Chapter8 - final

1、CHAPTER 8 Multiple-Choice Questions1.easyWhich of the following is not one of the three main reasons why the auditor should properly plan engagements?aa.To enable proper on-the-job training of employees.b.To enable the auditor to obtain sufficient appropriate evidence.c.To avoid misunderstandings wi

2、th the client.d.To help keep audit costs reasonable.2.Avoiding misunderstandings with the client is important for:easya.good client relations.db.facilitating high-quality work at a reasonable cost.c.either a or b, but not both.d.both a and b.3.easyA measure of how willing the auditor is to accept th

3、at the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the:ba.inherent risk.b.acceptable audit risk.c.statistical risk.d.financial risk.4.easyA measure of the auditors assessment of the likelihood that there are material mis

4、statements in an account before considering the effectiveness of the clients internal control is called:da.control risk.b.acceptable audit risk.c.statistical risk.d.inherent risk.5.When inherent risk is high, there will need to be:easya.more evidence accumulated.db.more experienced staff assigned to

5、 the work.c.either a or b, but not both.d.both a and b.6.The auditor is likely to accumulate more evidence when the audit is for a company:easya.whose stock is publicly traded.db.which has large amounts of debt.c.which is to be sold in the near future.d.All three of the above.7.Which of the followin

6、g is not typically included in initial audit planning?easya.Client acceptance/continuation decisions.db.Determination of the purpose of the audit.c.Obtain an understanding with the client.d.Perform preliminary analytical procedures.8.Initial audit planning involves four matters. Which of the followi

7、ng is not one of these?easya.Develop an overall audit strategy.bb.Request that bank balances be confirmed.c.Schedule engagement staff and audit specialists.d.Identify the clients reason for the audit.9.easyMost auditors assess inherent risk as high for related parties and related-party transactions

8、because:ca.of the accounting disclosure requirement.b.of the lack of independence between the parties.c.both a and b.d.it is required by generally accepted accounting principles.10.easyWhich of the following is not correct regarding the communications between successor and predecessor auditors?aa.Th

9、e burden of initiating the communication rests with the predecessor auditor.b.The burden of initiating the communication rests with the successor auditor.c.The predecessor auditor must receive their former clients permission prior to divulging information to the successor auditord.The predecessor au

10、ditor may choose to provide a limited response to a successor auditor.11.A successor auditor may perform which of the following for a new audit client?easya.Speak to local attorneys, banks and other businesses regarding the companys reputation.db.Speak to the predecessor auditor about disagreements

11、they had with management.c.Interview client personnel to better understand the business and associated risks.d.All of the above.12.mediumA CPA firm may choose to not continue working with an audit client for which of the following reasons?da.Conflicts over past audits.b.Disagreements regarding the t

12、ype of opinion to issue.c.Disagreements regarding audit fees.d.All of the above.13.mediumWhich of the following is not a potential effect of an auditors decision that a lower acceptable audit risk is appropriate?ba.More evidence is accumulated.b.Less evidence is accumulated.c.Special care is require

13、d in assigning experienced staff.d.Review of audit documentation is performed by personnel not assigned to the engagement.14.mediumIt is easier and more common to implement increased evidence accumulation for inherent risk than for acceptable audit risk because:aa.inherent risk can usually be isolat

14、ed to one or two accounts.b.inherent risk applies to the entire audit.c.acceptable audit risk and sample sizes are set statistically.d.acceptable audit risk does not impact on the amount of evidence which must be accumulated.15. (SOX)mediumIf an auditor is requested to perform nonaudit services for

15、a public company audit client, who is responsible for agreeing to those services with the audit firm?da.The clients management.b.The clients chief executive officer.c.The clients chief financial officer.d.The clients audit committee.16.mediumWhich of the following statements is true regarding commun

16、ications between predecessor and successor auditors? ba.The burden of initiating the communication rests with the predecessor.b.The predecessor should attempt to respond fully and truthfully to the successors inquiries.c.The predecessor should communicate with the successor only if the client is pub

17、lic.d.There is no requirement that the predecessor and successor communicate.17.mediumInvestigating new clients with a focus on assessing the auditors potential relationship with that new client is a critical element in determining:ba.inherent risk.b.acceptable audit risk.c.statistical risk.d.financ

18、ial risk.18.The purpose of an engagement letter is to:mediumba.document the CPA firms responsibility to external users of the audited financial statements.b.document the terms of the engagement in writing to minimize misunderstandings.c.notify the audit staff of an upcoming engagement so that person

