Becker Post-Test (Chapters 1-8)

There is substantial risk of management intentionally manipulating accounting records.

A portion of supporting evidence stored at an offsite storage facility was destroyed by a hurricane.

The CPA lacks experience in the client's operations and industry.

Management has imposed a restriction that the auditor believes will result in a qualified opinion.

Determine whether sufficient objectives have been created.

Identify suggestions for addressing the risks.

Identify risks that may result in material misstatement of financial statements.

Provide a basis for issuing an opinion the financial statements.

The same as the auditor's responsibility regarding material misstatements caused by error.

Either less than or greater than the auditor's responsibility regarding material misstatements caused by error, depending on the specific circumstances.

Less than the auditor's responsibility regarding material misstatements caused by error.

Greater than the auditor's responsibility regarding material misstatements caused by error.

They include incentives/pressures, opportunity, and rationalization.

Lack of observation of the three fraud risk factors implies that there is no fraud risk.

The existence of all three fraud risk factors is not an absolute indication that fraud has occurred.

Fraud risk factors are often present in circumstances where fraud has occurred.

The discussion should involve all members who participate on the audit team, including the engagement partner.

The risk assessment discussion should occur during the overall review stage of the audit.

The discussion should include consideration of the risk of management override of controls.

The discussion about the susceptibility of the entity's financial statements to material misstatement must be held separately from the discussion about the susceptibility of the entity's financial statements to fraud.

a. The assessment of the objectivity of the client's internal audit function.

b. The number of engagement personnel the predecessor assigned to the engagement.

c. The response rate for confirmations of accounts receivable.

d. Communications to management and those charged with governance regarding significant deficiencies in internal control.

a. The auditor must perform I, II, and III.

b. The auditor must perform I and II, and is allowed, but not required, to perform III.

c. The auditor must perform I and II, but may not perform III.

d. The auditor may, but is not required to, perform I, II, and III.

a. Communicate the two material weaknesses to Portico's management and those charged with governance, but not the three significant deficiencies that are not material weaknesses.

b. Communicate all five significant deficiencies to Portico's management and those charged with governance, but only require a management response with respect to the two material weaknesses.

c. Communicate all five significant deficiencies to Portico's management and those charged with governance, without distinction among the deficiencies.

d. Communicate all five significant deficiencies to Portico's management and those charged with governance, distinguishing between significant deficiencies and material weaknesses.

a. c

b. b

c. d

d. a

a. Evaluating management's representations (as included in the representation letter) is an important part of assessing control risk.

b. The auditor must assess control risk before performing substantive tests.

c. The auditor must perform some level of substantive tests before making a final assessment of control risk.

d. Evaluating management's integrity is an important part of the planning process.

a. The annual report (form 10-K) need not include audited financial statements.

b. The quarterly report (form 10-Q) need only be filed with the SEC by those corporations that are also subject to registration requirements of the Securities Act of 1933.

c. A current report (form 8-K) must be filed with the SEC within four days after a major change in the company.

d. The annual report (form 10-K) must be filed with the SEC within 20 days of the end of the corporation's fiscal year.

a. The adoption of quality control standards increases the likelihood of compliance with professional standards on individual engagements.

b. Quality control standards relate to the conduct of a firm's entire practice whereas professional standards such as GAAS relate to the conduct of an individual engagement.

c. A firm's failure to establish or comply with an appropriate system of quality control implies that the firm has also failed to follow professional standards on individual engagements.

d. A firm that has not adopted an appropriate system of quality control may still be in compliance with professional standards with respect to individual engagements.

a. Shipments to customers were recorded as sales.

b. Shipments to customers were properly invoiced.

c. All goods ordered by customers were shipped.

d. Sales billed to customers were actually shipped.

a. Compare subsequent bank statements with the accounts payable listing.

b. Obtain a sample of vendor invoices and recalculate the invoice amount.

c. Obtain the accounts payable listing and agree to subsequent cash payments.

d. Compare cash disbursements made prior to year-end with vendor invoices.

a. Compare accounts receivable turnover (net credit sales / average gross receivables) in the current year to that achieved in the prior year.

b. Use common size analysis to compare recorded sales to sales recorded by other companies in the same industry.

c. Select a sample of shipments occurring during the year and trace each one to inclusion in the sales journal.

d. Select large individual sales recorded during the year and review supporting documentation.

a. A written audit plan setting forth the procedures necessary to accomplish the audit objectives.

b. The assessment of the risks of material misstatement at both the financial statement and relevant assertion levels.

c. The basis for the auditor's decision to perform tests of controls concurrently with obtaining an understanding of internal control.

d. The auditor's understanding of the entity's control activities that help ensure achievement of management's objectives.

a. Completeness.

b. Rights and obligations.

c. Allocation and valuation.

d. Occurrence.

a. Appropriateness of audit evidence refers to the amount of corroborative evidence obtained.

b. Information obtained indirectly from independent outside sources is more persuasive than the auditor's direct personal knowledge obtained through observation and inspection.

c. Appropriateness of audit evidence refers to audit evidence obtained from outside the entity.

d. The more effective the internal control structure, the more assurance it provides about the reliability of the accounting data and financial statements.

a. A bank statement.

b. Analytical procedures.

c. Inquiries made of the audit committee.

d. A bank confirmation.

a. Inquire of the entity and the auditor's specialist about any known interests that the entity has with the auditor's external specialist that may affect that specialist's objectivity.

b. Refer to the auditor's specialist in the audit report to indicate a division of responsibility.

c. Review the working papers of the auditor's specialist.

d. Obtain knowledge of the specialist's qualifications.

a. Performing analytical procedures for indications of possible financial difficulties.

b. Reviewing confirmations of loans receivable and payable for indications of guarantees.

c. Inspecting correspondence with lawyers for evidence of unreported contingent liabilities.

d. Vouching accounting records for recurring transactions recorded just after the balance sheet date.

a. The existence of simple alliances and joint ventures.

b. Application of new accounting pronouncements.

c. High tenure of employees.

d. Abundant availability of capital and credit.

a. Increasing the assessment of control risk.

b. Increasing the assessment of inherent risk.

c. Decreasing the assessment of inherent risk.

d. Decreasing the assessment of control risk.

a. Lower the assessed level of inherent risk.

b. Increase the risk of material misstatement.

c. Change the planned timing of substantive tests from year-end to interim.

d. Eliminate the assessed level of control risk from consideration as a planning factor.

a. Cash receipts and traces them to the accounts receivable subsidiary ledger.

b. Invoices to verify proper extensions and footings.

c. Receivables and sends confirmations to client customers.

d. Purchase orders and examines them for indication of proper approval.