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1.23  Which of the following would be considered an assurance engagement?

1. Giving an opinion on a prize promoter’s claims about the amount of sweepstakes prizes awarded in the past.
2. Giving an opinion on the conformity of the financial statements of a university with generally accepted accounting principles.
3. Giving an opinion on the fair presentation of a newspaper’s circulation data.
4. Giving assurance about the average drive length achieved by golfers with a client’s golf balls.
5. All of the above.

 

1.24  It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that

1. A potential conflict of interest always exists between the auditor and the management of the enterprise under audit.
2. In audits of financial statements, the auditor acts exclusively in the capacity of an auditor.
3. The professional status of the independent auditor imposes commensurate professional obligations.
4. Financial statements and financial data are verifiable.

 

1.25  In an attestation engagement, a CPA practitioner is engaged to

1. Compile a company's financial forecast based on management's assumptions without expressing any form of assurance.
2. Prepare a written report containing a conclusion about the reliability of a management assertion.
3. Prepare a tax return using information the CPA has not audited or reviewed.
4. Give expert testimony in court on particular facts in a corporate income tax controversy.

 

1.26  A determination of cost savings obtained by outsourcing cafeteria services is most likely to be an objective of

1. Environmental auditing.
2. Financial auditing.
3. Compliance auditing.
4. Operational auditing.

 

1.27  The primary difference between operational auditing and financial auditing is that in operational auditing

1. The operational auditor is not concerned with whether the audited activity is generating information in compliance with financial accounting standards.
2. The operational auditor is seeking to help management use resources in the most efficient manner possible.
3. The operational auditor starts with the financial statements of an activity being audited and works backward to the basic processes involved in producing them.
4. The operational auditor can use analytical skills and tools that are not necessary in financial auditing.

 

1.28  According to the AICPA, the purpose of an audit of financial statements is to

1. Enhance the degree of confidence that intended users can place in the financial statements.
2. Express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the FASB.
3. Express an opinion on the fairness with which they present financial position, result of operations, and cash flows in conformity with accounting standards promulgated by the U.S. SEC.
4. Obtain systematic and objective evidence about financial assertions and report the results to intended users.

 

1.29  Bankers who are processing loan applications from companies seeking large loans will probably ask for financial statements audited by an independent CPA because

1. Financial statements are too complex to analyze themselves.
2. They are too far away from company headquarters to perform accounting and auditing themselves.
3. The consequences of making a bad loan are undesirable.
4. They generally see a potential conflict of interest between company managers who want to get loan and the bank's need for reliable financial statements.

 

 

 

1.30  The Sarbanes-Oxley Act of 2002 prohibits public accounting firms from providing which of the following services to an audit client?

1. Bookkeeping services.
2. Internal audit services.
3. Valuation services.
4. All of the above.

 

1.31  Independent auditors of financial statements perform audits that reduce

1. Business risk faced by investors.
2. Information risk faced by investors.
3. Complexity of financial statements.
4. Timeliness of financial statements.

 

1.32  The primary objective of compliance auditing is to

1. Give an opinion on financial statements.
2. Develop a basis for a report on internal control.
3. Perform a study on effective and efficient use of resources.
4. Determine whether auditee personnel are following laws, rules, regulations, and policies.

 

1.33  What requirements are usually necessary to become licensed as a certified public accountant?

1. Successful completion of the Uniform CPA Examination.
2. Experience in the accounting field.
3. Education.
4. All of the above.

 

1.34  The organization primarily responsible for ensuring that public officials are using public funds efficiently, economically, and effectively is the 

1. Governmental Internal Audit Agency (GIAA).
2. Central Internal Auditors (CIA).
3. Securities and Exchange Commission (SEC).
4. Government Accountability Office (GAO).

 

1.35  Performance audits usually include (2 answers)

1. Financial audits.
2. Economy and efficiency audits.
3. Compliance audits.
4. Program audits.

 

1.36  The objective in an auditor's review of credit ratings of a client's customers is to obtain evidence related to management's assertions about

1. Completeness.
2. Existence.
3. Valuation and allocation.
4. Rights and obligations.
5. Occurrence.

 

1.37  Jones, CPA, is planning the audit of Rhonda's Company. Rhonda verbally asserts to Jones that all expenses for the year have been recorded in the accounts. Rhonda's representation in this regard

1. Is sufficient evidence for Jones to conclude that the completeness assertion is supported for expenses.
2. Can enable Jones to minimize the work on the gathering of evidence to support Rhonda's completeness assertion.
3. Should be disregarded because it is not in writing.
4. Is not considered sufficient basis for Jones to conclude that all expenses have been recorded.

 

1.38  The risk to investors that a company's financial statements may be materially misleading is called

1. Client acceptance risk.
2. Information risk.
3. Moral hazard.
4. Business risk.

 

 

 

1.39  When auditing merchandise inventory at year-end, the auditor performs audit procedures to ensure that all goods purchased before year-end are received before the physical inventory count. This audit procedure provides assurance about which management assertion?

1. Cutoff.
2. Existence.
3. Valuation and allocation.
4. Rights and obligations.
5. Occurrence.

 

1.40  When auditing merchandise inventory at year-end, the auditor performs audit procedures to obtain evidence that no goods held on consignment are included in the client’s ending  inventory balance.  This audit procedure provides assurance about which management assertion?

1. Completeness.
2. Existence.
3. Validation and allocation.
4. Rights and obligations.
5. Occurrence.

 

1.41  When an auditor reviews additions to the equipment (fixed asset) account to make sure that repair and maintenance expenses are not understated, she wants to obtain evidence as to management’s assertion regarding

1. Completeness.
2. Existence.
3. Validation and allocation.
4. Rights and obligations.
5. Occurrence.

 

1.42  The Sarbanes-Oxley Act of 2002 generally prohibits public accounting firms from

1. Acting in a managerial decision-making role for an audit client.
2. Auditing the firm’s own work on an audit client.
3. Providing tax consulting to an audit client without audit committee approval.
4. All of the above.

 

1.43  Substantial equivalency refers to

1. An auditor’s tendency not to believe management’s assertions without sufficient corroboration.
2. Providing consulting work for another firm’s audit client in exchange for the other firm’s providing consulting services to one of your clients.
3. The waiving of certification exam parts for an individual holding an equivalent certification from another professional organization.
4. Permitting a CPA to practice in another state without having to obtain a license in that state.

 

1.44  Which of the following best describes the relationship between auditing and attestation engagements? 

1. Auditing is a subset of attestation engagements that focuses on the certification of financial statements.
2. Attestation is a subset of auditing that provides lower assurance than that provided by an audit engagement.
3. Auditing is a subset of attestation engagements that focuses on providing clients with advice and decision support.
4. Attestation is a subset of auditing that improves the quality of information, or its context, for decision makers.

 

1.45  Which of the following best describes the focus of the following engagements?

	Auditing Engagement	Attestation Engagement	Assurance Engagement	Consulting Services Engagement
a.	Any information	Financial statements	Advice and decision support	Financial information
b.	Financial information	Advice and decision support	Financial statements	Any information
c.	Advice and decision support	Any information	Financial information	Financial statements
d.	Financial statements	Financial information	Any information	Advice and decision support

 

 

 

1.46  Which of the following is a reason to obtain professional certification?

1. Certification provides credibility that an individual is technically competent.
2. Certification often is a necessary condition for advancement and promotion within a professional services firm.
3. Obtaining certification is often monetarily rewarded by an individual’s employer.
4. All of the above.