1. Which of the following auditor-provided services is NOT an attestation service?

A. Audit of internal control over financial reporting

B. Review of financial statements

C. Audit of financial statements

D. Accounting and bookkeeping

2) Which one of the following risks does the auditor reduce by performing an audit? A. Interest rate risk B. Business risks C. Information risk D. Environmental risk

3) Which of the following reasons make limited liability partnership (LLP) a more popular organisational structure for an audit firm than general partnership? A. The increased litigation risk faced by auditors B. The need for independence from clients C. The need for better competence D. A LLP is more profitable 4) Which of the following correctly describes an auditors legal liability?

A. An auditor breaches his or her common law duties if he or she does not perform those duties with a reasonable standard of skill and care and, as a consequence, the client suffers a loss B. A criminal act arises when an auditor unknowingly signs a false report C. A civil wrong, whereby the client entity suffers loss as a result of the auditor failing to meet his professional obligations as specified in relevant audit standards D. An auditor can be found guilty for criminal action under Statute Law 5) Which of the following is NOT a major purpose of establishing the International Standards on Auditing (ISAs)? A. Improve the uniformity of auditing practices and related services thought the world B. Improve public confidence in the quality of financial reporting C. Provide immediate guidance when there is no comparable auditing standard in a particular country D. Override a countrys auditing regulations and standards 6) In the audit of accounts payable, an auditors procedures will most likely focus

A. completeness B.valuation and allocation C. classification and understandability D. existence 7) Which of the following procedures would be the most appropriate for verifying the interest accrued on borrowings? A. Confirming the interest rate with the lender B. Vouching the payment of interest on the borrowings

C. Testing internal controls over cash payments D. Recalculating the interest accrued on the basis of outstanding amount, interest rate and period to which it relates

8) Which of the following does setting a preliminary materiality threshold NOT help auditors to decide? A. What audit staff to assign to the audit B. How many items to examine C. Whether to use sampling D. What level of error is likely to lead to the auditor not being able to give an unqualified opinion

9) For each of the following statement select whether they are true or false. A statutory audit gives reasonable assurance that the financial statements give a true and fair view (i) True (ii) False Reasonable assurance is absolute assurance of the correctness of the subject matter (iii) True (iv) False A. (i) and (iv) B. (i) and (iii) C.(iii) and (iv) D. (ii) and (iii) 10) For each of the following statements select whether they are true or false in respect of the concept of materiality. Materiality should be calculated at the planning stage of all audits (i) True (ii) False Once established, the materiality level initially set cannot be revised during the course of the audit (iii) True (iv) False A. (i) and (iii) B. (i) and (iv) C. (ii) and (iii) D. (ii) and (iv) 1) Matthews & Co., CPAs, issued an unqualified opinion on Dodgers Corporation. Millennium Bank, which relied on the audited financial statements, granted a loan of $200,00,000 to Dodgers Corporation. Dodgers subsequently defaulted on the loan. To succeed in an action against Matthews & Co., Millennium Bank must prove that the bank was:

A) in privity of contract with Dodgers.

B) in privity of contract with Millennium.

C) free from contributory negligence.

D) justified in relying on the financial statements in granting the loan.

2) The principal issue to be resolved in cases involving alleged negligence is usually: A) the amount of the damages suffered by plaintiff.

B) whether to impose punitive damages on defendant.

C) the level of care exercised by the auditor.

D) whether defendant was involved in fraud. 3) Which of the following statements is true? The auditor firm will lose its independence if:

A) a staff auditor providing audit services to the client acquires stock in that client.

B) a staff tax preparer who provides 15 hours of non-audit services to the client acquires stock in that client.

C) an audit manager in an office different than the office providing audit services has a direct, immaterial financial interest in the audit client.

D) a covered member has an indirect, immaterial financial interest in an audit client. 4) Oehlers, CPA, is a staff auditor participating in the engagement of Capital Trust, Inc. Which of the following circumstances impairs Oehlers independence? A) Oehlers sister is an internal auditor employed part-time by Capital Trust.

B) Oehlers friend, and employee of another local accounting firm, prepares the tax return of Capital Trust's CEO.

