Multiple Choice Questions

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Multiple Choice Questions

• Control risk is

• the probability that a material misstatement could not be prevented or detected by the entity's

internal control policies and procedures.

• the probability that a material misstatement could occur and not be detected by auditors'

procedures.

• the risk that auditors will not be able to complete the audit on a timely basis.

• the risk that auditors will not properly control the staff on the audit engagement.

• The responsibilities principle under generally accepted auditing standards does not include which

of the following?

• Competence and capabilities

• Independent attitude

• Due care

• Planning and supervision

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• Which of the following types of auditors' reports does not require an additional paragraph to

support the opinion?

• Unmodified opinion

• Adverse opinion

• Qualified opinion

• Disclaimer of opinion

• Which of the following is an element of a system of quality control that should be considered by a

public accounting firm in establishing its quality control policies and procedures?

• Lending credibility to a client's financial statements

• Using statistical sampling techniques

• Acceptance and continuance of client relationships and specific engagements

• Membership in the Center for Public Company Audit Firms

• Which of the following presumptions does not relate to the reliability of audit evidence?

• The more effective the client's internal control, the more assurance it provides about the

accounting data and financial statements.

• The auditors' opinion, to be economically useful, is formed within reasonable time and based on

evidence obtained at a reasonable cost.

• Evidence obtained from independent sources outside the entity is more reliable than evidence

secured solely within the entity.

• The independent auditors' direct personal knowledge, obtained through observation and

inspection, is of higher quality than information obtained indirectly.

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• An important role of the Public Company Accounting Oversight Board is to oversee the

• issuance of statements by the Financial Accounting Standards Board.

• preparation and grading of the Uniform CPA Examination.

• peer review of member firms of the Private Companies Practice Section.

• regulation of firms that audit public entities.

• Audit evidence is usually considered sufficient when

• it is reliable.

• there is enough quantity to afford a reasonable basis for an opinion on financial statements.

• it has the qualities of being relevant, objective, and free from unknown bias.

• it has been obtained through random selection methods.

• Which of the following is not considered a type of audit evidence?

• The entity's trial balance

• Auditors' calculations

• Physical observation

• Verbal statements made by client personnel

• An audit of the financial statements of Camden Corporation is being conducted by external

auditors. The external auditors are expected to

• certify the correctness of Camden's financial statements.

• make a complete examination of Camden's records and verify all of Camden's transactions.

• give an opinion on the fair presentation of Camden's financial statements in conformity with the

applicable financial reporting framework (e.g., GAAP, IFRS).

• give an opinion on the attractiveness of Camden for investment purposes and critique the

wisdom and legality of its business decisions.

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• Auditors try to achieve independence in appearance in order to

• maintain public confidence in the profession.

• become independent in fact.

• comply with the responsibilities principle.

• maintain an unbiased mental attitude.

• The preparation of an audit plan prior to the beginning of fieldwork is appropriately considered

documentation of

• planning.

• supervision.

• information evaluation.

• quality assurance.

• Which of the following procedures would provide the most reliable audit evidence?

• Inquiries of the client's accounting staff held in private

• Inspection of prenumbered client shipping documents

• Inspection of bank statements obtained directly from the client's financial institution

• Analytical procedures performed by auditors on the client's trial balance

• Which of the following would most likely be a violation of the independence requirement found in

the responsibilities principle under generally accepted auditing standards?

• An auditor on the engagement has a distant relative who is employed by a vendor that does a

significant amount of business with clients.

• The client's Chief Executive Officer graduated from the same university as the partner in charge

of the accounting firm.

• An auditor on the engagement owns a financial interest in the stock of the client.

• The client provides financial support to a number of charitable causes that also receive support

from the accounting firm.