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ACC 403 Final Exam 1 Chp. 9-13
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1. If an auditor believes the chance of financial failure is high and
there is a corresponding increase in business risk for the auditor,
acceptable audit risk would likely:
2. The preliminary judgment about materiality and the amount of
audit evidence accumulated are ________ related.
3. Auditors generally allocate the preliminary judgment about
materiality to the:
4. Auditors are ________ to document the known and likely
misstatements in the financial statements under audit.
5. An auditor who audits a business cycle that has low inherent risk
should:
6. When one material weakness is present at the end of the year,
management of a public company must conclude that internal control
over financial reporting is:
7. An audit procedure that would most likely be used by an auditor in
performing tests of control procedures in which the segregation of
functions and that leaves no "audit" trail is:

8. Which of the following is responsible for establishing a private
company's internal control?
9. Internal controls normally include procedures designed to provide
reasonable assurance that:
10. Internal controls:
11. Financial statement manipulation risk is arguably present for all
companies' financial statements. However, the risk is elevated for
companies that:
12. Which of the following is not a factor that relates to opportunities
to misappropriate assets?
13. Two of the most useful warning signals that can indicate that
revenue fraud is occurring are:
14. In the fraud triangle, fraudulent financial reporting and
misappropriation of assets:
15. Which of the following is a factor that relates to incentives to
misappropriate assets?
16. The audit approach in which the auditor runs his or her own
program on a controlled basis to verify the client's data recorded in a
machine languageis:
17. Auditors should evaluate which of the following before evaluating
application controls because of the potential for pervasive effects?
18. Which of the following is a component of general controls?
19. General controls may include firewalls which are used to protect
from:
20. An internal control deficiency occurs when computer personnel:

21. Analytical procedures:
22. In the context of an audit of financial statements, substantive tests
are audit procedures that:
23. A system walkthrough is primarily used to help the auditor:
24. Which of the following audit tests is usually the least costly to
perform?
25. Presentation and disclosure related audit objectives would be
performed in which phase of the audit process?
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ACC 403 Final Exam 2 Chp. 14-17 & 21&24
1. What critical event must take place before goods can be shipped in
order to assure payment can be reasonably expected?
2. When designing audit procedures, tracing of source documents to
the customers subsidiary ledger and subsequently to the general ledger
is done to satisfy what assertion?

3. The audit procedure referred to as proof of cash receipts is
particularly useful to test:
4. When an employee who is authorized to make customer entries in
the accounts receivable subsidiary ledger, purposefully enters cash
received into the wrong customer's account that employee may be
suspected of:
5. A document sent to each customer showing his or her beginning
accounts receivable balance and the amount and date of each sale, cash
payment received, any debit or credit memo issued, and the ending
balance is the:
6. One of the causes of nonsampling risk is:
7. A sample in which every possible combination of items in the
population has an equal chance of constituting the sample is a:
8. To determine if a sample is truly representative of the population,
an auditor would be required to:
9. When the auditor decides to select less than 100 percent of the
population for testing, the auditor is said to use:
10. Which of the following would have the least impact in determining
sample size?
11. When do most companies record sales returns and allowances?
13. The audit procedure that provides the auditor with the most
appropriate evidence when performing test of details of balances for
accounts receivable is:
14. Most tests of accounts receivable are based on what schedule, file,
or listing?

15. The two primary classes of transactions in the sales and collection
cycle are:
16. The appropriate assumption to make regarding the overall percent
of error in those population items containing an error is:
17. The method used to measure the estimated total error amount in a
population when there is both a recorded value and an audited value for
each item in the sample is:
18. The auditor is concerned with the audited value rather than the
error amount of each item in the sample when using:
19. The allowance for sampling risk when no misstatements are found
in the sample is:
20. The most commonly used method of statistical sampling for tests of
details of balances is:
21. Which of the following is a significant audit concern related to the
transfer of inventory from one location to another?
22. A major difficulty in the verification of inventory cost records for
the purpose of inventory valuation is in determining the reasonableness
of the:
23. In most manufacturing companies, the inventory and warehousing
cycle begins with the:
24. When determining the sample size for the number of items the
auditor should count during the physical inventory:
25. The inventory and warehousing cycle can be thoughtof as having
two separate but closely related systems, one involving the actual
physical flow of goods, and the other the:

26. The standard letter of inquiry to the client's legal counsel should be
prepared on:
27. Auditing standards require the auditor to communicate all
management frauds and illegal acts to the audit committee:
28. A client representation letter is:
29. At the completion of the audit, management is asked to make a
written statement that it is not aware of any undisclosed contingent
liabilities. This statement would appear in the:
30. Which of the following subsequent events is most likely to result in
an adjustment to a company's financial statements?
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ACC 403 Final Exam Part 1
1. Auditors typically rely on internal controls of their private
company clients:
should:

3.
Inherent risk is often high for an account such as:
4.
Auditors frequently refer to the terms audit assurance, overall
assurance, and level of assurance to refer to ________.
5.
To what extent do auditors typically rely on internal controls of their
public company clients?
6.
Which of the following is responsible for establishing a private
7.
The auditors primary purpose in auditing the client's system of internal
control over financial reporting is:
8.
A five-step approach can be used to identify deficiencies, significant
deficiencies, and material weaknesses. The first step in this approach is:
9.
The employee in charge of authorizing credit to the company's
customers does not fully understand the concept of credit risk. This lack
of knowledge would constitute:
10.

Which of the following deal with ongoing or periodic assessment of the
quality of internal control by management?
11.
Misappropriation of assets is normally perpetrated by:
12.
Fraud is more prevalent in smaller businesses and not-for-profit
organizations because it is more difficult for them to maintain:
13.
Who is most likely to perpetrate fraudulent financial reporting?
14.
Company management is often under pressure to increase revenue
and/or net income. One approach is to use a "bill and hold"
arrangement. This is an example of which of the following?
15.
Most cases of fraudulent reporting involve:
16.
A ________ is responsible for controlling the use of computer programs,
transaction files and other computer records and documentation and
releases them to the operators only when authorized.
17.
The approach to auditing where the auditor does not test automated
controls to reduce assessed control risk is called:
18.

Which of the following is a component of general controls?
19.
Which of the following computer-assisted auditing techniques inserts an
audit module in the client's application system to identify specific types
of transactions?
20.
The audit approach in which the auditor runs his or her own program
on a controlled basis to verify the client's data recorded in a machine
language is:
21.
The auditor would design which of the following audit tests to detect
possible monetary errors in the financial statements?
22.
Which of the following further audit procedures are used to determine
whether all six transaction-related audit objectives have been achieved
for each class of transactions?
23.
The purpose of tests of controls is to provide reasonable assurance that
the:
24.
If tests of controls support the control risk assessment, then ________ in
the audit risk model is increased.
25.

A procedure designed to test for monetary misstatements directly
affecting the correctness of financial statement balances is a:
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ACC 403 Final Exam Part 2
1. A document prepared to initiate shipment of the goods sold by an
independent shipper is the:
2. The document used to indicate to the customer the amount of a sale
and payment due date is the:
3. Who is generally responsible for opening receipts when a company
uses a lockbox to speed the handling of cash receipts?
4. An effective procedure to test for unbilled shipments is to trace
from the:
5. A ________ is a document that is matched with the customer order
to assure that the correct quantity and type of goods are shipped.
6. The most serious shortcoming of the haphazard sample selection
method is:

7. When the computed upper exception rate is greater than the
tolerable exception rate, it is necessary for the auditor to take specific
action. Which of the following courses of action would be most difficult
to justify?
9. In systematic sample selection, the population size is divided by the
number of sample items desired in order to determine the:
11. If the client's internal control for recording sales returns and
allowances is evaluated as ineffective:
12. The understatement of sales and accounts receivable is best
uncovered by:
14. Which of the following most likely would be detected by a review of
a client's sales cutoff?
15. The most important aspect of evaluating the client's method of
obtaining a reliable cutoff is to:
16. The client's trial balance has a balance of $410,000 for
merchandise inventory. As the auditor you are willing to accept a
balance that is within $20,000 of either side of the recorded balance.
You compute a 95% confidence interval of $395,000 to $425,000. You
could therefore:

17. When the sample selection is done using probability proportional to
size sample selection (PPS):
19. When errors are found in a sample, auditors in practice generally
make the assumption:
20. If an auditor desires a greater level of assurance in auditing a
balance, the acceptable risk of incorrect acceptance:
21. From which of the following evidence-gathering audit procedures
would an auditor obtain most assurance concerning the existence of
inventories?
22. Comparing the physical counts with the perpetual inventory master
files satisfies the balance-related audit objective of:
23. A major difficulty in the verification of inventory cost records for
the purpose of inventory valuation is in determining the reasonableness
of the:
24. Boxes or other containers holding inventory should also be opened
during test counts to determine the ________ of the inventory.
25. You are auditing the inventory account and are concerned about
the possibility of an inventory overstatement. What is the best audit
procedure to detect damaged inventory?
26. One of the primary approaches in dealing with uncertainties in loss
contingencies uses a ________ threshold.
27. If a potential loss on a contingent liability is remote, the liability
usually is:

28. While there is no professional requirement to do so on audit
engagements, CPAs frequently issue a formal "management" letter to
clients. The primary purpose of this letter is to provide:
29. The standard letter of inquiry to the client's legal counsel should be
prepared on:
30. The letter of representation obtained from an audit client should
be:
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ACC 403 Mid Term I
1. An audit to determine whether an entity is following specific
procedures or rules set down by some higher authority is classified as
a(n):
2. Which of the following services provides the lowest level of
assurance on a financial statement?
3. Any service that requires a CPA firm to issue a report about the
reliability of an assertion that is made by another party is a(n):

4. Which of the following is not a SysTrust Services principle as
defined by the AICPA?
5. An examination of part of an organization's procedures and
methods for the purpose of evaluating efficiency and effectiveness is
what type of audit?
6. One objective of an operational audit is to:
7. Hansen Corporation's stock is listed on a nationalstock exchange
and registered with the Securities and Exchange Commission. Hansen's
management hires a CPA to perform an independent audit of Hansen's
financial statements. The primary objective of this audit is to provide
assurance to the:
8. The AICPA has authority to establish standards and rules in all
but which of the following areas?
9. Which of the following is an element of the CPA's quality control
system that should be considered in establishing its quality control
policies and procedures?
10. Within the context of quality control, the primary purpose of
continuing professional education and training activities is to enable a
CPA firm to provide its personnel with:
11. Which of the following are audit standards used in professional
practice by audit firms?
12. The organization that is responsible for providing oversight for
auditors of public companies is called the ________.
13. When the auditor determines that the financial statements are fairly
stated, but there is a nonindependent relationship between the auditor
and the client, the auditor should issue:

14. A misstatement in the financial statements can be considered
material if knowledge of the misstatement will affect a decision of:
15. When dealing with materiality and scope limitation conditions:
16. Which of the following is least likely to cause uncertainty about the
ability of an entity to continue as a going concern?
17. The appropriate audit report date for a standard nonqualified audit
report for a non-public entity should be the:
18. Auditing standards require that the audit report must be titled and
that the title must:
19. The AICPA's Code of Professional Conduct requires independence
for all:
20. The AICPA's Code of Professional Conduct states that a CPA
should maintain integrity and objectivity. The term "objectivity" in the
Code refers to a CPA's ability to:
21. When determining whether independence is impaired because of an
ownership interest in a client company, materiality will affect
ownership:
22. Several months after an unqualified audit report was issued, the
auditor discovers the financial statements were materially misstated.
The client's CEO agrees that there are misstatements, but refuses to
correct them. She claims that "confidentiality" prevents the CPA from
informing anyone. Which of the following statements is correct?
23. The underlying reason for a code of professional conduct for any
profession is:
24. Freedom from ________ means the absence of relationships that
might interfere with objectivity or integrity.

25. Interpretations of the rules regarding independence allow an
auditor to serve as:
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ACC 403 Mid Term Part 1
1. Recording, classifying, and summarizing economic events in a
logical manner for the purpose of providing financial information for
decision making is commonly called:
2. ________ risk reflects the possibility that the information upon
which the business decision was made was inaccurate.
3. The use of the Certified Public Accountant title is regulated by:
4. The Sarbanes-Oxley Act applies to which of the following
companies?
5. Three common types of attestation services are:
6. The three requirements for becoming a CPA include all but which
of the following?

7. Members of the Public Company Accounting Oversight Board are
appointed and overseen by:
8. Assume the Public Company Accounting Oversight Board
(PCAOB) identifies a violation during its inspection of a registered
accounting firm. The PCAOB:
9. Hansen Corporation's stock is listed on a nationalstock exchange
assurance to the:
11. Statements on Auditing Standards issued by the AICPA's Auditing
Standards Board are:
12. In order to properly plan and perform an audit, an important fact
for both the auditor and the client to understand is that:
13. The first step to be followed when deciding the appropriate audit
report in a given set of circumstances is to:
14. As a result of management's refusal to permit the auditor to
physically examine inventory, the auditor must depart from the
unqualified audit report because:
15. If the phrase "except for" is present in the opinion paragraph of the
audit report, the auditor has issued a(n):
16. Under AICPA auditing standards, the primary auditor issuing the
opinion on the financial statements is called the:
17. Whenever the client imposes restrictions on the scope of the audit,
the auditor should be concerned that management may be trying to