C) Oehlers and Capital Trust's 401K plan own stock with the same corporation.

D) During the period of professional engagement, Capital Trust gave Oehlers tickets to a football game worth $75. 5) Which of the following statements is true? I. The auditor is required to issue a disclaimer of opinion in the event of a material uncertainty. II. The auditor is required to issue a disclaimer of opinion in the event of a going concern problem.

A) I only

B) II only

C) I and II 6) Brown Co.'s financial statements adequately disclose uncertainties that concern future events, the outcome of which are not reasonably estimable. The auditor's report should be a(n):

A) unqualified opinion.

B) disclaimer.

C) qualified opinion.

D) adverse opinion. 7) Which of the following forms of evidence would be least persuasive in forming the auditor's opinion about marketable securities and other investments held by the company?

A) Responses to auditor's questions by the president and controller regarding the investments account.

B) Correspondence with a stockbroker regarding the quantity of client's investments held in street name by the broker.

C) Minutes of the board of directors authorizing the purchase of stock as an investment.

D) The auditor's count of marketable securities. 8) Which of the following statements is true?

A) A large sample of highly competent evidence is persuasive if it is relevant to the objective being tested.

B) A large sample of evidence that is neither competent nor timely is not persuasive.

C) A small sample of only one or two pieces of relevant, competent, and timely evidence lacks persuasiveness.

D) The persuasiveness of evidence can be evaluated after considering its sufficiency.

9) The auditor uses knowledge gained from the understanding of the client's business and industry to assess:

A) client business risk.

B) control risk.

C) inherent risk.

D) audit risk. 10) The purpose of the requirement in having communication between the predecessor and successor auditors is to:

A) allow the predecessor to disclose information which would otherwise be confidential.

B) help the successor auditor to evaluate whether to accept the engagement.

C) help the client by facilitating the change of auditors.

D) ensure the predecessor collects all unpaid fees prior to a change in auditor.

1) Which of the following correctly describe the nature of auditing?

A. Auditing is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria.

B. Auditing could be done by an independent, but not competent, person.

C. Evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with common sense.

D. Auditors can evaluate the information in any kind of form.

2) Which of the following auditor-provided services is an attestation service?

A. Management consulting

B. Reviews

C. Accounting and bookkeeping

D. Tax services

3) Which of the following does NOT correctly describe the benefits derived from external audits of financial statements?

A. The external audits add to the reliability and quality of financial reporting.

B. The external audits contribute to effective operation of business capital markets and the public sector.

C. The external audits may lead to conflict of interests between management and shareholders.

D. The external audits provide directors and officers with constructive observations arising from the audit process

4) Which of the following most appropriately defines the prudent person concept?

A. An auditor can be found guilty for criminal action under Statute Law

B. The Auditor is a guarantor or insurer of financial statements.

C. It represents the risk that the auditor will conclude that the financial statements are fairly stated.

D. The auditor is expected only to conduct the audit with due care.

5) Which of the following is NOT a major purpose of having an audit standard?

A. To override the statute laws.

B. To provide immediate guidance for practitioner education.

C. To improve public confidence in the quality of audit.

D. To provide guidance on how audit duties are to be performed.

6) Which of the following is NOT a valid reason why auditors need ethical standards?

A. The eroded image of the profession after a series of financial scandals.

B. Theoretical knowledge for all aspects of the audit practices has been well developed.

C. The expansion of the accounting/auditing industry.

D. To curb abnormal wealth maximisers in the auditing industry.

7) Which of the following most appropriately describe the auditors reporting obligations?

A. Auditors need to form an opinion on whether all accounting records have been approved by the companys Chief Executive Officer.

B. Auditors need to form an opinion on whether the information given in the directors report is consistent with relevant news.

C. Auditors need to examine the financial statements and form and express an opinion as to whether or not they meet the statutory requirements.

D. Auditors need to form an opinion on whether they have received from the auditee the required information and explanations in relation to the entire trading activities during the financial period.

8) Which of the following steps show the most appropriate procedure to develop audit objectives?

