Exam1 - Auditing [1] A CPA who is associated with the...

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Auditing [1] A CPA who is associated with the unaudited financial statements of a public entity suggests revisions to the notes to provide adequate disclosure. If the client does not make the necessary changes, the CPA should disclaim an opinion and A. Refer to the nature of the departure but need not provide further details even if practicable. B. Include the necessary information if limited assurance can be expressed. C. Not refer to the departure. D. If practicable, include the necessary information. [2] Herman is the new independent external auditor for Bettina Company. Herman’s predecessor was Travis. In these circumstances, Herman must A. Attempt to communicate with Travis. B. Reject the engagement if the change in auditors resulted from a dispute between Bettina and Travis. C. Seek the permission of the SEC to accept the engagement if Bettina is publicly owned. D. Review Travis’s audit documentation if the audit is to be in accordance with GAAS. [3] Disclosure in financial statements of a reporting entity that has participated in related-party transactions that are material, individually or in the aggregate, should include all of the following except A. A description of the transactions for the period reported upon including amounts, if any, and such other information necessary to an understanding of the effects on the financial statements. B. The dollar volume of the transactions, amounts due from or to related parties and, if not otherwise apparent, the terms and manner of settlement. C. The nature of the relationship. D. A statement that the transactions would have taken place regardless of whether the parties were related. [4]
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Which of the following is a transaction that may indicate the existence of related parties? A. An interest-free loan. B. A large loan with specified terms as to when and how the funds are to be repaid. C. The purchase of real estate at a price comparable to its appraised value. D. The sale of equipment to another corporation with a similar name. [5] When qualifying an opinion because of an insufficiency of audit evidence, an auditor should refer to the situation in the A. Yes Yes B. No No C. No Yes D. Yes No [6] Most of the independent auditor’s work in formulating an opinion on financial statements consists of A. Obtaining and examining evidential matter. B. Considering internal control. C. Comparing recorded accountability with assets. D. Examining cash transactions. [7] A weakness in internal control relevant to available-for-sale securities is that A. The internal auditors test the controls. B. A trust company having no direct contact with the auditee’s employees has custody. C. The president approves temporary stock purchases subject to the board’s periodic review. D. Certificated securities are held in bearer form.
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This note was uploaded on 05/26/2011 for the course ACC 450 taught by Professor Null during the Summer '11 term at GWU.

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Exam1 - Auditing [1] A CPA who is associated with the...

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