prevent discovery of misstatements. In such cases, the auditor will likely
issue a:
19. The members of a client's "audit committee" should be:
20. Which of the following services are allowed by the SEC whenever a
CPA also audits the company?
21. A six-step approach is often used to resolve an ethical dilemma.
The first step in this process is to:
22. Under the AICPA independence rules, the auditor:
23. Independence is required of a CPA when performing:
24. When CPAs are able to maintain their actual independence, it is
referred to as independence in:
25. The Sarbanes-Oxley Act ________ a CPA firm from doing both
bookkeeping and auditing services for the same public company client.
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ACC 403 Mid Term Part 2

1. The principal issue in cases involving alleged negligence is
usually:
2. "Absence of reasonable care that can be expected of a person in a
set of circumstances" defines:
3. While the Foreign Corrupt Practices Act of 1977 remains in effect,
its internal control provisions have been largely superseded by which of
the following?
4. The standard of due care to which the auditor is expected to
adhere to in the performance of the audit is referred to as the:
5. In the performance of an audit, a CPA:
6. The laws that have been developed through court decisions are
called:
7. The auditor's best defense when material misstatements are not
uncovered is to have conducted the audit:
8. The responsibility for the preparation of the financial statements
and the accompanying footnotes belongs to:
9. A questioning mindset:
10. The posting and summarization audit objective is the auditor's
counterpart to management's assertion of:
11. The concept of reasonable assurance indicates that the auditor is:
12. If a short-term note payable is included in the accounts payable
balance on the financial statement, there is a violation of the:

13. The evaluations of financial information through analysis of
plausible relationships among financial and nonfinancial data is the
definition of:
14. Appropriateness of evidence is a measure of the:
15. The auditor must gather sufficient and appropriate evidence during
the course of the audit. Sufficient evidence must:
16. When auditors use documentation to support recorded transactions
and amounts, the process is usually called:
17. A benefit obtained from using industry averages is that it provides
a(n):
18. When the auditor uses tracing as an audit procedure for tests of
transactions she is primarily concerned with which audit objective?
19. Calculating the gross margin for the current year under audit as a
percent of sales and comparing it with previous years is what type of
evidence?
20. Business risk:
21. In making client acceptance decisions, the audit firm will consider:
22. If an auditor is requested to perform nonauditservices for a public
company audit client, who is responsible for agreeing to those services
with the audit firm?
23. The auditor is likely to accumulate more evidence when the audit is
for a company:
24. Most auditors assess inherent risk as high for related parties and
related-party transactions because:
25. The two major factors affecting acceptable audit risk are:the:

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ACC 403 midterm exam part 1
3. In "auditing" financial accounting data, the primary concern is
with:
6. The most common way for users to obtain reliable information is
to:
7. The legal right to perform audits is granted to a CPA firm by
regulation of:

8. The form that must be filed with the Securities and Exchange
Commission whenever a company plans to issue new securities to the
public is the:
9. For privately held companies who is responsible for establishing
auditing standards?
10. The "Principles Underlying an Audit in Accordance with Generally
Accepted Auditing Principles" provides a framework to help auditors:
11. The Public Company Accounting Oversight Board:
12. Statements on Standards for Accounting and Review Services are
issued by the:
13. The auditor's responsibility section of the standard audit report
states that the auditor is:
14. The standard unqualified audit report:
16. An audit of historical financial statements most commonly includes
the:
17. The standard unqualified audit report for public entities includes
the following three paragraphs:
18. If most or all users' decisions that are based on the financial
statements are likely to be significantly affected, the materiality level is:
19. Which of the following is required for a firm to designate itself
"Member of the American Institute of Certified Public Accountants" on
its letterhead?

