ACCT 444 Week 1 to 5 Quizzes

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ACCT 444 Week 1 to 5 Quizzes Click Link Below To Buy: http://hwcampus.com/shop/acct-444-week-1-to-5-quizzes/ 1. (TCO 3) Prior to the passage of the Sarbanes-Oxley Act, which of the following was responsible for establishing auditing standards? (Points: 3) Public Company Accounting Oversight Board Securities and Exchange Commission National Association of Accounting Auditing Standards Board Chapter 2 2. (TCO 1) Which one of the following is not one of the three general standards? (Points: 3) Proper planning and supervision Due professional care Adequate training and proficiency Independence of mental attitude Chapter 2 3. (TCO 1) An independent auditor must have which of the following? (Points: 3) A pre-existing and well-informed point of view with respect to the audit Technical training that is adequate to meet the requirements of a professional Experience in taxation that is sufficient to comply with generally accepted auditing standards A background in many different disciplines 4. (TCO 1) Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n) _____ (Points: 3) assurance service. attestation service. tax service. accounting and bookkeeping service. Chapter 1 5. (TCO 1) Which of the following statements is incorrect regarding the SEC’s partner rotation rules? (Points: 3) The lead and concurring partners are subject to a 5-year time out period. All audit partners must rotate off the audit engagement after 5 years. Other audit partners are subject to a 2-year time out period. Small firms may be exempted from the partner rotation requirement. 6. (TCO 3) Burrow & Co., CPAs, have provided annual audit and tax compliance services to Mare Corp. for several years. Mare has been unable to pay Burrow in full for services Burrow rendered 19 months ago. Burrow is ready to begin fieldwork for the current year’s audit. Under the ethical standards of the profession, which of the following arrangements will permit Burrow to begin the fieldwork on Mare’s audit? (Points: 3) Mare engages another firm to perform the fieldwork, and Burrow is limited to reviewing the workpapers and issuing the audit report. Mare sets up a 2-year payment plan with Burrow to settle the unpaid fee balance. Mare gives Burrow an 18-month note payable for the full amount of the past due fees before Burrow begins the audit. Mare commits to pay the past due fee in full before the audit report is issued. Chapter 2 7. (TCO 3) Independence in auditing means (Points: 3) remaining aloof from a client. taking an unbaised and objective viewpoint. not being financially dependent on a client. being an advocate for a client. Chapter 4 8. (TCO 3) The financial interests of which of the following parties would not be included as a direct financial interest of the CPA? (Points: 3) Dependent child Relative supported by the CPA Spouse Sibling living in the same city as the CPA Chapter 4 9. (TCO 1) The phrase U.S. generally accepted accounting principles is an accounting term that (Points: 3) encompasses the conventions, rules, and procedures necessary to define U.S. accepted accounting practice at a particular time. provides a measure of conventions, rules, and procedures governed by the AICPA. is included in the audit report to indicate that the audit has been conducted in accordance with generally accepted auditing standards (GAAS). includes broad guidelines of general application but not detailed practices and procedures. Chapter 1 10. (TCO 1) Which of the following statements best describes the ethical standard of the profession pertaining to advertising and solicitation? (Points: 3) A CPA may advertise in any manner that is not false, misleading, or deceptive. There are no prohibitions regarding the manner in which CPAs may solicit new business. All forms of advertising and solicitation are prohibited. A CPA may only solicit new clients through mass mailings. 1. (TCO 3) The Sarbanes-Oxley Act applies to which of the following companies? (Points : 3) Privately held companies All companies All public companies and privately held companies with assets greater than $500 million Public companies Chapter 1 Question 4. 4. (TCO 1) An operational audit has as one of its objectives to (Points : 3) make recommendations for improving performance. determine whether the financial statements fairly present the entity’s operations. evaluate the feasibility of attaining the entity’s operational objectives. report on the entity’s relative success in attaining profit maximization. Chapter 1 Question 5. 5. (TCO 1) Which of the following services do not need to be preapproved by the audit committee of an issuer? (Points : 3) Nonaudit services related to internal control over financial reporting Tax services Nonaudit services that are less than 5 % of total revenues from the audit client Services provided by the auditor on a recurring basis Question 8. 8. (TCO 3) Several months after an unqualified audit report was issued, the auditor discovered the financial statements were materially misstated. The client’s CEO agrees that there are misstatements, but refuses to correct them. She claims that confidentiality prevents the CPA from informing anyone. (Points : 3) The CEO is incorrect, but because the audit report has been issued, it is too late. The CEO is correct and the auditor must maintain confidentiality. The CEO is correct, but to be ethically correct the auditor should violate the confidentiality rule and disclose the error. The CEO is incorrect, and the auditor has an obligation to issue a revised audit report, even if the CEO will not correct the financial statements. Chapter 4 Question 9. 9. (TCO 1) Which of the following terms identifies a requirement for audit evidence? (Points : 3) Adequate Disconfirming Reasonable Appropriate Chapter 1 Question 10. 10. (TCO 1) The auditor of an issuer may provide which of the following tax services? (Points : 3) Tax services for immediate family members of corporate officers Tax planning services Tax services for officers of the issuer Services related to confidential tax transactions 5. (TCO 1) Jackson & Company, CPAs, plan to audit the financial statements of Perigee Technologies, an issuer as defined under the Sarbanes-Oxley Act of 2002. Which of the following situations would impair Jackson’s independence? (Points : 3) Discovering that Lowe, the chief financial officer of Perigee, started his accounting career 10 years earlier as a staff accountant for Jackson & Company and continues to maintain ties with current partners at the firm Provision of personal tax services to Johnson, the accounts payable manager of Perigee Audit of Perigee’s internal control is performed contemporaneously with the annual financial statement audit Preparation of Perigee’s routine annual tax return, where Jackson’s fee will be calculated as a percentage of the tax refund obtained ACCT 444 Week 2 Quiz Week 2 : Auditor Legal Liability, Fraud, & Audit Objectives – Quiz Question 1. 1. (TCO 4) To succeed in an action against the auditor, the client must be able to show that (Points : 3) the auditor was fraudulent. the auditor was grossly negligent. there was a written contract. there is a close causal connection between the auditor’s behavior and the damages suffered by the client. Chapter 5, 6 & 7 1. (TCO 4) In connection with the audit of financial statements, an independent auditor could be responsible for failure to detect a material fraud if (Points : 3) statistical sampling techniques were not used on the audit engagement. the auditor planned the audit in a negligent manner. accountants performing important parts of the work failed to discover a close relationship between the treasurer and the cashier. the fraud was perpetrated by one employee who circumvented the existing internal controls. Question 2. 2. (TCO 4) The principal issue to be resolved in cases involving alleged negligence is usually (Points : 3) the amount of the damages suffered by plaintiff. whether to impose punitive damages on the defendant. the level of care exercised by the CPA. whether defendant was involved in fraud. Chapter 5, 6 & 7 2. (TCO 4) The principal issue to be resolved in cases involving alleged negligence is usually (Points : 3) the amount of the damages suffered by plaintiff. whether to impose punitive damages on the defendant. the level of care exercised by the CPA. whether defendant was involved in fraud. Question 3. 3. (TCO 4) While performing services for their clients, professionals have a duty to provide a level of care that is (Points : 3) free from judgment errors. superior. greater than average. reasonable. Chapter 5 3. (TCO 4) A third-party beneficiary is one that (Points : 3) has failed to establish legal standing before the court. does not have privity of contract and is unknown to the contracting parties. does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract. may establish legal standing before the court after a contract has been consummated. Chapter 5 Question 4. 