Ch12

Question 1 (1 point) The auditor's responsibility for the financial statements includes selecting and applying appropriate accounting policies. Question 2 (1 point) In the audit report, a Key audit matter is: 0 never permitted in Canada O a qualified report. O always required to be included 0 should be specific to the entity and highlight matters that, in the auditor's professional judgement, were of most significance in the audit of the financial statements of the current period Question 10 (1 point) Mostafa Torabi, the partner on the Torabi, Jimenez LLP audit called a meeting of his senior staff during the engagement wrap-up. Which of the following areas would be the least likely to be covered during the wrap up? performing analytical procedures on the adjusted financial statements consideration of the amount used for materiality O removal of all unnecessary documentation from the engagement files Opreparation of budgets for the following year's auditQuestion 3 (1 point) The uninsured loss of inventory as a result of fire subsequent to year-end is an example of a type 2 subsequent event. True False Question 4 (1 point) Analytical review procedures are performed by the auditor at the end of the audit engagement- why? As a final check on the reasonableness of the audited financial statements To evaluate the various ratios and comparisons after the posting of audit adjustments O To determine whether sufficient audit evidence has been obtained to support the audit opinion As a check on the clerical accuracy on the analytical procedures performed at the beginning of the audit.Question 5 (1 point) The going concern assumption means the viability of a business to O maintain the current level of sales. 0 the viability of the business to operate in its current market. 0 achieve future targets for return on investment 0 remain in business for the foreseeable future. Question 6 (1 point) The evaluation of contingent liabilities is part of the search for unrecorded liabilities, and is most concerned with: O Overstatement- existence 0 Understatement- completeness O Overstatement- valuation 0 Presentation and disclosure Question 7 (1 point) The auditor should trace bank transfers using a bank transfer schedule primarily to determine if 0 cash has been overstated due to kiting. 0 cash has been understated due to lapping. 0 cash has been overstated due to lapping. 0 cash has been understated due to kiting. Question 7 (1 point) Which of the following statements regarding judgmental misstatements is incorrect? They are the same as errors. They can arise as a result of a difference in the application of judgment by the client and the auditor. O They are not the same as errors. They can arise as a result of a difference in underlying assumptions by the client and the auditor. Question 8 (1 point) The final phase of an audit includes which of the following? confirming the terms of the audit engagement with the auditor performing substantive tests of account balances determining whether the audit evidence obtained is sufficient and appropriate to reduce the risk of O material misstatements in the financial statements to an acceptable low level gaining an understanding of the client's internal control systemQuestion 8 (1 point) Which of these controls would be the most effective in assuring that the proper custody of assets in the investing cycle is maintained? 0 The recorded balances in the investment subsidiary ledger are periodically compared with the contents of the safety deposit box by independent personnel. 0 Direct access to securities in the safety deposit box is limited to only one corporate officer. 0 The purchase and sale of investments are executed on the specific authorization of the board of directors. 0 Personnel who post investment transactions to the general ledger are not permitted to update the investment subsidiary ledger. Question 9 (1 point} When an error or exception is identified during substantive testing, the rst response is to: 0 increase the sample size. 0 report the error or exception to the audit committee. 0 quality the audit report. 0 understand why the error or exception has arisen