Professional Ethics in Auditing Exam Bank
Course Introduction
Professional Ethics in Auditing explores the principles and standards that govern ethical conduct in the auditing profession. This course examines the fundamental ethical frameworks, codes of professional conduct, and legal requirements that auditors must adhere to when performing their duties. Topics include the importance of integrity, objectivity, confidentiality, professional behavior, and independence in audit practice. Through case studies and practical scenarios, students will analyze ethical dilemmas and learn how to apply professional judgement in complex situations, preparing them to uphold public trust and maintain the credibility of the auditing process.
Recommended Textbook
Auditing Assurance Services A Systematic Approach 11th Edition by William F Messier Jr
Available Study Resources on Quizplus
21 Chapters
1456 Verified Questions
1456 Flashcards
Source URL: https://quizplus.com/study-set/2400 Page 2
Chapter 1: An Introduction to Assurance and Financial Statement Auditing
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/47722
Sample Questions
Q1) Which of the following best describes the concept of audit risk?
A)The risk of the auditor being sued because of association with an auditee.
B)The risk that the auditor will provide a "clean" opinion on financial statements that are, in fact, materially misstated.
C)The overall risk that a material misstatement exists in the financial statements.
D)The risk that auditors use audit procedures that are inappropriate.
Answer: B
Q2) Why must an auditor assess materiality?
Answer: An auditor must assess materiality because to find all misstatements would not be cost-efficient, or even feasible. To search for all misstatements, the auditor would need to examine every transaction. In addition, relatively minor misstatements may not matter to users. For this reason, when planning and performing an audit the auditor focuses on misstatements that would affect the users' decisions (i.e., material misstatements).
Q3) Testing all transactions that occurred during the period is cost prohibitive.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: The Financial Statement Auditing Environment
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/47723
Sample Questions
Q1) Forensic audits include all of the following except:
A)criminal investigations.
B)manufacturers' assertions about product quality.
C)employee fraud.
D)management fraud. Answer: B
Q2) Generally, the financial statements of U.S. companies must be prepared based on GAAP.
A)True
B)False Answer: True
Q3) An "in-charge" auditor typically holds the rank of: A)associate.
B)senior.
C)manager.
D)partner. Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Audit Planning, Types of Audit Tests, and Materiality
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/47724
Sample Questions
Q1) The first phase of audit planning is risk assessment.
A)True
B)False
Answer: False
Q2) Which of the following matters generally is included in an auditor's engagement letter?
A)Management's responsibility for the entity's compliance with laws and regulations.
B)The factors to be considered in setting preliminary judgments about materiality.
C)Management's liability for illegal acts committed by its employees.
D)The auditor's responsibility to guarantee accuracy of the financial statements.
Answer: A
Q3) If the prospective client refuses to allow the predecessor auditor to communicate with the successor auditor, the successor auditor should have reservations about accepting the client.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Risk Assessment
Available Study Resources on Quizplus for this Chatper
57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/47725
Sample Questions
Q1) All of the following represent an increased opportunity for management to commit fraud except:
A)significant related party transactions.
B)the auditor's relationship with management is strained.
C)management is dominated by a single person.
D)the financial statements include highly subjective estimates.
Q2) Which of the following is a factual misstatement?
A)A management estimate that is outside the range of reasonable outcomes determined by the auditor.
B)A fixed asset being recorded at the incorrect cost.
C)A projected misstatement resulting from errors found during sampling.
D)Difference in judgment between the auditor and management.
Q3) DATRIX, Inc., a Fortune 500 company, has been experiencing poor performance. Industry analysts have been issuing negative reports and the company's stock price has been steadily declining. As an auditor, what would concern you about the audit engagement of DATRIX, Inc.
Q4) What is the difference between audit risk and engagement risk?
Q5) Inherent risk includes sampling risk and detection risk.
A)True
B)False
Page 6
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Evidence and Documentation
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/47726
Sample Questions
Q1) Which of the following is not a typical analytical procedure?