4. (TCO 4) Tort actions against CPAs are more common than breach of contract actions because (Points : 3) there are more torts than contracts. the burden of proof is on the auditor rather than on the person suing. the person suing need prove only negligence. the amounts recoverable are normally larger. Chapter 5 Question 5. 5. (TCO 4) The responsibility for adopting sound accounting policies and maintaining adequate internal control rests with the (Points : 3) board of directors. company management. financial statement auditor. company’s internal audit department. Chapter 6 Question 6. 6. (TCO 3) Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements? (Points : 3) The auditor commonly examines a sample, rather than the entire population of transactions. Accounting presentations contain complex estimates, which involve uncertainty. Fraudulently prepared financial statements are often difficult to detect. Auditors believe that reasonable assurance is sufficient in the vast majority of cases. Chapter 6 6. (TCO 3) Which of the following statements is most correct regarding errors and fraud? (Points : 3) An error is unintentional, whereas fraud is intentional. Frauds occur more often than errors in financial statements. Errors are always fraud and frauds are always errors. Auditors have more responsibility for finding fraud than errors. Question 7. 7. (TCO 3) Which of the following is not one of the factors of the fraud triangle? (Points : 3) Incentives/pressures Attitudes/rationalization Opportunities Psychological make-up Chapter 5 or 11 7. (TCO 3) In the fraud triangle, fraudulent financial reporting and misappropriation of assets (Points : 3) share little in common. share most of the same risk factors. share the same three conditions. share most of the same conditions. Chapter 11 Question 8. 8. (TCO 3) Fraudulent financial reporting may be accomplished through the manipulation of (Points : 3) assets. liabilities. revenues. all of the above. Chapter 11 8. (TCO 3) Because of the risk of material misstatements due to fraud, an audit of financial statements in accordance with generally accepted auditing standards should be performed with an attitude of (Points : 3) objective judgment. impartial conservatism. independent integrity. professional skepticism. Chapter 11 Question 9. 9. (TCO 3) Which of the following is a factor that relates to attitudes or rationalization to commit fraudulent financial reporting? (Points : 3) Significant accounting estimates involving subjective judgments Excessive pressure for management to meet debt repayment requirements Management’s practice of making overly aggressive forecasts High turnover of accounting, internal audit and information technology staff Chapter 11 Question 10. 10. (TCO 3) Auditor responses to fraud risks include which of the following? (Points : 3) Change the overall conduct of the audit to respond to identified fraud risks. Design and perform audit procedures to address identified risks. Perform procedures to address the risk of management override of controls. All of the above. Chapter 11 10. (TCO 3) Which of the following characteristics is most likely to heighten an auditor’s concern about the risk of material misstatements, due to fraud in an entity’s financial statements? (Points : 3) Employees who handle cash receipts are not bonded. The entity’s industry is experiencing declining customer demand. Internal auditors have direct access to the board of directors and the entity’s management. The board of directors is active in overseeing the entity’s financial reporting policies. Chapter 11 ACCT 444 Week 3 Quiz Week 3 : Audit Evidence, Planning, Risk, & Materiality – Quiz 1. (TCO 6) Physical examination is the inspection or count by the auditor of items such as (Points : 3) cash or inventory only. cash, inventory, canceled checks, and sales documents. cash, inventory, canceled checks, and tangible fixed assets. cash, inventory, securities, notes receivable, and tangible fixed assets. Chapter 7 1. (TCO 6) The distinction between physical examination of assets and examination of documents is dependent on the item being examined. If the object being examined has no inherent value, the evidence is called (Points : 3) documentation. physical examination. confirmation. none of the above. Chapter 7 1. (TCO 6) Which of the following statements regarding documentation is not correct? (Points : 3) Documentation includes examining client records, such as general ledgers and supporting journals. Internal documents are documents that are generated within the company and used to communicate with external parties. External documents are documents that are generated outside of the company and are used to communicate the results of a transaction. All of the above are correct statements Chapter 7 2. (TCO 6) Which of the following is not a purpose of analytical procedures? (Points : 3) Understand the client’s industry Assess the client’s ability to continue as a going concern Identify misstatements Reduce detailed audit tests Chapter 7 2. (TCO 6) Analytical procedures are (Points : 3) diagnostic tests of financial information that may not be classified as evidential matter. calculations of financial information made by a computer. substantive tests of financial information made by a study and comparison of relationships among data. statistical tests of financial information designed to identify areas requiring intensive investigation. Chapter 7 2. (TCO 6) When analytical procedures reveal no unusual fluctuations, the implication is that (Points : 3) there are no material errors or irregularities. there are no material errors. there are no material irregularities. the possibility of a material error or irregularity is lessened. Chapter 7 3. (TCO 6) The Auditing Standards Board has concluded that analytical procedures are so important that they are required during (Points : 3) planning and testing phases. planning and completion phases. testing and completion phases. planning, testing, and completion phases. Chapter 7 3. (TCO 6) The primary purpose of performing analytical procedures in the testing phase of an audit is to (Points : 3) help the auditor obtain an understanding of the client’s industry and business. assess the going concern assumption. indicate possible misstatements. reduce detailed tests. Chapter 7 3. (TCO 6) Which of the following statements regarding analytical procedures is not correct? (Points : 3) The definition of analytical tests emphasizes a comparison of client’s data to GAAP. Analytical procedures are required on all audits. Analytical procedures can be used as substantive tests. For certain accounts with small balances, analytical procedures alone may be sufficient evidence. Chapter 7 4. (TCO 6) Which of the following statements about confirmation is true? (Points : 3) Confirmations are expensive and so are often not used. Confirmations may inconvenience those asked to supply them, but they are widely used. Confirmations are sometimes not reliable and so auditors use them only as necessary. None of the above statements are true. Chapter 7 4. (TCO 6) Three common types of confirmations used by auditors are (1) negative confirmations where only a response is requested if the debtor disagrees with the amount, (2) positive confirmations with a request for information where the debtor is requested to respond and to include their believed balance, and (3) positive confirmations with the information included where the debtor is requested to respond and to confirm the balance we give them. If they were placed in the order of their competence, from highest to lowest, the sequence would be (Points : 3) 3, 1, 2. 1, 2, 3. 3, 2, 1. 2, 3, 1. Chapter 7 4. (TCO 6) Traditionally, confirmations are used to verify (Points : 3) individual transactions between organizations, such as sales transactions. bank balances and accounts receivables. fixed asset additions. All of the above Chapter 7 5. (TCO 7) The major concern when using nonfinancial data in analytical procedures is the (Points : 3) accuracy of the nonfinancial data. source of the nonfinancial data. type of nonfinancial data. presence of multiple sources of nonfinancial data. Chapter 8 5. (TCO 7) Analytical procedures used in planning an audit should focus on identifying (Points : 3) material weaknesses of internal control. the predictability of financial data from individual transactions. the various assertions that are embodied in the financial statements. areas that may represent specific risks relevant to the audit. Chapter 8 5. (TCO 7) Which of the following is correct with respect to the use of analytical procedures? (Points : 3) Analytical procedures may be used in evaluating balances in the testing phase as long as the auditor also uses them in assessing the going concern assumption. Analytical procedures must be used throughout the audit. Analytical procedures used in the testing phase of the audit are primarily used to direct an auditor’s attention so that the auditor’s understanding of the business is improved. None of the above Chapter 8 6. (TCO 