The auditors were unable to attend the year end inventory count and the inventory balance is material.
The allowance for doubtful accounts is understated by an amount that is material but not pervasive.
The auditors are not independent from the audit client.
The cost of goods sold is overstated by an amount that is material and pervasive.
None of the above.
The scope paragraph of the Auditor's report would be modified for a Qualified Opinion with a GAAP departure.
The GAAP error found by the auditor must be material and pervasive.
The introductory paragraph of the Qualified Auditor's Report would be different from the introductory paragraph of an Unqualified Auditor's Report.
A third paragraph should be included in the Auditor's Report explaining the GAAP error identified.
All of the above.
The audit report date is the date that management approves the financial statements.
The date represents when management and the auditors have agreed to the accounting adjustments.
The date represents substantial completion of the audit work.
The date represents when the auditors have completed all their audit work.
They typically review the entire Annual Report of the Company.
They act as a liaison between the auditors and management.
They typically review and approve the audit fee.
They assist management with the preparation of the year-end Financial Statements.
None of the above.
An error in the financial statements is considered material if the decision of a person who is relying on the financial statements would be changed.
If an error in the financial statements is immaterial, it does not matter if it was due to fraud or illegal transactions.
You can never have an Unqualified Auditor's Report if there is a material error in the Financial Statements.
When calculating materiality, you could use total assets at the base to calculate the materiality amount.
None of the above.
Criteria to audit against
Reporting after the audit has been completed
Must be performed by a Chartered Accountant
Audit evidence must be gathered
None of the above
Independence
Confidentiality
Association with false and misleading information.
Competency
C and D above
Auditors are selected after the client's year-end and therefore it was not possible for them to observe the year-end inventory count.
Management refuses to allow you to confirm the receivables at year-end.
Management refuses to increase their allowance for doubtful accounts for a customer that is now in bankruptcy and has no money.
During your audit work, the client informed you that they purchased a new factory in Asia just before year-end which is material but it is now too late to audit that factory but the client would still like the Auditor's Report.
None of the above.
Must not take on as an audit client a company owned by a member of his/her immediate family
Must be independent in fact and in appearance
Must not have a direct financial interest in a client
Must have a license to practice as a public accountant
Obtain knowledge of matters that related to the nature of the entity's business
Design special substantive tests to compensate for the lack of industry expertise
Engage financial experts familiar with the nature of the industry
Reduce audit risk by lowering the preliminary levels of materiality
Existing legal exposure of CAs
The potential for interference by the regional or provincial securities exchanges and government
Peer review requirements
All of the above
All services provided by CA firms
Audit and MAS services, but not tax services
Only audit and attestation services
Audit and tax services, but not MAS services
A qualified opinion
A denial of opinion
An adverse opinion
An unqualified opinion
Denial of opinion
Adverse opinion
Unqualified opinion with a separate reservation paragraph
"except for" qualified opinion regarding a departure from generally accepted accounting principles
The auditor is not independent during the fiscal period under audit
The financial statements have not been prepared in accordance with generally accepted accounting principles
The client company's financial statements show a significant net loss for each of the last three years, including the current fiscal period
The scope of the auditor's examination has been restricted, although the cause of the restriction was not the client's fault
A client-imposed scope limitation
The client's failure to present supplementary information required by the FASB
Inadequate disclosure of material information
The qualifications of an opinion by the other auditor of a subsidiary where there is a division of responsibility
Be liable only to the corporation and to third parties who are members of a class of intended users of the financial statements
Be liable only to third parties in privity of contract with the CA
Probably be liable to any person who suffered a loss as a result of the fraud
Probably be liable to the corporation even though its management was aware of the fraud and did not rely on the financial statements
Gross negligence
Breach of contract
Either negligence or gross negligence
Strict liability for all damages incurred
To provide an opinion on whether the company is run effectively
To assist management with the preparation of the year-end financial statements
To assess whether the financial statements are fairly presented in accordance with GAAP, in all material respects
To provide shareholders with a guarantee that there are no errors in the financial statements
All of the above
To aid the independent auditors with the financial statement audit
To assess whether the company’s processes are efficient and effective
To review operational management to ensure they are complying with company policies
To ensure that individuals are completing their tax returns properly
None of the above
The audit is not adequately planned
The auditor did not have time to complete all the audit procedures but did not inform anyone and an audit opinion was issued
The auditor did not obtain an understanding of the company’s business