A)Study of relationships of the financial information with relevant nonfinancial information.
B)Comparison of the financial information with similar information regarding the industry in which the entity operates.
C)Comparison of recorded amounts of major disbursements with appropriate invoices.
D)Comparison of the financial information with budgeted amounts.
Q2) Which of the following would be least likely to be comparable between similar corporations in the same industry or line of business?
A)Earnings per share.
B)Return on total assets before interest and taxes.
C)Accounts receivable turnover.
D)Operating cash flow.
Q3) Name the three types of analytical procedures and provide a definition and example for each.
Q4) Why is appropriateness important for audit evidence? What qualities must evidence have to be considered appropriate?
Q5) According to the text, what are the three functions of working papers?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Internal Control in a Financial Statement Audit
Available Study Resources on Quizplus for this Chatper
94 Verified Questions
94 Flashcards
Source URL: https://quizplus.com/quiz/47727
Sample Questions
Q1) As the acceptable level of detection risk increases, an auditor may change the:
A)assessed level of control risk from a lower level to a higher level.
B)assurance provided by tests of controls by using a larger sample size than planned.
C)timing of substantive procedures from year-end to an interim date.
D)nature of substantive procedures from less effective to more effective procedures.
Q2) Reports on service organizations typically:
A)provide reasonable assurance that their financial statements are free of material misstatements.
B)ensure that the entity will not have any misstatements in areas related to the service organization's activities.
C)ensure that the auditee is billed correctly.
D)assess whether the service organization's controls are suitably designed to achieve internal control objectives.
Q3) What are some typical types of evidence that may be collected in testing an entity's internal controls?
Q4) What are the differences between document flowcharts, system flowcharts, and program flowcharts?
To view all questions and flashcards with answers, click on the resource link above.
8
Chapter 7: Auditing Internal Control Over Financial Reporting
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/47728
Sample Questions
Q1) Management documentation of the ICFR assessment should include all of the following except:
A)documentation regarding every control in a process.
B)documentation regarding reasonable support for the basis for management's assessment and conclusion.
C)documentation regarding the design of controls management has placed in operation.
D)documentation on the controls management concludes are adequate to address the entity's financial reporting risks.
Q2) An "integrated audit":
A)will, in most cases, lead to a substantive audit strategy.
B)denies the auditor access to information about the entity's controls.
C)may be performed by two separate audit firms.
D)is comprised of audits of internal control over financial reporting and of financial statements.
Q3) Identify indicators of a material weakness in internal control over financial reporting.
Q4) Discuss entity-level controls and provide examples of these types of controls.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Audit Sampling: An Overview and Application to
Tests of Controls
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/47729
Sample Questions
Q1) When determining the sample size of accounts receivable to test, what are three factors that are important for you to consider?
Q2) Before performing sampling procedures in an audit of controls, Sue set the tolerable deviation rate at 4.0%. After the procedures, she computes a computed upper deviation rate of 5.4%. What can Sue conclude about the entity's controls?
Q3) "Computer assisted audit techniques and audit data analytics have steadily reduced the number of situations in which audit sampling is necessary and, in the future, will probably eliminate the need for auditors to rely on sampling." Defend or refute the preceding statement.
Q4) Your manager, Sally, believes that nonstatistical sampling is the best method to use on the audit of YaYa Corporation. You, however, believe that statistical sampling is by far the better method. In addition, you have a great deal of training in the proper use of sampling techniques. Prepare an argument to convince Sally why statistical sampling should be used.
Q5) Confidence level is the complement of sampling risk. A)True B)False
Q6) Define Type I and Type II errors.
Page 10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Audit Sampling: An Application to Substantive
Tests of Account Balances
Available Study Resources on Quizplus for this Chatper
53 Verified Questions
53 Flashcards
Source URL: https://quizplus.com/quiz/47730
Sample Questions
Q1) In a monetary-unit sample with a sampling interval of $10,000, an auditor discovered that a selected account receivable with a recorded amount of $5,000 had an audit amount of $2,000. The projected misstatement of this sample was:
A)$3,000.
