Auditing Exam Solutions
Course Introduction
Auditing is a comprehensive course that introduces students to the foundational principles, procedures, and practices involved in the examination and verification of financial statements and internal controls. The course covers topics such as auditing standards, ethical responsibilities, risk assessment, evidence gathering, and audit reporting. Students will learn how auditors plan and execute audit engagements, evaluate internal controls, detect fraud, and communicate findings to stakeholders. Through real-world case studies and practical exercises, the course prepares students to understand the auditor's role in enhancing the reliability and integrity of financial information for decision-making purposes.
Recommended Textbook Principles of Auditing Other Assurance Services 21st Edition by Ray Whittington
Available Study Resources on Quizplus
21 Chapters
1432 Verified Questions
1432 Flashcards
Source URL: https://quizplus.com/study-set/1548 Page 2
Chapter 1: The Role of the Public Accountant in the American Economy
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/30570
Sample Questions
Q1) The American Institute of Certified Public Accountants creates the CPA Exam,while individual states issue CPA certificates and permits CPAs to practice.
A)True
B)False
Answer: True
Q2) The risk that a company's financial statements will materially depart from generally accepted accounting principles is referred to as:
A)Business Risk.
B)Information Risk.
C)Detection Risk.
D)Control Risk.
Answer: B
Q3) The SEC does not pass on the merits of the securities that are registered with the agency.
A)True
B)False
Answer: True
Q4) Prepares the CPA exam.
Answer: American Institute of Certified Public Accountants.
Page 3
To view all questions and flashcards with answers, click on the resource link above.
Chapter 2: Professional Standards
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/30571
Sample Questions
Q1) Which of the following is <b>not </b>included as a part of the description of the auditor's responsibility in a nonpublic company unmodified report?
A)The audit was performed in accordance with generally accepted accounting principles.
B)An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
C)The procedures selected depend on the auditor's judgment.
D)An audit includes evaluating the appropriateness of accounting policies used.
Answer: A
Q2) In pursuing a CPA firm's quality control objectives,a CPA firm may maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm's clients.Which quality control objective would this be most likely to satisfy?
A)Acceptance and continuance of clients and engagements.
B)Engagement performance.
C)Personnel management.
D)Relevant ethical requirements.
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Professional Ethics
Available Study Resources on Quizplus for this Chatper
76 Verified Questions
76 Flashcards
Source URL: https://quizplus.com/quiz/30572
Sample Questions
Q1) The AICPA's Code of Professional Conduct includes principles,rules and interpretations.
a.Describe the purpose of each of the three parts.
b.Describe the disciplinary action that may be taken against a member who violates the Code.
c.Must the Rules be followed by members of the AICPA that are not in public practice? Explain your answer.
Answer: a.Principles provide an overall ethical framework.Rules are enforceable applications of the principles.Interpretations provide guidelines for the scope and application of the Rules.
b.For violations of the Code a member may be required to take remedial action,such as attending continuing education programs.For more serious violations,the member may be censured,suspended,or expelled.
c.No,not all standards must be followed by those not in public practice.Members in business must follow the following rules-Integrity and Objectivity,General Standards (general standards,compliance with standards,accounting principles)and Acts
Discreditable.Other CPAs not in public practice or business only must follow the Acts
Discreditable rule.
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Legal Liability of Cpas
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/30573
Sample Questions
Q1) The Securities Exchange Act of 1933 offers recourse against the auditors to a far greater number of investors than does the Securities Act of 1934.
A)True
B)False
Q2) Under which common law approach are auditors most likely to be held liable for ordinary negligence to a "reasonably foreseeable" third party?
A)Due Diligence Approach.
B)Ultramares Approach.
C)Restatement of Torts Approach.
D)Rosenblum Approach.
Q3) Which of the following is the best defense that a CPA can assert against common law litigation by a stockholder claiming fraud based on an unqualified opinion on materially misstated financial statements?
A)Lack of due diligence.
B)Due professional care.
C)Contributory negligence on the part of the client.
D)A disclaimer contained in the engagement letter.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Audit Evidence and Documentation
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/30574
Sample Questions
Q1) An independent auditor finds that the Simmer Corporation purchased land owned by an officer of the company for an amount in excess of its asking price.This finding indicates the existence of:
A)Management fraud.
B)Related party transactions.
C)Window dressing.
D)Weak internal control.
