32 medium a which of the following statements is

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Unformatted text preview: cting employee fraud. 34. medium a If several employees collude to falsify documents, the chance a normal audit would uncover such acts is: a. very low. b. very high. c. zero. d. none of the above. 35. medium d When planning the audit, if the auditor has no reason to believe that illegal acts exist, the auditor should: a. include audit procedures which have a strong probability of detecting illegal acts. b. still include some audit procedures designed specifically to uncover illegalities. c. ignore the issue. d. make inquiries of management regarding their policies for detecting and preventing illegal acts and regarding their knowledge of violations, and then rely on normal audit procedures to detect errors, irregularities, and illegalities. 36. medium When the auditor has reason to believe an illegal act has occurred, the auditor should: a. inquire of management only at one level below those likely to be involved with the illegality. b. begin communication with the FASB in accordance with PCAOB regulations. c. consider accumulating additional evidence to determine if there is actually an illegal act. d. withdraw from the engagement. c 37. medium b When the auditor knows that an illegal act has occurred, the auditor must: a. report it to the proper governmental authorities. b. consider the effects on the financial statements, including the adequacy of disclosure. c. withdraw from the engagement. d. issue an adverse opinion. 38. (Public) medium c If an auditor uncovers an illegal act at a public company, the auditor must notify: a. local law enforcement officials. b. the Public Company Accounting Oversight Board. c. the Securities and Exchange Commission. d. all of the above. 39. medium a Why does the auditor divide the financial statements into smaller segments? a. Using the cycle approach makes the audit more manageable. b. Most accounts have few relationships with others and so it is more efficient to break the financial statements into smaller pieces. c. The cycle approach is used because auditing standards require it. d. All of the above are correct. 40. medium Why does the auditor divide the financial statements into segments around the financial statement cycles? 1-95 b a. b. c. d. Most auditors are trained to audit cycles as opposed to entire financial statements. The approach aids in the assignment of tasks to different members of the audit team. The cycle approach is required by auditing standards. The cycle approach allows the auditor to detect indirect-effect illegal acts. 41. medium a The most important general ledger account included in and affecting several cycles is the: a. cash account. b. inventory account. c. income tax expense and liability accounts. d. retained earnings account. 42. medium a Management assertions are: a. implied or expressed representations about accounts, transactions, and disclosures in the financial statements. b. stated in the footnotes to the financial statements. c. explicitly expressed representations about the financial statements. d. provided to the auditor in the assertions letter, but are not disclosed on the financial statements. 43. medium a Which of the following statements is true? a. Audit objectives follow and are closely related to management assertions. b. Management’s assertions follow and are closely related to the audit objectives. c. The auditor’s primary responsibility is to find and disclose fraudulent management assertions. d. Assertions about presentation and disclosure deal with whether the accounts have been included in the financial statements at appropriate amounts. 44. medium b Which of the following statements is true regarding the distinction between general audit objectives and specific audit objectives for each account balance? a. The specific audit objectives are applicable to every account balance on the financial statements. b. The general audit objectives are applicable to every account balance on the financial statements. c. The general audit objectives are stated in terms tailored to the engagement. d. For any given class of transactions, usually only one audit objective must be met to conclude the transactions are properly recorded.. 45. medium c Which of the following statements about the existence and completeness assertions is not true? a. The existence and completeness assertions emphasize different audit concerns. b. Existence deals with overstatements and completeness deals with understatements. c. Existence deals with understatements and completeness deals with overstatements. d. The completeness assertion deals with unrecorded transactions. 46. medium b The occurrence assertion applies to _______. a. presentation and disclosure matters b. classes of transactions and events during the period c. account balances d. proper classification of income statement accounts 47. medium b Which of the following management assertions is not associated with transaction-related audit objectives? a. Occurrence b. Classification and understandability c. Accuracy d. Completeness 4...
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This note was uploaded on 02/04/2014 for the course ACCOUNTING 211 taught by Professor Alikapur during the Fall '13 term at American University of Sharjah.

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