Audit Final

Confirms the exact accuracy of management's financial representations

Lends credibility to the financial statements

Guarantees that financial data are fairly presented

Assures the readers of financial statements that any fraudulent activity has been corrected.

Managements fraud may exist, and it is more likely to be detected by independent auditors than by internal auditors.

Different interests may exist between the entity preparing the statements and the persons using the statements, and thus outside assurance is needed to enhance the credibility of the statements.

A misstatement of account balances may exist, and all misstatements are generally corrected as a result of the independent auditor's work

An entity may have a poorly designed internal control system.

Arrest is a type of auditing service.

Auditing and attest services represent two distinctly different types of services.

Auditing is a type of assurance service.

Assurance is a type of attest service.

Independence is an important attribute of assurance service providers

Assurance services can be performed to improve the quality or context of information for decision makers.

Financial statement auditing is a form of attest service but it is not an assurance service.

In performing an attest service, the CPA determines the correspondence of the subject matter (or an assertion about the subject matter) against criteria that are suitable and available to users.

To determine the audit fee.

To decide which facts about the entity to include in the audit report.

To plan the audit and determine the scope of audit procedures to be performed.

To limit audit risk to an appropriately high level.

Materiality refers to the "material" from which audit evidence is developed.

The higher the level at which the auditor assesses materiality, the greater the amount of evidence the auditor must gather.

The lower the level at which the auditor assesses materiality, the greater the amount of evidence the auditor must gather.

The level of materiality has no bearing on the amount of evidence the auditor must gather.

Understanding a client's system of internal control can help the auditor assess risk and identify areas where financial statement misstatements might be more likely.

Understanding a client's system of internal control can help the auditor make valuable recommendations to management at the end of the engagement.

Understanding a client's system of internal control can help the auditor seel consulting services to the client.

Understanding a client's system of internal control is not a required part of the audit process.

Understanding the client and the client's industry.

Determining audit engagement team requirements.

Ensuring the independence of the audit team and audit firm.

All of the above.

Issuance of an unqualified auditor's report indicates that in the auditor's opinion the client's financial statements are not fairly enough presented in accordance with agreed-upon criteria to qualify for a clean opinion.

Issuance of an unqualified auditor's report indicates that the auditor is not qualified to express an opinion that the client's financial statements are fairly presented in accordance with agreed-upon criteria.

Issuance of an unqualified auditor's report indicates that the auditor is expressing different opinions on each of the basic financial statements regarding whether the client's financial statements are fairly presented in accordance with agreed-upon criteria.

Issuance of a standard unqualified auditor's report indicates that in the audtior's opinion the client's financial statements are fairly presented in accordance with agreed-upon criteria, which no need for the inclusion of the qualifying phrases.

Implicitly referred to in the opening paragraph of the auditor's standard report

Explicitly referred to in the opening paragraph of the auditor's standard report

Implicitly referred to in the scope paragraph of the auditor's standard report

Explicitly referred to in the scope paragraph of the auditor's standard report

Implicitly referred to in the opinion paragraph of the auditor's standard report

Explicitly referred to in the opinion paragraph of the auditor's standard report.

Standard unqualified opinion.

Qualified opinion due to departure from GAAP.

Adverse opinion.

No opinion at all.

Sarbanes-Oxley act, increased consulting services to audit clients, Enron and other scandals, prohibition of most consulting work for audit clients, establishment of PCAOB.

Increased consulting services to audit clients, Sarbanes-Oxley act, Enron and other scandals, prohibition of most consulting work for audit clients, establishment of PCAOB.

Enron and other scandals, Sarbanes-Oxley Act, increased consulting services to audit clients, prohibition of most consulting work for audit clients, establishment of PCAOB.

Increased consulting services to audit clients, Enron and other scandals, Sarbanes-Oxley Act, prohibition of most consulting work for audit clients, establishment of PCAOB.

To achieve its objectives, a business formulates strategies and implements processes, which are carried out through business transactions. The entity's information and internal control systems must be designed to ensure that the transactions are properly executed, captured, and processed.

To achieve its strategies, a business formulates objectives and implements processes, which are carried out through the entity's information and internal control systems. Transactions are conducted to ensure that the processes are properly executed, captured, and processed.