7) A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the (Points : 3) inherent risk. acceptable audit risk. statistical risk. financial risk. Chapter 8 6. (TCO 7) When inherent risk is high, there will need to be (Points : 3) more evidence accumulated. more experienced staff assigned to the work. either a or b, but not both. both a and b. Chapter 8 6. (TCO 7) A measure of the auditor’s assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client’s internal control is (Points : 3) acceptable audit risk. control risk. inherent risk. statistical risk. Chapter 8 7. (TCO 7) What is the responsibility of a successor auditor with respect to communicating with the predecessor auditor in connection with a prospective new audit client? (Points : 3) The successor auditor has no responsibility to contact the predecessor auditor. The successor auditor should obtain permission from the prospective client to contact the predecessor auditor. The successor auditor should contact the predecessor regardless of whether the prospective client authorizes contact. The successor auditor need not contact the predecessor if the successor is aware of all available relevant facts. Chapter 8 7. (TCO 7) A successor auditor may perform which of the following for a new audit client? (Points : 3) Speak to local attorneys, banks, and other businesses regarding the company’s reputation Speak to the predecessor auditor about disagreements they had with management Interview client personnel to better understand the business and associated risks All of the above Chapter 8 7. (TCO 7) Which of the following is not correct regarding the communications between successor and predecessor auditors? (Points : 3) The burden of initiating the communication rests with the predecessor auditor. The burden of initiating the communication rests with the successor auditor. The predecessor auditor must receive their former client’s permission prior to divulging information to the successor auditor. The predecessor auditor may choose to provide a limited response to a successor auditor. Chapter 8 8. (TCO 8) The FASB definition of materiality emphasizes what class of financial statement users? (Points : 3) Regulators Informed investors Reasonable persons Potential investors Chapter 9 8. (TCO 8) Auditors are responsible for determining whether financial statements are materially misstated, so upon discovering a material misstatement, they must bring it to the attention of (Points : 3) regulators. the audit firm’s managing partner. no one in particular. the client’s management. Chapter 9 8. (TCO 8) The preliminary judgment about materiality is the _____ amount by which the auditor believes the statements could be misstated and still not affect the decisions of reasonable users. (Points : 3) minimum maximum mean average median average Chapter 9 9. (TCO 8) In setting materiality guidelines for current assets, the two standard setters, FASB and the AICPA, provide the following guidelines to practitioners (Points : 3) Both agree that materiality should be set at an amount greater than 10% of current assets. FASB’s guideline is greater than 10%, but the AICPA’s is greater than 5%. Both agree that it should be greater than 5%. No specific materiality guidelines are provided by either of them. Chapter 9 9. (TCO 8) Auditors are _____ to decide on the combined amount of misstatements in the financial statements that they would consider material early in the audit. (Points : 3) permitted required not allowed strongly encouraged Chapter 9 9. (TCO 8) When auditors allocate the preliminary judgment about materiality to account balances, the materiality allocated to any given account balance is referred to as (Points : 3) the materiality range. the error range. tolerable materiality. tolerable misstatement. Chapter 9 10. (TCO 8) Which of the following is not a correct statement regarding the allocation of the preliminary judgment about materiality to balance sheet accounts? (Points : 3) Auditors expect certain accounts to have more misstatements than others. The allocation has virtually no effect on audit costs because the auditor must collect sufficient appropriate audit evidence. Auditors expect to identify overstatements as well as understatements in the accounts. Relative audit costs affect the allocation. Chapter 9 10. (TCO 8) Which of the following elements ultimately determines the specific auditing procedures that are necessary in the circumstances to afford a reasonable basis for an opinion? (Points : 3) Inherent risk Materiality Auditor judgment Reasonable assurance Chapter 9 10. (TCO 8) Why do auditors establish a preliminary judgment about materiality? (Points : 3) To determine the appropriate level of audit experience required for the work So that the client can know what records to make available to the auditor To plan the appropriate audit evidence to accumulate and develop an overall audit strategy None of the above Chapter 9 ACCT 444 Week 4 Quiz 1. (TCO 5) Which of the following is responsible for establishing internal controls for a public company? (Points : 3) Management Financial statement auditors Management and auditors Committee of Sponsoring Organizations 1. (TCO 5) Which of the following parties provides an assessment of the effectiveness of internal control over financial reporting for public companies? (Points : 3) Management Financial statement auditors Management and the financial statement auditors Committee of Sponsoring Organizations 1. (TCO 5) Which of the following is responsible for establishing a private company’s internal control? (Points : 3) Management Auditors Management and auditors Committee of Sponsoring Organizations 2. (TCO 5) Which section of the Sarbanes-Oxley Act requires management to issue an internal control report? (Points : 3) 202 203 404 408 2. (TCO 5) Sarbanes-Oxley requires management to issue an internal control report that includes two specific items. Which of the following is one of these two requirements? (Points : 3) A statement that management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting A statement that management and the board of directors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting A statement that management, the board of directors, and the external auditors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting None of the above 2. (TCO 5) Internal control reports issued by public companies must identify the framework used to evaluate the effectiveness of internal control. Which of the following is the most common framework in the U.S.? (Points : 3) Effective Internal Control Framework-AICPA Internal Control-Integrated Framework-COSO Enterprise Internal Control-COSO There is no common framework used in the U.S. 3. (TCO 5) Which of the following activities would be least likely to strengthen a company’s internal control? (Points : 3) Separating accounting from other financial operations Maintaining insurance for fire and theft Fixing responsibility for the performance of employee duties Carefully selecting and training employees 3. (TCO 5) Management’s tests of operating effectiveness might include which of the following types of procedures? (Points : 3) Inspection of relevant documentation Inquiries of personnel Reperformance of the application of controls All of the above 3. (TCO 5) Which of management’s concerns with respect to implementing internal controls is the auditor primarily concerned? (Points : 3) Efficiency of operations Reliability of financial reporting Effectiveness of operations Compliance with applicable laws and regulations 4. (TCO 5) Internal controls can never be regarded as completely effective. Even if company personnel could design an ideal system, its effectiveness depends on the (Points : 3) adequacy of the computer system. proper implementation by management. ability of the internal audit staff to maintain it. competency and dependability of the people using it. 4. (TCO 5) Even with the most effectively designed internal control, the auditor must obtain audit evidence, beyond testing the controls, for every (Points : 3) transaction. financial statement account. material financial statement account. financial statement account that will be relied upon by third parties. 4. (TCO 5) The essence of an effectively controlled organization lies in the (Points : 3) effectiveness of its independent auditor. effectiveness of its internal auditor. attitude of its employers. attitudes of its management. 5. (TCO 5) Which of the following is not one of the levels of an absence of internal controls? (Points : 3) Major deficiency Material weakness Significant deficiency Control deficiency 5. (TCO 5) To determine if a significant internal control deficiency or deficiencies are a material weakness, they must be evaluated on their (Points : 3) likelihood. materiality or significance. both A and B are correct. neither A nor B is correct. 