Q2) When using management's written representations as audit evidence about the completeness assertion,an auditor should consider that such representations:
A)Complement,but do not replace,substantive procedures designed to support the assertion.
B)Constitute sufficient evidence to support the assertion when considered in combination with a moderate assessed level of control risk.
C)Are generally sufficient audit evidence to support the assertion regardless of the assessed level of control risk.
D)Replace the assessed level of control risk as evidence to support the assertions.
To view all questions and flashcards with answers, click on the resource link above.
Chapter
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/30575
Sample Questions
Q1) A form filed with the SEC when a company changes auditors is a:
A)Form 8-K.
B)Form 10-K.
C)Form S-1.
D)Form B-1.
Q2) Confirming a bank account establishes existence but not rights to the cash balance.
A)True
B)False
Q3) Which of the following is <b>not </b>a general objective for the audit of asset accounts?
A)Establishing existence of assets.
B)Establishing proper valuation of assets.
C)Establishing proper liabilities relating to assets.
D)Establishing the completeness of assets.
Q4) Analytical procedures are seldom used during the risk assessment stage of an audit engagement because they are substantive procedures.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Internal Control
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/30576
Sample Questions
Q1) Which of the following statements is correct concerning the understanding of internal control needed by auditors?
A)The auditors must understand the information system,not the accounting system.
B)The auditors must understand monitoring and all preliminary accounting controls.
C)The auditors must have a sufficient understanding to assess the risks of material misstatement.
D)The auditors must understand the control environment,risk assessment,and all control activities.
Q2) Incompatible duties exist when an employee is in a position to perpetrate and conceal errors or fraud.
A)True
B)False
Q3) Which is most likely when the assessed level of control risk increases?
A)Change from performing substantive procedures at year-end to an interim date.
B)Perform substantive procedures directed inside the entity rather than tests directed toward parties outside the entity.
C)Use the maximum number of dual purpose tests.
D)Use larger sample sizes for substantive procedures.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Consideration of Internal Control in an Information Technology Environment
Available Study Resources on Quizplus for this Chatper
76 Verified Questions
76 Flashcards
Source URL: https://quizplus.com/quiz/30577
Sample Questions
Q1) A network security system that monitors and controls the incoming and outgoing network access and data based on predetermined security criteria is referred to as a A)cloud approach.
B)method of data encryption.
C)firewall.
D)test data approach.
Q2) A data warehouse is an example of:
A)Online analytical processing.
B)Online transaction processing.
C)Essential information batch processing.
D)Decentralized processing.
Q3) Auditing by testing the input and output of a computer system instead of the computer program itself will:
A)Not detect program errors which do not show up in the output sampled.
B)Detect all program errors,regardless of the nature of the output.
C)Provide the auditors with the same type of evidence.
D)Not provide the auditors with the confidence in the results of the auditing procedures.
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Audit Sampling
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/30578
Sample Questions
Q1) Teal Corporation has 2,000 accounts receivable,with a total book value of $300,000.Ricardo Ramaro,CPA,has selected and audited a sample of 100 of the accounts with a combined book value of $16,100;the total of the audited values was $16,000.Using the mean-per-unit method,calculate the:
a.Accounts receivable estimated audited value.
b.Projected misstatement.
Q2) Statistical sampling generally may be applied to test internal control when the client's internal control procedures:
A)Depend primarily on appropriate segregation of duties.
B)Are carefully reduced to writing and are included in client accounting manuals.
C)Leave an audit trail in the form of evidence of compliance.
D)Enable the detection of material fraud in the accounting records.
Q3) Which of the following is <b>not</b> generally used for selecting samples?
A)Random number tables.
B)Random number generators.
C)Physical representation numbers.
D)Systematic selection.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Cash and Financial Investments
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/30579
Sample Questions
Q1) Control over the receipt of cash sales is best achieved when two or more employees participate in each transaction.
A)True
B)False
Q2) An auditor compares annual revenues and expenses with similar amounts from the prior year and investigates all changes exceeding 10%.This procedure most likely could indicate that:
A)Fourth quarter payroll taxes were properly accrued and recorded,but were not paid until early in the subsequent year.
B)Unrealized gains from increases in the value of available-for-sale securities were recorded in the income account for trading securities.
C)The annual provision for uncollectible accounts expense was inadequate because of worsening economic conditions.
D)Notice of an increase in property tax rates was received by management,but was not recorded until early in the subsequent year.
