Auditing Theory

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| By Nikkisanoria
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Nikkisanoria
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1. Which organizations operate to enforce ethical conduct among certified public accountants?

Explanation

The correct answer is the AICPA, state societies of CPAs, and state boards of accountancy. These organizations are responsible for enforcing ethical conduct among certified public accountants. The AICPA (American Institute of Certified Public Accountants) sets ethical standards for the profession and has a code of professional conduct that CPAs must adhere to. State societies of CPAs also play a role in promoting ethical behavior among their members. State boards of accountancy regulate the licensing and disciplinary actions for CPAs in their respective states, ensuring that ethical standards are upheld. The SEC (Securities and Exchange Commission) primarily focuses on regulating the financial markets and public companies, rather than specifically enforcing ethical conduct among CPAs.

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About This Quiz
Auditing Quizzes & Trivia

This Auditing Theory quiz assesses knowledge of ethical standards, compliance, and audit efficiency within the accounting profession. It covers AICPA conduct codes, governmental audit reporting, and sampling risks,... see moreaiming to enhance understanding and application of auditing principles. see less

2.       To improve control over merchandise purchases, a company's receiving department should

Explanation

The correct answer is to accept merchandise only if an approved purchase order is on hand. This ensures that the receiving department has proper documentation and authorization for the merchandise being received. It helps prevent unauthorized purchases and ensures that the company has control over its inventory and expenses. Accepting and counting all merchandise received from known vendors may not be sufficient as it does not guarantee that the purchases were approved. Relying solely on shipping documents to prepare receiving reports may lead to errors or discrepancies. The receiving department should be responsible for both handling merchandise and preparing receiving reports to ensure accuracy and accountability.

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3. Due professional care requires

Explanation

Due professional care requires a critical review of the work done at every level of supervision. This means that professionals should carefully assess and evaluate the work performed by their subordinates or team members. By conducting a critical review, professionals can identify any errors, omissions, or inconsistencies in the work and take necessary corrective actions. This ensures that the work meets the required standards and is of high quality. It also helps in maintaining the integrity and credibility of the profession. The other options listed, such as the examination of corroborating evidence, exercising error-free judgment, and considering internal control structure, are important aspects of due professional care but are not specifically mentioned in the question.

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4. Which of the following is prohibited by the AICPA Code of Professional Conduct? 

Explanation

The AICPA Code of Professional Conduct prohibits a firm from designating itself as "Members of the AICPA" when one of its partners has been expelled from the AICPA. This is because the use of such a designation implies that all partners in the firm are members of the AICPA, which is not the case when one partner has been expelled. This violates the principle of integrity and professional behavior, as it misrepresents the firm's membership status and undermines the credibility of the AICPA.

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5. In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk too                         high relate to the 

Explanation

The risk of incorrect rejection and the risk of assessing control risk too high relate to the efficiency of the audit. This means that if the efficiency of the audit is low, there is a higher likelihood of incorrectly rejecting the sample or assessing control risk too high. This could be due to factors such as inadequate planning, insufficient resources, or ineffective sampling techniques. Therefore, it is important for auditors to ensure that their audit procedures are efficient in order to minimize these risks.

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6. In a governmental financial audit, the auditor is required to test an entity's compliance with applicable laws and regulations and to prepare a written report that provides all of the following except

Explanation

The auditor is required to test an entity's compliance with applicable laws and regulations and prepare a written report that provides positive assurance on items tested, negative assurance on items not tested, and a description of material instances of noncompliance for items tested. However, the report does not include a description of the entity's performance on major financial assistance programs.

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7. When an auditor selects a sample of items from the vouchers payable register for the last month of the period audited and traces the items to underlying documents, the auditor is gathering evidence primarily in support of the assertion that

Explanation

The auditor is gathering evidence primarily in support of the assertion that recorded obligations were valid. By tracing the items from the vouchers payable register to underlying documents, the auditor can verify that the recorded obligations actually existed and were legitimate. This helps to ensure that the financial statements accurately reflect the company's obligations and liabilities.

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8. Client strategy templates provide a means for an auditor to 

Explanation

Client strategy templates provide a means for an auditor to compile the strategies and characteristics of an entity. This means that the templates allow the auditor to gather and organize information about the client's strategies, such as their business goals and objectives, as well as the characteristics of the entity, such as its industry, size, and structure. By having this information compiled in a template, the auditor can have a better understanding of the client's operations and risks, which can help in planning and conducting the audit effectively.

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9. In a variables sampling plan, an auditor must generally consider each of the following except

Explanation

In a variables sampling plan, an auditor must generally consider variation within the population, acceptable risk of incorrect acceptance, and tolerable error. However, population size is not a factor that needs to be considered in this type of sampling plan. The focus is on the variability of the population, the risk of accepting incorrect results, and the acceptable level of error, rather than the size of the population being sampled.

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10. Which of the following incorrectly matches the authoritative body with its authoritative pronouncements?

Explanation

The given answer is correct because it accurately identifies the mismatch between the authoritative body and its authoritative pronouncements. The Auditing Standards Executive Committee is incorrectly matched with "Statements on Auditing Procedure." The correct pronouncements for this committee are "Statements on Auditing Standards."

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Due professional care requires
Which ...
In assessing ...
In a governmental ...
When an auditor selects a ...
Client strategy templates provide a means for an auditor to 
In ...
Which of the ...
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