Archive for December 2015

An auditor has been asked to report on the balance sheet of Kane Company but not on the other basic financial statements. The auditor will have access to all information underlying the basic financial statements. Under these circumstances, the auditor:

An auditor has been asked to report on the balance sheet of Kane Company but not on the other basic financial statements. The auditor will have access to all information underlying the basic financial statements. Under these circumstances, the auditor:

a. may accept the engagement because such engagements merely involve limited reporting objectives.
b. may accept the engagement but should disclaim an opinion because of an inability to apply the procedures considered necessary.
c. should refuse the engagement because there is a client-imposed scope limitation.
d. should refuse the engagement because of a departure from generally accepted auditing standards.

Non-accounting data included in a long-form report have been subjected to auditing procedures. The auditor’s report should state this fact and should explain that the non-accounting data are presented for analysis purposes. In addition, the auditor’s report should state whether the non-accounting data are:

Non-accounting data included in a long-form report have been subjected to auditing procedures. The auditor’s report should state this fact and should explain that the non-accounting data are presented for analysis purposes. In addition, the auditor’s report should state whether the non-accounting data are:

a. audited, unaudited, or reviewed on a limited basis.
b. fairly stated in all material respects in relation to the basic financial statements taken as a whole.
c. beyond the scope of the normal engagement and therefore, not covered by the opinion on the financial statements.
d. within the framework of generally accepted auditing standards, which apply to the financial statements taken as a whole.

An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided that:

An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided that:

a. distribution of the report is to be restricted to the specified users involved.
b. the prospective financial statements are also examined.
c . responsibility for the adequacy of the procedures performed is taken by the accountant.
d. negative assurance is expressed on the prospective financial statements taken as a whole.

Which of the following is not an element of examining a forecast?

Which of the following is not an element of examining a forecast?

a. Evaluating the preparation of the prospective financial statements.
b. Understanding internal controls.
c . Evaluating the support underlying the assumptions.
d. Issuing an examination report.

Why do standards prohibit the general use of projections?

Why do standards prohibit the general use of projections?

a. Standards allow the general use of projections.
b. Reports on projections are not well understood by the general public.
c. Underlying hypothetical assumptions are difficult to interpret without obtaining additional information.
d. None of the above.

Debt compliance letters are ordinarily addressed to:

Debt compliance letters are ordinarily addressed to:

a. underwriters of securities.
b. the client’s audit committee.
c. creditor financial institutions.
d. the Securities and Exchange Commission.

You are a CPA retained by the manager of a cooperative retirement village to do “write-up work.” You are expected to prepare unaudited financial statements with each page marked “unaudited” and accompanied by a disclaimer of opinion stating no audit was performed. In performing the work, you discover that there are no invoices to support a claim for a $25,000 disbursement. The manager informs you that all the disbursements are proper. What should you do?

You are a CPA retained by the manager of a cooperative retirement village to do “write-up work.” You are expected to prepare unaudited financial statements with each page marked “unaudited” and accompanied by a disclaimer of opinion stating no audit was performed. In performing the work, you discover that there are no invoices to support a claim for a $25,000 disbursement. The manager informs you that all the disbursements are proper. What should you do?

a. Submit the expected statements but omit $25,000 of unsupported disbursements.
b. Include the unsupported disbursements in the statements since you are not expected to make an audit.
c. Obtain from the manager a written statement that you informed him of the missing invoices and include his assurance that the disbursements are proper.
d. Notify the owners that some of the claimed disbursements are unsupported and withdraw if the situation is not satisfactorily resolved.

When an accountant performs more than one level of service (for example, a compilation and a review, or a compilation and an audit) concerning the financial statements of a nonpublic entity, the accountant generally should issue the report that is appropriate for:

When an accountant performs more than one level of service (for example, a compilation and a review, or a compilation and an audit) concerning the financial statements of a nonpublic entity, the accountant generally should issue the report that is appropriate for:

a. a review engagement.
b. a compilation engagement.
c. the lowest level of service rendered.
d. the highest level of service rendered.

An accountant who reviews the financial statements of a nonpublic entity should issue a report stating that a review:

An accountant who reviews the financial statements of a nonpublic entity should issue a report stating that a review:

a. is substantially equivalent in scope to an audit.
b. is substantially more in scope than a compilation.
c. is substantially less in scope than an audit.
d. provides only limited assurance that the financial statements are fairly presented.

Assurance provided by a review is substantially less than an audit. Which of the following statements is true regarding these services?

