Subject: AUDIT AND ASSURANCE. Answer all the MCQ's. Choose the correct option for each question.

1. Which of the following factors should most influence an auditors decision to modify the audit opinion of an issuers financial statements?

a. The types of users expected to rely on the financial statements

b. The effect of a misstatement on the financial statements taken as a whole

c. Whether the auditors opinion is based in part on the report of another auditor.

d. Uncertainties related to managements estimates as of the reporting date that are adequately disclosed in the financial statements

2. Which of the following characteristics of prospective financial statements examined by the practitioner would require the report to include a paragraph that restricts the use and distribution of the report?

a. They are considered a financial projection

b. They are considered a financial forecast

c. They contain a range of forecasted results.

d. They are prepared by a practitioner who lacks independence.

3. Accepting an engagement to compile an entity financial projection most likely would be inappropriate if the projection is to be included in a (an:

a. Mortgage application for the purpose of expanding the entitys facilities

b. Offering statement of the entitys initial public offering of common stock

c. Comprehensive document to be used is negotiating a new labor contract.

d. Report to the audit committee that is not sent to the stockholders.

4. After obtaining an understanding of the internal control structure and assessing control risk of an entity. An auditor decided not to perform tests of controls. The auditor most likely decided that

a. The available evidence matter obtained through tests of controls would not support an increased level of control risk.

b. A reduction in the assessed level of control risk is justified for certain financial statement assertions

c. It would be inefficient to perform tests of controls that would result in a reduction in planned substantive tests.

d. The assessed level of inherent risk exceeded the assessed level of control risk.

5. An auditor most likely would assess Control Risk (Risk of material misstatement) at a high level if the payroll department supervisor is responsible for

a. Examining authorization forms for new employees.

b. Comparing payroll registers with original batch transmittal date

c. Authorizing payroll rate changes for all employees

d. Hiring all subordinate payroll department employees

6. When auditing contingent liabilities, which of the following procedures would generally be least effective?

a. Reading the minutes of the board and other committee meetings

b. Examining all IRS documentation related to possible tax disputes.

c. Examining legal letters

d. Examining accounts payable confirmations

7. Dewey,Needham & howe accept an engagement to audit the 2013 financial statements of Syracuse Co. and begin fieldwork in september 2013. Syracuse (December 31st year-end) gives the unaudited financial statements to the auditors on 1/17/2014. The auditors completed the fieldwork on 3/12/2014 and distributed the audit report on 3/23/2014. The entitys letter of representation should be dated___________ and the audit report should be dated___________.

a. March 23rd ; March 12th

b. March 12th ; March 12th

c. January 17th; March 23rd

d. March 23rd; march 23rd 50.

8. To which of the following matters would an auditor not apply materiality limits when obtaining specific written management representations?

a. Disclosure of compensating balance arrangements involving restrictions on cash balances.

b. Information concerning related-party transactions and related amounts receivable or payable.

c. Fraud involving employees with significant roles in the internal control system.

d. The absence of errors and unrecorded transactions in the financial statements.