Auditing Final Cheat Sheet

Topic 5.4
19-An audito­r's flowch­art... (d) unders­tanding of the system
21-An advantage of using systems flowch­arts... (b) provide a visual depiction of client­'s activities
Topic 5.5
23-Which of the foll. charac­ter­ist­ics... (a) computer processing virtually eliminates the occurrence of comput­ational error normally associated with manual processing
24- In which of the following circum... (d) When transa­ctions are high-v­olume and recurring
25-Which of the following contro­ls... (b) Separation of duties for computer progra­mming and computer operations
26- A client is concerned that a power... (d) hot site
27 Which of the following is a computer program... (c) Trojan horse
28-A client who recently installed a new a/p system... (d) employees are not required to take regular vacations
30-Which of the following most likely represents a hash total (d) 810
31-A customer intended to order 100 units... (a) check digit verifi­cation
32-Able Co. uses an online sales order proces­sing... (b) File of all rejected sales transa­ctions
33-One of the major problems in a computer system... (d) A computer access log
Topic 16.1
1-The objective of the audit of GAAP-based financial statements is to (b) Express an opinion on the fairness with which...
2-Which ...sta­tement best describes distin­ction b/w audito­r/m­ana­gement respon­sib­ili­ties? (d)aud­ito­r's respon­sib­ility is confined to expressing an opinion, but financial statements remain management respon­sib­ility
3- The evaluation of fairne­ss... (a) indicators of possible bias exist in manage­men­t's judgements
7-When single­-year fin statements are presented (d) Prior year's financial statements were audited by another CPA whose report, which expressed an unmodified opinion, is not presented
8-Does an auditor make the following repres­ent­ations explicitly or implicitly in opinion? (d) ex/impl
9-In May Year 3, an auditor reissu­es... (c) use the original report date on the reissued report.
10-March, CPA, is engaged by Monday corp... (a) Monday Corp, the client that engaged March
11-An auditor released an audit report that was dual-d­ated... (a) Limited to the specific event refere­nced.
12- On August 13, a CPA dated the audit report... (a) All subsequent events that occurred through August 27.
13-An auditor may express a qualified opinion for which of the following reasons? (a) Yes, Yes
14-When an issuer refuses to include in its audited... (b) Qualified opinion because of inadequate disclosure
15-In which situation would an auditor choose between a qualified or adverse opinion? (b) conditions that cause the auditor to have substa­ntial doubt about the entity­'s ability to continue as a going concern are adequately disclosed
16-When qualifying an opinion because of an insuff­ici­ency... (b) Yes, No
17- An auditor decides to express a qualified opinion an an entity­'s financial statem­ents... (c) The possible effects on the financial statements
18- In which of the following situations would an auditor choose between qualif­ied­/ad­verse opinion? (b) The financial statements fail to disclose inform­ation that is required by the applicable reporting framework
19- An auditor did not observe a client­'s taking of beginning physical invent­ory... (a) the balance sheet only
20- When management does not provide reasonable justif­ication for a change in accounting principle (b) Each year that the financial statements initially reflecting the changes are presented.
21- An auditor concludes that a client­'s noncom­pliance w/ laws & regula­tio­ns... (b) Qualified opinion or an adverse opinion
22-

22-An audito­r's report includes the following statement: "the fin statem­ent­s..." (c) Misleading
23- When an auditor expresses an adverse opinion, paragraph should include (b) A direct reference to a separate paragraph disclosing the basis for the opinion.
24- In which of the following circum­stances would an auditor be most likely to express an adverse opinion? (d) The fin statements are not in conformity with FASB codifi­cat­ion­'s guidance regarding the capita­liz­ation of leases
25-Under which of the following circum­stances might an auditor disclaim an opinion? (d) The auditor is unable to obtain sufficit approp­riate evidence to support manage­men­t's assertions concerning an uncert­ainty
26- Due to a scope limita­tion, an auditor disclaimed an opinion... (a) Not approp­riate because it may tend to overshadow the audito­r's disclaimer of opinion.