6. (TCO 10) Which of the following is not a benefit of using IT-based controls? (Points : 3) Ability to process large volumes of transactions Ability to replace manual controls with computer-based controls Reduction in misstatements due to consistent processing of transactions Over-reliance on computer-generated reports 6. (TCO 10) Which of the following is not a risk to IT systems? (Points : 3) Need for IT experience Separation of IT duties Improved audit trail Hardware and data vulnerability 6. (TCO 10) Which of the following is not a risk specific to IT environments? (Points : 3) Reliance on the functioning capabilities of hardware and software Increased human involvement Loss of data due to insufficient backup Reduced segregation of duties 7. (TCO 10) Which of the following IT duties should be separated from the others? (Points:3) Systems development Operations Data control All of the above 7. (TCO 10) The extent to which IT duties are separated in an organization depends on (Points : 3) the organization’s size. the organization’s complexity. both A and B. neither A nor B. 7. (TCO 10) Programmers should do all but which of the following? (Points : 3) Test programs for proper performance Evaluate legitimacy of transaction data input Develop flowcharts for new applications Programmers should perform each of the above 8. (TCO 10) Which of the following is a category of general controls? (Points : 3) Processing controls Output controls Physical and online security Input controls 8. (TCO 10) General controls include all of the following except (Points : 3) systems development. online security. processing controls. hardware controls. 8. (TCO 10) Which of the following is least likely to be used in obtaining an understanding of client general controls? (Points : 3) Examination of system documentation Inquiry of client personnel (e.g. key users) Observation of transaction processing Reviews of questionnaires completed by client IT personnel 9. (TCO 10) Controls that apply to a specific element of the system are called (Points : 3) user controls. general controls. systems controls. application controls. 9. (TCO 10) A control that relates to all parts of the IT system is called a(n) (Points : 3) general control. systems control. universal control. applications control. 9. (TCO 10) Auditors should evaluate the _____ before evaluating application controls because of the potential for pervasive effects. (Points : 3) input controls control environment processing controls general controls 10. (TCO 10) Which of the following is not an example of an application control? (Points: 3) An equipment failure causes system downtime. There is a preprocessing authorization of the sales transactions. There are reasonableness tests for the unit selling price of a sale. After processing, all sales transactions are reviewed by the sales department. 10. (TCO 10) Which of the following is not a category of an application control? (Points : 3) Processing controls Output controls Hardware controls Input controls 10. (TCO 10) Which of the following statements related to application controls is correct? (Points : 3) Application controls relate to various aspects of the IT function, including software acquisition and the processing of transactions. Application controls relate to various aspects of the IT function, including physical security and the processing of transactions in various cycles. Application controls relate to all aspects of the IT function. Application controls relate to the processing of individual transactions. ACCT 444 Week 5 Quiz 1. (TCO 6) The auditor looks for an indication on duplicate sales invoices to see whether the invoices have been verified. This is an example of (Points : 3) a test of details of balances. a test of control. a substantive test of transactions. both a test of control and a substantive test of transactions. 1. (TCO 6) Tests of controls may include which of the following types of evidence? (Points : 3) Observation Reperformance Inquiries All of the above 1. (TCO 6) For efficiency, tests of controls are frequently done at the same time as (Points : 3) analytical procedures. compliance tests. tests of transactions. tests of details of balances. 2. (TCO 6) Analytical procedures are defined in the auditing standards as (Points : 3) compliance tests. substantive tests. tests of controls. helpful procedures not possessing the validity of other tests available to the auditor. 2. (TCO 6) Which of the following is not a direct result of performing analytical procedures? (Points : 3) Identify areas of potential misstatements. Reduce detailed audit risk. Understand the client’s business. Identify specific errors in the accounts. 2. (TCO 6) Analytical procedures may be classified as being primarily (Points : 3) tests of controls. substantive tests. tests of ratios. tests of details of balances. 3. (TCO 6) Which of the following audit tests is usually the least costly to perform? (Points : 3) Analytical procedures Tests of controls Tests of balances Substantive tests of transactions 3. (TCO 6) Which of the following audit tests is usually the most costly to perform? (Points : 3) Analytical procedures Tests of controls Tests of balances Substantive tests of transactions 4. (TCO 6) Which of the following tests commonly occur together? (Points : 3) Substantive tests of transactions and tests of controls Substantive tests of transactions and obtaining an understanding of internal controls Analytical procedures and tests of controls All of the above 4. (TCO 6) Which of the following relationships between types of tests and audit evidence is not correct? (Points : 3) Tests of details and documentation Tests of controls and observation Tests of details and observation Substantive tests of transactions and reperformance 5. (TCO 6) The sequence of steps in gathering evidence as the basis of the auditor’s opinion are (Points : 3) substantive tests, initial assessment of control risk, and tests of controls. initial assessment of control risk, substantive tests, and tests of controls. initial assessment of control risk, tests of controls, and substantive tests. tests of controls, initial assessment of control risk, and substantive tests. 5. (TCO 6) The purpose of tests of controls is to provide reasonable assurance that the (Points : 3) accounting treatment of transactions and balances is valid and proper. internal control procedures are functioning as intended. entity has complied with GAAP disclosure requirements. entity has complied with requirements of quality control. 6. (TCO 9) It is important that sales be billed and recorded in the journal as soon as possible after (Points : 3) the order is received. the order is received and credit is approved. credit is approved and it is verified that there is enough inventory to fill the order. the shipment takes place. 6. (TCO 9) The use of prenumbered sales invoices is meant to prevent (Points : 3) the failure to bill or record sales. duplicate billings and recording of sales. both A and B are correct. neither A nor B is correct. 6. (TCO 9) Prenumbered documents will only be useful for control purposes if (Points : 3) a different numerical sequence is used for each company. the sequence is accounted for periodically. employees do not have access to the complete sequence. All of the above 7. (TCO 9) Which one of the following is not an auditor’s concern about a key authorization point in the sales or collection cycle? (Points : 3) The receiving room must have authorization before releasing items to inventory control. Credit must be authorized before the sale. Goods must be shipped after the authorization. Prices must be authorized. 7. (TCO 9) At which point in an ordinary sales transaction would a lack of specific authorization be of least concern to the auditor? (Points : 3) Granting of credit Shipment of goods Determination of discounts Selling of goods for cash 8. (TCO 9) The credit-granting functions should be separated from which of the following? (Points : 3) Purchasing functions Manufacturing function Sales function None of the above 9. (TCO 9) When designing substantive tests of transactions for sales, the auditor is concerned with the possibility of several types of misstatements. Which of the following is not one of the types of these misstatements? (Points : 3) Sales being included in the journal for which no shipment was made Sales to related parties, such as officers and subsidiaries Sales recorded more than once Shipments being made to nonexistent customers and recorded as sales 10. (TCO 9) A key internal control in the sales and collection cycle is the separation of duties between cash handling and record keeping. The objective most directly associated with this control is to verify that (Points : 3) cash receipts recorded in the cash receipts journal are reasonable. cash receipts are properly classified. recorded cash receipts result from legitimate transactions. existing cash receipts are recorded. 10. (TCO 9) Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom? (Points : 3) The cashier prepares the daily deposit. The cashier makes the deaily deposit at a local bank. The cashier posts the receipts to the accounts receivable subsidiary ledger cards. The cashier endorses the checks.