Assurance provided by a review is substantially less than an audit. Which of the following statements is true regarding these services?

a. A review requires more substantive evidence than an audit.
b. An audit requires less evidence related to internal control than a review.
c. A review requires less evidence than an audit.
d. None of the above statements is true.

Statements on Accounting and Review Services are issued by the:

Statements on Accounting and Review Services are issued by the:

a. Auditing Standards Board.
b. Securities and Exchange Commission.
c. Public Company Accounting Oversight Board.
d. Accounting and Review Services Committee of the AICPA.

An agreed-upon procedures engagement is one in which:

An agreed-upon procedures engagement is one in which:

a. the auditor and management agree that procedures will be applied to all accounts and circumstances.
b. the auditor and management agree that procedures will not be applied to all accounts and circumstances.
c. the auditor and management or a third party agree that the audit will be limited to certain specific audit procedures.
d. none of the above.

__ are prospective financial statements that present an entity’s financial position, results of operations, and cash flows, to the best of the responsible party’s knowledge and belief, given one or more hypothetical assumptions.

__ are prospective financial statements that present an entity’s financial position, results of operations, and cash flows, to the best of the responsible party’s knowledge and belief, given one or more hypothetical assumptions.

a. Forecasts
b. Projections
c. either a or b
d. neither a nor b

__ are prospective financial statements that present an entity’s expected financial position, results of operations, and cash flows, to the best of the responsible party’s knowledge and belief.

__ are prospective financial statements that present an entity’s expected financial position, results of operations, and cash flows, to the best of the responsible party’s knowledge and belief.

a. Forecasts
b. Projections
c. either a or b
d. neither a nor b

Which of the following is not a standard contained in both the Statement on Standards for Attestation Engagements and the Statement on Auditing Standards?

Which of the following is not a standard contained in both the Statement on Standards for Attestation Engagements and the Statement on Auditing Standards?

a. The examination is to be performed by a person having adequate technical training.
b. An independence in mental attitude is to be maintained.
c. Sufficient evidence is to be obtained.
d. The practitioner must obtain a sufficient understanding of the client’s internal control.

Auditors frequently audit statements that were prepared on a comprehensive basis of accounting other than GAAP. When this occurs:

Auditors frequently audit statements that were prepared on a comprehensive basis of accounting other than GAAP. When this occurs:

a. generally accepted auditing standards apply to these engagements and the reporting requirements differ.
b. generally accepted auditing standards apply to these engagements and the reporting requirements are the same as well.
c. generally accepted auditing standards do not apply to these examinations and the reporting requirements differ also.
d. generally accepted auditing standards do not apply to this engagement and the reporting requirements remain the same for the CPA.

Reports on debt compliance and similar engagements may be issued as a separate report or as part of a report that expresses the auditor’s opinion on the financial statements. When they are issued as a part of the report on the financial statements, it is done by:

Reports on debt compliance and similar engagements may be issued as a separate report or as part of a report that expresses the auditor’s opinion on the financial statements. When they are issued as a part of the report on the financial statements, it is done by:

a. adding a middle paragraph before the opinion paragraph.
b. adding a paragraph after the opinion paragraph.
c. adding an additional phrase or sentence within the opinion paragraph.
d. adding a paragraph between the introductory and scope paragraphs.

The quarterly reports submitted to the SEC by the client:

The quarterly reports submitted to the SEC by the client:

a. have to be audited and the CPA firm must be identified.
b. do not have to be audited, but the CPA firm which does the year-end audit must be identified.
c. have to be audited, but the CPA firm does not have to be identified.
d. do not have to be audited, but the CPA firm which does the year-end audit must review the quarterly statements before they are submitted to the SEC.

Reports on agreed-upon procedures are intended to be distributed:

Reports on agreed-upon procedures are intended to be distributed:

a. to only the involved parties, who would have the requisite knowledge about those procedures and the level of assurance resulting from them.
b. to only the involved parties, who would have the requisite knowledge about those procedures
c. to any party to whom the client wishes.
d. none of the above.

An auditor who conducts an examination in accordance with generally accepted auditing standards and concludes that the financial statements are fairly presented in accordance with a comprehensive basis of accounting other than GAAP, should issue a:

An auditor who conducts an examination in accordance with generally accepted auditing standards and concludes that the financial statements are fairly presented in accordance with a comprehensive basis of accounting other than GAAP, should issue a:

a. review report.
b. special report.
c. qualified opinion.
d. disclaimer of opinion.

For reviews, an accountant does not do which of the following?

For reviews, an accountant does not do which of the following?

a. Obtain an understanding of internal control.
b. Perform tests of controls.
c. Perform tests of transactions.
d. An accountant will not do any of the above in a review.

