Audit true or false

Question 1

The term “ethics” refers to a person’s propensity to follow the laws of the land.

Answer 1

False

Question 2

Professionalism refers to the conduct, aims, or qualities that characterize a given profession.

Answer 2

true

Question 2

The Principles of Professional Conduct set forth the minimum standards.

Answer 2

false

Question 3

When auditing a public company, a CPA must follow the auditing standards and Code of CSQM-1 Quality Management for Firms That Perform Audits or Review of Financial Statements.

Answer 3

true

Question 4

Rules of Conduct are enforceable.

Answer 4

true

Question 5

Interpretations of Rules of Conduct are enforceable.

Answer 5

false

Question 6

Principles are stated at a conceptual level, not a detailed level.

Answer 6

true

Question 7

The rules contained in Section 202 cover issues relating to integrity, due care and objectivity.

Answer 7

true

Question 8

If an auditor is not independent of the client, it is unlikely that a user of financial statements will place much reliance on the CPA’s work.

Answer 8

true

Question 9

As per the CPA Rules of Professional Conduct, a CPA is required to identify and assess the extent to which a threat to independence exists.

Answer 9

true

Question 10

An indirect financial interest is defined as a financial interest that is owned or is under the control of an individual or entity.

Answer 10

false

Question 11

A financial interest is “beneficially owned” when an individual or entity is NOT the recorded owner of the interest but has a right to some or all of the underlying benefits of ownership.

Answer 11

true

Question 12

If a CPA owns an insurance policy issued by an attest client, independence would be considered impaired, even if the policy was purchased under the insurance company’s normal terms and procedures and does not offer an investment option.

Answer 12

false

Question 13

The independence standards issued by the CPA Rules of Professional Conduct do not prohibit the provision of tax services to an attest client.

Answer 13

true

Question 14

CPA Rules of Professional Conduct require tax services provided by a public company auditor to be considered and approved by the company’s audit committee.

Answer 14

true

Question 15

A going concern issue requires an explanatory paragraph to be added to the standard unqualified audit report (public company).

Answer 15

true

Question 16

An opinion based in part on the report of another auditor requires an explanatory/emphasis-of-matter paragraph be added to the standard unqualified audit report.

Answer 16

false

Question 17

A basic assumption that underlies financial reporting is that an entity will continue as a going concern.

Answer 17

true

Question 18

A change in accounting estimate is an example of an accounting change that affects comparability and requires an explanatory paragraph in the audit report.

Answer 18

false

Question 19

A correction of a material misstatement in previously issued financial statements is an example of an accounting change that affects comparability and requires an explanatory paragraph in the audit report.

Answer 19

true

Question 20

Changes that affect comparability but that do not involve a change in accounting principle or the correction of a misstatement are normally disclosed in the footnotes but do not require an explanatory paragraph in the audit report.

Answer 20

true

Question 21

An auditor may be unable to express an unqualified opinion if an immaterial departure from GAAP is present in the financial statements.

Answer 21

false

Question 22

An auditor must disclaim an opinion when the auditor lacks independence.

Answer 22

true

Question 23

The choice of which audit report to issue depends on the nature and the materiality of the condition giving rise to the departure.

Answer 23

true

Question 24

A scope limitation results from an inability to obtain sufficient appropriate evidence about some component of the financial statements.

Answer 24

true

Question 25

Every contingent liability must be recorded.

Answer 25

false

Question 26

An example of a contingent liability is an income tax dispute.

Answer 26

true

Question 27

Reading contracts and loan agreements is one way to identify unrecorded contingent liabilities.

Answer 27

true

Question 28

A legal letter will include and evaluate all contingent liabilities of the company.

Answer 28

false

Question 29

Type II subsequent events are conditions that require an adjustment to the account balance shown on the financial statements.

Answer 29

false

Question 30

An example of a Type I event or condition is the settlement of a lawsuit after the balance sheet date for an amount different from the amount recorded in the year-end financial statements.

Answer 30

true

Question 31

An example of a Type II event or condition is an uncollectible account receivable resulting from deterioration in a customer's financial condition prior to year end, about which the entity is unaware. The customer declares bankruptcy after the balance sheet date but prior to the issuance of the financial statements.

Answer 31

false

Question 32

Dual dating is used to identify unrecorded contingent liabilities.

Answer 32

false

Question 33

The auditor must perform final analytical procedures before deciding on the appropriate audit report to issue for the entity.

Answer 33

true

Question 34

If there is substantial doubt about the entity's ability to continue as a going concern, the auditor should obtain information about the management's plans to mitigate the problem and assess the likelihood that such plans can be implemented.

Answer 34

true

Question 35

The responsibility to assess the entity's ability to continue as a going concern rests solely with the auditor.

Answer 35

false

Question 36

The cash account is affected by all of the entity's business processes.

Answer 36

true

Question 37

The general cash account is normally the principal account used to disburse payroll.

Answer 37

false

Question 38

An imprest cash account is used for specific purposes and contains a stipulated amount of money.

Answer 38

true

Question 39

The auditor's use of analytical procedures for auditing cash is limited.

Answer 39

true

Question 40

A major control that directly affects the audit of cash is the bank reconciliation prepared by the auditor.

Answer 40

false

Question 41

A cutoff bank statement is used to verify the propriety of the reconciling items shown on the bank reconciliation.

Answer 41

true

Question 42

Kiting is an audit procedure used to test the accuracy of the cash receipts.

Answer 42

false

Question 43

It is generally more efficient to follow a substantive strategy for auditing investments.

Answer 43

true

Question 44

If the entity maintains custody of its investments, the auditor normally examines the actual securities.

Answer 44

true

Question 45

Level 1 inputs are more risky and difficult to audit than Level 3 inputs to a valuation model.

Answer 45

false