Analytical procedures are required as a part of the:
Procedures performed near the end of the audit.
The statement that best expresses the auditor's responsibility with respect to events occurring between the balance sheet date and the end of his audit is that:
The auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period.
Shortly after year end Zero Corp. was informed of the bankruptcy of Bingo. Zero Corp. showed a receivable of $10,000 due from Bingo as of year end- none of which seems recoverable. Bingos bankruptcy did not occur until after Zero Corp.'s year end. Under these circumstances:
The financial statements should be adjusted.
In auditing the balance sheet, most revenue and expense accounts are also audited. Which accounts are most likely to be audited when auditing Accounts Receivable?
Sales and Bad debt Expense.
Auditors should perform audit procedures relating to subsequent events?
Through the date of the audit report.
Which of the following procedures would an auditor most likely perform while evaluating audit findings at the conclusion of an audit?
Develop an estimate of the total likely misstatement in the financial statements.
Which of the following ledger accounts would be least likely to be analyzed in detail by auditors?
When auditing the statement of cash flows of a profitable, growing company which combination is most likely?
Positive cash flows from operations and negative cash flows from investing.
The audit of which of the following balance sheet accounts does not normally result in verification of an income statement account?
An example of an internal control weakness is to assign the payroll department the responsibility for:
Authorizing increasing in pay.
An example of an internal control weakness is to assign the personnel department responsibility for:
Distribution of paychecks.
Which of the following audit procedures is aimed at determining whether every name on the company payroll is an employee actually on the job?
A surprise observation of a paycheck distribution.
Which of the following is not a procedure that is designed to provide evidence about the existence of loss contingencies?
Confirming accounts payable.
Which of the following types of matters do not generally require disclosure in the financial statements?
General risk contingencies.
Material loss contingencies should be recorded in the financial statements is available information indicates it is probable that a loss can be reasonably estimated. These considerations will affect the audit report as follows:
If a loss is probable but the amount cannot be reasonably estimated and is disclosed in the notes to the financial statements rather than being recorded therein.
A refusal by lawyer to furnish information related to litigation included in the letter of inquiry is likely to result in:
Qualification of the audit report.
If, after issuing an audit report, the auditors find that they have failed to perform certain significant audit procedures they should first:
Attempt to determine whether their report is still being relied upon by third parties.
Which of the following is not a procedure that auditors typically perform to search for significant events during the period after year end but prior to the audit report date?
Review changes in internal control during the period subsequent to the balance sheet date.
Which of the following subsequent events might require an adjustment to the clients financial statements?
Loss on the sale of a closely held investment.
Authorization of which of the following is least likely to be found during a review of the minutes of the board of directors?
Writeoff of trade accounts receivables.
Which of the following is not a procedure normally performed while completing the audit?
Obtain confirmation of capital stockholdings from shareholders.
Auditors often request that the audit client send a letter of inquiry to those attorneys who have been consulted with respect to litigation, claims, or assessments. The primary reason for this request is to provide the auditor with:
Corroborative audit evidence.
Auditors must communicate internal control "significant deficiencies" to:
The audit committee.
Which of the following procedures is not a procedure that is completed near the end of the engagement?
Review cash transactions.
Which of the following information need not be reported on in the auditors' report if the information is considered to be properly stated after performing appropriate procedures?
Other information in documents containing audited financial statements.
In evaluating whether there is a sufficiently low probability of material misstatement in the financial statements, the auditors accumulate:
Known, projected and other estimated misstatements in the financial statements.
Specific misstatement in one of a client's 2,000 accounts receivable is referred to as a(n):
The review of audit working papers by the audit partner is normally completed:
Near the completion of the audit.
Management estimates the company's allowance for doubtful accounts as $200,000 and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000. The known misstatement in this situation is:
Management estimates the company's allowance for doubtful accounts as $200,000 and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000. The likely misstatement in this situation is:
An approach that qualifies the total likely misstatement as of the current year end based of the effects of reflecting misstatements during the current year (and not considering any unadjusted previous year misstatements) is referred to as the:
An approach that quantifies the total likely misstatement as of the current year end based on the effects of reflecting all misstatements existing in the balance sheet at the end of the current year, irrespective of whether the misstatements occurred in the current or previous year is referred to as the:
Iron curtain approach.
