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Business Assurance Test 2

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Study questions for Business Assurance Services test 2 at Bowling Green State University.
Vicki Myers
Quiz by Vicki Myers, updated more than 1 year ago
Vicki Myers
Created by Vicki Myers about 9 years ago
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Resource summary

Question 1

Question
A square in a flow chart indicates
Answer
  • terminator
  • decision
  • manual loop
  • process

Question 2

Question
Which of the following is not a Generally Accepted Privacy Principle (GAPP)?
Answer
  • Retention and disposal
  • Quality
  • Processing integrity
  • Collection

Question 3

Question
The objective of AU-C 500 is to obtain written representations from management that they believe they have fulfilled their responsibilities in regards to the financial statements.
Answer
  • True
  • False

Question 4

Question
Which type of opinion means that there is sufficient appropriate evidence, but there is a material misstatement and it is pervasive through the financial statements?
Answer
  • unqualified
  • adverse
  • disclaimer of opinion
  • qualified

Question 5

Question
Which of the following are components of the control environment? (more than 1)
Answer
  • risk assessments
  • commitment to integrity and ethical values
  • notice
  • monitoring activities
  • financial reporting competencies
  • management's philosophy

Question 6

Question
What does a parallelogram represent in a flow chart?
Answer
  • decision
  • document
  • internal process
  • data

Question 7

Question
Susceptibility to loss, nature of the account, accounting complexities, and planning materiality are all qualitative factors in determining if an account is significant.
Answer
  • True
  • False

Question 8

Question
If the company being audited is a publicly listed corporation, the auditor must put an opinion as to the effectiveness of internal controls.
Answer
  • True
  • False

Question 9

Question
The objective of the audit of GAAP-based financial statements is to
Answer
  • Express an opinion on the accuracy with which the statements present financial position, results of operations, and cash flows in accordance with generally accepted accounting principles.
  • Express an opinion on the fairness with which the statements present financial position, results of operations, and cash flows in accordance with generally accepted accounting principles.
  • Make suggestions as to the form or content of the financial statements or to draft them in whole or in part
  • Ensure adoption of sound accounting policies and the establishment and maintenance of internal control

Question 10

Question
Which of the following statements about audit evidence is true?
Answer
  • A client’s accounting records can be sufficient audit evidence to support the financial statements
  • The sufficiency and appropriateness of audit evidence is a matter of professional judgment.
  • To be appropriate, audit evidence should be either persuasive or relevant but need not be both.
  • The difficulty and expense of obtaining audit evidence about an account balance is a valid basis for omitting the test.

Question 11

Question
How many Generally Accepted Privacy Principles are there?
Answer
  • 5
  • 7
  • 10
  • 4

Question 12

Question
A company has made a material change in its method of inventory measurement from an unacceptable one to one in accordance with the applicable financial reporting framework. The auditor’s report on the financial statements of the year of the change should include
Answer
  • Justification for the change and the effect of the change on reported net income.
  • A reference to the entity’s disclosure of the correction.
  • A note explaining the change.
  • No reference to consistency.

Question 13

Question
It is the duty of management to maintain internal controls, prepare the financial statements, and to provide all the information the auditor needs.
Answer
  • True
  • False

Question 14

Question
The auditor should issue written communication stating that no significant deficiencies were identified.
Answer
  • True
  • False

Question 15

Question
Who developed the Systrust service
Answer
  • Canadian Institute of Chartered Accountants
  • PCAOB and AICPA
  • AICPA
  • PCAOB
  • AICPA and Canadian Institute of Chartered Accountants

Question 16

Question
When considering the use of management’s written representations as audit evidence about the completeness assertion, an auditor should understand that such representations
Answer
  • Constitute sufficient appropriate evidence to support the assertion when considered in combination with sufficiently low assessed risks of material misstatement.
  • Complement, but do not replace, substantive procedures designed to support the assertion.
  • Replace low assessed risks of material misstatement as evidence to support the assertion.
  • Are not part of the evidence considered to support the assertion.

Question 17

Question
A limitation on the scope of an audit sufficient to preclude an unmodified opinion will usually result when management
Answer
  • Does not make the minutes of the board of directors’ meetings available to the auditor.
  • Asks the auditor to report on the balance sheet and not on the other basic financial statements.
  • Presents financial statements that are prepared in accordance with the cash receipts and disbursements basis of accounting
  • States that the financial statements are not intended to be presented in accordance with generally accepted accounting principles

Question 18

Question
A continuing auditor should update the report on prior financial statements by issuing a report modified for the
Answer
  • Resolution of an uncertainty related to and discovered in the current period.
  • Determination in the current period that a substantial doubt exists about the entity’s ability to continue as a going concern for a reasonable time.
  • Removal in the current period of doubt about the entity’s ability to continue as a going concern.
  • Purchase and consolidation of a new company by the client.

Question 19

Question
Which of the following statements about internal control is true?
Answer
  • The establishment and maintenance of internal control are important responsibilities of the internal auditor
  • A limitation of internal control is that management makes judgments about the extent of controls it implements
  • Exceptionally effective internal control is enough for the auditor to eliminate substantive procedures on a significant account balance
  • Properly maintained internal control reasonably ensures that collusion among employees cannot occur

Question 20

Question
A CPA has previously communicated a significant control deficiency in connection with an audit of prior financial statements of a non-issuer. As of the current audit date, the deficiency has not been corrected. What communication should be made by the CPA?
Answer
  • A new communication is required only if the auditor has relied on the controls
  • A new communication is required only if it involves an area in which the auditor has not relied on the controls
  • The condition should be reported
  • None, because management has been previously put on notice and now has sole responsibility

Question 21

Question
An auditor should communicate misstatements to those charged with governance
Answer
  • even if they are clearly trivial
  • if they were not recorded before the end of the auditor's field work
  • if they are uncorrected
  • if they are immaterial and corrected but frequently recurring
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