Professional Documents
Culture Documents
Difficulty: Easy
Difficulty: Hard
14. An audit provides reasonable assurance of detecting which of the following types of
important illegal acts?
A. Option A
B. Option B
C. Option C
D. Option D
Difficulty: Medium
15. Which of the following is not a broad category of threat to auditor independence?
A. Familiarity.
B. Safeguards implemented by the client.
C. Financial self interest.
D. Undue Influence.
Difficulty: Easy
16. A small CPA firm provides audit services to a large local company. Almost eighty percent of
the CPA firm's revenues come from this client. Which statement is most likely to be true?
A. Appearance of independence may be lacking.
B. The small CPA firm does not have the proficiency to perform a larger audit.
C. The situation is satisfactory if the auditor exercises due skeptical negative assurance care in
the audit.
D. The auditor should provide an "emphasis of a matter paragraph" to his/her audit report
adequately disclosing this information and then it may issue an unqualified opinion.
Difficulty: Easy
17. Which of the following forms of organization is most likely to protect the personal assets of
any partner, or shareholder who has not been involved on an engagement resulting in litigation?
A. Professional corporation.
B. Limited liability partnership.
C. Partnership.
D. Subchapter M Incorporation.
Difficulty: Medium
18. Under which common law approach are auditors most likely to be held liable for ordinary
negligence to a "reasonably foreseeable" third party?
A. Due Diligence Approach.
B. Ultramares Approach.
C. Restatement of Torts Approach.
D. Rosenblum Approach.
Difficulty: Medium
Difficulty: Medium
A. Option A
B. Option B
C. Option C
D. Option D
Difficulty: Hard
A. Option A
B. Option B
C. Option C
D. Option D
Difficulty: Medium
23. Which of the following statements is correct concerning the understanding of internal control
needed by auditors?
A. The auditors must understand the information system, not the accounting system.
B. The auditors must understand monitoring and all preliminary accounting controls.
C. The auditors must have a sufficient understanding to assess the risks of material misstatement.
D. The auditors must understand the control environment, risk assessment, and all control
activities.
Difficulty: Easy
Difficulty: Medium
Difficulty: Easy
26. Which of the following testing techniques is more commonly used by internal auditors than
by independent auditors?
A. Integrated test facilities.
B. Test data.
C. Controlled programs.
D. Tagging and tracing transactions.
Difficulty: Medium
27. The auditor using nonstatistical attributes sampling, but who nevertheless has chosen the
sample in conformity with random selection procedures:
A. Need not consider the risk of assessing control risk too low.
B. Has committed a nonsampling error.
C. Will have to use discovery sampling techniques to evaluate the results.
D. Should compare the deviation rate of the sample to the tolerable rate.
Difficulty: Medium
28. When performing tests of controls over authorization of cash receipts, which of the following
sampling methods would be most appropriate?
A. Attributes.
B. Ratio.
C. Stratified.
D. Variables.
Difficulty: Easy
29. Which of the following subsequent events might require an adjustment to the client's
financial statements?
A. A business combination with another company.
B. Loss on the sale of a closely-held investment.
C. Loss of plant and equipment due to a fire.
D. Retirement of bonds payable at a loss.
Difficulty: Medium
30. Authorization of which of the following is least likely to be found during a review of the
minutes of the board of directors?
A. Dividends.
B. New debt issuance.
C. New bank accounts.
D. Writeoff of trade accounts receivable.
Difficulty: Medium
31. Which of the following statements is correct with respect to explanatory paragraphs in
reports on audits of the financial statements of nonpublic companies?
A. They always precede the opinion paragraph.
B. They always follow the opinion paragraph.
C. Sometimes they precede and sometimes they follow the opinion paragraph.
D. They always precede the scope paragraph.
Difficulty: Easy
32. A client has changed the salvage values of a number of its fixed assets. The auditors believe
that the salvage values are realistic. The appropriate report on the financial statements is:
A. Standard unqualified.
B. Unqualified with explanatory language as to consistency.
C. Qualified for consistency.
D. Disclaimer.
Difficulty: Hard
Difficulty: Medium
Source: IIA
34. The internal auditing department provides information about control and quality of
performance to:
A. Management and the board of directors.
B. A level in the organization sufficient to ensure acceptance of all recommendations.
C. Outside agencies for regulatory and financial compliance.
D. Any member of the organization upon request.
Difficulty: Easy
Source: IIA
35. The GAO standards of reporting for governmental financial audits incorporate the AICPA
standards of reporting and prescribe supplemental standards to satisfy the unique needs of
governmental audits. Which of the following is a supplemental reporting standard for audits in
accordance with Government Auditing Standards?
A. A report on the entity's internal control.
B. Material indications of illegal acts should be reported in a document with distribution
restricted to senior officials of the entity audited.
C. Instances of abuse, fraud, mismanagement, and waste should be reported to the organization
with legal oversight authority over the entity audited.
D. All privileged and confidential information discovered should be reported to the senior
officials of the organization that arranged for the audit.
Difficulty: Medium
Source: AICPA