CPA TEST BANK QUESTIONS
- CPA TEST BANK QUESTIONS
Last Modified: 2012-10-26
This answer is correct because a small tolerable misstatement combined with a high misstatement frequency increases the auditor’s required sample size which may lead to the conclusion by the auditor that all items of the account should be examined.
This answer is correct because variables sampling deals with dollar amounts (or quantities), and accordingly, this answer is correct because it involves the dollar amount of inventory. Attributes sampling addresses deviation rates from various controls.
Because systematic sampling is a procedure where a random start is obtained and then every nth item is selected. For example, a sample of forty from a population of a thousand would require selecting every 25th item after obtaining a random start between items 1 through 25. Therefore, although the forms are not consecutively numbered, the use of systematic sampling may be appropriate.
Why?This answer is correct because audit sampling is the application of an audit procedure to less than 100% of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class.
This answer is correct because although the use of random sampling makes it possible to calculate statistical conclusions, the wrong size sample will affect the achieved allowance for sampling risk at the desired risk of incorrect acceptance. For example, a sample which is too small will lead to a larger allowance for sampling risk than desired bc of a larger standard of error of the mean.
This answer is correct because attribute sampling (used with tests of controls) addresses the frequency with which a control operates effectively—such as the proper posting of accounts.
• Formed an association, not a partnership, with two other sole practitioners and called the association "Adams, Betts and Associates."
• Purchased another CPA’s accounting practice and based the price on a percentage of the fees accruing from clients over a 3-year period.
This answer is correct because the purchase of another practitioner’s practice is acceptable and the professional standards do not prohibit such a contingent payment.
Auditing Standards Board Standards
Ethics Standards 101
The CPA is convicted of a felony.
The CPA intentionally did not file his personal tax return as required by federal law.
Inquires of mgmt and others within entity
-Observation and inspection
-Other procedures such inquires of others outside of the entity (lawyers, experts) and reviewing of info from external sources such as banks.
-stmt that the company auditor has issued an attestation report on mgmt assertion
-identification of the framework for evaluating intl ctrls.
A walkthrough provides evidence to 1- confirm the auditor's understanding of the flow of transactions and the design of ctrls. 2- evaluate the effectiveness of the design of ctrls. 3- to confirm whether ctrls have been placed in operations.
Starting at the top includes consideration of entity levels controls and financial statements.
-may no omit controls related to financial stmts
-In our opinion, company x, maintained, in all material respoects, effective internal control over financial reporting
-Our audit included obtaining understanding of internal control over financial reporting
-Company X mgmt is responsible for maintaining effective ICFR.
-Indicates matters covered by the considerations and whether the auditor's considerations included test of ctrls with the procedures covered by his/her consideration.
-The report should describe the obj. and limitations of IC and the accountant's eval. thereof.
-Report should state the accountants conclusions based on the agency criteria
-Describe the purpose of the report and state that it should not be used for any other purpose.
-Approving voucher for pmt by having an authrized employee sign the voucher
-Indicating the asset and expense accts to be debited
-WILL not have access to unsued prenumbered purchase orers and recieving reports
-Must communicate in writing
-Communication indicating that no significant deficiencies were identified should not be issued.
-Previously communicated weaknesses that have not been corrected need to to be re-communicated.
Distrubution of auditor's report on significant deficiencies should be restricted to mgmt and the a/c
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