To achieve its objectives a business formulates strategies to implement its transactions, which are carried out through business processes. The entity's information and internal control systems must be designed to ensure that the processes are properly executed, captured, and processed.

To achieve its business processes, a business formulates objectives, which are carried out through the entity's strategies. The entity's information and internal control systems must be designed to ensure that the entity's strategies are properly executed, captured, and processed.

The competence, independence, and professional care of persons performing the audit.

Criteria for the content of the auditor's report on financial statements and related footnote disclosures.

Criteria for audit planning and evidence gathering.

The need to maintain an independence of mental attitude in all matters relating to the audit.

Management and the external auditor share equal responsibility for the fairness of the entity's financial statements in accordance with GAAP.

Neither management nor the external auditor has significant responsibility for the fairness of the entity's financial statements in accordance with GAAP.

Management has the primary responsibility to ensure that the company's financial statements are prepared in accordance with GAAP, and the auditor provides reasonable assurance that the statements are free of material misstatement.

Management has the primary responsibility to ensure that the company's financial statements are prepared in accordance with GAAP, and the auditor provides a guarantee that the statements are free of material misstatement.

Is a quasi-governmental organization that has legal authority to set auditing standards for audits of public companies.

Is a quasi-governmental organization that has legal authority to set accounting standards for public companies.

Is a quasi-governmental organization that has a policy to ignore public comment and input in the process of setting auditing standards.

Is a quasi-governmental organization that is independent of the SEC in setting auditing standards.

Assisting the external auditors.

Providing reports on the reliability of financial statments to investors and creditors.

Consulting activities.

Operational auditrs.

Future improvements to accomplish the goals of management.

The accuracy of data reflected in management's financial records.

Verification that an entity's financial statements are fairly presented.

Past protection provided by existing internal control.

I only

II only

Both I and II.

Neither I nor II

Internal control

Expected misstatement.

Control risk.

Materiality and audit risk.

Obtains reasonable assurance about whether the financial statements are free of material misstatement.

Assesses the accounting principles used and also evaluates the overall financial statement presentation.

Realizes that some matters, either individually or in the aggregate, are important while other matters are not important.

Is responsible for expressing an opinion on the financial statements, which are the responsibility of management.

Audit risk and inherent risk.

Audit risk and control risk

Inherent risk and control risk.

Control risk and detection risk.

Whether management has ever intentionally violated the securities laws.

Whether management has any knowledge of fraud that has been perpetrated on or within the entity.

Management's attitudes toward regulatory authorities.

Management's attitutde about hiring ethical employees.

Turnover of senior accounting personnel is low.

Insiders recently purchased additional shares of the entity's stock.

Management places substantial emphasis on meeting earnings projections.

The rate of change in the entity's industry is slow.

Classifying inventory held for resale as supplies.

Investing cash and earnings a 3 percent rate of return as opposed to paying off a loan with an interest rate of 7 percent.

An employee of a consumer electronics store steals 12 CD players.

Management estimates bad debt expense as 2 percent of sales when it actually expects bad debts equal to 10 percent of sales.

Company management falsifies inventory count tags, thereby overstating ending inventory and understating cost of sales.

An employee diverts customer payments to his personal use, concealing his actions by debiting an expense account, thus overstating expenses.

An employee seals inventory, and the shrinkage is recorded as a cost of goods sold.

An employee borrows small tools from the company and neglects to return them; the cost is reported as a a miscellaneous operating expense.

When the amount is material

When the fraud results from misappropriation of assets rather than fraudulent financial reporting.

In response to inquiries from a s successor auditor.

When a line manager rather than a lower-level employee commits the fraudulent act.

The amount of misstatement that management is willing to tolerate in the financial statements.

Materiality for the balance sheet as a whole.

Materiality for the income statement as a whole.

Materiality allocated to a specific account.

Find smaller errors.

Find larger errors.

Increase the tolerable misstatements in the accounts.

Decrease the risk of over reliance.

Reviewing standard bank confirmations for indications of cash manipulations.

Comparing a sample of shipping documents to related sales invoices.

Observing the client's distribution of payroll checks.

Confirming a sample of recorded receivables by direct communication with the debtors.

Financial statement to the potentially unrecorded items.

Potentially unrecorded items to the financial statements.

.Accounting records to the supporting documents.