B)$4,000.
C)$6,000.
D)$8,000.
Q2) You have been placed in charge of determining the sample size for an audit of accounts receivable. Your superior would like a confidence level of 99%. How does this affect your determination of sample size? What can you infer about the level of risk of incorrect acceptance that your superior is willing to accept?
Q3) Haphazard selection allows the auditor to select items with bias.
A)True
B)False
Q4) The size of the upper limit on misstatement is largely dependent on the sample size, which is inversely related to the desired confidence level.
A)True
B)False
Page 11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Auditing the Revenue Process
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/47731
Sample Questions
Q1) An auditor reconciles the total of the accounts receivable subsidiary ledger to the general ledger control account as of October 31. By this procedure, the auditor would be most likely to learn about which of the following?
A)An October invoice was improperly computed.
B)An October check from a customer was posted in error to the account of another customer with a similar name.
C)An opening balance in a subsidiary ledger account was improperly carried forward from the previous accounting period.
D)An account balance is past due and should be written off.
Q2) Review of cash receipts journal for unusual items
A)Accuracy
B)Authorization
C)Classification
D)Occurrence
E)Completeness
F)Cutoff
Q3) What inherent risk factors should an auditor consider when auditing the revenue process of a computer manufacturer?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Auditing the Purchasing Process
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/47732
Sample Questions
Q1) Identify the primary functions in the purchases cycle and describe each function. Functions in the purchasing process include:
Q2) An auditor compares information on canceled checks with information contained in the cash disbursements journal. The objective of this test is to determine that:
A)recorded cash disbursement transactions are properly authorized.
B)proper cash purchase discounts have been recorded.
C)cash disbursements are for goods and services actually received.
D)no discrepancies exist between the data on the checks and the data in the journal.
Q3) The key inherent risk factors an auditor must consider when auditing the purchasing process are industry factors. Which two are most important and why?
Q4) Which of the following control activities is not usually performed in the accounts payable department?
A)Determining the mathematical accuracy of the vendor's invoice.
B)Having an authorized person approve the voucher.
C)Controlling the mailing of the check and remittance advice.
D)Matching the receiving report with the purchase order.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Auditing the Human Resource Management Process
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/47733
Sample Questions
Q1) Effective internal control over the payroll function would include which of the following?
A)Total time recorded on time sheets should be reconciled to job reports by employees responsible for those specific jobs.
B)Payroll Department employees should be supervised by the management of the Human Resource Department.
C)Payroll Department employees should be responsible for maintaining employee personnel records.
D)Total time spent on jobs should be compared with total time indicated on time sheets.
Q2) Which of the following circumstances most likely would cause an auditor to suspect an employee payroll fraud scheme?
A)There are significant unexplained variances between standard and actual labor cost.
B)Payroll checks are disbursed by the same employee each payday.
C)Employee time sheets are approved by individual departmental supervisors.
D)A separate payroll bank account is maintained on an imprest basis.
Q3) Explain how the human resource management process can affect the financial statements.
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Auditing the Inventory Management Process
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/47734
Sample Questions
Q1) For the purpose of determining proper cutoff for inventory, the auditor will select a sample from which of the following for a few days before and after year-end?
A)Materials requisitions.
B)Production schedules.
C)Receiving documents.
D)Purchase orders.
Q2) The major control procedure for preventing fictitious inventory transactions from being recorded is proper segregation of duties.
A)True
B)False
Q3) In obtaining an understanding of a manufacturing entity's internal control concerning inventory balances, an auditor most likely would:
A)review the entity's description of inventory policies and procedures.
B)perform test counts of inventory during the entity's physical count.
C)analyze inventory turnover statistics to identify slow-moving and obsolete items.
