Question 1

1. The primary responsibility for the adequacy of disclosure in the financial statements of a publicly held company rests with the:

		Partner assigned to the audit engagement.
		Management of the company.
		Auditor in charge of the fieldwork.
		Securities and Exchange Commission.

Question 2

1. Which of the following is explicitly included as a part of the description of management's responsibility in an unmodified audit report?

		Management is responsible for making a judgment on which misstatements are material vs. immaterial.
		Management is responsible for providing auditors with all relevant evidence.
		Management is responsible for the design, implementation, and maintenance of internal control.
		Management is responsible for listing all illegal acts with a direct effect on financial statement amounts and disclosures.

2 points

Question 3

1. An audit should be designed to detect if the financial statements are materially misstated due to:

		Material misstatement due to errors, not fraud.
		Material misstatement due to fraud, not errors.
		Material misstatement due to errors and fraud.

2 points

Question 4

1. Which of the following is not one of the Personal Responsibilities of the Auditor under the AICPA's principles?

		Comply with relevant ethical requirements.
		The auditor has a minimum of a four year degree in accounting from an accredited university.
		Exercise professional skepticism.
		Exercise professional judgement through the planning and the performance of the audit.

2 points

Question 5

1. A CPA would ordinarily not ultimately be liable to any party if they perform their services with:

		Ordinary negligence.
		Approrpiate supervisory approvals.
		Due professional care.
		Properly trained personnel.

2 points

Question 6

1. The CPA's investigation of prospective clients is considered:

		Discreditable to the profession.
		A violation under the right to privacy act.
		An anti-trade violation by the AICPA.
		A positive action to prevent potential lawsuits.

2 points

Question 7

1. Which of the following is correct concerning evidence provided by specialists on audits?

		The use of a specialist is most likely to be appropriate when the auditor's independence is questioned.
		The auditor must obtain an understanding of the methods used by the specialist to determine whether the findings are suitable to serve as corroborating evidence.
		The specialist must be independent in fact and appearance.
		A specialist should not be used to determine the market valuation of inventory.

2 points

Question 8

1. The audit workpapers provide the principal support for:

		The audit fee was reasonable.
		Evidence that the auditor's basis for concluding on the achievement of the audits overall objectives and evidence that the audit was planned and performed in accordance with generally accepted auditing standards.
		The audit procedures performed were approved in the professional standards.
		The audit was been performed by persons having adequate training and proficiency as an auditor.

2 points

Question 9

1. Failure to detect material errors in the financial statements is a risk that auditors primarily mitigate by:

		Performing substantive tests.
		Preparing an engagement letter.
		Assessing control risk.
		Assessing inherent risk.

2 points

Question 10

1. Which of the following is not one of the financial statement account balance assertions?

		Existence.
		Valuation and allocation.
		Completeness.
		Internal Control.

2 points

Question 11

1. An auditor's working papers serve mainly to:

		Provide the principal support for the auditor's report.
		Document the level of independence maintained by the auditor.
		Monitor the effectiveness of the CPA's quality control program.
		Satisfy the auditor's responsibilities under the AICPA's Code of Conduct.

2 points

Question 12

1. Which of the following statements is generally correct about audit evidence?

		The auditor's direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly from independent outside sources.
		To be appropriate, audit evidence must be sufficient.
		Accounting data alone may be considered sufficient appropriate audit evidence to issue an unqualified opinion on financial statements.
		Appropriateness of audit evidence refers to the amount of corroborative evidence to be obtained.

2 points

Question 13

1. Which of the following is not normally a function of the audit working papers?

		Aid in the supervision of work.
		Provide support for the auditor's opinion.
		Assist in planning future audits.
		Provide a basis for the auditor's hourly rate.

2 points

Question 14

1. If materiality is $100,000 for the balance sheet and $15,000 for the income statement, which should be used at the financial statement level?

		$15,000
		$100,000
		$115,000
		$85,000

2 points

Question 15

1. Which of the following is not considered a limitation of internal control?

		Misunderstanding instructions.
		Not having an internal audit function.
		Mistakes of judgment.
		Carelessness, distraction and/or fartigue.

2 points

Question 16

1. What is the purpose of using analytical reviews during the planning stage of an audit?

		To test controls.
		To insure duties are segregated.
		To identify unusual items for further investigation.
		To insure the audit evidence supports the auditor's conclusions regarding the financial statements.

2 points

Question 17

1. A CPA's refusal to return client provided records is:

		Considered acceptable under the AICPA Code of Professional Conduct.
		Permissible as a "mechanics" lien under the Uniform Commercial Code.
		Considered discreditable to the profession
		A violation of generally accepted auditing standards.

2 points

Question 18

1. In planning an audit, the auditor's understanding of the client and its environment, including internal controls should be used to:

		Assess the risk of material misstatement.
		Assess the operational efficiency of internal control.
		Determine whether controls have been circumvented by collusion.
		Document the assessed level of control risk.

2 points

Question 19

1. Which of the following best describes why an auditor performs risk assessment procedures?

		To develop recommendations for improvements in internal control.
		To determine if fraud or illegal acts have occurred.
		To assess the risk of material mistatement and determine the types of further audit procedures to be performed.
		To determine the extent of audit supervision required.

2 points

Question 20

1. In considering the system of internal control the auditor is basically concerned with the structure providing reasonable assurance that:

		Material misstatements will be prevented or detected.
		Management cannot override the system.
		Inherent risk is minimal.
		Controls have not been circumvented by collusion.

2 points