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ACCT 444 Week 1 to 5 Quizzes Click Link Below To Buy: http://hwcampus.com/shop/acct-444-week-1-to-5-quizzes/ 1. (TCO 3) Prior to the passage of the Sarbanes-Oxley Act, which of the following was responsible for establishing auditing standards? (Points: 3) Public Company Accounting Oversight Board Securities and Exchange Commission National Association of Accounting Auditing Standards Board Chapter 2 2. (TCO 1) Which one of the following is not one of the three general standards? (Points: 3) Proper planning and supervision Due professional care Adequate training and proficiency Independence of mental attitude Chapter 2 3. (TCO 1) An independent auditor must have which of the following? (Points: 3) A pre-existing and well-informed point of view with respect to the audit Technical training that is adequate to meet the requirements of a professional Experience in taxation that is sufficient to comply with generally accepted auditing standards A background in many different disciplines 4. (TCO 1) Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n) _____ (Points: 3) assurance service. attestation service. tax service. accounting and bookkeeping service. Chapter 1 5. (TCO 1) Which of the following statements is incorrect regarding the SEC’s partner rotation rules? (Points: 3) The lead and concurring partners are subject to a 5-year time out period. All audit partners must rotate off the audit engagement after 5 years. Other audit partners are subject to a 2-year time out period. Small firms may be exempted from the partner rotation requirement. 6. (TCO 3) Burrow & Co., CPAs, have provided annual audit and tax compliance services to Mare Corp. for several years. Mare has been unable to pay Burrow in full for services Burrow rendered 19 months ago. Burrow is ready to begin fieldwork for the current year’s audit. Under the ethical standards of the profession, which of the following arrangements will permit Burrow to begin the fieldwork on Mare’s audit? (Points: 3) Mare engages another firm to perform the fieldwork, and Burrow is limited to reviewing the workpapers and issuing the audit report. Mare sets up a 2-year payment plan with Burrow to settle the unpaid fee balance. Mare gives Burrow an 18-month note payable for the full amount of the past due fees before Burrow begins the audit. Mare commits to pay the past due fee in full before the audit report is issued. Chapter 2 7. (TCO 3) Independence in auditing means (Points: 3) remaining aloof from a client. taking an unbaised and objective viewpoint. not being financially dependent on a client. being an advocate for a client. Chapter 4 8. (TCO 3) The financial interests of which of the following parties would not be included as a direct financial interest of the CPA? (Points: 3) Dependent child Relative supported by the CPA Spouse Sibling living in the same city as the CPA Chapter 4 9. (TCO 1) The phrase U.S. generally accepted accounting principles is an accounting term that (Points: 3) encompasses the conventions, rules, and procedures necessary to define U.S. accepted accounting practice at a particular time. provides a measure of conventions, rules, and procedures governed by the AICPA. is included in the audit report to indicate that the audit has been conducted in accordance with generally accepted auditing standards (GAAS). includes broad guidelines of general application but not detailed practices and procedures. Chapter 1 10. (TCO 1) Which of the following statements best describes the ethical standard of the profession pertaining to advertising and solicitation? (Points: 3) A CPA may advertise in any manner that is not false, misleading, or deceptive. There are no prohibitions regarding the manner in which CPAs may solicit new business. All forms of advertising and solicitation are prohibited. A CPA may only solicit new clients through mass mailings. 1. (TCO 3) The Sarbanes-Oxley Act applies to which of the following companies? (Points : 3) Privately held companies All companies All public companies and privately held companies with assets greater than $500 million Public companies Chapter 1 Question 4. 4. (TCO 1) An operational audit has as one of its objectives to (Points : 3) make recommendations for improving performance. determine whether the financial statements fairly present the entity’s operations. evaluate the feasibility of attaining the entity’s operational objectives. report on the entity’s relative success in attaining profit maximization. Chapter 1 Question 5. 5. (TCO 1) Which of the following services do not need to be preapproved by the audit committee of an issuer? (Points : 3) Nonaudit services related to internal control over financial reporting Tax services Nonaudit services that are less than 5 % of total revenues from the audit client Services provided by the auditor on a recurring basis Question 8. 8. (TCO 3) Several months after an unqualified audit report was issued, the auditor discovered the financial statements were materially misstated. The client’s CEO agrees that there are misstatements, but refuses to correct them. She claims that confidentiality prevents the CPA from informing anyone. (Points : 3) The CEO is incorrect, but because the audit report has been issued, it is too late. The CEO is correct and the auditor must maintain confidentiality. The CEO is correct, but to be ethically correct the auditor should violate the confidentiality rule and disclose the error. The CEO is incorrect, and the auditor has an obligation to issue a revised audit report, even if the CEO will not correct the financial statements. Chapter 4 Question 9. 9. (TCO 1) Which of the following terms identifies a requirement for audit evidence? (Points : 3) Adequate Disconfirming Reasonable Appropriate Chapter 1 Question 10. 10. (TCO 1) The auditor of an issuer may provide which of the following tax services? (Points : 3) Tax services for immediate family members of corporate officers Tax planning services Tax services for officers of the issuer Services related to confidential tax transactions 5. (TCO 1) Jackson & Company, CPAs, plan to audit the financial statements of Perigee Technologies, an issuer as defined under the Sarbanes-Oxley Act of 2002. Which of the following situations would impair Jackson’s independence? (Points : 3) Discovering that Lowe, the chief financial officer of Perigee, started his accounting career 10 years earlier as a staff accountant for Jackson & Company and continues to maintain ties with current partners at the firm Provision of personal tax services to Johnson, the accounts payable manager of Perigee Audit of Perigee’s internal control is performed contemporaneously with the annual financial statement audit Preparation of Perigee’s routine annual tax return, where Jackson’s fee will be calculated as a percentage of the tax refund obtained ACCT 444 Week 2 Quiz Week 2 : Auditor Legal Liability, Fraud, & Audit Objectives – Quiz Question 1. 1. (TCO 4) To succeed in an action against the auditor, the client must be able to show that (Points : 3) the auditor was fraudulent. the auditor was grossly negligent. there was a written contract. there is a close causal connection between the auditor’s behavior and the damages suffered by the client. Chapter 5, 6 & 7 1. (TCO 4) In connection with the audit of financial statements, an independent auditor could be responsible for failure to detect a material fraud if (Points : 3) statistical sampling techniques were not used on the audit engagement. the auditor planned the audit in a negligent manner. accountants performing important parts of the work failed to discover a close relationship between the treasurer and the cashier. the fraud was perpetrated by one employee who circumvented the existing internal controls. Question 2. 2. (TCO 4) The principal issue to be resolved in cases involving alleged negligence is usually (Points : 3) the amount of the damages suffered by plaintiff. whether to impose punitive damages on the defendant. the level of care exercised by the CPA. whether defendant was involved in fraud. Chapter 5, 6 & 7 2. (TCO 4) The principal issue to be resolved in cases involving alleged negligence is usually (Points : 3) the amount of the damages suffered by plaintiff. whether to impose punitive damages on the defendant. the level of care exercised by the CPA. whether defendant was involved in fraud. Question 3. 3. (TCO 4) While performing services for their clients, professionals have a duty to provide a level of care that is (Points : 3) free from judgment errors. superior. greater than average. reasonable. Chapter 5 3. (TCO 4) A third-party beneficiary is one that (Points : 3) has failed to establish legal standing before the court. does not have privity of contract and is unknown to the contracting parties. does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract. may establish legal standing before the court after a contract has been consummated. Chapter 5 Question 4. 