D)analyze monthly production reports to identify variances and unusual transactions.
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: Auditing the Financinginvesting Process:
Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/47735
Sample Questions
Q1) For each of the following tests, state whether it is a test of details of account balances or a test of details of transactions. Then note for which property management assertion the test provides evidence.
1. Test depreciation calculations for a sample of capital assets
2. For assets written off, test amounts charged against income and accumulated depreciation
3. Physically examine the capital asset additions
4. Vouch transactions included in repairs and maintenance for items that should be capitalized
5. Vouch significant additions and dispositions to vendor invoices or other supporting documentation
6. Examine or confirm deeds or title documents for proof of ownership
Q2) Property, plant, and equipment is often a significant portion of a company's assets. Describe the inherent risk factors that can affect the audit of this account.
Q3) Identify the types of transactions that occur in the property management process.
Q4) List two ways an auditor can test the existence and completeness of insurance policies.
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Auditing the Financinginvesting Process:
Long-Term Liabilities, Stockholders' Equity, and Income
Statement Accounts
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/47736
Sample Questions
Q1) The auditor gathers evidence about dividends that are declared and paid primarily because of:
A)concerns with violations of corporate bylaws or debt covenants.
B)the large dollar value of the transactions.
C)the ease with which the transactions can be audited.
D)fraud concerns.
Q2) Before expressing an opinion concerning the results of operations, the auditor would most likely proceed with the examination of the income statement by:
A)applying a rigid measurement standard designed to test for understatement of net income.
B)analyzing the beginning and ending balance sheet inventory amounts.
C)making net income comparisons to published industry trends and ratios.
D)examining income statement accounts concurrently with the related balance sheet accounts.
Q3) A substantive strategy is typically used to audit stockholders' equity because:
A)the number of transactions is small.
B)controls over stockholders' equity transactions typically are weak.
C)a reliance strategy is most efficient.
D)a substantive strategy likely was used in prior years.
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Auditing the Financinginvesting Process: Cash and Investments
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/47737
Sample Questions
Q1) Under which of the following circumstances would an auditor be most likely to intensify an examination of a $1,000 petty cash fund maintained on an imprest basis?
A)Reimbursement vouchers are not prenumbered.
B)Reimbursement of the fund from the general cash account occurs twice or more each week.
C)The custodian occasionally uses the cash fund to cash employee checks.
D)The custodian endorses reimbursement checks.
Q2) Which of the following is not one of the auditor's primary objectives in an examination of marketable securities?
A)To determine whether securities are authentic.
B)To determine whether securities are the property of the entity.
C)To determine whether securities actually exist.
D)To determine whether securities are properly classified on the balance sheet.
Q3) Level 1 inputs are more risky and difficult to audit than Level 3 inputs to a valuation model.
A)True
B)False
Q4) Identify 3 of the 6 tests an auditor uses on the bank reconciliation. (Only 3 are required for the student's answer)
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Completing the Audit Engagement
Available Study Resources on Quizplus for this Chatper
81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/47738
Sample Questions
Q1) Which of the following procedures would an auditor ordinarily perform during the review of subsequent events?
A)An analysis of related party transactions for the discovery of possible irregularities.
B)A review of the cutoff bank statements for the period after the year-end.
C)A reading of the available minutes of meetings of stockholders, directors, or other committees for the subsequent-events period.
D)An investigation of material weaknesses in internal control previously communicated to the entity.
Q2) Reading contracts and loan agreements is one way to identify unrecorded contingent liabilities.
A)True
B)False
Q3) State the two primary purposes of the management representation letter.
Q4) Dual dating is used to identify unrecorded contingent liabilities.
A)True
B)False
Q5) Discuss the steps used by an auditor to evaluate an entity's ability to continue as a going concern.