All of the above
None of the above
Adequate hiring policies that ensure competence and integrity of personnel
Organizational culture that provides audit quality
Supervision of auditing team members and review of their work
Ongoing adequate training of staff
All of the above
A public accountant working with the Company to prepare their year-end financial statements
A public accountant providing tax advice to assist the company in reducing their corporate taxes
Review of historical financial statements
Reviewing the company’s operations and providing management consulting advice
None of the above
The auditor is owed $100K from the client who has been a client for 2 years
The auditor has gone to court for the client to support the client’s accounting position
The client has decided to reduce the audit fee by 50% without discussing with the auditor
It is the auditor’s fourth year auditing the client and he feels management has integrity and are very competent. This is one reason he decides that auditing certain balance sheet accounts is not required and may not be efficient
None of the above
To act as a liaison between the financial statement auditors and management
To decide who will be the financial statement auditors
To work in the internal audit department to help complete the internal audit work when required
To review the annual report
All of the above are key activities of the Audit Committee
Confidentiality rule
Competency rule
Integrity rule
Reputation of the profession
None
To inform the predecessor auditors that their client is not satisfied with their audit services
To ensure the predecessor auditor hands over all the audit files to the new auditor
To protect the successor auditors from getting involved with undesirable clients
To confirm the audit fee that was being charged to the client
All of the above
Advertising that states “We have the best and brightest auditors
Advertising that promises a “clean” auditor’s report every audit
Advertising that includes a list of all audit fees for every client of the public accounting firm
Advertising that has photos of the partners of the firm, their office phone numbers and their backgrounds
None of the above
Shareholders suffered a loss
Auditors owed duty of care to shareholders
Shareholders contacted the auditors prior to the audit
There was connection between auditor's negligence and shareholders' loss
Auditor was negligent
First time that financial statement auditors could be sued by third parties
Introduced the notion of the auditor having a duty of care to foreseeable third parties
Narrowed the responsibility for duty of care by the auditor to the limited class whom the auditor actually knew would use and rely on the financial statements
Limited the auditor’s liability for negligence to parties being in privity with the auditor
None of the above
Maintain independence when performing audits
Understand the client’s business and industry
Set appropriate auditing standards and rules for the profession
Perform quality audits consistently
Document the audit work properly and maintain the audit files
Audit failure is when both management and the auditors made mistakes and audit risk is the risk that businesses may not succeed
Audit risk is the risk that the auditors found mistakes but did not say anything and audit failure is when the auditors did not do their job properly
Audit failure is when the auditors did not do their job properly and audit risk is the risk that the auditors may not find every material error even though they did everything properly
Audit risk is the risk that the audit will not find all the material errors and audit failure is the auditors not finding all errors in the financial statements
None of the above
The share price decreased significantly once this news reached investors
The company had to file for bankruptcy
The company is privately held and the owners did not indicate any change in their wealth
Another company planning to purchase the company at a 20% premium decided to withdraw the purchase offer
None of the above
The financial statements have a material misstatement which is not considered pervasive
The financial statements do not include a cashflow statement
The client does not allow the auditor to attend the year-end inventory count and the inventory is material
The auditors are appointed after year-end and therefore were unable to count the cash on hand at year-end.
None of the above
Outlines in detail, management’s responsibility for the financial statements
Indicates that an audit has been completed
Identifies the scope of the audit
States that the audit is designed to provide reasonable assurance
All of the above
The client has recorded a capital lease as an operating lease and the amount is material
The financial statement presentation is not consistent with the previous year
The auditors were hired after year-end as the previous auditor had to resign due to independence issues
The client informed the auditor about the year-end inventory count but the auditor missed the year-end count as they wrote down the wrong date
None of the above
Client refuses to record a income tax liability that is material and pervasive
The client is likely to go bankrupt and a disclosure has not been made in the financial statements
The auditor is relying on secondary auditors to audit the company’s subsidiary in another country
The auditor was unable to audit the inventory account at year-end which was material but not significant to the overall financial statements as the company is a consulting firm.
None of the above
Professional judgment is very important when determining materiality
If an auditor finds accounting errors that are not material, they do not need to track them
If an accounting error is immaterial but is due to fraud, the auditor must investigate further
Immaterial errors identified in the previous year audit should be tracked and considered when performing the current year audit
None of the above
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