Q3) Signed checks should be returned to the cash disbursements clerk for mailing.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
12
Chapter 11: Accounts Receivable, notes Receivable, and Revenue
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/30580
Sample Questions
Q1) An auditor should perform alternative procedures to substantiate the existence of accounts receivable when:
A)No reply to a positive confirmation request is received.
B)No reply to a negative confirmation request is received.
C)Collectibility of the receivables is in doubt.
D)Pledging of the receivables is probable.
Q2) Which procedure would be of most assistance to an auditor discovering a large credit sale that has erroneously been recorded twice?
A)Footing the sales journal.
B)Confirming accounts receivable.
C)Tracing the total sales in the sales journal to the general ledger.
D)Observation of the physical inventory count at year-end.
Q3) To verify that all sales that have been shipped to customers have been recorded,a test of transactions should be completed on a representative sample drawn from:
A)The sales journal.
B)The billing clerk's file of sales orders.
C)Duplicate copies of sales invoices.
D)The shipping clerk's file of duplicate copies of bills of lading.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Inventories and Cost of Goods Sold
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/30581
Sample Questions
Q1) A "bill and hold" scheme is most likely to include:
A)Shipment of items to a customer beyond what the customer has ordered.
B)Recording as sales items that the company retains as of year-end.
C)Billing of items that are held by customers for future revenue production purposes.
D)Selling items at substantial discounts near year-end.
Q2) From the auditor's point of view,inventory counts are more acceptable prior to the year-end when:
A)Internal control is weak.
B)Accurate perpetual inventory records are maintained.
C)Inventory is slow-moving.
D)Significant amounts of inventory are held on a consignment basis.
Q3) After accounting for a sequence of inventory tags,an auditor traces a sample of tags to the physical inventory listing to obtain evidence that all items:
A)Included in the listing have been counted.
B)Represented by inventory tags are included in the listing.
C)Included in the listing are represented by inventory tags.
D)Represented by inventory tags are bonafide.
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Property,plant,and Equipment: Depreciation and Depletion
Available Study Resources on Quizplus for this Chatper
46 Verified Questions
46 Flashcards
Source URL: https://quizplus.com/quiz/30582
Sample Questions
Q1) When there are numerous property and equipment transactions during the year,an auditor planning to assess the risk of material misstatement at a low risk level must perform.
A)Tests of controls and extensive tests of property and equipment balances at the end of the year.
B)Extensive tests of current year property and equipment transactions.
C)Tests of controls and limited tests of current year property and equipment transactions.
D)Analytical procedures for property and equipment balances at the end of the year.
Q2) In the audit of depletion the auditors must often rely on the work of specialists.
A)True
B)False
Q3) The primary purpose of internal control over plant and equipment is to safeguard the assets from theft.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Accounts Payable and Other Liabilities
Available Study Resources on Quizplus for this Chatper
57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/30583
Sample Questions
Q1) Which of the following is an example of an accrued liability?
A)Accounts payable.
B)Notes payable.
C)Prepaid insurance.
D)Interest payable.
Q2) Which of the following is the best control procedure to prevent the payment of an invoice twice?
A)Review of supporting documentation by the person signing the check.
B)Requiring dual signatures on checks.
C)Use of a check protector.
D)Reconciliation of vendor statements to accounts payable.
Q3) The primary objective of the auditors' examination of accounts payable is to determine whether payments are made on a timely basis.
A)True
B)False
Q4) Information regarding the proper cutoff of accounts payable is generally obtained in conjunction with the audit of inventories.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Debt and Equity Capital
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/30584
Sample Questions
Q1) For a corporation that does not utilize the services of an independent registrar and stock transfer agent,which of the following represents a weakness in internal control over stock issuance?
A)Stock certificates are prenumbered.
B)Stock certificates are signed immediately upon receipt from the printer.
C)Stock certificates are in the exclusive custody of a responsible officer.
D)Stock certificates require the signature of two officers.
Q2) The auditor would be<b> least</b> likely to be concerned about internal control as it relates to:
A)Land and buildings.
B)Common stock.
C)Shareholder meetings.
D)Minutes of board of directors' meetings.
Q3) For audit purposes,a corporation's articles of incorporation are normally:
A)Copied and placed on the owners' equity lead schedule.
B)Copied and placed in the permanent file.
C)Confirmed with the transfer agent.
D)Ignored since they are not normally considered to be related to the internal control structure.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Auditing Operations and Completing the Audit
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/30585
Sample Questions
Q1) Which of the following ledger accounts would be <b>least</b> likely to be analyzed in detail by auditors?
