13-21

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1. 

A client has changed the salvage values of a number of its fixed assets. The auditors believe that the salvage values are realistic. The appropriate report on the financial statements is:

A) Standard unmodified.

B) Unmodified with explanatory language as to consistency.

C) Qualified for consistency.

D) Disclaimer.

 
Standard unmodified.
 
2. 

Which of the following information need not be reported on in the auditors' report if the information is considered to be properly stated after performing appropriate procedures?

A) FASB-required supplementary information.

B) Other information in documents containing audited financial statements.

C) Supplementary information in relation to the financial statements as a whole.

D) GASB-required supplementary information.

 
Other information in documents containing audited financial statements.
 
3. 

A common audit procedure in the audit of payroll transactions involves tracing selected items from the payroll journal to employee time cards that have been approved by supervisory personnel. This procedure is designed to provide evidence in support of the audit proposition that:

A) Only bona fide employees worked and their pay was properly computed.

B) Jobs on which employees worked were charged with the appropriate labor cost.

C) Internal control relating to payroll disbursements are operating effectively.

D) Employees worked the number of hours for which their pay was computed.

 
Employees worked the number of hours for which their pay was computed.
 
4. 

Which of the following types of audits is designed to determine that an organization has complied with the specific requirements of major financial assistance programs?

A) An audit in accordance with Government Auditing Standards.

B) A single audit.

C) An audit in accordance with generally accepted auditing standards.

D) An operational audit.

 
A single audit.
 
5. 

A material weakness that exists at year end will result in what type of audit report on internal control?

A) Adverse.

B) Qualified.

C) Unqualified.

D) Unqualified with explanatory language.

 
Advrerse
 
6. 

When an adverse opinion is expressed, the opinion paragraph should include a direct reference to:

A) A note to the financial statements which discusses the basis for the opinion.

B) The Auditor's Responsibility section of the audit report which discusses the basis for the opinion rendered.

C) A separate paragraph (section) which discusses the basis for the opinion rendered.

D) The consistency in the application of generally accepted accounting principles.

 
A separate paragraph (section) which discusses the basis for the opinion rendered.
 
7. 

Which of the following is not required of an individual seeking to become a certified internal auditor?

A) Two years work experience in internal auditing or its equivalent.

B) Successful completion of a two-day examination.

C) A baccalaureate degree from an accredited college.

D) One year of supervisory experience.

 
One year of supervisory experience.
 
8. 

If the predecessor auditors do not reissue their audit report on comparative financial statements the successor auditors should:

A) Express a qualified opinion on the comparative financial statements audited by the predecessor auditors.

B) Reproduce the predecessor auditors' report and include it with the new set of financial statements.

C) Have the client omit the comparative financial statements.

D) Refer to the report of the predecessor auditors.

 
Refer to the report of the predecessor auditors.
 
9. 

A scope restriction is least likely to result in a(an):

A) Qualified opinion.

B) Disclaimer of opinion.

C) Adverse opinion.

D) Standard unmodified opinion.

 
Adverse Opinion
 
10. 

Which of the following is not a difference between the audit report of a nonpublic and public company?

A) The public company report includes the word "Registered" in the title.

B) The public company report refers to standards of the PCAOB.

C) The public company report has an additional paragraph referring to the client's fraud prevention procedures.

D) The public company report is shorter.

 
The public company report has an additional paragraph referring to the client's fraud prevention procedures.
 
11. 

Which of the following best describes the scope of internal auditing as it has developed to date?

A) Internal auditing involves appraising the economy and efficiency with which resources are employed.

B) Internal auditing involves evaluating compliance with policies, plans, procedures, laws, and regulations.

C) Internal auditing has evolved to verifying the existence of assets and reviewing the means of safeguarding assets.

D) Internal auditing has evolved to more of an operational orientation from a financial orientation.

 

Internal auditing has evolved to more of an operational orientation from a financial orientation.

 
12. 

An independent auditor has concluded that substantial doubt remains about a client's ability to continue as a going concern, but the client's financial statements have properly disclosed all of its solvency problems. The auditor would probably issue a(an):

A) Unmodified opinion with an appropriate emphasis of matter paragraph.

B) "Except for" qualified opinion.

C) Standard unmodified opinion.

D) Adverse opinion.

 
Unmodified opinion with an appropriate emphasis of matter paragraph.
 
13. 

An approach that quantifies the total likely misstatement as of the current year-end based on the effects of reflecting misstatements during the current year (and not considering any unadjusted previous year misstatements) is referred to as the:

A) Evaluation materiality approach.

B) Iron curtain approach.

C) Projected misstatement approach.

D) Rollover approach.

 
Rollover approach.
 
14. 

Which of the following most likely would approve the issuance of notes payable?

A) Controller.

B) Payroll.

C) Personnel.

D) Treasurer.

 
Treasurer
 
15. 

Which of the following is used to obtain evidence that the client's equipment accounts are not understated?

A) Analyzing repairs and maintenance expense accounts.

B) Vouching purchases of plant and equipment.

C) Recomputing depreciation expense.

D) Analyzing the miscellaneous revenue account.

 
Analyzing repairs and maintenance expense accounts.
 
16. 

An operational audit report which deals with the scrap disposal function in a manufacturing company is most likely to address:

A) The efficiency and effectiveness of the scrap disposal function and include any findings requiring corrective action.

B) Whether the scrap material inventory is reported as a current asset.

C) Whether the physical inventory count of the scrap material agrees with the recorded amount.

D) Whether the scrap materials inventory is valued at the lower of cost or market.

 
The efficiency and effectiveness of the scrap disposal function and include any findings requiring corrective action.
 
17. 

When a client declines to disclose essential information in the financial statements or notes, the auditor of the financial statements should:

A) Provide the information in the audit report, if practicable, and qualify the opinion because of a limitation on the scope of the audit.

B) Provide the information in the audit report, if practicable, and qualify the opinion because of a departure from GAAP.

C) Issue a disclaimer of opinion because the client has interfered with the auditor's function of assessing the adequacy of disclosure.

D) Issue an unmodified opinion, but inform the reader by including the omitted information in the audit report.

 
Provide the information in the audit report, if practicable, and qualify the opinion because of a departure from GAAP.
 
18. 

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.

B) May accept the engagement but must 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.

 
May accept the engagement.
 
19. 

Assume that an auditor is focusing on two weaknesses in internal control. Although neither is by itself a material weakness, the two significant deficiencies in combination represent a material weakness. The client effectively remediates one of them prior to year-end but does not have time to remediate the other prior to year-end. What type of audit report on internal control is appropriate?

A) Adverse.

B) Qualified.

C) Unqualified.

D) Unqualified with explanatory language.

 
Unqualified
 
20. 

A control deficiency that is less than a significant deficiency is most likely to result in what form of audit opinion on internal control?

A) Adverse.

B) Qualified.

C) Unqualified.

D) Unqualified with explanatory language.

 
Unqualified