Reporting and Analyzing
Because of a
past event . . .
. . . For future
a. (1) A lockbox is controlled by the companys financial institution, which has no access to
the companys accounting records. Businesses receiving a large volume of cash through
the mail may use as lockbox system to strengthen internal contr
a. (2) Sampling risk is the risk that the auditors conclusion base on a sample might be
different from the conclusion they would reach if they examined every item in the entire
population. Only (2) talks about the sample and population.
a. (3). The objectives of internal control relate to operations, reporting and compliance.
b. (4) Ongoing monitoring evaluations include regularly performed supervisory and
c. (1). (2)(3)and (4) are not the primary objec
a. (3). 1,2,and 4 are risk factors for fraudulent financial reporting.
b. (4). Audit committee is a sub-committee of the board of directors. An audit committee
must be composed of at least three independent directors that is, those outside
a. (4). Effectiveness of internal control is not considered to be a financial statement
assertion. Assertions that relate to financial statement are: Assertions about Account
Balances; Assertions about Classes of Transactions and Events and As
a. (2) Under Ultramares Approach, the auditors should be held liable to unidentified thirdparty users of the audit report for gross negligence or fraud.
b. (2). Under Rosenblum Approach, CPAs can be held liable for ordinary negligence to any
a. (4) Partner in the national office of the firm the performs marketing services is not
capable of influencing the attest engagement.
b. (4) is the answer. (1) (2) (3) are listed under Rules of the AICPA Code of Professional
c. (1) i
(4) PCAOB has the authority to revoke a firms registration or bar an individual CPA from
participating in public company audits, while state board of accountancy has the right to
revoke the certificate of a CPA.
b (2) is correct. Generally a
Answers Chapter 11 Homework
11-37 Adapted AICPA Task Based Simulation
Customer Reply (and any audit action already taken)
We mailed the check for this on December 31.
We returned those goods on December 2. You
have been able to deter
A financial statement audit is, by far, the most common type of attest engagement. The overall
assertion, made by management, most frequently is that the financial statements follow generally
accepted accounting principles.
a. 1 Auditing around the computer involves examining input into and outputs from the
computer while ignoring the processing.
b. 6 Test data is a set of dummy transactions developed by the auditor and processed by thee
clients computer prog
The primary advantage of the internal control questionnaire is
that control weaknesses, including the absence of controls, are prominently
identified by the no answers. Another advantage of the questionnaire is its
simplicity. If the questions
The typical engagement letter includes the following:
The name of the person who retained the auditors to perform the auditing services.
A description of the objective and scope of the audit.
Multiple Choice Questions
Sampling risk is the risk of making a wrong decision based on a sample result.
The other choices are elements of nonsampling risk.
The risk of incorrect rejection and assessing control risk too high relate to th
Objective Questions Chapter 5 homework
Multiple Choice Questions
The effectiveness of internal control is not a financial statement assertion made by
A large amount of assets by itself is not indicative of high inherent r
Multiple Choice Questions
A CPA will be liable to third parties who were unknown and not
foreseeable for gross negligence. It should be pointed out that if the third party
had been "foreseeable," liability might be establish
Analytical Question Chapter 3
Internal and external standards represent the two major types of constraints on decisions that
involve ethical issues. Examples of internal standards are individuals' views on the importance of
truthfulness, fairness, loya
Review Question Chapter 2
Generally accepted accounting principles are accounting principles that have substantial
authoritative support, such as approval by the Governmental Accounting Standards Board or the
Financial Accounting Standards Board. These
a. (3) is the correct answer since accountants must be independent to perform assurance
services. Attestation services is a major subset of assurance services, thus independence
is also required in attest services. (1) is not correct because a
Ch. 14, Objective Q 14-33 (A-L)
A. 2, Search for unrecorded liabilities.
Reason: Since the majority of unrecorded liabilities are due to transactions
recorded after year-end, it is least likely to be completed before the balance
B. 1, Detect ac
Ch. 16, Objective Q 16-36 (A-L)
A. 4, Test whether employee time reports are approved by supervisors.
Reason: The above would be categorized as a test of control rather than a
B. 3, Make a surprise observation of the company's regul
Ch. 15, Objective Q 15-32 (A-Q)
A. 3, Determine that the client has rights to receive proceeds relating to the
redemption of debt.
Reason: Determining existence, completeness and valuation are all goals of
audit- reception of proceeds related to debt woul
Ch. 18, Objective Q 18-32 (D-J)
D. 1, Ineffective oversight of financial reporting by the audit committee.
Reason: Both 1 & 2 would be considered a material weakness according to
PCAOB Standard No. 5, but if caught in enough time 2 would not necessarily
Ch. 12, Objective Q 12-29 (A-G)
A. 3, Establish that the client includes only inventory on hand at year-end in
Reason: Like with other accounts cutoff needs to be applied to ensure items,
and the COGS associated with them, are recorded i
Ch. 13, Objective Q 13-32 (A-L)
A. 3, Utilization of serially numbered retirement work orders.
Reason: Serially numbered retirement work orders would provide the most
complete set of information and provide the most control as the work orders
Ch. 20, Objective Q 20-29 (A-K)
A. 2, State the practitioners conclusion about the subject matter or assertions.
Reason: The Codification of the Statements on Standards for Attestation
Engagements state that it is the duty of the engaged practitioner to i
Ch. 21, Objective Q 21-43 (A-L)
A. 4, A control function.
Reason: Internal auditors provide a high-level of control by continuously
performing analyses, appraisals, recommendations etc. while measuring and
evaluating the effectiveness of these actions on
Ch. 17, Objective Q 17-25 (A-L)
A. 3, Whether to issue an adverse opinion rather than a qualified opinion.
Reason: If the auditor knows a material departure exists the options are to
issue a qualified opinion or an adverse opinion. The question does not s
Ch. 1, Objective Q 1-29 (A-L)
A. 3, Both attest and assurance services require independence.
Reason: While attest services fall under the umbrella of assurance services,
there are assurance services that are not attest services. Either way, any
Ch. 19, Objective Q 19-29 (A-L)
A. 3, Confirmation of accounts receivable.
Reason: Generally analytical procedures are applied to financial data,
inquiries are made regarding significant subsequent events, and an effort to
understand accounting principles