Choose the best answer from the choices given in each question. Type your answer at the bottom of the box indicating letter and the numbers corresponding to your choice of answer.

a. How does an auditor use professional skepticism in an external audit?

1) Professional skepticism recognizes that circumstances may exist that cause the financial statements to be materially misstated.

2) Professional skepticism assumes that management is honest; therefore management representations are sufficient appropriate evidence.

3) Professional skepticism increases the risks of using faulty assumptions in determining the nature, timing, and extent of the audit procedures.

4) Professional skepticism is used to prove management's honesty and integrity concerning the financial statements.

b. Which of the following is false concerning a reservation paragraph (modified opinion) in the audit report?

1) The reservation paragraph describes the departure from Canadian GAAP and/or the limitation in scope causing the reservation of opinion.

2) The reservation paragraph is included in the audit report after the opinion paragraph.

3) The opinion paragraph should include a reference to the reservation paragraph.

4) In the case of a limitation in scope, the scope paragraph in the auditors' report should include a reference to the reservation paragraph.

c. Which type of engagement does not require the practitioner to verify the accuracy or completeness of the information provided by management?

1) An external audit

2) An internal audit

3) A compilation engagement

4) A review engagement

d. How could an auditor use the audit risk model?

1) To estimate control risk

2) To estimate audit risk

3) To estimate the amount of assurance needed from the substantive procedures

4) To estimate the acceptable level of inherent risk

e. What does the phrase "presents fairly" mean in the auditor's standard report?

1) The financial statements conform to IFRS.

2) The audit has been conducted according to CAS.

3) The audit is conducted on a test basis.

4) The financial statements are management's responsibility.

f. How does the timing of an audit procedure affect the audit evidence?

1) The correct timing of an audit procedure provides evidence that is conclusive rather than just persuasive.

2) Evidence that is not obtained at the fiscal year end is not as reliable.

3) Timing affects the appropriateness of the evidence.

4) Timing affects the sufficiency of the evidence.

g. YES Inc. imports and sells toys and has been told by its bank that it will require audited financial statements to expand its borrowing arrangements. On January 18, 2020, a CPA firm was engaged by YES to conduct an audit of the company's financial statements for the fiscal period ended November 30, 2019. The auditors are concerned because YES took its annual inventory on November 30, 2019. Assuming recorded inventory at year end was a material amount, which of the following audit opinions are possible in these circumstances?

1) Unmodified, modified, adverse, or denial

2) Only modified, adverse, or denial

3) Only adverse or denial

4) Only denial

h. Which of the following is included in the reporting standards of CAS?

1) The report shall be prepared by a person with an objective state of mind.

2) The report shall include sufficient appropriate evidence to support the audit opinion.

3) The report should distinguish between the responsibilities of management and the responsibilities of the auditor.

4) The report should be prepared by a person with adequate technical training.

i. What does the term "normalized income" refer to when computing preliminary materiality?

1) Income calculated on the same basis as the previous year

2) Income calculated on a basis other than the current year's financial results

3) Income calculated according to IFRS

4) Income minus financial income or loss items

j. Which of the following would be considered the most reliable evidence?

1) A vendor's invoice, on which the client's accounting staff has noted the cheque and purchase order numbers

2) A receiving report prepared and signed by the client's manager of receiving

3) The auditor's physical observation of an inventory item

4) Interview evidence obtained by the auditor during an interview with the chief executive officer (CEO) of the client

k. Which of the following is false concerning confirmations as an evidence gathering technique?

1) The confirmation should be printed on the audit firm's letterhead and returned directly to the auditor.

2) The request should only seek information that the recipient can supply.

3) The auditor should verify the recipient's address.

4) The confirmations should not be given to the client for mailing.

l. While conducting analytical procedures during the planning stage of the audit, comparing the audit year to previous years, an auditor found that both accounts receivable and days' sales in receivables had increased. Given this evidence, which management assertion would the auditor most likely be concerned with?

1) Existence

2) Valuation

3) Completeness

4) Ownership

m. Which of the following statements regarding analytical procedures required by CAS is true?

1) Analytical procedures are required at the risk assessment phase.

2) Analytical procedures are not required during the risk response phase.

3) Analytical procedures are not required at the reporting stage.

4) Analytical procedures are not required at any stage of the audit.

n. To whom is an auditor liable when the auditor is found guilty of fraud in an audit?

1) To the client

2) To the client and to known third-party users of the financial statements

3) To the client and to any third party who the auditor could reasonably foresee would rely on the financial statements

4) To any person who can prove that money was lost because of the fraud

o. Which internal control objective is being tested by the following question on an internal control questionnaire: Are material requisitions reviewed by the production manager after the supervisor prepares them?

1) Validity

2) Classification

3) Accuracy

4) Completeness