4. (TCO 4) Tort actions against CPAs are more common than breach of contract actions because (Points : 3) there are more torts than contracts. the burden of proof is on the auditor rather than on the person suing. the person suing need prove only negligence. the amounts recoverable are normally larger. Chapter 5 Question 5. 5. (TCO 4) The responsibility for adopting sound accounting policies and maintaining adequate internal control rests with the (Points : 3) board of directors. company management. financial statement auditor. company’s internal audit department. Chapter 6 Question 6. 6. (TCO 3) Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements? (Points : 3) The auditor commonly examines a sample, rather than the entire population of transactions. Accounting presentations contain complex estimates, which involve uncertainty. Fraudulently prepared financial statements are often difficult to detect. Auditors believe that reasonable assurance is sufficient in the vast majority of cases. Chapter 6 6. (TCO 3) Which of the following statements is most correct regarding errors and fraud? (Points : 3) An error is unintentional, whereas fraud is intentional. Frauds occur more often than errors in financial statements. Errors are always fraud and frauds are always errors. Auditors have more responsibility for finding fraud than errors. Question 7. 7. (TCO 3) Which of the following is not one of the factors of the fraud triangle? (Points : 3) Incentives/pressures Attitudes/rationalization Opportunities Psychological make-up Chapter 5 or 11 7. (TCO 3) In the fraud triangle, fraudulent financial reporting and misappropriation of assets (Points : 3) share little in common. share most of the same risk factors. share the same three conditions. share most of the same conditions. Chapter 11 Question 8. 8. (TCO 3) Fraudulent financial reporting may be accomplished through the manipulation of (Points : 3) assets. liabilities. revenues. all of the above. Chapter 11 8. (TCO 3) Because of the risk of material misstatements due to fraud, an audit of financial statements in accordance with generally accepted auditing standards should be performed with an attitude of (Points : 3) objective judgment. impartial conservatism. independent integrity. professional skepticism. Chapter 11 Question 9. 9. (TCO 3) Which of the following is a factor that relates to attitudes or rationalization to commit fraudulent financial reporting? (Points : 3) Significant accounting estimates involving subjective judgments Excessive pressure for management to meet debt repayment requirements Management’s practice of making overly aggressive forecasts High turnover of accounting, internal audit and information technology staff Chapter 11 Question 10. 10. (TCO 3) Auditor responses to fraud risks include which of the following? (Points : 3) Change the overall conduct of the audit to respond to identified fraud risks. Design and perform audit procedures to address identified risks. Perform procedures to address the risk of management override of controls. All of the above. Chapter 11 10. (TCO 3) Which of the following characteristics is most likely to heighten an auditor’s concern about the risk of material misstatements, due to fraud in an entity’s financial statements? (Points : 3) Employees who handle cash receipts are not bonded. The entity’s industry is experiencing declining customer demand. Internal auditors have direct access to the board of directors and the entity’s management. The board of directors is active in overseeing the entity’s financial reporting policies. Chapter 11 ACCT 444 Week 3 Quiz Week 3 : Audit Evidence, Planning, Risk, & Materiality – Quiz 1. (TCO 6) Physical examination is the inspection or count by the auditor of items such as (Points : 3) cash or inventory only. cash, inventory, canceled checks, and sales documents. cash, inventory, canceled checks, and tangible fixed assets. cash, inventory, securities, notes receivable, and tangible fixed assets. Chapter 7 1. (TCO 6) The distinction between physical examination of assets and examination of documents is dependent on the item being examined. If the object being examined has no inherent value, the evidence is called (Points : 3) documentation. physical examination. confirmation. none of the above. Chapter 7 1. (TCO 6) Which of the following statements regarding documentation is not correct? (Points : 3) Documentation includes examining client records, such as general ledgers and supporting journals. Internal documents are documents that are generated within the company and used to communicate with external parties. External documents are documents that are generated outside of the company and are used to communicate the results of a transaction. All of the above are correct statements Chapter 7 2. (TCO 6) Which of the following is not a purpose of analytical procedures? (Points : 3) Understand the client’s industry Assess the client’s ability to continue as a going concern Identify misstatements Reduce detailed audit tests Chapter 7 2. (TCO 6) Analytical procedures are (Points : 3) diagnostic tests of financial information that may not be classified as evidential matter. calculations of financial information made by a computer. substantive tests of financial information made by a study and comparison of relationships among data. statistical tests of financial information designed to identify areas requiring intensive investigation. Chapter 7 2. (TCO 6) When analytical procedures reveal no unusual fluctuations, the implication is that (Points : 3) there are no material errors or irregularities. there are no material errors. there are no material irregularities. the possibility of a material error or irregularity is lessened. Chapter 7 3. (TCO 6) The Auditing Standards Board has concluded that analytical procedures are so important that they are required during (Points : 3) planning and testing phases. planning and completion phases. testing and completion phases. planning, testing, and completion phases. Chapter 7 3. (TCO 6) The primary purpose of performing analytical procedures in the testing phase of an audit is to (Points : 3) help the auditor obtain an understanding of the client’s industry and business. assess the going concern assumption. indicate possible misstatements. reduce detailed tests. Chapter 7 3. (TCO 6) Which of the following statements regarding analytical procedures is not correct? (Points : 3) The definition of analytical tests emphasizes a comparison of client’s data to GAAP. Analytical procedures are required on all audits. Analytical procedures can be used as substantive tests. For certain accounts with small balances, analytical procedures alone may be sufficient evidence. Chapter 7 4. (TCO 6) Which of the following statements about confirmation is true? (Points : 3) Confirmations are expensive and so are often not used. Confirmations may inconvenience those asked to supply them, but they are widely used. Confirmations are sometimes not reliable and so auditors use them only as necessary. None of the above statements are true. Chapter 7 4. (TCO 6) Three common types of confirmations used by auditors are (1) negative confirmations where only a response is requested if the debtor disagrees with the amount, (2) positive confirmations with a request for information where the debtor is requested to respond and to include their believed balance, and (3) positive confirmations with the information included where the debtor is requested to respond and to confirm the balance we give them. If they were placed in the order of their competence, from highest to lowest, the sequence would be (Points : 3) 3, 1, 2. 1, 2, 3. 3, 2, 1. 2, 3, 1. Chapter 7 4. (TCO 6) Traditionally, confirmations are used to verify (Points : 3) individual transactions between organizations, such as sales transactions. bank balances and accounts receivables. fixed asset additions. All of the above Chapter 7 5. (TCO 7) The major concern when using nonfinancial data in analytical procedures is the (Points : 3) accuracy of the nonfinancial data. source of the nonfinancial data. type of nonfinancial data. presence of multiple sources of nonfinancial data. Chapter 8 5. (TCO 7) Analytical procedures used in planning an audit should focus on identifying (Points : 3) material weaknesses of internal control. the predictability of financial data from individual transactions. the various assertions that are embodied in the financial statements. areas that may represent specific risks relevant to the audit. Chapter 8 5. (TCO 7) Which of the following is correct with respect to the use of analytical procedures? (Points : 3) Analytical procedures may be used in evaluating balances in the testing phase as long as the auditor also uses them in assessing the going concern assumption. Analytical procedures must be used throughout the audit. Analytical procedures used in the testing phase of the audit are primarily used to direct an auditor’s attention so that the auditor’s understanding of the business is improved. None of the above Chapter 8 6. (TCO 7) A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the (Points : 