Which of the following would not be included in a CPA’s report based upon a review of the financial statements of a nonpublic entity?

Which of the following would not be included in a CPA’s report based upon a review of the financial statements of a nonpublic entity?

a. A statement that the review was in accordance with generally accepted auditing standards.
b. A statement that all information included in the financial statements is the representation of management.
c. A statement describing the principal procedures performed.
d. A statement describing the auditor’s conclusions based upon the results of the review.

A CPA firm can issue a compilation report:

A CPA firm can issue a compilation report:

a. only if the partners are independent.
b. only if all the partners and the staff in the office performing the engagement are independent.
c. if the partners have no material or direct immaterial interest in client.
d. even if it is not independent.

Compilation reports may be of all but which of the following types?

Compilation reports may be of all but which of the following types?

a. Compilation with limited independence.
b. Compilation with full disclosure
c. Compilation without independence.
d. Compilation that omits substantially all disclosures.

Compilation reports may be of all but which of the following types?

Compilation reports may be of all but which of the following types?

a. Compilation with limited independence.
b. Compilation with full disclosure
c. Compilation without independence.
d. Compilation that omits substantially all disclosures.

The auditor’s responsibility with respect to events occurring between the balance sheet date and the end of the audit examination is best expressed by which of the following statements?

The auditor’s responsibility with respect to events occurring between the balance sheet date and the end of the audit examination is best expressed by which of the following statements?

a. The auditor is fully responsible for events occurring in the subsequent period and should extend all detailed procedures through the last day of fieldwork.
b. The auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period.
c. The auditor’s responsibility is to determine that a proper cutoff has been made and that transactions recorded on or before the balance sheet date actually occurred.
d. The auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the balance sheet date.

The auditor’s responsibility with respect to events occurring between the balance sheet date and the end of the audit examination is best expressed by which of the following statements?

The auditor’s responsibility with respect to events occurring between the balance sheet date and the end of the audit examination is best expressed by which of the following statements?

a. The auditor is fully responsible for events occurring in the subsequent period and should extend all detailed procedures through the last day of fieldwork.
b. The auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period.
c. The auditor’s responsibility is to determine that a proper cutoff has been made and that transactions recorded on or before the balance sheet date actually occurred.
d. The auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the balance sheet date.

A client has a calendar year-end. Listed below are four events that occurred after December 31. Which one of these subsequent events might result in adjustment of the December 31 financial statements?

A client has a calendar year-end. Listed below are four events that occurred after December 31. Which one of these subsequent events might result in adjustment of the December 31 financial statements?

a. Sale of a major subsidiary.
b. Adoption of accelerated depreciation methods.
c. Write-off of a substantial portion of inventory as obsolete.
d. Collection of 90% of the accounts receivable existing at December 31.

After an auditor has issued an audit report on a nonpublic entity, there is no obligation to make any further audit tests or inquiries with respect to the audited financial statements covered by that report unless:

After an auditor has issued an audit report on a nonpublic entity, there is no obligation to make any further audit tests or inquiries with respect to the audited financial statements covered by that report unless:

a. material adverse events occur after the date of the auditor’s report.
b. final determination or resolution was made of a contingency which had been disclosed in the financial statements.
c. final determination or resolution was made on matters which had resulted in a qualification in the auditor’s report.
d. new information comes to the auditor’s attention concerning an event that occurred prior to the date of the auditor’s report that may have affected the auditor’s report.

An auditor’s decision concerning whether or not to “dual date” the audit report is based upon the auditor’s willingness to:

An auditor’s decision concerning whether or not to “dual date” the audit report is based upon the auditor’s willingness to:

a. extend auditing procedures and assume responsibility for a greater period of time.
b. accept responsibility for subsequent events.
c. permit inclusion of a footnote captioned: event (unaudited) subsequent to the date of the auditor’s report.
d. assume responsibility for events subsequent to the issuance of the auditor’s report.

Subsequent events affecting the realization of assets ordinarily will require adjustments of the financial statements under examination because such events typically represent the:

Subsequent events affecting the realization of assets ordinarily will require adjustments of the financial statements under examination because such events typically represent the:

a. culmination of conditions that existed at the balance sheet date.
b. discovery of new conditions occurring in the subsequent events period.
c. final estimates of losses relating to casualties occurring in the subsequent events period.
d. preliminary estimate of losses relating to new events that occurred subsequent to the balance sheet date.

An auditor must obtain written client representations that normally should be signed by:

An auditor must obtain written client representations that normally should be signed by:

a. the treasurer and the internal auditor.
b. the president and the chairperson of the board.
c. the chief executive officer and the chief financial officer.
d. the corporate counsel and the audit committee chairperson.