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Reports on Audited Financial Statements
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/47739
Sample Questions
Q1) In connection with the examination of the consolidated financial statements of Mott Industries, Frazier, CPA, plans to refer to another CPA's examination of the financial statements of a subsidiary company. Under these circumstances, Frazier's report must disclose:
A)the name of the other CPA and the type of report issued by the other CPA.
B)the portion of the financial statements examined by the other CPA.
C)the nature of Frazier's review of the other CPA's work.
D)in a footnote the portions of the financial statements that were covered by the examinations of both auditors.
Q2) In the auditor's report, the principal auditor decides not to make reference to another CPA who audited an entity's subsidiary. The principal auditor could justify this decision if, among other requirements, the principal auditor:
A)issues an unqualified opinion on the consolidated financial statements.
B)learns that the other CPA issued an unqualified opinion on the subsidiary's financial statements.
C)is unable to review the other CPA's audit programs and working papers.
D)is satisfied as to the other CPA's independence and professional reputation.
To view all questions and flashcards with answers, click on the resource link above.
Page 20
Chapter 19: Professional Conduct, Independence, and Quality Control
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/47740
Sample Questions
Q1) Which of the following is an element of a CPA firm's quality control system that should be considered in establishing its quality control policies and procedures?
A)Using the audit risk model.
B)Using statistical sampling techniques.
C)Assigning personnel to engagements.
D)Considering audit risk and materiality.
Q2) Distinguish between the following theories of ethical behavior: a utilitarian approach, a rights-based approach, and a justice-based approach.
Q3) Which of the following bodies ordinarily would have the authority to suspend or revoke a CPA's license to practice public accounting?
A)The SEC.
B)The AICPA.
C)A state CPA society.
D)A state board of accountancy.
Q4) The independence standards issued by the PCAOB do not prohibit the provision of tax services to an attest client.
A)True
B)False
21
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: Legal Liability
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/47741
Sample Questions
Q1) Under the Rusch Factors doctrine, to which of the following parties will an accountant be liable for negligence?
A)Only parties in privity and not those reasonably foreseeable third parties.
B)Both parties in privity and reasonably foreseeable third parties.
C)Only reasonably foreseeable third parties and not those parties in privity.
D)Neither reasonably foreseeable third parties nor parties in privity.
Q2) Why are plaintiffs motivated to bring actions under RICO?
A)It pertains exclusively to auditors' actions.
B)It guarantees that cases will be heard in state courts.
C)It provides for treble damages.
D)It holds auditors to standards that exceed reasonable assurance.
Q3) When performing an audit, a CPA:
A)must exercise the level of care, skill, and judgment expected of a reasonably prudent CPA under the circumstances.
B)must strictly adhere to generally accepted accounting principles.
C)is strictly liable for failing to discover client fraud.
D)is not liable under any legal standard unless the CPA commits gross negligence or intentionally disregards generally accepted auditing standards.
To view all questions and flashcards with answers, click on the resource link above.
Page 22
Chapter 21: Assurance, Attestation, and Internal Auditing Services
Available Study Resources on Quizplus for this Chatper
76 Verified Questions
76 Flashcards
Source URL: https://quizplus.com/quiz/47742
Sample Questions
Q1) Availability
A)Personal information is collected, used, retained, and disclosed and disposed to meet the entity's objectives.
B)Information and systems are protected against unauthorized access, unauthorized disclosure of information, and damage to systems that could compromise the availability, integrity, confidentiality, and privacy of information or systems and affect the entity's ability to meet its objectives.
C)System processing is complete, valid, accurate, timely, and authorized to meet the entity's objectives.
D)Information designated as private is protected to meet the entity's objectives.
E)Information and systems are available for operation and use to meet the entity's objectives.
Q2) The practitioner's objective in an engagement to audit an entity's internal control is to assess management's assessment of the effectiveness of internal controls.
A)True
B)False
Q3) How has the advancement in technology led to the creation of the Trust Services?
To view all questions and flashcards with answers, click on the resource link above.
Page 23