3) inherent risk. acceptable audit risk. statistical risk. financial risk. Chapter 8 6. (TCO 7) When inherent risk is high, there will need to be (Points : 3) more evidence accumulated. more experienced staff assigned to the work. either a or b, but not both. both a and b. Chapter 8 6. (TCO 7) A measure of the auditor’s assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client’s internal control is (Points : 3) acceptable audit risk. control risk. inherent risk. statistical risk. Chapter 8 7. (TCO 7) What is the responsibility of a successor auditor with respect to communicating with the predecessor auditor in connection with a prospective new audit client? (Points : 3) The successor auditor has no responsibility to contact the predecessor auditor. The successor auditor should obtain permission from the prospective client to contact the predecessor auditor. The successor auditor should contact the predecessor regardless of whether the prospective client authorizes contact. The successor auditor need not contact the predecessor if the successor is aware of all available relevant facts. Chapter 8 7. (TCO 7) A successor auditor may perform which of the following for a new audit client? (Points : 3) Speak to local attorneys, banks, and other businesses regarding the company’s reputation Speak to the predecessor auditor about disagreements they had with management Interview client personnel to better understand the business and associated risks All of the above Chapter 8 7. (TCO 7) Which of the following is not correct regarding the communications between successor and predecessor auditors? (Points : 3) The burden of initiating the communication rests with the predecessor auditor. The burden of initiating the communication rests with the successor auditor. The predecessor auditor must receive their former client’s permission prior to divulging information to the successor auditor. The predecessor auditor may choose to provide a limited response to a successor auditor. Chapter 8 8. (TCO 8) The FASB definition of materiality emphasizes what class of financial statement users? (Points : 3) Regulators Informed investors Reasonable persons Potential investors Chapter 9 8. (TCO 8) Auditors are responsible for determining whether financial statements are materially misstated, so upon discovering a material misstatement, they must bring it to the attention of (Points : 3) regulators. the audit firm’s managing partner. no one in particular. the client’s management. Chapter 9 8. (TCO 8) The preliminary judgment about materiality is the _____ amount by which the auditor believes the statements could be misstated and still not affect the decisions of reasonable users. (Points : 3) minimum maximum mean average median average Chapter 9 9. (TCO 8) In setting materiality guidelines for current assets, the two standard setters, FASB and the AICPA, provide the following guidelines to practitioners (Points : 3) Both agree that materiality should be set at an amount greater than 10% of current assets. FASB’s guideline is greater than 10%, but the AICPA’s is greater than 5%. Both agree that it should be greater than 5%. No specific materiality guidelines are provided by either of them. Chapter 9 9. (TCO 8) Auditors are _____ to decide on the combined amount of misstatements in the financial statements that they would consider material early in the audit. (Points : 3) permitted required not allowed strongly encouraged Chapter 9 9. (TCO 8) When auditors allocate the preliminary judgment about materiality to account balances, the materiality allocated to any given account balance is referred to as (Points : 3) the materiality range. the error range. tolerable materiality. tolerable misstatement. Chapter 9 10. (TCO 8) Which of the following is not a correct statement regarding the allocation of the preliminary judgment about materiality to balance sheet accounts? (Points : 3) Auditors expect certain accounts to have more misstatements than others. The allocation has virtually no effect on audit costs because the auditor must collect sufficient appropriate audit evidence. Auditors expect to identify overstatements as well as understatements in the accounts. Relative audit costs affect the allocation. Chapter 9 10. (TCO 8) Which of the following elements ultimately determines the specific auditing procedures that are necessary in the circumstances to afford a reasonable basis for an opinion? (Points : 3) Inherent risk Materiality Auditor judgment Reasonable assurance Chapter 9 10. (TCO 8) Why do auditors establish a preliminary judgment about materiality? (Points : 3) To determine the appropriate level of audit experience required for the work So that the client can know what records to make available to the auditor To plan the appropriate audit evidence to accumulate and develop an overall audit strategy None of the above Chapter 9 ACCT 444 Week 4 Quiz 1. (TCO 5) Which of the following is responsible for establishing internal controls for a public company? (Points : 3) Management Financial statement auditors Management and auditors Committee of Sponsoring Organizations 1. (TCO 5) Which of the following parties provides an assessment of the effectiveness of internal control over financial reporting for public companies? (Points : 3) Management Financial statement auditors Management and the financial statement auditors Committee of Sponsoring Organizations 1. (TCO 5) Which of the following is responsible for establishing a private company’s internal control? (Points : 3) Management Auditors Management and auditors Committee of Sponsoring Organizations 2. (TCO 5) Which section of the Sarbanes-Oxley Act requires management to issue an internal control report? (Points : 3) 202 203 404 408 2. (TCO 5) Sarbanes-Oxley requires management to issue an internal control report that includes two specific items. Which of the following is one of these two requirements? (Points : 3) A statement that management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting A statement that management and the board of directors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting A statement that management, the board of directors, and the external auditors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting None of the above 2. (TCO 5) Internal control reports issued by public companies must identify the framework used to evaluate the effectiveness of internal control. Which of the following is the most common framework in the U.S.? (Points : 3) Effective Internal Control Framework-AICPA Internal Control-Integrated Framework-COSO Enterprise Internal Control-COSO There is no common framework used in the U.S. 3. (TCO 5) Which of the following activities would be least likely to strengthen a company’s internal control? (Points : 3) Separating accounting from other financial operations Maintaining insurance for fire and theft Fixing responsibility for the performance of employee duties Carefully selecting and training employees 3. (TCO 5) Management’s tests of operating effectiveness might include which of the following types of procedures? (Points : 3) Inspection of relevant documentation Inquiries of personnel Reperformance of the application of controls All of the above 3. (TCO 5) Which of management’s concerns with respect to implementing internal controls is the auditor primarily concerned? (Points : 3) Efficiency of operations Reliability of financial reporting Effectiveness of operations Compliance with applicable laws and regulations 4. (TCO 5) Internal controls can never be regarded as completely effective. Even if company personnel could design an ideal system, its effectiveness depends on the (Points : 3) adequacy of the computer system. proper implementation by management. ability of the internal audit staff to maintain it. competency and dependability of the people using it. 4. (TCO 5) Even with the most effectively designed internal control, the auditor must obtain audit evidence, beyond testing the controls, for every (Points : 3) transaction. financial statement account. material financial statement account. financial statement account that will be relied upon by third parties. 4. (TCO 5) The essence of an effectively controlled organization lies in the (Points : 3) effectiveness of its independent auditor. effectiveness of its internal auditor. attitude of its employers. attitudes of its management. 5. (TCO 5) Which of the following is not one of the levels of an absence of internal controls? (Points : 3) Major deficiency Material weakness Significant deficiency Control deficiency 5. (TCO 5) To determine if a significant internal control deficiency or deficiencies are a material weakness, they must be evaluated on their (Points : 3) likelihood. materiality or significance. both A and B are correct. neither A nor B is correct. 