Elise-Greer, LLP is an affiliate of the audit client and is audited by another firm of auditors. Which of the following is most likely to be used by the auditor to obtain assurance that all guarantees of the affiliate’s indebtedness have been detected?

Elise-Greer, LLP is an affiliate of the audit client and is audited by another firm of auditors. Which of the following is most likely to be used by the auditor to obtain assurance that all guarantees of the affiliate’s indebtedness have been detected?

a. Send the standard bank confirmation request to all of the client’s lender banks.
b. Review client minutes and obtain a representation letter.
c. Examine supporting documents for all entries in intercompany accounts.
d. Obtain written confirmation of indebtedness from the auditor of the affiliate.

A company guarantees the debt of an affiliate. Which of the following best describes the audit procedure that would make the auditor aware of the guarantee?

A company guarantees the debt of an affiliate. Which of the following best describes the audit procedure that would make the auditor aware of the guarantee?

a. Review minutes and resolutions of the board of directors.
b. Review prior year’s audit files with respect to such guarantees.
c. Review the possibility of such guarantees with the chief accountant.
d. Review the legal letter returned by the company’s outside legal counsel.

An attorney is responding to an independent auditor as a result of the client’s letter of inquiry. The attorney may appropriately limit the response to:

An attorney is responding to an independent auditor as a result of the client’s letter of inquiry. The attorney may appropriately limit the response to:

a. asserted claims and litigation.
b. asserted, overtly threatened, or pending claims and litigation.
c. items which have an extremely high probability of being resolved to the client’s detriment.
d. matters to which the attorney has given substantive attention in the form of legal consultation or representation.

Management furnishes the independent auditor with information concerning litigation, claims, and assessments. Which of the following is the auditor’s primary means of initiating action to corroborate such information?

Management furnishes the independent auditor with information concerning litigation, claims, and assessments. Which of the following is the auditor’s primary means of initiating action to corroborate such information?

a. Request that client lawyers undertake a reconsideration of matters of litigation, claims, and assessments with which they were consulted during the period under examination.
b. Request that client management send a letter of inquiry to those lawyers with whom management consulted concerning litigation, claims, and assessments.
c. Request that client lawyers provide a legal opinion concerning the policies and procedures adopted by management to identify, evaluate, and account for litigation, claims, and assessments.
d. Request that client management engage outside attorneys to suggest wording for the text of a footnote explaining the nature and probable outcome of existing litigation, claims, and assessments.

A CPA has received an attorney’s letter in which no significant disagreements with the client’s assessments of contingent liabilities were noted. The resignation of the client’s lawyer shortly after receipt of the letter should alert the auditor that:

A CPA has received an attorney’s letter in which no significant disagreements with the client’s assessments of contingent liabilities were noted. The resignation of the client’s lawyer shortly after receipt of the letter should alert the auditor that:

a. an adverse opinion will be necessary.
b. undisclosed unasserted claims may have arisen.
c. the auditor must begin a completely new examination of contingent liabilities.
d. the attorney was unable to form a conclusion with respect to the significance of litigation, claims, and assessments.

Which of the following is not required to be communicated to the audit committee or similarly designated body under auditing standards?

Which of the following is not required to be communicated to the audit committee or similarly designated body under auditing standards?

a. All material frauds and illegal acts of a material nature.
b. Disagreements with management about the scope of the audit, applicability of accounting principles, or wording of the audit report.
c. Difficulties encountered in performing the audit, such as lack of availability of client personnel and failure to provide necessary information.
d. Auditor’s responsibilities under generally accepted auditing standards, including responsibility for evaluating internal control and the concept of reasonable rather than absolute assurance.

Which of the following is not a reason why the auditor requests that the client provide a letter of representation?

Which of the following is not a reason why the auditor requests that the client provide a letter of representation?

a. Professional auditing standards require the auditor to obtain a letter of representation.
b. It impresses upon management its responsibility for the accuracy of the information in the financial statements.
c. It provides written documentation of the oral responses already received to inquiries of management.
d. It provides written documentation, which is a higher quality of evidence than management’s oral responses to inquiries.

The process of “final evidence accumulation” is always done late in the engagement. Which one of the following would be done the earliest in the engagement?

The process of “final evidence accumulation” is always done late in the engagement. Which one of the following would be done the earliest in the engagement?

a. Final analytical procedures.
b. Search for contingent liabilities.
c. Evaluate the going concern assumption.
d. Acquire the client’s letter of representation.

