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Question 1

2 out of 2 points

William Gregory, CPA, is the principal auditor for a multi-national corporation. Another CPA has examined and reported on the financial statements of a significant subsidiary of the corporation. Gregory is satisfied with the independence and professional reputation of the other auditor, as well as the quality of the other auditor's examination. With respect to his report on the consolidated financial statements, taken as a whole, Gregory:
Selected Answer:

may refer to the examination of the other auditor. may refer to the examination of the other auditor.
Question 2
0 out of 2 points

Correct Answer:

Which of the following is not explicitly stated in the standard unqualified audit report?
Selected Answer:

The auditors believe that the audit provides a reasonable basis for their opinion. The audit was conducted in accordance with generally accepted accounting principles.
Question 3
2 out of 2 points

Correct Answer:

The scope paragraph of the standard unqualified audit report states that the audit is designed to:
Selected Answer:

obtain reasonable assurance whether the statements are free of material misstatement. obtain reasonable assurance whether the statements are free of material misstatement.
Question 4
2 out of 2 points

Correct Answer:

An auditor determines the financial statements include at least a material departure from GAAP. Which type of opinion may be issued?
Selected Answer: Disclaimer No Qualified Yes Adverse Yes

Correct Answer:

Disclaimer No

Qualified Yes

Adverse Yes 2 out of 2 points

Question 5

Whenever the client imposes restrictions on the scope of the audit, the auditor should be concerned that management may be trying to prevent discovery of misstatements. In such cases, the auditor will likely issue a:
Selected Answer:

disclaimer of opinion whenever materiality is in question. disclaimer of opinion whenever materiality is in question.
Question 6
2 out of 2 points

Correct Answer:

Examples of unqualified opinions which contain modified wording (without adding an explanatory paragraph) include:
Selected Answer:

the use of other auditors. the use of other auditors.


Question 7
2 out of 2 points

Correct Answer:

To emphasize the fact that the auditor is independent, a typical addressee of the audit report could be:
Selected Answer: Company Controller No Shareholders Yes Board of Directors Yes

Correct Answer:

Company Controller No

Shareholders Yes

Board of Directors Yes 2 out of 2 points

Question 8

Whenever an auditor issues an audit report for a public company, the auditor can choose to issue a report in which of the following forms? I. A combined report on financial statements and internal control over financial reporting. II. Separate reports on financial statements and internal control over financial reporting.
Selected Answer:

Either I or II.

Correct Answer:

Either I or II.
Question 9
2 out of 2 points

When a client has changed their method of valuing inventory from FIFO to LIFO and the change has a material effect on the financial statements. If the auditor does not concur with the appropriateness of the change, the auditor should issue a(n):
Selected Answer:

qualified opinion. qualified opinion.


Question 10
2 out of 2 points

Correct Answer:

In which situation would the auditor be choosing between "except for" qualified opinion and an adverse opinion?
Selected Answer:

Lack of full disclosure within the footnotes. Lack of full disclosure within the footnotes.
Question 11
2 out of 2 points

Correct Answer:

When the auditor evaluates the effect of a change in accounting principle, the materiality of the change should be evaluated based on:
Selected Answer:

the current year. the current year.


Question 12
2 out of 2 points

Correct Answer:

A CPA may wish to emphasize specific matters regarding the financial statements even though an unqualified opinion will be issued. Normally, such explanatory information is:
Selected Answer:

included in a separate paragraph in the

report.
Correct Answer:

included in a separate paragraph in the report.


Question 13
2 out of 2 points

An audit of historical financial statements most commonly includes the:


Selected Answer:

balance sheet, income statement, and the statement of cash flows. balance sheet, income statement, and the statement of cash flows.
Question 14
2 out of 2 points

Correct Answer:

Items that materially affect the comparability of financial statements generally require disclosure in the footnotes. If the client refuses to properly disclose the item, the auditor will most likely issue:
Selected Answer:

a qualified opinion. a qualified opinion.


Question 15
2 out of 2 points

Correct Answer:

When the auditor determines the financial statements are fairly stated and then determines that the auditor lacks independence, the auditor should issue:
Selected Answer:

a disclaimer of opinion. a disclaimer of opinion.


Question 16
2 out of 2 points

Correct Answer:

Interpretations of the rules regarding independence allow an auditor to serve as:


Selected Answer:

an honorary director for a not-for-profit charitable or religious organization.

