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23 Cards in this Set
- Front
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To be proficient asan auditor, a person must first be able to accomplish which of thesetasks in a decision-making process: A. Identify audit evidence relevant to theverification of assertions management makes in its unaudited financialstatements and notes B. Formulate evidence-gathering procedures(audit program) designed to obtain sufficient, competent evidence aboutassertions management makes in financial statements and notes C. Recognize the financial assertions made inmanagement's financial statements and footnotes D. Evaluate the evidence produced by theperformance of procedures and decide whether management's assertions conform togenerally accepted accounting principles and reality |
C. Recognize the financial assertions made in management's financial statements and footnotes. |
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Which of thefollowing is an underlying condition that in part creates the demand by usersfor reliable information? A. Economic transactions that are numerousand complex B. Decisions are time-sensitive C. Users separated from accounting records bydistance and time D. Financial decisions that are important toinvestors and users E. All of the above |
E. All of the Above |
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What is the term usedto identify the risk that the client's financial statements may be materiallyfalse and misleading? A. Business risk B. Information risk C. Client risk D. Risk assessment |
B. Information Risk |
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In order to beconsidered as external auditors with respect to government agencies, GAOauditors must be A. Organizationally independent B. Empowered as the accounting and auditingagency by the U.S.Congress C. Funded by the federal government D. Guided by standards similar to GAAS |
A. Organizationally Independent |
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Which of thefollowing is the essential purpose of the audit function? A. Detection of fraud B. Examination of individual transactions tocertify as to their validity C. Determination of whether the client's financialstatement assertions are fairly stated D. Assurance of the consistent application ofcorrect accounting procedures |
C. Determination of whether the clients financial statement assertions are fairly stated |
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The audit objectivethat all transactions are recorded in the proper period is related most closelyto which ASB transaction assertion? A. Occurrence B. Completeness C. Cutoff D. Accuracy |
C. Cutoff |
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The audit objectivethat all balances include items owned by the client is related most closelywith which ASB balance assertion? A. Existence B. Rights and obligations C. Completeness D. Valuation |
B. Rights and obligations |
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The engineeringdepartment at Omni Company built a piece of equipment in the company's own shopfor use in the company's operations. The auditor reviewed all work orders thatwere capitalized as part of the equipment costs. Which of the following is theASB transaction assertion most closely related to the auditor's testing? A. Occurrence B. Completeness C. Accuracy D. Classification |
D. Classification |
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Theengineering department at Omni Company built a piece of equipment in thecompany's own shop for use in the company's operations. When looking at theending balance for the fixed asset account the auditor examined all workorders, purchased materials, labor cost reports, and applied overhead that werecapitalized as part of the equipment costs. Which of the following is the ASBbalance assertion most closely related to the auditor's testing? A. Existence B. Completeness C. Rightsand obligations D. Valuation |
D. Valuation |
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Which of thefollowing best describes the primary role and responsibility of independentexternal auditor? A. Produce a company's annual financialstatements and notes B. Express an opinion on the fairness of acompany's annual financial statements and footnotes C. Provide business consulting advice toaudit clients D. Obtain an understanding of the client'sinternal control structure and give management a report about control problemsand deficiencies |
B. Express an opinion on the fairness of a company's annual financial statement and footnotes |
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Theauditor's judgment concerning the overall fairness of the presentation offinancial position, results of operations, and cash flows is applied within theframework of A. Qualitycontrol B. Generallyaccepted auditing standards, which include the concept of materiality C. Theauditor's evaluation of the audited company's internal control D. Generallyaccepted accounting principles |
D. Generally accepted accounting principles |
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Assuranceservices involve all of the following, except A. Relevanceas well as reliability B. Nonfinancialinformation as well as traditional financial statements C. Absoluterather than reasonable assurance D. Electronicdatabases as well as printed reports |
C. Absolute rather than reasonable assurance |
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Becauseof the risk of material misstatement, an audit of financial statements inaccordance with generally accepted auditing standards should be planned andperformed with an attitude of A. Objectivejudgment B. Independentintegrity C. Professionalskepticism D. Impartialconservatism |
C. Professional skepticism |
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In performing anattestation engagement, a CPA typically A. Supplies litigation support services B. Assesses control risk at a low level C. Expresses a conclusion on subject matteror an assertion about the subject matter D. Provides management consulting advice |
C. Expresses a conclusion on subject matter or an assertion about the subject matter |
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Inquiries ofwarehouse personnel concerning possible obsolete or slow moving inventory itemsprovide assurance about the PCAOB assertion of A. Completeness B. Existence C. Presentation D. Valuation E. Rights and obligations |
D. Valuation |
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The Sarbanes-OxleyAct of 2002 requires that the key company officials certify thefinancial statements. Certification means that the company CEO and CFO mustsign a statement indicating: A. They have read the financial statements B. They are not aware of any false ormisleading statements (or any key omitted disclosures) C. They believe that the financial statementspresent an accurate picture of the company's financial condition D. All of the above |
D. All of the above |
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The four basicrequirements for becoming a CPA in most states are A. Education, the CPA Examination,experience, and reciprocity B. The CPA Examination, experience,continuing professional education, and a state certificate C. Continuing professional education, the CPAExamination, experience, and an AICPA certificate D. Education, the CPA Examination,experience, and a state certificate |
D. Education, the CPA Examination, experience and a state certification |
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Thestudy of business operations for the purpose of making recommendations aboutthe efficient use of resources, effective achievement of business objectives,and compliance with company policies is referred to as A. Environmentalauditing B. Financialauditing C. Complianceauditing D. Operationalauditing |
D. Operational Auditing |
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Procedures that gobeyond an audit of financial reports and compliance with laws and regulationsto include economy and efficiency and program results audits are referred toas A. Expanded-scope governmental auditing B. Environmental auditing C. Financial auditing D. Operational auditingthe CPA |
A. Expanded-scope governmental auditing |
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Defineassurance, attestation, and auditing in the context of "lendingcredibility." |
Assurance is the "lending of credibility" to information. Attestation is the "lending of credibility" to assertions made by a third party. Auditing is the "lending of credibility" to financial statements. |
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What are the differences between the American AccountingAssociation and AICPA definitions and objectives of auditing? |
The AAA definition is broad and general enough to encompass independent, internal, and governmental auditing. The AICPA has not defined auditing but its statement on objectives of financial audits restricts auditing to independent CPA's audit of the traditional financial statements and their footnotes. The AICPA SAS also offers guides to report on internal control, letters to underwriters, and special reports. |
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What is operationalauditing and by whom is it performed? |
Operational auditing is the evaluation of business operations for various purposes. Operational auditing includes: (1) testing for compliance with laws and regulations and company policies and procedures, (2) evaluating the effectiveness of operations in achieving goals and objectives, and (3) evaluating the efficiency and economy of operations. Operational audits are normally performed by internal auditors. However, operational audits also may be conducted by independent CPA firms as part of their management advisory services. |
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Which of thefollowing is not an ASB assertion about inventory related to presentation anddisclosure? A. Inventory is properly classified as acurrent asset B. Inventory is properly stated at cost C. Major inventory categories and theirvaluation bases are adequately disclosed in notes D. All of the above are ASB presentation anddisclosure assertions about inventoryextp |
D. All of the above are ASB presentation and disclosure assertions about inventory extp |
