Keiser ACG465 week 4 post test

Question 1

When researching the requirements to become a CPA, one should first look at

AICPA rules and regulations on professional careers

GAAP rules

PCBOA laws

State laws

Question 2

Different professional standards apply to different types of services offered by a CPA. Assurance services performed by a CPA would include:

Audits of financial statements

Bookkeeping and accounting system consulting services

Tax services

All of the above

Question 3

Auditing standards for non-public companies are set by

AICPA

PCAOB

FASB

the state where the auditor is licensed

Question 4

Audit risk represents the risk that

Auditors will issue an adverse audit report when in fact they should have issued an unqualified opinion

Auditors will issue a disclaimer of opinion when in fact they should have issued an adverse opinion

Financial statements are not fairly stated when in fact they were fairly stated

Financial statements are fairly stated when in fact they were materially misstated

Question 5

One of the initial steps in the audit process is to obtain a _______ that is used as an agreement between a CPA firm and a client for the conduct of an audit and related services.

10-Q filed with the SEC

Assessment report

Audit and risk report

Engagement letter

Question 6

An auditor must consider both acceptable audit risk and inherent risk when planning an audit. These two types of risk affect the:

Amount of evidence that needs to be gathered and staffing

Amount the auditor pays to the client's attorney and reporting

Cost and the amount of the client's staff that can be employed by the auditor

Types of auditing standards the auditor chooses to use

Question 7

One of the final steps in the audit process is to issue a report. Of the four categories of audit reports, which one indicates that while the auditors believes the financial statements are fairly presented, not all generally accepted accounting principles have been followed and the scope of the audit may have been substantially restricted?

Adversed or disclaimer

Qualified

Standard unqualified

Unqualified with explanatory paragraph

Question 8

When an auditor selects the type of tests to perform, when planning an audit, they also need to keep in mind the cost of the tests. The most costly type of test listed is

Analytical procedures

Procedures to obtain an understanding of internal control and test of controls

Substantive tests of transactions

Test of details of balances

Question 9

Which of these statements is true about internal controls

They can be one hundred percent effective

They can never be completely effective

They are the sole responsibility of the auditor

They are optional for public companies yet required for private companies

Question 10

During an audit, auditors perform substantive tests and analytical procedures. Substantive tests emphasize the

Overall reasonableness of transactions in journals and ledgers

Amount of transactions recorded by a company in their journals and ledgers

Amount of time it takes a company's accounting department to record transaction in journal and ledgers

Verification of transactions recorded in journals and then posted to ledgers

Question 11

Substantive procedures would include:

Gathering evidence to ensure the engagement letter is properly written

Review of internal controls are in substantial compliance with COSO procedures

Tests of account balances

Writing recommendations for internal control procedures over cash

Question 12

Analytical procedures would consist of all of the follow except:

Common-size financial statements

Cross-wire horizontal financial analysis

Leverage ratios

Liquidity ratios

Question 13

Sampling risk is the risk that the

Auditor did not perform proper audit procedures on documents and transactions reviewed

Auditor's conclusions may not be representative of the population

Monitoring controls were not in place when samples were drawn from the population

Samples were taken shortly after the audit was concluded

Question 14

An example of audit sampling would be:

analyzing the confidence level and standard deviation for the number of transactions selected by a senior auditor

calculating the percentage of increase or decrease for the years covered in the audit period for only assets accounts on the balance sheet

reviewing all transactions related to the purchase of new equipment

reviewing every 25th invoice prepared checking for proper authorization

Question 15

____controls are designed to ensure information processed by the computer is authorized, accurate, and complete

Application controls

Access controls

Software controls

Computer controls

Question 16

The term confirmation in auditing referrers to

The notation in the auditor’s work papers that states all of the account balances have been verified by the client for accuracy

The notations on the primary auditor’s work papers that correspond to those of the managing auditor

The receipt of a written or oral response from an independent third party verifying the accuracy of information requested by the auditor

The written verification by the client to the auditor stating that all of the work they agreed upon has been completed

Question 17

One of the purposes of an internal control questionnaire is

To determine if management has written internal control procedures

To determine if the company has answered all of the SEC questions during their 10-K audit

To show that the auditor has following generally accepted auditing standards during the course of the audit

To uncover aspects of internal controls that may be inadequate

Question 18

The workpapers that are prepared by the auditor are the property of the

Auditor

Client

State authorities that regulate the audit profession in the state where the audit was performed

State authorities that regulate the audit profession in the stater where the main office of the client reside

Question 19

_____ has established a Code of Professional Conduct containing rules of conduct for accountants

Accounting Ethics Review Committee

American Ethics Committee

American Institute of Certified Public Accountants

Governmental Accounting Standards Board

Question 20

CPA's can be liable for audits performed under

Common law

Statutory law

Theory of liability law

Both common and statutory law