Audit Final Exam Questions with 100% Correct Answers 2022/2023

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Audit Final Exam Questions with 100% Correct Answers 2022/2023 Which of the following is not important documentation for substantive procedures for capital stock and equity transactions? -Ans-A me... mo regarding audit ideas generated during the brainstorming session regarding potential frauds applicable to the capital stock and equity transactions. An example of a Type I subsequent event would be a significant lawsuit that is initiated relating to an incident that occurred after the balance sheet date. -Ans-False An auditor determines that there is an inherent risk that all stock repurchased is not recorded as treasury stock. This determination is most likely tied to which of the following management assertions? -Ans-Completeness When an auditor issues an adverse opinion, which of the following should be included in the opinion paragraph? -Ans-A reference to a separate paragraph that describes the reason for the adverse opinion. Significant changes in the competitive market and a decrease in the competitiveness of the client's products are potential indicators of going conern problems -Ans-True Once the auditor has obtained an understanding of the inherent and fraud risks of material misstatement associated with debt obligations and stockholders' equity transactions, the auditor needs to understand the controls that the client has designed and implemented to address those risks. -Ans-True Management's refusal to sign the management reputation letter is considered a scope limitation sufficient to preclude the issuance of an unqualified opinion. -Ans-True Auditing standards require the auditor to identity and assess the risks of material misstatement due to fraud at the financial statement level only. -Ans-False Which of the following is a tool that is best used by the audit team to determine if the client has included all disclosures? -Ans-Checklists Which of the following is not a purpose of the management representation letter? -Ans-It implies that the auditor is responsible for the design of the internal controls The auditor will modify the audit report on ICFR effectiveness when management's annual certification pursuant to Section 302 of the SOX is misstated -Ans-True A client that has a departure from generally accepted accounting principles that is immaterial will receive a qualified or adverse opinion -Ans-False The auditor may test a manufacturing client's cost system to substantiate the valuation of inventory -Ans-True In the audit of consolidated financial statements under U.S. auditing standards when more than one CPA firm is involved and the principal audit firm chooses to mention the other firm, the wording of which paragraph is modified? -Ans-Introductory Paragraph: Yes; Scope Paragraph: Yes; Opinion Paragraph: Yes Some auditors may be reluctant to issue a going-conern audit opinion because it may hasten the failure of the client company. -Ans-True Which of the following is not a technique that auditors can use when performing preliminary analytical procedures related to long-lived assets? -Ans-All the above are techniques that auditors can use. A starting point for substantive tests of details on debt obligations is to have the client provide a cash flow statement. -Ans-False Which of the following are not included in a fixed-asset ledger? -Ans-List of all the assets, Estimated useful life and salvage value The audit committee is typically independent of the board of directors. -Ans-False The most difficult decisions about which opinion to issue are generally centered around decisions based on the materiality level and pervasiveness of GAAP violations, the significance of scope limitations, and the likelihood of the entity being a going conern. -Ans-True. Which of the following controls is not a typical control that affects multiple assertions for long-lived assets? -Ans-Reviewing insurance policies for adequate replacement coverage of assets. The auditor is only concerned about the aggregate internal control deficiencies when determining the appropriate opinion on internal control over financial reporting (ICFR). -Ans-False Which of the following is an example of the type of analytics that an auditor would use for inventory? -Ans-Inventory turnover for the previous five years. When a subsequent event evidence about conditions that did not exist at the balance sheet date, what is the best course of action for the auditor to follow? -Ans-Ensure that any necessary footnote disclosures be included with the statements. Which of the following is not an inherent limitation in an auditor's ability to detect material misstatements relating to a client's compliance with laws and regulations? -Ans-Auditors are not required to consider the applicable legal and regulatory frameworks that apply to the entity. [Show More]

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