Acct 208 Fall 17 Exam

AUDITING ACCT 208/718

FALL 2017

EXAMINATION #1

OCTOBER 9, 2017

The test consists of multiple choice questions; please circle your answer. The test is due in class on October 16, 2017. If you are unable to attend class on that date, you can submit your test to the information below.

Contact information is as follows:

Karl G. Fassnacht

610-862-2418

kfassnacht@cbiz.com

fax 610-862-2500

NAME___________________________

GRADE_____________

1. Any service requiring the CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n)

1. accounting and bookkeeping service
2. attestation service
3. assurance service
4. tax service

2.        The organization responsible for providing oversight for auditors of public companies is called the

1. Auditing Standards Board
2. American institute of Certified Public Accountants
3. Public Oversight Board
4. Public Company Accounting Oversight Board

3.        An audit of historical financial statements most commonly includes the

1. balance sheet, income statement and the statement of cash flows
2. income statement, statement of cash flows and the footnotes
3. statement of cash flows, balance sheet and statement of stockholders’ equity

4.        An audit of historical financial statements is most often performed to determine whether the

1. organization is operating effectively and efficiently
2. entity is following specific procedures or rules set by a higher authority
3. management team is fulfilling its fidicuiary responsibilities to shareholders
4. none of the above

5.        Financial statement users often receive unreliable financial information from companies. Which of the following is not a common reason for this?

1. complex business transactions
2. large amounts of data
3. lack of firsthand knowledge of the business
4. each of the above is a common reason or unreliable information

6.        The Sarbanes-Oxley Act prohibits a CPA firm that audits a public company from providing which of the following types of service to that company?

1. reviews of quarterly financial statements
2. preparation of corporate tax returns
3. most consulting services
4. all of the above are prohibited services

7.        In any case in which the CPA or the CPA’s assistants are not qualified to perform the work, a professional obligation exists to

1. acquire the perquisite skills and experience
2. suggest someone else who is qualified to do the work
3. decline the engagement
4. any of the above

8.        The third general standard states that due care is to be exercised in the performance of an audit. This standard is generally interpreted to require

1. objective review of the adequacy of the technical training of firm personnel
2. thorough review of the existing internal control structure
3. critical review of work done at every level of supervision
4. periodic review of a CPA firm’s quality control procedure

9.        The purpose of the introductory paragraph in the standard unqualified report is

1. to identify the entity that was audited
2. to identify the financial statements that were audited and the dates and time periods covered by the report
3. to communicate the responsibilities of management in preparing the financial statements and to clarify the respective roles of management and the auditor
4. all of the above

10.        The audit report date on a standard unqualified report indicates

1. the last day of the fiscal period
2. the date on which the financial statements were filed with the Securities and Exchange Commission
3. the last date on which users may institute a lawsuit against the client or the auditor
4. the last day of the auditor’s responsibility for the review of significant events that occurred subsequent to the date of the financial statements

11.        Whenever an auditor issues a standard unqualified audit report, the implication is the auditor

1. does not know if the financial statements are presented in conformity with GAAP
2. does not believe the financial statements are presented in conformity with GAAP
3. believe the financial statements to be presented fairly in accordance with GAAP except for a specific aspect of them
4. believe the financial statements are presented fairly in accordance with GAAP

12. If the balance sheet of a company is dated December 31, 2015, the audit report is dated February 8, 2016, and both are released on February 15, 2016, this indicates that the auditor has searched for subsequent events that occurred up to

1. December 31, 2015
2. February 8, 2016
3. February 15, 2016
4. None of these

13.        The least severe type of audit report for disclosing departures from GAAP is the

1. adverse opinion
2. disclaimer of opinion
3. qualified opinion
4. report on unaudited financial statements

14.        Misstatements must be compared with some measurement base before a decision can be made about materiality. A commonly accepted measurement base includes

1. net income
2. total assets
3. working capital
4. all of the above

15.        Whenever there is a scope restriction, the appropriate response is to issue a (n)

1. disclaimer of opinion
2. adverse opinion
3. qualified opinion
4. unqualified report, a qualification of scope and opinion, or a disclaimer, depending on materiality

16.        The primary concern(s) in assessing materiality when a client has failed to follow GAAP include(s)

1. the total dollar error in the accounts involved compared with some base
2. the nature of the item
3. the qualitative nature of the item
4. all of the above

17. Brown Co.’s financial statements adequately disclose uncertainties that concern future events, the outcome of which are not reasonably estimable. The auditor’s report should include a (n)

1. unqualified opinion
2. “subject to” qualified opinion
3. “except for” qualified opinion
4. Adverse opinion

     18.  The underlying reason for a code of professional conduct for any profession is

1. the need for public confidence in the quality of the service of the profession
2. that it provides a safeguard to keep unscrupulous people out
3. that it is required by federal legislation
4. that it allows licensing agencies to have a yardstick to measure deficient behavior

     19.”Independence” in auditing means

1. remaining aloof from the client
2. not being financially dependent on the client
3. taking an unbiased and objective viewpoint
4. being an advocate for the client

    20.        To emphasize auditor independence from management, many corporations

1. appoint a partner of the firm conducting the audit to the corporation’s audit committee
2. establish a policy of discouraging social contact between employees of the corporation and staff of the independent auditor
3. have the independent auditor report to the audit committee of outside members of the board of directors
4. request that a representative of the independent auditor be on hand at the annual stockholders’ meeting

     21. The members of the company’s auditor committee should be

1. members of management
2. directors who are not part of company management
3. non-directors and non-members
4. directors and managers

22.        In which of the following circumstances would a CPA be bound by ethics to refrain from disclosing any confidential information about a client?

1. the CPA is issued a summons enforceable by a court order which orders the CPA to present confidential information
2. a major stockholder of the company seeks accounting information from the CPA after management has declined to disclose the requested information
3. confidential client information is made available as part of a quality review of the CPA’s practice by a review team authorized by the AICPA
4. an inquiry by a disciplinary body of a state CPAS society requests confidential information

23. The standard of due care to which the auditor is expected to adhere is referred to as the