ACC 562 WEEK 11 FINAL EXAM
ACC 562 Final Exam
1.Developing an understanding of the client’s business and industry is essential to proficiency as discussed in the general standards of GAAS. (Points: 4)
2. Ratio analysis only involves a year-to-year comparison of account balances. (Points: 4)
3. Control is considered to be part of corporate governance. (Points: 4)
4. When control risk is assessed at a maximum level, the auditor assumes that the internal controls are reliable in preventing or detecting material misstatements. (Points: 4)
5. Accounting subsystems are accounting cycles composed of one or more accounting applications. (Points: 4)
6. Presentation and disclosure assertions imply that all transactions and balances are properly presented, disclosures represent what actually happened, and the footnote disclosures are appropriate and adequate. (Points: 4)
7. Vouching recorded transactions involves taking a sample from the journal and tracing them back to the source documents to ensure they occurred. (Points: 4)
8. Audit documentation serves as support for the financial statements. (Points: 4)
9. In analysis of the results of audit sampling, an auditor may determine that the sample size must be increased. (Points: 4)
10. The revenue cycle considered by auditors includes the sales process but not collections. (Points: 4)
11. Inventory is complex and typically considered a high-risk area in audits of service firms. (Points: 4)
12. An auditor can utilize a cross-sectional analysis for a client operating in multiple locations to identify areas of further inventory testing. (Points: 4)
13. Legal expenses are reviewed by auditors for possible litigation and related FAS 5 treatment. (Points: 4)
14. An imprest payroll account will never reach a zero balance. (Points: 4)
15. A turnaround document is an effective completeness control because they list essential information for further processing of the collection on account. (Points: 4)
16. Auditors will perform an analysis of leases using SFAS 13 criteria and other EITF statements to substantiate the accounting treatment. (Points: 4)
17. Contingencies are considered by the auditor in relation to the SFAS No. 5 criteria to determine whether material contingencies exist with the client and, if so, that they are properly accrued or disclosed. (Points: 4)
18. An example of a Type II Subsequent Event includes the settlement two months after year-end of a liability for an amount well in excess of the amount that was accrued at year-end. (Points: 4)
19. A report on agreed-upon procedures issued by accountants provides the lowest form of attestation assurance. (Points: 4)
20. The need for assurance services arises for all of the following reasons EXCEPT: (Points: 4)
potential bias in providing information.
closeness between a user and the organization.
complexity of the processing systems.
remoteness between a user and the organization.
21. Which one of the following is not part of the attest process? (Points: 4)
evaluating evidence against objective criteria
gathering evidence about assertions
proving the accuracy of the books and records
communicating the conclusions reached
22. Users can reasonably expect audited financial statements to be (Points: 4)
complete and contain all important financial disclosures, be free from material misstatements and be presented fairly.
complete and contain all-important financial disclosures, be free from material misstatements and be presented fairly according to GAAP.
complete, be accurate and be presented fairly according to GAAP.
complete and contain all-important financial disclosures, be free from all misstatements and be presented fairly according to the substance of GAAP.
23. Which one of the following is not a provider of assurance services? (Points: 4)
24. The primary governing board that performs quality reviews on registered CPA firms that audit public companies is the (Points: 4)
25. Management of an organization has the responsibility for all of the following except: (Points: 4)
accounting principles used in financial reporting
engagement of a qualified auditor
internal control over financial reporting
financial statements and disclosures
26. The financial statement auditor must understand the client’s internal control as a component of the fieldwork standards. The one of the reason for this understanding is so that the auditor may (Points: 4)
provide individual comments on internal control non-compliance.
become comfortable that the client will pay its audit bills.
assess the risk of possible misstatements in the financial statements.
27. For an auditor to be independent, he or she must be independent in (Points: 4)
fact and appearance.
either fact or appearance.
28. An auditor is concerned with materiality for which of the following reasons? (Points: 4)
to assess internal control
to comply with the quality assurance standards of GAAS
to determine the effects of misstatements on the users of financial information
to cut down on audit procedures and testing
29. A proper system of corporate governance is one that demands (Points: 4)
decision making by auditors in place of management.
internal audit representation on the board of directors.
audit planning to obtain competent and sufficient audit evidence.
accountability back through the system to the shareholders.
30. In determining the types of activities, engagements and interactions an auditor should have with a client, the CPA and the audit firm must (select the best answer) (Points: 4)
follow the rules exactly as they are written.
assess all of their relationships with every client to ensure that independence is intact.
focus on client satisfaction above all other considerations
realize that ethics are only guidelines and a matter of personal judgment.
31. The AICPA Principles of Professional Conduct include (Points: 4)
due professional care and supervision.
scope and nature of services and adequate training.
integrity and independence
public interest, integrity and objectivity.
32. A public client is required to report material changes in internal control (Points: 4)
33. Programs written to accomplish specific processing tasks, such as computing payroll, are (Points: 4)
operating system programs.
access control programs.