The auditor’s responsibility for “reviewing the subsequent events” of a public company that is about to issue new securities is normally limited to the period of time:

The auditor’s responsibility for “reviewing the subsequent events” of a public company that is about to issue new securities is normally limited to the period of time:

a. beginning with the balance sheet date and ending with the date of the auditor’s report.
b. beginning with the start of the fiscal year under audit and ending with the balance sheet date.
c. beginning with the start of the fiscal year under audit and ending with the date of the auditor’s report
d. beginning with the balance sheet date and ending with the date the registration statement becomes effective.

If the auditor concludes that there are contingent liabilities, he or she must evaluate the significance of the potential liability and the nature of the disclosure needed in the financial statements. Which of the following statements is not true?

If the auditor concludes that there are contingent liabilities, he or she must evaluate the significance of the potential liability and the nature of the disclosure needed in the financial statements. Which of the following statements is not true?

a. The potential liability is sufficiently well known in some instances to be included in the financial statements as an actual liability.
b. Disclosure may be unnecessary if the contingency is highly remote or immaterial.
c. Frequently, the CPA firm obtains a separate evaluation of the potential liability from its own legal counsel rather than relying on management or management’s attorneys.
d. Answers b and c are correct, but answer is not.

Why must audit documentation be reviewed?

Why must audit documentation be reviewed?

a. To ensure that the audit meets the CPA firm’s standard of performance.
b. To evaluate the performance of inexperienced personnel.
c. To counteract bias that often enters into the auditor’s judgment.
d. All of the above are reasons for review of audit documentation.

If the auditor determines that a subsequent event that affects the current period financial statements occurred after fieldwork was completed but before the audit report was issued, what date(s) may the auditor use on the report?

If the auditor determines that a subsequent event that affects the current period financial statements occurred after fieldwork was completed but before the audit report was issued, what date(s) may the auditor use on the report?

a. The date on which the last day of fieldwork occurred.
b. The date of the subsequent event.
c. The date on which the last day of fieldwork occurred and the date of the subsequent event.
d. b and c, but not a.

While there is no professional requirement to do so on audit engagements, CPAs frequently issue a formal “management” letter to clients. The primary purpose of this letter is to provide:

While there is no professional requirement to do so on audit engagements, CPAs frequently issue a formal “management” letter to clients. The primary purpose of this letter is to provide:

a. evidence indicating whether the auditor is reasonably certain that internal accounting control is operating as prescribed.
b. a permanent record of the internal accounting control work performed by the auditor during the course of the engagement.
c. a written record of discussions between auditor and client concerning the auditor’s observations and suggestions for improvements.
d. a summary of the auditor’s observations that resulted from the auditor’s special study of internal control.

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

a. Loss of a plant as a result of a flood.
b. Sale of long-term debt or capital stock.
c. Settlement of litigation in excess of the recorded liability.
d. Major purchase of a business that is expected to double the sales volume.

Which of the following determines the sufficiency of evidence?

Which of the following determines the sufficiency of evidence?

a. Generally Accepted Auditing Standards.
b. Securities and Exchange Commission regulations.
c. Auditor judgment.
d. Adherence to the audit program.

Which event that occurred after the end of the fiscal year under audit but prior to issuance of the auditor’s report would not require disclosure in the financial statements?

Which event that occurred after the end of the fiscal year under audit but prior to issuance of the auditor’s report would not require disclosure in the financial statements?

a. Sale of a bond or capital stock issue.
b. Loss of plant or inventories as a result of fire or flood.
c. A significant decline in the market price of the corporation’s stock.
d. Settlement of litigation when the event giving rise to the claim took place after the balance sheet date.

In connection with the annual audit, which of the following is not a “subsequent events” procedure?

In connection with the annual audit, which of the following is not a “subsequent events” procedure?

a. Review available interim financial statements.
b. Read available minutes of meetings of stockholders, directors, and committees and, for meetings where minutes are not available, inquire about matters dealt with at such meetings.
c. Make inquiries with respect to the financial statements covered by the auditor’s previously issued report if new information has become available during the current examination that might affect that report.
d. Discuss with officers the current status of items in the financial statements that were accounted for on the basis of tentative, preliminary, or inconclusive data.

As part of an audit, a CPA often requests a representation letter from the client. Which one of the following is not a valid purpose of such a letter?

As part of an audit, a CPA often requests a representation letter from the client. Which one of the following is not a valid purpose of such a letter?

a. To provide audit evidence.
b. To emphasize to the client the client’s responsibility for the correctness of the financial statements.
c. To satisfy the CPA by means of other auditing procedures when certain customary auditing procedures are not performed.
d. To provide possible protection to the CPA against a charge of knowledge in cases where fraud is subsequently discovered to have existed in the accounts.