A client's previous two years of financial statements understated estimated warranty payable by $30,000 and $50,000 respectively, immaterial amounts. This year the auditors estimate that the accrual is understated by an additional $60,000. In this year's audit $100,000 represents a material amount. Assuming that the entire understatement is to recorded, following SEC SAB 108 the decrease is this year's income due to these understatement is:
A client's previous two years financial statements understated estimated warranty payable by $30,000 and $50,000 respectively, immaterial amounts. This year the auditors estimate that the accrual is understated by an additional $60,000. In this year's audit $55,000 represents a material amount. Assuming that the entire understatement is to be recorded, the decrease in this year's income due to these misstatements is:
One reason why the independent auditors perform analytical procedures on the client's operations is to identify:
Which of the following is an analytical procedure that should be applied to the income statement?
Compare the actual revenues and expenses with the corresponding figures of the previous year and investigate significant difference.
It would be appropriate for the payroll accounting department to be responsible for which of the following functions?
Preparation of periodic governmental reports as to employees' earnings and withholding taxes.
Which of the following is the best reason why the auditors should consider observing a clients's distribution of regular payroll checks?
Separation of payroll duties is less than adequate for effective internal control.
To minimize the opportunities for fraud, unclaimed cash payroll should be:
Deposited in a special bank account.
The purpose of segregating the duties of distributing payroll checks and hiring personnel is to:
Separate the authorization of transactions from the custody of related assets.
A CPA reviews a client's payroll procedures. The CPA would consider internal control to less than effective if a payroll department supervisor was assigned the responsibility for:
Distributing payroll checks to employees.
A common audit procedure in the audit of payroll transactions involves tracing selected items from the payroll journal to employee time cards that have been approved by supervisory personnel. This procedure is designed to provide evidence in support of the audit proposition that:
Employees worked the number of hours for which their pay was computed.
Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?
Settlement of litigation in excess of the recorded liability.
With respect to issuance of an audit report which is dual dated for a subsequent even occurring after the completion of field work but before issuance of the auditors' report, the auditors' responsibility for events occurring until the date of the audit report:
Limited to the specific event referred to.
An auditor's decision concerning whether or not to "dual date" the audit report is based upon the auditor's willingness to:
Extended auditing procedures.
Auditors often request that the audit client send a letter of inquiry to those attorneys who have been consulted with respect to litigation, claims, or assessments. The primary reason for this request is to provide the auditors with:
Corroborative audit evidence.
The auditors' primary means of obtaining corroboration of management's information concerning litigation is a:
Letter of audit inquiry to the client's lawyer.
Which of the following auditing procedures is ordinarily performed last?
Obtaining a management representation letter.
Which of the following is not correct relating to representation letters?
They often serve as a substitute for the application of other procedures.
The date the auditor grants the client permission to use the audit report in connection with the financial statements is the:
Report release date?
Which of the following statements ordinarily is not included among the written client representations made by the chief executive officer and the chief financial officer?
"Sufficient audit evidence has been made available to the auditor to permit the issuance of an unqualified opinion."
To which of the following matters would materiality limits not apply when obtaining written client representations?
Instances of fraud involving management.
The auditors' best course of action with respect to "other information" included in an annual report containing the auditors' report is to:
Read and consider the manner of presentation of the "other financial information."
In the course of the audit of financial statements for the purpose of expressing an opinion thereon, the auditors will normally prepare a schedule of unadjusted differences for which the auditors did not propose adjustment when they were identified. What is the primary purpose served by this schedule?
To identify the potential financial statement effects of misstatements or disputed items that were considered immaterial when discovered.
An auditor will ordinarily examine invoices from lawyers primarily in order to:
Identify possible unasserted litigation, claims and assessments.
The auditor's primary means of obtaining corroboration of management's information concerning litigation is a:
Letter of audit inquiry to the client's lawyer.
A nonpublic client has provided required supplementary information with its audited financial statements. The auditor's proper reporting responsibility includes:
An emphasis of matter of paragraph should be added to the audit report.
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