Audit Midterm pgs 6-9

Question 1 of 17

1

41. In a leading securities law and CPA liabilities case, the U.S. Supreme Court ruled in 1976 in Hochfelder v. Ernst and Ernst that before CPAs could be held liable for Rule 10b-5 of the Securities Exchange Act of 1934, what would be required to be shown to the court was the auditor's:

Select one of the following:

ordinary negligence
gross negligence
knowledge and intent to deceive
financial gain at the expense of the plaintiff

Explanation

Question 2 of 17

1

42. In describing the cycle approach to segmenting an audit, which of the following statements is not true?

Select one of the following:

all general ledger acounts and journals are included at least once.
some journals and general ledger accounts are included in more than one cycle.
the "capital acquisition and repayment" cycle is closely related to the "acquisition of goods and services and payment" cycle.
the "inventory and warehousing" cycle may be audited at any time during the engagement since it is unrelated to the other cycles.

Explanation

Question 3 of 17

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48. Which of the following statements best describes the auditor's responsibility regarding the detection of fraud?

Select one of the following:

the auditor is responsible for the failure to detect fraud only when such failure clearly results from nonperformance of audit procedures specifically describd in the engagement letter
the auditor is required to provide reasonable assurance that the financial statements are free of both material errors and fraud
the auditor is responsible for detecting material financial statement fraud, but not a material misappropriation of assets
the auditor is responsible for the failure to detect fraud only when an unqualified opinion is issued

Explanation

Question 4 of 17

1

46. The essence of the attest function is to:

Select one of the following:

assure the consistent application of correct accounting procedures
determine whether the client's financial statements are fairly stated in accordance with an applicable financial reporting framework
examine individual transactions so that the auditor may certify as to their validity
detect collusion and fraud

Explanation

Question 5 of 17

1

49. Two overriding considerations affect the many ways an auditor can accumulate evidence:
1. Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility.
2. Cost of accumulating evidence should be minimized.

Select one of the following:

the first is more important than the second
the second is more important than the first
they are equally important
it is impossible to prioritize them

Explanation

Question 6 of 17

1

Professional skepticism requires auditors to possess a(n) ______ mind.

Select one of the following:

introspective
questioning
intelligent
unbelieving

Explanation

Question 7 of 17

1

which of the following is not one of the four phases in the audit process?

Select one of the following:

inform client of any adjustments or corrections made to the financial statements
test controls and transactions
complete the audit and issue the report
plan and design an audit approach

Explanation

Question 8 of 17

1

three common types of confirmations used by auditors are 1. negative confirmations. 2. positive confirmations with a request for information 3. positive confirmations with the information included. if they were placed in the order of importance from highest to lowest, the sequence would be

Select one of the following:

3,2,1
3,1,2
2,3,1
1,2,3

Explanation

Question 9 of 17

1

when making decisions about evidence for a given audit, the auditors goal is to obtain a sufficient amount of timely, reliable evidence that is relevant to the information being verified, and to do so

Select one of the following:

no matter what the cost involved in obtaining such evidence
at any cost because the costs are billed to the client
at the lowest possible total cost

Explanation

Question 10 of 17

1

traditionally, confirmations are used to verify

Select one of the following:

bank balances and accounts
fixed asset additions
individual transactions between organizations, such as sales transactions
all of the above

Explanation

Question 11 of 17

1

Which of the following statements is not true?

Select one of the following:

A large sample of highly competent evidence is not persuasive unless it is relevant to the objective being tested.
A large sample of evidence that is neither competent nor timely is not persuasive.
A small sample of only one or two pieces of relevant, competent, and timely evidence lacks persuasiveness.
The persuasiveness of evidence can be evaluated after considering its competence and its sufficiency.

Explanation

Question 12 of 17

1

Evidence obtained directly by the auditor is more competent than information obtained indirectly. Which of the following is not an example of the auditor's direct knowledge

Select one of the following:

inquiry
computation

Explanation

Question 13 of 17

1

An auditor would be least likely to use confirmations in connection with the examination of

Select one of the following:

property, plant, and equipment
Refundable income taxes.

Explanation

Question 14 of 17

1

to adequately plan the appropriate audit evidence to gather, generally accepted auditing standards require the auditor to gain and understanding of

Select one of the following:

the clients internal control
the clients procedural manuals
the clients organization charts
all of the above

Explanation

Question 15 of 17

1

If there is fraud involving the collusion of several employees that includes the falsification of documents, the chancedocuments, the chance a normal audit would uncover such acts is:

Select one of the following:

very low
very high

Explanation

Question 16 of 17

1

	Created by amanda.padilla almost 9 years ago

1 Audit- Exam 1 Quiz on Audit Midterm pgs 6-9, created by amanda.padilla on 25/02/2016.

Audit Midterm pgs 6-9

Question 1 of 17

41. In a leading securities law and CPA liabilities case, the U.S. Supreme Court ruled in 1976 in Hochfelder v. Ernst and Ernst that before CPAs could be held liable for Rule 10b-5 of the Securities Exchange Act of 1934, what would be required to be shown to the court was the auditor's:

Select one of the following:

Explanation

Question 2 of 17

42. In describing the cycle approach to segmenting an audit, which of the following statements is not true?

Select one of the following:

Explanation

Question 3 of 17

48. Which of the following statements best describes the auditor's responsibility regarding the detection of fraud?

Select one of the following:

Explanation

Question 4 of 17

46. The essence of the attest function is to:

Select one of the following:

Explanation

Question 5 of 17

49. Two overriding considerations affect the many ways an auditor can accumulate evidence: 1. Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility. 2. Cost of accumulating evidence should be minimized.

Select one of the following:

Explanation

Question 6 of 17

Professional skepticism requires auditors to possess a(n) ______ mind.

Select one of the following:

Explanation

Question 7 of 17

which of the following is not one of the four phases in the audit process?

Select one of the following:

Explanation

Question 8 of 17

three common types of confirmations used by auditors are 1. negative confirmations. 2. positive confirmations with a request for information 3. positive confirmations with the information included. if they were placed in the order of importance from highest to lowest, the sequence would be

Select one of the following:

Explanation

Question 9 of 17

when making decisions about evidence for a given audit, the auditors goal is to obtain a sufficient amount of timely, reliable evidence that is relevant to the information being verified, and to do so

Select one of the following:

Explanation

Question 10 of 17

traditionally, confirmations are used to verify

Select one of the following:

Explanation

Question 11 of 17

Which of the following statements is not true?

Select one of the following:

Explanation

Question 12 of 17

Evidence obtained directly by the auditor is more competent than information obtained indirectly. Which of the following is not an example of the auditor's direct knowledge

Select one of the following:

Explanation

Question 13 of 17

An auditor would be least likely to use confirmations in connection with the examination of

Select one of the following:

Explanation

Question 14 of 17

to adequately plan the appropriate audit evidence to gather, generally accepted auditing standards require the auditor to gain and understanding of

Select one of the following:

Explanation

Question 15 of 17

If there is fraud involving the collusion of several employees that includes the falsification of documents, the chancedocuments, the chance a normal audit would uncover such acts is:

Select one of the following:

Explanation

Question 16 of 17

an audit process is a well defined methodology for organizing an audit to ensure that

Select one of the following:

Explanation

Question 17 of 17

In testing for cutoff, the objective is to determine:

Select one of the following:

Explanation

49. Two overriding considerations affect the many ways an auditor can accumulate evidence:
1. Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility.
2. Cost of accumulating evidence should be minimized.