Which of the following is the most efficient audit procedure for the detection of unrecorded liabilities at the balance sheet date?

Which of the following is the most efficient audit procedure for the detection of unrecorded liabilities at the balance sheet date?

a. Obtain an attorney’s letter from the client’s attorney.
b. Confirm large accounts payable balances at the balance sheet date.
c. Examine purchase orders issued for several days prior to the close of the year.
d. Compare cash disbursements in the subsequent period with the accounts payable trial balance at year-end.

Which of the following auditing procedures is ordinarily performed last?

Which of the following auditing procedures is ordinarily performed last?

a. Reading minutes of the board of directors’ meetings.
b. Confirming accounts payable.
c. Obtaining a client representation letter.
d. Testing the purchasing function.

Which of the following would be a subsequent discovery of facts which would require a response by the auditor?

Which of the following would be a subsequent discovery of facts which would require a response by the auditor?

a. Discovery of the inclusion of material nonexistent sales.
b. Discovery of the failure to write off material obsolete inventory.
c. Discovery of the omission of a material footnote.
d. Each of the above would require a response by the auditor.

Which of the following statements is correct?

Which of the following statements is correct?

a. A letter of representation is documentation of management’s acceptance of responsibility for the financial statements and is deemed to be reliable evidence.
b. A letter of representation is not deemed to be reliable evidence because of the potential incompetence of management.
c. A letter of representation is not deemed to be reliable evidence because of the lack of independence of the preparers.
d. None of the above is correct.

Which of the following audit procedures would most likely assist an auditor in identifying conditions and events that may indicate there could be substantial doubt about an entity’s ability to continue as a going concern?

Which of the following audit procedures would most likely assist an auditor in identifying conditions and events that may indicate there could be substantial doubt about an entity’s ability to continue as a going concern?

a. Review compliance with the terms of debt agreements.
b. Confirmation of accounts receivable from principal customers.
c. Reconciliation of interest expense with debt outstanding.
d. Confirmation of bank balances.

Which of the following is not a purpose of the client letter of representation?

Which of the following is not a purpose of the client letter of representation?

a. To impress upon the audit firm its responsibility for the audit.
b. To impress upon management its responsibility for the financial statement assertions.
c. To remind management of potential misstatements or omissions in the financial statements.
d. To document the responses from management to inquiries about various aspects of the audit.

A client representation letter is:

A client representation letter is:

a. prepared on the client’s letterhead.
b. addressed to the CPA firm.
c. signed by high-level officials (e.g. the president and chief financial officer).
d. all of the above.

Which of the following statements regarding the letter of representation is not correct?

Which of the following statements regarding the letter of representation is not correct?

a. It is prepared on the client’s letterhead.
b. It is addressed to the CPA firm.
c. It is signed by high-level corporate officials, usually the president and chief financial officer.
d. It is optional, not required, that the auditor obtain such a letter from management.

SAS No. 59 requires auditors to evaluate whether there is a substantial doubt about a client’s ability to continue as a going concern. One of the most important types of evidence to assess the going concern question is:

SAS No. 59 requires auditors to evaluate whether there is a substantial doubt about a client’s ability to continue as a going concern. One of the most important types of evidence to assess the going concern question is:

a. analytical procedures.
b. confirmations of creditors.
c. statistical sampling procedures.
d. inquiries of client and its legal counsel.

SAS No. 59 requires the auditor to evaluate whether there is a substantial doubt about a client’s ability to continue as a going concern for at least:

SAS No. 59 requires the auditor to evaluate whether there is a substantial doubt about a client’s ability to continue as a going concern for at least:

a. one quarter beyond the balance sheet date.
b. one quarter beyond the date of the auditor’s report.
c. one year beyond the balance sheet date.
d. one year beyond the date of the auditor’s report.

Which of the following is not a matter that is typically included in the letter of representation obtained from an audit client?

Which of the following is not a matter that is typically included in the letter of representation obtained from an audit client?

a. Availability of all financial records and related data.
b. Absence of unrecorded transactions.
c. Compliance with aspects of contractual agreements that may affect the financial statements.
d. Assessment of management’s efficiency of decision making.

The audit procedures for the subsequent events review can be divided into two categories: (1) procedures normally integrated as a part of the verification of year-end account balances, and (2) those performed specifically for the purpose of discovering subsequent events. Which of the following procedures is in category 2?