Correct Answer:

an honorary director for a not-for-profit charitable or religious organization.


Question 17
2 out of 2 points

In determining independence with respect to any audit engagement, the ultimate decision as to whether or not the auditor is independent must be made by the:
Selected Answer:

audito r. audito r.
Question 18
2 out of 2 points

Correct Answer:

Interpretations of Independence Rule 101 prohibit covered members from owning any stock or other direct investment in audit clients. Covered members would include which of the following?
Selected Answer: All partners in the engagement office even if they have no engagement responsibility Yes

Individuals on the attest engagement Yes

The firm and its employee benefit plans Yes

Correct Answer:

All partners in the engagement office even if they have no engagement responsibility Yes

Individuals on the attest engagement Yes

The firm and its employee benefit plans Yes 2 out of 2 points

Question 19

The AICPA's Code of Professional Conduct ________ a CPA firm from doing both bookkeeping and auditing services for the same public company client?
Selected Answer:

prohibit s prohibit s
Question 20
2 out of 2 points

Correct Answer:

The Code of Conduct rule on independence indicates that materiality must be considered when:
Selected Answer: Evaluating direct investments made by the CPA Evaluating indirect ownership investments No Yes

Correct

Answer:

Evaluating direct investments made by the CPA Evaluating indirect ownership investments No Yes

Question 21
2 out of 2 points

If the board of accountancy in the state in which a CPA firm is licensed has rules that are different than the AICPA's rules, the CPA firm must follow:
Selected Answer:

whichever rules are more restrictive. whichever rules are more restrictive.
Question 22
2 out of 2 points

Correct Answer:

Several months after an unqualified audit report was issued, the auditor discovers the financial statements were materially misstated. The client's CEO agrees that there are misstatements, but refuses to correct them. She claims that "confidentiality" prevents the CPA from informing anyone.
Selected Answer:

The CEO is incorrect, and the auditor has an obligation to issue a revised audit report, even if the CEO will not correct the financial statements. The CEO is incorrect, and the auditor has an obligation to issue a revised audit report, even if the CEO will not correct the financial statements.
Question 23
0 out of 2 points

Correct Answer:

Ethical Rulings are: I. Explanations relating to broad hypothetical circumstances. II. Not enforceable, but one must justify departure. III. Explanations relating to specific factual circumstances.
Selected Answer:

I, II, and III II and III


Question 24
2 out of 2 points

Correct Answer:

If a nonpublic company asks an accountant to perform a review engagement, and the accountant has an immaterial direct financial interest in the company, the accountant is:
Selected Answer:

not independent and, therefore, may not issue a review report.


Correct Answer:

not independent and, therefore, may not issue a review report.


Question 25
2 out of 2 points

Financial interests family members of a CPA can affect the CPA's independence. Which of the following parties would not be included as a "direct financial interest" of the CPA?
Selected Answer:

Sibling living in the same city as the CPA Sibling living in the same city as the CPA
Question 26
2 out of 2 points

Correct Answer:

According to the Principles section of the Code of Professional Conduct, all members:
Selected Answer:

in public practice should be independent in fact and in appearance when providing auditing and other attestations services. in public practice should be independent in fact and in appearance when providing auditing and other attestations services.
Question 27
2 out of 2 points

Correct Answer:

Of the four parts of the AICPA's Code of Professional Conduct, which part is enforceable?
Selected Answer:

Rules of Conduct Rules of Conduct


Question 28
2 out of 2 points

Correct Answer:

Which of the following is(are) true concerning the Ethical Principles of the Code of Professional Conduct? I. They identify ideal conduct. II. They are general ideals and difficult to enforce.

Selected Answer:

I and II I and II
Question 29
2 out of 2 points

Correct Answer:

Which of the following is not one of the four parts of the AICPA's Code of Professional Conduct?
Selected Answer:

Definitio ns Definitio ns
Question 30
2 out of 2 points

Correct Answer:

Which of the following services is not prohibited by the SEC whenever a CPA also audits the company?
Selected Answer:

assisting the company in preparing certain SEC registration statements (e.g., 10-Q, 10-K) assisting the company in preparing certain SEC registration statements (e.g., 10-Q, 10-K)

Correct Answer:

Sunday, July 15, 2012 9:04:19 AM EDT