(i) Divide financial statements into cycles.

(ii) Know management assertions about financial statements.

(iii) Understand objectives and responsibilities for the audit.

(iv) Know general audit objectives for classes of transactions, accounts and disclosures.

(v) Know specific audit objectives for classes of transactions, accounts and disclosures.

A. (i), (iii), (ii), (iv), (v)

B. (v), (iii), (ii), (iv), (i)

C. (i), (v), (ii), (iv), (iii)

D. (iii), (i), (ii), (iv), (v)

9) What must be considered before selecting the best types of audit evidence?

(i) Persuasiveness of the evidence

(ii) Cost of obtaining the evidence

A. Both (i) and (ii)

B. Neither (i) nor (ii)

C. Only (i)

D. Only (ii)

10) Which of the following qualitative factors is least likely to be considered by an auditor in making a preliminary judgement about materiality thresholds?

A. Who the major financial statements users are

B. The CEOs social network

C. Management compensation

D. Breach of loan covenants

1) Who are charged responsibility by the Companies Act 2006 regarding the preparation of a companys financial statements?

A. Auditors

B. Shareholders

C. Internal auditors

D. Board of directors

2) Which of the following does NOT appropriately describe the operational audit?

A. Examine employee time records and personnel records to determine if sufficient information is available to maximize the effective use of personnel.

B. Review the processing of sales invoices to determine if it could be done more efficiently.

C. Determine whether the corporate tax return are prepared in accordance with the relevant taxation regulations.

D. Review and evaluate the efficiency of the manufacturing process.

3) Which of the following is NOT a characteristic of the organisational structure of a limited liability partnership (LLP)?

A. A LLP is structured and taxed like a general partnership.

B. A LLP is owned by only one partner.

C. Partners are not personally liable for liabilities arising from negligent acts of other partners and employees not under their supervision.

D. The personal liability protection of an LLP is less than that of a limited liability company.

4) Which of the following best describes the role of Common Law in defining the duties of auditors?

A. Professional auditing standards do not override Case Law in respect of auditors duties.

B. Common Law provides guidance on ethical conduct expected of auditors.

C. The courts do not have any role in explaining what is expected of auditors in the performance of their statutory duties.

D. Common Law states some administrative matters relating to statutory audit.

5) Which of the following threat to independence might NOT arise on the current audit when an audit team member is involved in family relationship with the finance director of an audit client?

A. Self-interest threat

B. Management threat

C. Familiarity threat

D. Intimidation

6) The most important reason independent auditors gather audit evidence is to

A. evaluate management

B. detect fraud

C. form their opinions on the financial statements

D. assess control risk

7) Which TWO of the following statements are correct?

(i) Inspection of assets confirms rights and obligations

(ii) Inspection of a purchase agreement confirms the cost of inventory

(iii) Observation gives strong ongoing evidence of the matter being observed

(iv) The information obtained from third parties gives better evidence than that from entity insiders

A. (i) and (ii)

B. (ii) and (iv)

C.(iii) and (iv)

D. (i) and (iii)

8) Which TWO of the following would normally be included in the overall audit strategy?

(i). Details of economic factors and industry conditions

(ii). Identification of specific audit risks

(iii). The results of complete analytical procedures

(iv). Confirmation of managements responsibility for the financial statements

A. (i) and (ii)

B. (i) and (iii)

C. (ii) and (iv)

D. (iii) and (iv)

9) Which THREE of the following would increase inherent risk?

(i) Sample sizes have been calculated incorrectly by the auditor and are too small

(ii) A significant number of balances are based on estimates

(iii) The financial statement include complex transactions

(iv) A significant number of non-routine transactions

A. (ii), (iii) and (iv)

B. (i), (iii) and (iv)

C (i), (ii) and (iv)

D. (i), (ii) and (iii)

10) Which of the following describe one of the causes of the expectations gap with respect to the external audit?

A. Users fully understand the meaning of the audit opinion

B. Users are not aware of the limitation of the audit process

C. Users are aware of that the responsibility for preparing financial statements does not lie with the auditor

D. Users understand what the audit process involves