The audit procedures for the subsequent events review can be divided into two categories: (1) procedures normally integrated as a part of the verification of year-end account balances, and (2) those performed specifically for the purpose of discovering subsequent events. Which of the following procedures is in category 2?

a. Correspond with attorneys.
b. Test the collectibility of accounts receivable by reviewing subsequent period cash receipts.
c. Subsequent period sales and purchases transactions are examined to determine whether the cutoff is accurate.
d. Compare the subsequent-period purchase price of inventory with the recorded cost as a test of lower-of-cost-or-market valuation.

The audit procedures for the subsequent events review can be divided into two categories: (1) procedures integrated as a part of the verification of year-end account balances, and (2) those performed specifically for the purpose of discovering subsequent events. Which of the following procedures is in category 1?

The audit procedures for the subsequent events review can be divided into two categories: (1) procedures integrated as a part of the verification of year-end account balances, and (2) those performed specifically for the purpose of discovering subsequent events. Which of the following procedures is in category 1?

a. Inquiries of client regarding contingent liabilities.
b. Obtain a letter of representation written by client.
c. Subsequent period sales and purchases transactions are examined to determine whether the cutoff is accurate.
d. Review journals and ledgers of year 2 to determine the existence of any transaction related to year 1.

The letter of representation obtained from an audit client should be:

The letter of representation obtained from an audit client should be:

a. dated as of the end of the period under audit.
b. dated as of the audit report date.
c. dated as of any date decided upon by the client and auditor.
d. left undated.

Which of the following items would ordinarily not be included in the standard letter of inquiry to the client’s attorney?

Which of the following items would ordinarily not be included in the standard letter of inquiry to the client’s attorney?

a. A list, prepared by management, of pending threatened litigation of material amounts.
b. A request that the attorney furnish information or comment about the likelihood of an unfavorable outcome of litigation.
c. A request that the attorney furnish an estimate of the amount or range of the potential loss.
d. A request that the attorney confirm the amount of outstanding fees which client owes for legal services.

The standard letter of inquiry to the client’s legal counsel should be prepared on:

The standard letter of inquiry to the client’s legal counsel should be prepared on:

a. plain paper (no letterhead) and be unsigned.
b. lawyer’s stationery and signed by the lawyer.
c. auditor’s stationery and signed by an audit partner.
d. client’s stationery and signed by a company official.

Commitments include all but which of the following?

Commitments include all but which of the following?

a. Agreements to purchase raw materials.
b. Pension plans.
c. Agreements to lease facilities at set prices.
d. Each of the above is a commitment.

Which of the following procedures might be useful in discovering a contingent liability for a lawsuit that management is intentionally neglecting to disclose?

Which of the following procedures might be useful in discovering a contingent liability for a lawsuit that management is intentionally neglecting to disclose?

a. Inquiries (orally and in writing) of management.
b. Analyzing legal expense and review invoices and statements from outside legal counsel.
c. Reviewing current and previous years’ internal revenue agent reports.
d. Obtaining a letter of representation from management that it is aware of no undisclosed contingent liabilities.

Inquiries of management regarding the possibility of unrecorded contingencies will not be useful in uncovering:

Inquiries of management regarding the possibility of unrecorded contingencies will not be useful in uncovering:

a. management’s intentional failure to disclose existing contingencies.
b. a particular type of contingency which management has overlooked.
c. when management does not comprehend accounting disclosure requirements.
d. all three of the above items.

Which of the following procedures and methods are important in assessing a company’s ability to continue as a going concern?

Which of the following procedures and methods are important in assessing a company’s ability to continue as a going concern?

a. Performance of analytical procedures directed at profitability, asset turnover, and cash flows.
b. Discussions with management regarding future plans related to sales activities, cost controls, and marketing efforts.
c. Knowledge of the client’s business gained throughout the audit.
d. All of the above are important procedures and methods used in assessing going concern.

Which of the following subsequent events is most likely to result in an adjustment to a company’s financial statements?

Which of the following subsequent events is most likely to result in an adjustment to a company’s financial statements?

a. Merger or acquisition activities.
b. Bankruptcy (due to deteriorating financial condition) of a customer with an outstanding accounts receivable balance.
c. Issuance of common stock.
d. An uninsured loss of inventories due to a fire.

Which of the following is not one of the three main reasons why it is essential that audit files be thoroughly reviewed by another member of the audit firm at the completion of the audit?

Which of the following is not one of the three main reasons why it is essential that audit files be thoroughly reviewed by another member of the audit firm at the completion of the audit?

a. To evaluate the performance of inexperienced personnel.
b. To counteract the bias that frequently enters into the auditor’s judgement.
c. To make sure that the audit meets the CPA firm’s standard of performance.
d. To evaluate the accuracy of the auditing firm’s time budget for the engagement.