27- A CPA concludes that the unaudited fin statements of an issuer... (d) Describe the nature of the departure from GAAP in the CPA's report and state the effects on the fin statem­ents, if practi­cable
28- When an indepe­ndent CPA assists in prepar­ing... (d) Reading the fin statements for obvious material missta­tements
29- In the first audit of a client, an auditor was not able to gather sufficient approp­riate audit eviden­ce... (a) Be unable to express an opinion on the current year's results of operations and cash flows
Topic 11.1
1- Which of the following compar­isons would be most useful to an auditor in evaluating the results of an entity­'s operat­ions? (c) curren­t-year revenue to budgeted curren­t-year revenue
2- An auditor most likely would limit substa­ntive audit tests of sales... (b) Cash receipts and accounts receivable
3- If the objective of a test of details is to detect overst­ate­ments of sales, the auditor should compare transa­ctions in the (d) Accounting records w/ the source documents
4- Tracing shipping documents to prenum­bered sales invoices provides evidence that (b) Shipments to customers were properly invoiced
5- An auditor most likely would review an entity­'s periodic accounting for the numerical sequen­ce... (d) Comple­teness
6- An entity­'s financial statements were misstated over a period of years because large amounts of revenue... (a) Scanning the general journal for unusual entries.
7- Which of the following might be detected by an audito­r's review of the client­'s sales cutoff? (d) Inflated sales for the year
8- An audit client sells 15 to 20 units of product annual­ly... (b) The auditor should inspect transa­ctions occurring in the last month of the fiscal year and review the related sale contracts to determine that revenue was posted in the proper period
9. Which of the following would most likely give the most assurance concerning the valuation assertion about accounts receiv­able? (d) Assessing the allowance for uncoll­ectible accounts for reason­abl­eness.
10- An audito­r's purpose in reviewing credit ratings of customers with delinquent accounts receivable most likely... (d) Valuation and allocation
11- For the fiscal year ending December 31 of the previous year and for the current year...(b) A/R turnovers are 10.0 and 6.7. Uncoll accoun­ts/­Gross A/R is .3 and .17
12- AU-C 505, External Confir­mat­ions, defines external confir­mation as...(c) Rights and obliga­tions and existence
13- An auditor confirms a repres­ent­ative number of open accounts receivable as of December 31...(a) One of the cashiers has been covering a personal embezz­lement by lapping
14- An auditor suspects that a client­'s cashier is misapp­rop­riating cash... (a) Dates checks are deposited per bank statements with the dates remittance credits are recorded
15- An auditor who has confirmed accounts receivable may discover that the sales journal... (d) Most of the returned positive confir­mation requests indicate that the debtor owes a smaller balance than the amount being confirmed.
16- During the process of confirming receiv­ables as of Dec 31, Year 1... (d) Verify the amount that was received
17- An auditor confirmed a/r as of an interim date, and all confir­mations were return­ed... (c) Review supporting documents for new large balances occurring after the interim date, and evaluate any signif­icant changes in balances at year end.
18- To reduce the risks associated with accepting fax responses to requests for confir­mat­ion­s...(b) Verify the sources and contents of the faxes in telephone calls to the senders.
19- Cooper, CPA, is auditing the financial statements of a small rural munici­pality (a) Send positive confir­mation requests
20- When an auditor does not receive replies to positive requests for year end a/r confir­mat­ions... (c) Send the customer a second confir­mation request
21- Which of the following procedures would an auditor perform... second requests? (d) Inspect the shipping records docume­nting the mercha­ndise sold to the debtors

22- The best evidence regarding year-end bank balances is documented in the (b) Bank reconc­ili­ations
23- Which of the following sets of inform­ation does an auditor usually confirm on one form? (b) Cash in bank and collateral for loans
24- An auditor ordinarily sends a standard confir­mation request to all banks with which the client... (d) Seek info about other deposit and loan amounts that come to the attention of the instit­ution in the process of completing the confir­mation
25- The usefulness of the standard bank confir­mation request may be limited... (d) Be unaware of all the financial relati­onships that the bank has with the client.
26- An indepe­ndent auditor asked a client­'s internal auditor to assist in preparing a standa­rd... (b) The form was mailed by the controller
27- An auditor should test bank transfers for the last part of the audit period and first part of the subsequent period to detect whether (c) Cash balances were overstated because of kiting.
14.1
1- The primary source of info to be reported about litiga­tion, claims, and assess­ments is the (c) Client­'s management
4-If the auditor determines that an inquiry of a client­'s external legal counsel is necessary, who should make the inquiry? (c) Client management
5- The primary reason an auditor requests letters of inquiry to be sent to a client­'s legal counsel is... (b) Corrob­oration of the info furnished by management about litiga­tion, claims, and assess­ments
7- The refusal of a client­'s legal counsel to provide info requested in an inquiry letter generally is considered (b) A limitation on the scope of the audit
13- Which of the following proced­ure­s.... to obtain evidence about the occurrence of subsequent events? (c) Inquiring of the entity­'s legal counsel concerning litiga­tion, claims, and assess­ments arising after year end.