19、nel scheduling can be facilitated.d.all of the above.19.mediumOne means of informing the client that the auditor is not responsible for the discovery of all acts of fraud is the:aa.engagement letter.b.representation letter.c.responsibility letter.d.client letter.20.Which of the following normally si

20、gns the engagement letter for an audit of a public company?mediuma.Corporate treasurer.db.Chief financial officer.c.Chairman of the board of directors.d.Audit committee.21.Which of the following normally signs the engagement letter for an audit of a private company?mediuma.Management.ab.Board of dir

21、ectors representative.c.Audit committee representative.d.None of the above.22.mediumAn understanding of a clients business and industry and knowledge about operations are essential for doing an adequate audit. For a new client, most of this information is obtained:da.from the predecessor auditor.b.f

22、rom the Securities and Exchange Commission.c.from the permanent file.d.at the clients premises.23.mediumWhich of the following factors partially explains the increased importance of understanding the clients business?da.Expansion of business to include global operations.b.Increased connectedness of

23、clients with their suppliers and customers via technology.c.Increased importance of human capital and other intangible assets.d.All of the above.24.The least effective method of identifying related parties for a public company would be a(n):mediuma.inquiry of management.cb.review of SEC filings.c.re

24、view of the purchases and sales journals for the period under audit.d.examination of stockholders listings to identify principal stockholders.25.mediumAn official record of meetings of the board of directors and stockholders is included in the corporate: ca.bylaws.b.charter.c.minutes.d.license.26.An

25、 understanding of a companys industry and external environment includes: mediuma.general economic conditions.db.the extent of competition within the industry.c.regulatory requirements.d.all of the above.27.Which of the following is not likely to be a related party?mediuma.Affiliated companies.cb.A m

26、ajor stockholder of the company.c.A warehouse employee.d.The chief executive officer.28.Related parties are commonly identified in which of the following ways?mediuma.Review of SEC filings.db.Examination of stockholder listings.c.Inquiry of management.d.All of the above.29.mediumA tour of the client

27、s facilities is helpful in obtaining an understanding of the operations because:da.the auditor will be able to assess the physical safeguards over assets.b.the auditor may be better able to assess certain inherent risks.c.the auditor obtains a broader perspective about the company as a whole.d.all o

28、f the above.30.Which of the following is most likely to occur at the beginning of an initial audit engagement?mediuma.Prepare a rough draft of the financial statements and of the auditors report.cb.Study and evaluate the system of internal administrative control.c.Determine the clients reason for an

29、 audit.d.Consult with and review the work of the predecessor auditor prior to discussing the engagement with the client management.31.An auditor should examine minutes of the board of directors meetings:mediuma.through the date of the financial statements.bb.through the date of the audit report.c.on

30、ly at the beginning of the audit.d.on a test basis.32.mediumThe first standard of field work, which states that the work is to be adequately planned and that assistants, if any, are to be properly supervised, recognizes that:aa.early appointment of the auditor is advantageous to the auditor and the

31、client.b.acceptance of an audit engagement after the close of the clients fiscal year is generally not permissible.c.appointment of the auditor subsequent to the physical count of inventories requires a disclaimer of opinion.d.performance of substantial parts of the examination is necessary at inter

32、im dates.33.mediumThe corporate minutes are the official record of the meetings of the board of directors and stockholders. The minutes typically include authorizations related to:da.significant acquisitions or dispositions of property, plant and equipment.b.dividend payments.c.management compensati

33、on.d.all of the above.34.An engagement letter sent to an audit client usually would not include a(n):mediuma.reference to the auditors responsibility for the detection of errors or irregularities.cb.estimation of the time to be spent on the audit work by audit staff and management.c.statement that m

34、anagement advisory services would be made available upon request.d.reference to managements responsibility for the financial statements.35.Which of the following is correct with respect to a companys corporate charter?mediumca.The corporate charter is granted by the federal government and is require

35、d to recognize the corporation as a separate entity.b.The corporate charter includes the rules and procedures used to operate a corporation.c.The corporate charter includes the exact name of the corporation, the date of incorporation, and the types of business the corporation is authorized to conduc

36、t.d.None of the above is correct.36.Corporate bylaws include:mediuma.the corporations exact name.bb.the rules and procedures used to operation the corporation.c.the kinds and amounts of capital stock the corporation is authorized to issue.d.all of the above.37.mediumbIn what order should the followi

