10/13/2015 TheAceStudent: ACC504/ACC 504 MID TERM EXAM– ADVANCED AUDITING (50 MCQ) 100% ANSWER

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ACC504/ACC 504 MID TERM EXAM– ADVANCED AUDITING (50 MCQ) 100% ANSWER

Question1. What is the term used to identify the risk that the client’s financial statements may be materiallyfalse and misleading? A. Business risk.B. Information risk.C. Client risk.D. Risk assessment.2. The audit objective that all transactions are recorded in the proper account is related most closelyto which one of the ASB transaction assertions? A. Occurrence.B. Completeness.C. Accuracy.D. Classification.3. Assurance services involve all of the following except A. Relevance as well as the reliability of information.B. Nonfinancial information as well as traditional financial statements.C. Providing absolute rather than reasonable assurance.D. Electronic databases as well as printed reports.4. An attestation engagement is one in which a CPA is engaged to A. Issue a report on subject matter or an assertion about the subject matter that is the responsibilityof another party.B. Provide tax advice or prepare a tax return based on financial information the CPA has not auditedor reviewed.C. Testify as an expert witness in accounting, auditing, or tax matters, given certain stipulatedfacts.D. Assemble prospective financial statements based on the assumptions of the entity’smanagement without expressing any assurance.5. The process by which a CPA obtains a certificate and license in a state other than the state inwhich the CPA’s certificate was originally obtained is referred to as A. Substantial equivalency.B. Quid pro quo.C. Relicensing.D. Re­examination6. Which of the following would be considered an assurance engagement? A. Giving an opinion on a prize promoter’s claims about the amount of sweepstakes prizes awardedin the past.B. Giving an opinion on the conformity of the financial statements of a university with generallyaccepted accounting principles.C. Giving an opinion on the fair presentation of a newspaper’s circulation data.D. Giving assurance about the average drive length achieved by golfers with a client’s golf balls.E. All of the above.7. Bankers who are processing loan applications from companies seeking large loans will probablyask for financial statements audited by an independent CPA because A. Financial statements are too complex to analyze themselves.B. They are too far away from company headquarters to perform accounting and auditingthemselves.

ACC504/ACC 504 MID TERM EXAM– ADVANCEDAUDITING (50 MCQ) 100% ANSWER

10/13/2015 TheAceStudent: ACC504/ACC 504 MID TERM EXAM– ADVANCED AUDITING (50 MCQ) 100% ANSWER

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C. The consequences of making a bad loan are very undesirable.D. They generally see a potential conflict of interest between company managers who want to getloans and the bank’s needs for reliable financial statements.8. The Sarbanes­Oxley Act of 2002 prohibits public accounting firms from providing which of thefollowing services to an audit client? A. Bookkeeping services.B. Internal audit services.C. Valuation services.D. All of the above.9. The risk to investors that a company’s financial statements may be materially misleading iscalled A. Client acceptance risk.B. Information risk.C. Moral hazard.D. Business risk.10. Substantial equivalency refers to A. An auditor’s tendency not to believe management’s assertions without sufficient corroboration.B. Providing consulting work for another firm’s audit client in exchange for the other firm’s providingconsulting services to one of your clients.C. The waiving of certification exam parts for an individual holding an equivalent certification fromanother professional organization.D. Permitting a CPA to practice in another state without having to obtain a license in that state.11. Which of the following best describes the relationship between auditing and attestationengagements? A. Auditing is a subset of attestation engagements that focuses on the certification of financialstatements.B. Attestation is a subset of auditing that provides lower assurance than that provided by an auditengagement.C. Auditing is a subset of attestation engagements that focuses on providing clients with advice anddecision support.D. Attestation is a subset of auditing that improves the quality of information, or its context, fordecision makers.12. Which of the following best describes the focus of the following engagements?A. Option AB. Option BC. Option CD. Option D13. Which of the following is an example of a regulatory auditor? A. Internal auditors.B. Big 4 auditors.C. U.S. Internal Revenue Service auditors.D. Operational auditors.14. The definition of performance audits does not include A. Economy audits.B. Efficiency audits.C. Financial audits.D. Program audits.15. CPA certificates and licenses to practice are issued by the A. AICPA.B. States or territories.C. AICPA Examinations Division.D. GAO.16. The attestation standards do not require the attestation report to include a statement that A. Provides a conclusion whether the subject matter is presented in conformity with established or