Auditors will generally send a standard inquiry letter to:

Auditors will generally send a standard inquiry letter to:

a. only those attorneys who have devoted substantial time to client matters during the year.
b. every attorney that the client has been involved with in the current or preceding year, plus any attorney the client engages on occasion.
c. those attorneys whom the client relies on for advice related to substantial legal matters.
d. none of the above.

Whenever subsequent events are used to evaluate the amounts included in the statements, care must be taken to distinguish between conditions that existed at the balance sheet date and those that come into being after the end of the year. The subsequent information should not be incorporated directly into the statements if the conditions causing the change in valuation:

Whenever subsequent events are used to evaluate the amounts included in the statements, care must be taken to distinguish between conditions that existed at the balance sheet date and those that come into being after the end of the year. The subsequent information should not be incorporated directly into the statements if the conditions causing the change in valuation:

a. took place before year-end.
b. did not take place until after year-end.
c. occurred both before and after year-end.
d. are reimbursable through insurance policies.

Which type of subsequent event requires consideration by management and evaluation by the auditor?

Which type of subsequent event requires consideration by management and evaluation by the auditor?

a. Subsequent events that have a direct effect on the financial statements and require adjustment.
b. Subsequent events that have no direct effect on the financial statements but for which disclosure is advisable.
c. Both a and b.
d. Neither a nor b.

The auditor has a responsibility to review transactions and activities occurring after the year-end to determine whether anything occurred that might affect the statements being audited. The procedures required to verify these transactions are commonly referred to as the review for:

The auditor has a responsibility to review transactions and activities occurring after the year-end to determine whether anything occurred that might affect the statements being audited. The procedures required to verify these transactions are commonly referred to as the review for:

a. contingent liabilities.
b. subsequent year’s transactions.
c. late unusual occurrences.
d. subsequent events.

At the completion of the audit, management is asked to make a written statement that it is not aware of any undisclosed contingent liabilities. This statement would appear in the:

At the completion of the audit, management is asked to make a written statement that it is not aware of any undisclosed contingent liabilities. This statement would appear in the:

a. management letter.
b. letter of inquiry.
c. letters testamentary.
d. letter of representation.

Which of the following is an incorrect combination of the “likelihood of occurrence” and financial statement treatment?

Which of the following is an incorrect combination of the “likelihood of occurrence” and financial statement treatment?

a. Remote – no disclosure.
b. Probable (amount is estimable) – financial statements are adjusted.
c. Reasonably possible (amount is estimable) – financial statements are adjusted.
d. Probable (amount is not estimable) – footnote disclosure is required.

If a potential loss on a contingent liability is remote, the liability should be:

If a potential loss on a contingent liability is remote, the liability should be:

a. disclosed in footnotes, but not accrued.
b. neither accrued nor disclosed in footnotes.
c. accrued and indicated in the body of the financial statements.
d. disclosed in the auditor’s report but not disclosed on the financial statements.

Which of the following is not a condition for a contingent liability to exist?

Which of the following is not a condition for a contingent liability to exist?

a. There is a potential future payment to an outside party that would result from a current condition.
b. There is uncertainty about the amount of the future payment.
c. The outcome of an uncertainty will be resolved by some future event.
d. The amount of the future payment is reasonably estimable.

Class templates are called ____types.

Class templates are called ____types. 


b.parameterized

The general
syntax to define a derived class is:
class className:memberAccessSpecifier baseClassName
{
memberlist
};

A base class wants to allow a derived class to access one of its data members. However, the base class does not want this member to be directly accessed outside the class. The base class should declare the member using the ____ access specifier.

A base class wants to allow a derived class to access one of its data members. However, the base class does not want this member to be directly accessed outside the class. The base class should declare the member using the ____ access specifier.


b.protected

template<classType>
function definition;
where Type is referred to as a formal parameter of the template. It
is used to specify the type of
parameters of the function and the return type of the function, and to declare variables within the
function. Look at the following code:
template<classType>
Type larger(Type x,Type y)
{
if(x>=y)
return x;
else
return y;
}

While working on an IT project, you learn that a particular department plans to reduce its staff by 50%.

While working on an IT project, you learn that a particular department plans to reduce its staff by 50%. The manager of this department has asked the project team to keep this information secret until the plans are finalized. A good friend of yours works in this department and has asked you whether you heard of any news concerning the future of the department. This would be an example of which of the following ethical dilemmas? 


a. Confidence
b. Human resource
c. Corporate resource
d. Conflict of interest
e. None of the above
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