AC555 Midterm Exam - AC555 External Auditing Midterm Exam...

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AC555 External Auditing Midterm Exam Page 1: Question: 1. The objective of the ordinary audit of financial statements is the expression of an opinion on: the fairness of the financial statements CORRE CT the accuracy of the financial statements the accuracy of the annual report the balance sheet and income statement 2. The auditor's best defense when material misstatements are not uncovered is to have conducted the audit: in accordance with auditing standards CORRE CT as effectively and as reasonably possible in a timely manner only after an adequate investigation of the management team 3. Which of the following statements is most correct regarding errors and fraud? An error is unintentional, whereas fraud is intentional. CORRE CT Fraud occurs more often than errors in financial statements. Errors are always fraud and fraud is always errors. Auditors have more responsibility for finding fraud than errors. 4. Which of the following statements is true of a public company's financial statements? Sarbanes-Oxley requires only the CEO to certify the financial statements. Sarbanes-Oxley requires only the CFO to certify the financial statements. Sarbanes-Oxley requires the CEO and CFO to certify the financial statements. CORRE CT Sarbanes-Oxley requires neither the CEO nor the CFO to certify the financial statements. 5. When auditors use documents to support recorded transactions, the process is often called: inquiry confirmation vouching CORRE CT physical examination 6. An example of an external document is:
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employee time reports bank statements CORRE CT purchase order for company purchases carbon copies of checks 7. An example of a document the auditor receives from the client, but which was prepared by someone outside the client's organization, is a(n): confirmation INCORRECT sales invoice vendor invoice CORRECT ANSWER bank reconciliation 8. Traditionally, confirmations are used to verify: individual transactions between organizations, such as sales transactions bank balances and accounts receivable CORRE CT fixed asset additions payroll expenses 9. Which of the following forms of evidence is most reliable? General ledger account balances Confirmation of accounts receivable balance received from client's customer CORRE CT An internal memo explaining the issuance of a credit memo Copy of month-end adjusting entries 10. Which of the following statements is not correct with respect to analytical procedures? Auditing standards emphasize the need for auditors to develop and use
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This note was uploaded on 11/30/2010 for the course ACCOUNTING AC555 taught by Professor Pei during the Fall '10 term at DeVry Irvine.

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AC555 Midterm Exam - AC555 External Auditing Midterm Exam...

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