28- To which of the following matters would materi­ality limits not apply in obtaining written management repres­ent­ations? (a) The availa­bility of minutes of shareh­old­ers­' and direct­ors­' meetings
31- Which of the following auditing proced­ure­s...su­bst­antial doubt about an entitys ability to continue as a going concern? (b) Confirming with third parties the details of arrang­ements to maintain financial support
17.1
1- Pell, CPA is the gropu engagement partner... (b) II only
2- An auditor may issue an unmodified audit report when the (d) Group engagement partner assumes respon­sib­ility for the work of a component auditor
3- The group engagement partner has identified a signif­icant component of the group that is being audited by a component auditor... (c) The group engagement team should either audit the component directly or have the component auditor audit the inform­ation on its behalf
4- In which situation will a group auditor be most likely to refer to a component auditor... (a) The component auditor performed an audit in accordance with PCAOB standards
5- The audito­r's respon­sib­ility section of an audito­r's report contains the follow­ing:... (a) Assume no respon­sib­ility for the audit of the component auditor.
6-The following paragraph was included in an audito­r's report to indicate a lack of consis­ten­cy:... (b) Unmodi­fied, After Opinion Pagragraph
7-For which event would an auditor issue a report that omits any reference to a change in accounting principle or correction of a material missta­tement? (c)
A change in the useful life used to calculate the provision for deprec­iation expense.
8- When an entity changes its method of accounting for income taxes,... (d) Refer to the financial statement note that discusses the change in detail.
9- When the auditor concurs with a change in accounting principle that materially affects the compar­ability of the compar­ative fin... (a) No, No, Yes

10- Digit Co uses the FIFO method of costing for its intern­ational subsid­iar­y's inventory and the LIFO... (a) Unmodified opinion
11- A nonissuer changed from the straig­ht-line method to the declin­ing­-ba­lance method... (c)
12- When there has been a change in accounting principles but the effect of the change on... (a) Not refer to to the change in the audito­r's report
13-An auditor most likely will express an unmodified opinion and will not add additional language to the report if the auditor (d) Believes that there is a remote likelihood of a material loss resulting form an uncert­ainty
14- Management believes, and the auditor is satisfied, that a material loss probably will occur when pending litigation is resolv­ed... (d) Unmodified opinion with no additional paragraph in the audito­r's report
15- Tech Company has disclosed an uncert­ainty arising from pending litiga­tion. The audito­r's decision to express... (a) Lack of sufficient approp­riate evidence
16- When an auditor concludes that substa­ntial doubt exists about an entity­'s... (d) Consider the adequacy of disclose about the entity­'s possible inability to continue as a going concern.
17- In which circum­stance would auditor add emphas­is-­of-­matter paragr­aph... (b) There is substa­ntial doubt about the entity­'s ability to continue as a going concern
18- An audito­r's report included the following paragraph relative to substa­ntial doubt... (b) The report should not contain condit­ional language
19- Green, CPA, concludes that there is substa­ntial doubt about JKL Co.'s ability to contin­ue... (a) Yes Yes Yes
20- Kane, CPA concludes that there is substa­ntial doubt about Lima Co's ability to continue as a going (d) No No
21- An auditor concludes that there is substa­nti­al... If disclo­sures are adequate and no issues prevail, audit report may include a (d) Yes, No
22- Mead, CPA... (a) The Emphas­is-­of-­matter paragraph included in the Year 1 audito­r's report should not be repeated.
23- When a predec­essor auditor reissues the report... (c) Compare the prior period­'s financial statements that the predec­essor reported on with the financial statements to be presented for compar­ative purposes
24- When reporting on compar­ative fin statem­ents... (a) Prior year's fin statements are restated to correct a material missta­tement
25- The predec­essor auditor, who is satisfied after... (d) Not refer to the report or the work of the current auditor.
26- Jewel, CPA... (d) I, I, and III.
28- Unaudited fin statem­ent­s...In accordance with PCAOB'S interim auditing standards, should be (a) Yes, No, No
29-An other-­matter paragraph is included in the audito­r's report except when (d) The client has materially restated the prior year's compar­ative financial statem­ents.
31- In which situation is the auditor most likely not to include an emphas­is-­of-­mattter paragraph in the audito­r's report? (a) An important audit procedure was formed.