6. (TCO 10) Which of the following is not a benefit of using IT-based controls? (Points : 3) Ability to process large volumes of transactions Ability to replace manual controls with computer-based controls Reduction in misstatements due to consistent processing of transactions Over-reliance on computer-generated reports 6. (TCO 10) Which of the following is not a risk to IT systems? (Points : 3) Need for IT experience Separation of IT duties Improved audit trail Hardware and data vulnerability 6. (TCO 10) Which of the following is not a risk specific to IT environments? (Points : 3) Reliance on the functioning capabilities of hardware and software Increased human involvement Loss of data due to insufficient backup Reduced segregation of duties 7. (TCO 10) Which of the following IT duties should be separated from the others? (Points:3) Systems development Operations Data control All of the above 7. (TCO 10) The extent to which IT duties are separated in an organization depends on (Points : 3) the organization’s size. the organization’s complexity. both A and B. neither A nor B. 7. (TCO 10) Programmers should do all but which of the following? (Points : 3) Test programs for proper performance Evaluate legitimacy of transaction data input Develop flowcharts for new applications Programmers should perform each of the above 8. (TCO 10) Which of the following is a category of general controls? (Points : 3) Processing controls Output controls Physical and online security Input controls 8. (TCO 10) General controls include all of the following except (Points : 3) systems development. online security. processing controls. hardware controls. 8. (TCO 10) Which of the following is least likely to be used in obtaining an understanding of client general controls? (Points : 3) Examination of system documentation Inquiry of client personnel (e.g. key users) Observation of transaction processing Reviews of questionnaires completed by client IT personnel 9. (TCO 10) Controls that apply to a specific element of the system are called (Points : 3) user controls. general controls. systems controls. application controls. 9. (TCO 10) A control that relates to all parts of the IT system is called a(n) (Points : 3) general control. systems control. universal control. applications control. 9. (TCO 10) Auditors should evaluate the _____ before evaluating application controls because of the potential for pervasive effects. (Points : 3) input controls control environment processing controls general controls 10. (TCO 10) Which of the following is not an example of an application control? (Points: 3) An equipment failure causes system downtime. There is a preprocessing authorization of the sales transactions. There are reasonableness tests for the unit selling price of a sale. After processing, all sales transactions are reviewed by the sales department. 10. (TCO 10) Which of the following is not a category of an application control? (Points : 3) Processing controls Output controls Hardware controls Input controls 10. (TCO 10) Which of the following statements related to application controls is correct? (Points : 3) Application controls relate to various aspects of the IT function, including software acquisition and the processing of transactions. Application controls relate to various aspects of the IT function, including physical security and the processing of transactions in various cycles. Application controls relate to all aspects of the IT function. Application controls relate to the processing of individual transactions. ACCT 444 Week 5 Quiz 1. (TCO 6) The auditor looks for an indication on duplicate sales invoices to see whether the invoices have been verified. This is an example of (Points : 3) a test of details of balances. a test of control. a substantive test of transactions. both a test of control and a substantive test of transactions. 1. (TCO 6) Tests of controls may include which of the following types of evidence? (Points : 3) Observation Reperformance Inquiries All of the above 1. (TCO 6) For efficiency, tests of controls are frequently done at the same time as (Points : 3) analytical procedures. compliance tests. tests of transactions. tests of details of balances. 2. (TCO 6) Analytical procedures are defined in the auditing standards as (Points : 3) compliance tests. substantive tests. tests of controls. helpful procedures not possessing the validity of other tests available to the auditor. 2. (TCO 6) Which of the following is not a direct result of performing analytical procedures? (Points : 3) Identify areas of potential misstatements. Reduce detailed audit risk. Understand the client’s business. Identify specific errors in the accounts. 2. (TCO 6) Analytical procedures may be classified as being primarily (Points : 3) tests of controls. substantive tests. tests of ratios. tests of details of balances. 3. (TCO 6) Which of the following audit tests is usually the least costly to perform? (Points : 3) Analytical procedures Tests of controls Tests of balances Substantive tests of transactions 3. (TCO 6) Which of the following audit tests is usually the most costly to perform? (Points : 3) Analytical procedures Tests of controls Tests of balances Substantive tests of transactions 4. (TCO 6) Which of the following tests commonly occur together? (Points : 3) Substantive tests of transactions and tests of controls Substantive tests of transactions and obtaining an understanding of internal controls Analytical procedures and tests of controls All of the above 4. (TCO 6) Which of the following relationships between types of tests and audit evidence is not correct? (Points : 3) Tests of details and documentation Tests of controls and observation Tests of details and observation Substantive tests of transactions and reperformance 5. (TCO 6) The sequence of steps in gathering evidence as the basis of the auditor’s opinion are (Points : 3) substantive tests, initial assessment of control risk, and tests of controls. initial assessment of control risk, substantive tests, and tests of controls. initial assessment of control risk, tests of controls, and substantive tests. tests of controls, initial assessment of control risk, and substantive tests. 5. (TCO 6) The purpose of tests of controls is to provide reasonable assurance that the (Points : 3) accounting treatment of transactions and balances is valid and proper. internal control procedures are functioning as intended. entity has complied with GAAP disclosure requirements. entity has complied with requirements of quality control. 6. (TCO 9) It is important that sales be billed and recorded in the journal as soon as possible after (Points : 3) the order is received. the order is received and credit is approved. credit is approved and it is verified that there is enough inventory to fill the order. the shipment takes place. 6. (TCO 9) The use of prenumbered sales invoices is meant to prevent (Points : 3) the failure to bill or record sales. duplicate billings and recording of sales. both A and B are correct. neither A nor B is correct. 6. (TCO 9) Prenumbered documents will only be useful for control purposes if (Points : 3) a different numerical sequence is used for each company. the sequence is accounted for periodically. employees do not have access to the complete sequence. All of the above 7. (TCO 9) Which one of the following is not an auditor’s concern about a key authorization point in the sales or collection cycle? (Points : 3) The receiving room must have authorization before releasing items to inventory control. Credit must be authorized before the sale. Goods must be shipped after the authorization. Prices must be authorized. 7. (TCO 9) At which point in an ordinary sales transaction would a lack of specific authorization be of least concern to the auditor? (Points : 3) Granting of credit Shipment of goods Determination of discounts Selling of goods for cash 8. (TCO 9) The credit-granting functions should be separated from which of the following? (Points : 3) Purchasing functions Manufacturing function Sales function None of the above 9. (TCO 9) When designing substantive tests of transactions for sales, the auditor is concerned with the possibility of several types of misstatements. Which of the following is not one of the types of these misstatements? (Points : 3) Sales being included in the journal for which no shipment was made Sales to related parties, such as officers and subsidiaries Sales recorded more than once Shipments being made to nonexistent customers and recorded as sales 10. (TCO 9) A key internal control in the sales and collection cycle is the separation of duties between cash handling and record keeping. The objective most directly associated with this control is to verify that (Points : 3) cash receipts recorded in the cash receipts journal are reasonable. cash receipts are properly classified. recorded cash receipts result from legitimate transactions. existing cash receipts are recorded. 10. (TCO 9) Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom? (Points : 3) The cashier prepares the daily deposit. The cashier makes the deaily deposit at a local bank. The cashier posts the receipts to the accounts receivable subsidiary ledger cards. The cashier endorses the checks.

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