33. (1) Interviewing operating personnel, identifying the objectives of the auditee, identifying standards used to evaluate performance, and assessing the risk inherent in the auditee's operations are activities typically performed in which phase of an internal audit? A) The fieldwork phase. B) The preliminary survey phase. C) The audit programming phase. D) The reporting phase 34. (1) Which of the following audit procedures is aimed at determining whether every name on the company payroll is an employee actually on the job? A) A surprise observation of a paycheck distribution. B) A test of payroll extensions. C) Analytical comparisons of budgeted to actual payroll expense. D) Comparison of payee names on canceled payroll checks with the payroll register. 35. (1) Which of the following is least likely to result in qualification of the auditors' opinion due to a scope limitation? A) Scope limitations imposed by the client. B) Reliance placed upon the report of component auditors. C) Inability to obtain sufficient appropriate audit evidence. D) Inadequate accounting records. 36. (1) In an audit in accordance with generally accepted auditing standards, the auditors must test compliance with those laws and regulations that: A) Have a direct and material effect on the financial statements. B) Have a direct and material effect on major federal programs. C) Have a material direct or indirect effect on the financial statements. E) Have a material effect on major or nonmajor programs. 37. (1) CPA Firm A has performed most of the audit of Consolidated Company's financial statements and qualifies as the group auditor. CPA Firm B did the remainder of the work. Firm A wishes to assume full responsibility for Firm B's work. Which of the following statements is correct? A) Such assumption of responsibility violates the profession's standards. B) In such circumstances, when appropriate requirements have been met, Firm A should issue a standard unmodified opinion on the financial statements. C) In such circumstances, when appropriate requirements have been met, Firm A should issue an unmodified opinion on the financial statements but should make appropriate reference to Firm B in the audit report. D) CPA firm A should normally qualify its audit report on the basis of the scope limitation involved when another CPA firm is involved. 38. (1) Which of the following is an auditor most likely to confirm from the transfer agent and registrar? A) Total shares of stock issued. B) Restrictions on the payment of dividends. C) Total market value of outstanding shares of stock. D) Gains from sale of treasury stock. 39. (1) Which of the following best describes the reason for the auditors' review of the client's cost accounting system? A) To obtain evidence regarding the quantities of good described as work-in-process. B) To obtain evidence about the valuation of work-in-process, finished goods, and cost of goods sold. C) To obtain evidence about the profit margin on specific jobs. D) To obtain evidence about compliance with Cost Accounting Standards. 40. (1) A change that the auditor agrees with from one generally accepted accounting principle to another generally accepted accounting principle that has a pervasive effect on net income usually results in an adverse opinion by the auditors. A) True B) False 41. (1) Confirmation requests should contain a "business reply" envelope addressed to the auditors at the client's address. A) True B) False 42. (1) When there is a significant question about a company's ability to remain a going concern, the report issued is usually unmodified with an emphasis of matter paragraph. A) True B) False 43. (1) In the audit of depletion the auditors must often rely on the work of specialists. A) True B) False 44. (1) Even when internal control is weak, a significant portion of the audit work on property, plant, and equipment may be performed at an interim date. A) True B) False 45. (1) Subsequent events that provide additional evidence as to conditions that existed at the balance sheet date may result in adjusting journal entries. A) True B) False 46. (1) Auditors generally consider the evidence regarding accounts payable in the client's possession as more reliable than that for accounts receivable. A) True B) False 47. (1) If management's report on internal control discloses a material weakness, the auditors (who agree that it is a material weakness) will issue a report that includes a qualified opinion. A) True B) False 48. (1) Section 404 of the Sarbanes-Oxley Act of 2002 includes internal control reporting requirements for both management and auditors. A) True B) False