Supporting documents to the accounting records.

To be appropriate, audit evidence should be either persuasive or relevant but need not be both.

The measure of the reliability of audit evidence lies in the auditor's judgment.

The difficulty and expense of obtaining audit evidence concerning an account balance is a valid basis for omitting the test.

A client's general ledger may be sufficient audit evidence to support the financial statements.

Inquiries of the client's internal accounting staff.

Inspection of prenumbered client purchase orders filed in the vouchers payable department.

Observation of procedures performed by the client's personnel on the entity's trial balance.

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

Prenumbered purchase order forms prepared by the client.

Bank statements obtained from the client.

Test counts of inventory performed by the auditor.

Correspondence from the client's attorney about litigation.

Bank statements obtained from the client.

Computations made by the auditor.

Prenumbered client sales invoices.

Vendors' invoices included in the client's files.

Inventory held in a third-party warehouse.

Refundable income taxes.

Long-term debt.

Stockholders' equity.

A flowchart of the accounting system.

Organization charts.

A copy of the financial statements.

Copies of bond and note indentures.

Review notes pertaining to questions and comments regarding the audit work performed.

A schedule of time spent on the engagement by each individual auditor.

Correspondence with the client's legal counsel concerning pending litigation.

Narrative descriptions of the client's accounting system and control procedures.

Lead schedule.

Supporting schedule.

Audit control account.

Working trial balance.

Awareness of the consistency in the application of generally accepted accounting principles between periods.

Evaluation of all matters of continuing accounting significance.

Opinion of any subsequent events occurring since the predecessor's audit report was issued.

Understanding as to the reasons for the change of auditors.

Internal control letter.

Letter of audit inquiry.

Management letter.

Engagement letter.

Place limited reliance on the work performed by the internal auditors.

Decrease the extent of the tests of controls needed to support the assessed level of detection risk.

Increase the extent of the procedures needed to reduce control risk to an acceptable level.

Avoid using the work performed by the internal auditors.

Identify specific internal control activities that are likely to prevent fraud.

Evaluate the reasonableness of the client's accounting estimates.

Discuss the timing of the audit procedures with the client's management.

Inquire of the client's attorney if it is probable that any unrecorded claims will be asserted.

Consider whether the extent of substantive procedures may be reduced based on the results of the internal control questionnaire.

Determine planning materiality for audit purposes.

Conclude whether changes in compliance with prescribed internal controls justify reliance on them.

Prepare a preliminary draft of the management representation letter.

Representatives of the major equity interests (preferred stock, common stock).

The audit partner, the chief financial officer, the legal counsel, and at least one outsider.

Representatives from the client's management, investors, suppliers, and customers.

Members of the board of directors who are not officers or employees.

The payment violated the client's policies regarding the prevention of illegal acts.

The client receives financial assistance from a federal government agency.

Documentation that is necessary to prove that the bribes were paid does not exist.

Management fails to take the appropriate remedial action.

An auditor's responsibility to detect illegal acts that have a direct and material effect on the financial statements is the same as that for errors and fraud.

An audit in accordance with generally accepted auditing standards normally includes audit procedures specifically designed to detect illegal acts that have an indirect but material effect on the financial statements.

An auditor considers illegal acts from the perspective of the reliability of management's representations rather than their relation to audit objectives derived from financial statement assertions.

An auditor has no responsibility to detect illegal acts by clients that have an indirect effect on the financial statements.

Enhancing the auditor's understanding of the client's business and of events that have occurred since the last audit date.

Developing plausible relationships that corroborate anticipated results with measurable amount of precision.

Applying ratio analysis to externally generated data such as published industry statistics or price indexes.

Comparing recorded financial information to the results of other tests of transactions and balances.

Obtain evidence from details tested to corroborate particular assertions.

Identify areas that represent specific risks relevant to the audit.

Assist the auditor in assessing the validity of the conclusions reached.

Satisfy doubts when questions arise about a client's ability to continue in existence.

The comparison, across time or to a benchmark, of relationships between financial statement accounts or between an account and nonfinancial data.

Development of a model to form an expectation using financial data, nonfinancial data, or both to test account balances or charges in account balances between accounting periods.

The examination of changes in an account over time.

The comparison of common-size financial statements over time.