10/13/2015 TheAceStudent: ACC504/ACC 504 MID TERM EXAM– ADVANCED AUDITING (50 MCQ) 100% ANSWER

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stated criteria.B. Indicates that the practitioner has significant reservations about the engagement.C. Identifies the subject matter or assertion being reported on.D. Indicates that the accountant assumes no responsibility to update the report.17. Control risk is A. The probability that a material misstatement could not be prevented or detected by the entity’sinternal control policies and procedures.B. The probability that a material misstatement could occur and not be detected by auditors’procedures.C. The risk that auditors will not be able to complete the audit on a timely basis.D. The risk that auditors will not properly control the staff on the audit engagement.18. Which of the following is an element of a system of quality control that should be considered bya public accounting firm in establishing its quality control policies and procedures? A. Lending credibility to a client’s financial statements.B. Using statistical sampling techniques.C. Accepting and continuing client relationships and specific engagements.D. Obtaining membership in the Center for Public Company Audit Firms.19. Auditors try to achieve independence in appearance in order to: A. Maintain public confidence in the profession.B. Become independent in fact.C. Comply with the responsibilities principle.D. Maintain an unbiased mental attitude.20. Which of the following is not included in the auditors’ standard report representing an unqualifiedopinion? A. A brief indication of the responsibility of auditors and management for the financial statements.B. An indication that all appropriate disclosures have been made and included in the financialstatements.C. An indication that the audit was conducted in accordance with standards established by thePCAOB.D. The auditors’ opinion on the fairness of the financial statements.21. Which of the following statements is true with respect to the persuasiveness of audit evidence? A. Persuasiveness is related to the relevance of evidence but not the reliability of evidence.B. Evidence is considered more persuasive when gathered prior to year­end than following year­end.C. Evidence obtained under environments of stronger internal control is more persuasive thanevidence obtained under environments of weaker internal control.D. In evaluating persuasiveness, sufficiency of evidence is of more importance thanappropriateness of evidence.22. Which of the following is least related to the concept of independence in appearance? A. The auditors’ objectivity and ability to act impartially toward the client.B. The perceptions of individuals who rely on the financial statements and auditors’ opinion on thefinancial statements.C. The ownership of a financial interest in a client by the auditor.D. The employment of the auditor’s family member in an important position with the client.23. The most persuasive evidence regarding the existence of newly acquired computer equipmentis A. Inquiry of management.B. Documentation prepared externally.C. Observation of auditee’s procedures.D. Physical observation.24. Which of the following combinations would provide the auditor the most persuasive evidence?A. Option AB. Option BC. Option CD. Option D

10/13/2015 TheAceStudent: ACC504/ACC 504 MID TERM EXAM– ADVANCED AUDITING (50 MCQ) 100% ANSWER

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25. The human resources element of quality control in a public accounting firm includes which of thefollowing? A. Supervision appropriate for the competencies of the personnel assigned to the work is important.B. Professional development should be provided so that personnel will have the knowledge requiredto enable them to fulfill their responsibilities.C. People at all organizational levels must maintain independence in fact and appearance.D. When accepting and continuing client relationships, firms should consider their own competence.26. The application of relevant training, knowledge, and experience in making informed decisionsabout appropriate courses of action during an audit is known as A. Absolute assurance.B. Professional judgment.C. Professional skepticism.D. Reasonable assurance.27. C. Hill, CPA, has been retained to audit the financial statements of Monday Co. Monday’spredecessor auditor was K. Post, CPA, whom Monday has notified by that its services have beenterminated. Under these circumstances, which party should initiate the communications betweenHill and Post? A. Hill, the auditor.B. Post, the predecessor auditor.C. Monday’s controller or CFO.D. The chair of Monday’s board of directors.28. The firm of Banta, Brown, and Burgess, CPAs, requires that audit documentation contain theinitials of the preparer and the reviewer in the top right­hand corner. This procedure providesevidence of professional concern regarding which generally accepted auditing standard? A. Independence.B. Adequate technical competence and capabilities.C. Adequate planning and supervision.D. Gathering sufficient competent evidence.29. Comparing data on separate files can be accomplished by using computer­assisted audittechniques (CAATs) to determine whether comparable information is in agreement. Examples ofsuch comparisons would not include A. Payroll details with personnel records.B. Current and prior inventory to details of purchases and sales.C. Paid vouchers to disbursements.D. Observation of inventory accounts.30. The idea of the cycle approach is to group accounts together by A. Specific function.B. Financial statement assertion.C. Audit objective.D. Transactions that affect all accounts in that particular group.

ACC504/ACC 504 MID TERM EXAM– ADVANCED AUDITING (50 MCQ) 100% ANSWER