correct AnswerverifiedShow Answer

In comparing management fraud with employee fraud,the auditor's risk of failing to discover the fraud is

Correct AnswerverifiedShow Answer

The auditor is determining that the correct selling price was used for billing and that the quantity of goods shipped was the same as the quantity billed.She is gathering evidence about which transaction-related audit objective?

Correct AnswerverifiedShow Answer

Briefly explain each management assertion related to account balances at period end.

Correct Answerverified•Existence.Assets,liabilities,and equity...View AnswerShow Answer

Correct Answerverified1.(1)A (2)V2.(1)F (...View AnswerShow Answer

If there is collusion among management,the chance a normal audit would uncover such acts is

Correct AnswerverifiedShow Answer

The auditor's first course of action when an illegal act is uncovered should be to immediately notify the appropriate authorities,including but not limited to,law enforcement and the Securities and Exchange Commission.

Correct AnswerverifiedShow Answer

When an auditor knows that an illegal act has occurred,she must

Correct AnswerverifiedShow Answer

Correct Answerverified1.S,2.C,3....View AnswerShow Answer

The auditors determine which disclosures must be presented in the financial statements.

Correct AnswerverifiedShow Answer

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verified
•Existence.Assets,liabilities,and equity...
View Answer

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verified
1.(1)A (2)V
2.(1)F (...
View Answer

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Correct Answer
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Correct Answer
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1.S,2.C,3....
View Answer

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