37、ng steps occur?A. Assess client business riskB. Understand the clients business and industryC. Perform preliminary analytical proceduresD. Assess risk of material misstatementsa.D, B, C, A.b.B, A, D, C.c.B, D, A, C.d.D, C, B, A.38.Which of the following would be least likely to occur in assessing a

38、clients business risk?mediuma.Evaluating management controls.db.Obtaining an understanding of the clients industry.c.Assess risks of material misstatements.d.All of the above are equally likely to occur.39.Which of the following statements is not correct with respect to analytical procedures?mediuma

39、.Auditing standards emphasize the need for auditors to develop and use expectations.bb.Analytical procedures must be performed throughout the audit.c.Analytical procedures may be performed at any time during the audit.d.Analytical procedures use comparisons and relationships to assess whether accoun

40、t balances appear reasonable.40.The most widely used profitability ratio is the:mediuma.quick fit margin.c.return on assets.d.earnings per share.41.challengingThe purpose of the requirement in SAS No. 84 of having communication between the predecessor and successor auditor is to:ba.allow

41、 the predecessor to disclose information which would otherwise be confidential.b.help the successor auditor to evaluate whether to accept the engagement.c.help the client by facilitating the change of auditors.d.ensure the predecessor collects all unpaid fees prior to a change in auditor.42.challeng

42、ingThe predecessor auditor is required to respond to the request of the successor auditor for information, but the response can be limited to stating that no information will be provided when:ca.the predecessor auditor has poor relations with the successor auditor.b.the client is dissatisfied with t

43、he predecessors work.c.there are actual or potential legal problems between the client and the predecessor.d.the predecessor believes that the client lacks integrity.43.Which of the following is correct with respect to the use of analytical procedures?challengingda.Analytical procedures may be used

44、in evaluating balances in the testing phase as long as the auditor also uses them in assessing the going concern assumption.b.Analytical procedures must be used throughout the audit.c.Analytical procedures used in the testing phase of the audit are primarily used to direct an auditors attention so t

45、hat the auditors understanding of the business is improved.d.None of the above is correct.44.challengingWhich of the following ratios is best used to assess a companys ability to meet its long-term debt obligations?ca.Quick ratio.b.Return on common equity.c.Debt to equity.d.None of the above.45.Whic

46、h of the following statements is not correct?challengingba.Analytical procedures used in the planning phase of the audit are primarily directed at understanding the clients business and directing the auditors attention to areas that may contain possible misstatements.b.Analytical procedures used in

47、the completion phase are primarily aimed at assessing going concern and secondarily aimed at directing the auditors attention to areas that may contain possible misstatements.c.Analytical procedures must be used in the planning and completion phases of the audit, and are optional in the testing phas

48、e.d.Analytical procedures used in the completion phase are primarily aimed at directing the auditors attention to areas that may contain possible misstatements and secondarily aimed at assessing going concern.46.Which of the following would not likely be classified as a related-party transaction?cha

49、llenginga.An advance of one weeks salary to an employee.ab.Sales of merchandise between affiliated companies.c.Loans or credit sales to the principal owner of the client company.d.Exchanges of equipment between two companies owned by the same person.47.Which of the following would not be found in th

50、e corporate charter?challenginga.The kinds and amount of capital stock authorized.db.The date of incorporation.c.The types of business activity that the corporation is allowed to conduct.d.The rules and procedures adopted by the stockholders.48.Which of the following would not usually be included in

51、 the minutes of the board of directors?challenginga.The duties and powers of the corporate officers.ab.Declaration of dividends.c.Authorization of long-term loans.d.All of the above would be included.49.When are auditors likely to encounter judgment problems in the use of analytical procedures?chall

52、engingda.Whenever the auditor places reliance on managements explanations for unusual fluctuations in account balances without first developing independent expectations.b.Whenever the auditor allows unaudited balances to unduly influence his/her expectations of current balances.c.Whenever the audito

53、r fails to consider the pattern reflected by several unusual fluctuations when trying to explain what caused them.d.The auditor is likely to encounter judgment problems in each of the above instances.50.The major concern when using nonfinancial data in analytical procedures is the:challenginga.accur

54、acy of the nonfinancial data.ab.source of the nonfinancial data.c.type of nonfinancial data.d.presence of multiple sources of nonfinancial data.51.challengingAn auditor searching for related party transactions should obtain an understanding of each subsidiarys relationship to the total entity because:ba.the business structure may be deliberately designed to obscure related party transactions.b.this may reveal whether transactions would have taken place if the parties had been unrelated.c.transactions may have been consummated on terms equivalent to arms-length transactions.d.this m