A)Miscellaneous revenue.
B)Professional fees.
C)Supplies expense.
D)Repairs and maintenance.
Q2) Which of the following subsequent events might require an adjustment to the client's financial statements?
A)A business combination with another company.
B)A major customer declares bankruptcy causing a material receivable to be uncollectible.
C)Loss of plant and equipment due to a fire.The loss in insured.
D)Plant employees could possibly go on strike.
Q3) The date the auditor grants the client permission to use the audit report in connection with the financial statements is the:
A)Last day of significant field work.
B)Report cutoff date.
C)Report release date.
D)Representation date.
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Auditors Reports
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/30586
Sample Questions
Q1) Which of the following is <b>not</b> explicitly included in an audit report for a nonpublic company?
A)A statement that the auditor believes that the audit provides a reasonable basis for expressing negative assurance.
B)A statement that the auditor's responsibility is to express an opinion on the financial statements.
C)A statement that the financial statements are the responsibility of management.
D)A title with the word "independent."
Q2) An audit report on a public company is <b>least</b> likely to include a paragraph titled:
A)Auditor responsibility
B)Basis for Opinion.
C)Critical Audit Matters.
D)Opinion on the Financial Statements.
Q3) A public company's financial statements should be prepared following standards of the Public Company Accounting Oversight Board.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
19
Chapter 18: Integrated Audits of Public Companies
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/30587
Sample Questions
Q1) A client imposed scope limitation relating to the audit of internal control ordinarily results in a qualified report.
A)True
B)False
Q2) A circumstance caused scope limitation in a Sarbanes-Oxley 404 internal control audit is most likely to result in a(n):
A)Withdrawal from the engagement.
B)Disclaimer of opinion.
C)Unqualified opinion with explanatory language.
D)All of these are equally likely.
Q3) Which of the following fits most directly under the control activities components of the COSO IC framework?
A)Company-level controls dealing with tone at the top.
B)Overall methods for assigning authority and responsibility.
C)The control environment.
D)Ensuring that cash disbursements are authorized by appropriate personnel.
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Additional Assurance Services: Historical
Financial Information
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/30588
Sample Questions
Q1) An auditor is reporting on cash basis financial statements.These statements are best referred to in his opinion by which of the following descriptions?
A)Financial position and results of operation arising from cash transactions.
B)Assets and liabilities arising from cash transactions,and revenue collected and expenses paid.
C)Balance sheet and income statement resulting from cash transactions.
D)Cash balance sheet and the source and application of funds.
Q2) Which of the following is accurate relating to audit reports on tax basis financial statements?
A)No emphasis-of-matter paragraph is included in the audit report.
B)Use of the report need not be restricted.
C)The purpose of the financial statements should be described in the audit report.
D)Only reports with modified opinions are appropriate.
Q3) Letters to underwriters should not contain negative assurances.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
21
Chapter 20: Additional Assurance Services: Other Information
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/30589
Sample Questions
Q1) The five principles of a reliable system considered in a Trust Services engagement include confidentiality,availability,processing integrity,privacy,and:
A)Control.
B)Security.
C)Relevance.
D)Reliability.
Q2) Practitioners may report on either an assertion about the subject matter or on the subject matter itself for most attestation engagements.
A)True
B)False
Q3) Which of the following is a prospective financial statement for general use upon which a practitioner may appropriately report?
A)Financial projection.
B)Partial presentation.
C)Pro forma financial statement.
D)Financial forecast.
To view all questions and flashcards with answers, click on the resource link above.
Page 22
Chapter 21: Internal, operational, and Compliance Auditing
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/30590
Sample Questions
Q1) In governmental accounting,emphasis is placed on:
A)Total assets owned by the governmental entity.
B)Generating income from funds employed.
C)Expenditures of funds.
D)The flow of funds through the income statement.
Q2) Operational auditing has grown in importance over the last few decades.
a.Define operational auditing.
b.Who are the major users of operational audit reports.
c.List the phases of an operational audit.
Q3) An audit in accordance with the Single Audit Act does not involve reporting upon:
A)Compliance with provisions of laws that may have a direct and material effect on each major federal financial assistance program.
B)Financial statements.
C)Internal control over operations.
D)Schedule of expenditures of federal awards.
Q4) The passage of the Foreign Corrupt Practices Act increased the demand for internal auditing.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 23