20. The Sarbanes-Oxley Act requires a cooling off period of ________
before a member of an audit team can work for a client in a key
management position?
23. "Independence" in auditing means:
25. An auditor's independence is considered impaired if the auditor
has:
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ACC 403 Midterm Exam part 2

2. Under the laws of agency, partners of a CPA firm may be liable for
the work of others on whom they rely. This would not include:
3. An individual who is not party to the contract between a CPA and
the client, but who is known by both and is intended to receive certain
benefits from the contract is known as:
4. Fraud occurs when:
5. Laws that have been passed by the U.S. Congress and other
governmental units are:
the following?
7. The cycle approach to auditing:
8. If a short-term note payable is included in the accounts payable
balance on the financial statement, there is a violation of the:
9. If the auditor believes that the financial statements are not fairly
stated or is unable to reach a conclusion because of insufficient
evidence, the auditor:
10. The auditor has no responsibility to plan and perform the audit to
obtain reasonable assurance that misstatements, whether caused by
errors or fraud, that are not ________ are detected.
11. Which of the following is not one of the three categories of
assertions?
12. "The auditor should not assume that management is dishonest, but
the possibility of dishonesty must be considered." This is an example of:

14. An example of a document the auditor receives from the client, but
which was prepared by someone outside the client's organization, is a:
15. A(n) ________ is the detailed instruction that explains the audit
evidence to be obtained during the audit.
16. The Auditing Standards Board has concluded that analytical
procedures are so important that they are required during:
17. Two determinants of the persuasiveness of evidence are:
18. Evidence is generally considered appropriate when:
evidence?
22. Smith, CPA has requested permission to communicate with the
predecessor auditor in order to review certain workpapers for high risk
accounts for a new audit client. The new audit client's refusal to allow
this communication to occur would impact Rodgers decision
concerning:
23. Which is a liquidity activity ratio?
24. The purpose of an engagement letter is to:
25. A measure of how willing the auditor is to accept that the financial
statements may be materially misstated after the audit is completed and
an unqualified opinion has been issued is the:

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ACC 403 midterm part 1
with:
to:
regulation of:

has:
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ACC 403 Midterm part 2

15. A(n) ________ is the detailed instruction that explains the audit
evidence to be obtained during the audit.
17. Two determinants of the persuasiveness of evidence are:
evidence?
22. Smith, CPA has requested permission to communicate with the
predecessor auditor in order to review certain workpapers for high risk
accounts for a new audit client. The new audit client's refusal to allow
this communication to occur would impact Rodgers decision
concerning:
23. Which is a liquidity activity ratio?
24. The purpose of an engagement letter is to:
A measure of how willing the auditor is to accept that the financial
statements may be materially misstated after the audit is completed and
an unqualified opinion has been issued is the:

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ACC 403 Quiz 8
2. Cutoff misstatements occur:
or listing?
5. The most important test of details of balances to determine the
existence of recorded accounts receivable is:
7. An auditor is performing a credit analysis of customers with
balances over 60 days due. She is most likely obtaining evidence for
which audit related objective?

8. When designing tests of details of balances, an important point to
remember is:
9. Audit procedures designed to uncover credit sales made after the
client's fiscal year end that relate to the current year being audited
provide evidence for which of the following audit objective?
10. A positive confirmation is more reliable evidence than a negative
confirmation because:
11. Which of the following audit procedure would normally be included
in the audit plan when auditing the allowance for doubtful accounts?
12. The net realizable value of accounts receivable is equal to:
13. Communication addressed to the debtor requesting him or her to
confirm whether the balance as stated on the communication is correct
or incorrect is a:
14. An auditor selects a sample from the file of shipping documents to
determine whether invoices were prepared. This test is to satisfy the
audit objective of:
15. Confirmation of accounts receivable selected from the trial balance
is the most common test of details of balances for the ________ of
accounts receivable.
16. Monetary unit sampling is not particularly effective at detecting:
in the sample is:
18. While performing a substantive test of details during an audit, the
auditor determined that the sample results supported the conclusion that
the recorded account balance was not materially misstated. It was, in
fact, materially misstated. This situation illustrates the risk of:

19. In monetary unit sampling, a sampling interval of 900 means that:
22. The word below that best explains the relationship between
required sample size and the acceptable risk of incorrect acceptance is:
23. Which of the following is not a type of statistical method that
provides results in dollar terms?
24. The risk the auditor is willing to take of accepting a balance as
correct when the true misstatement in the balance under audit is greater
than the tolerable misstatement is:
25. When selecting a sample size for substantive tests of balances
which factor, other factors being equal, would result in a larger sample?
26. If acceptable audit risk is increased, acceptable risk of incorrect
acceptance should be:
28. In monetary unit sampling, the relationship between tolerable
misstatement size and required sample size is:
29. If no exceptions were found in the substantive tests of transactions:
could therefore:

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ACC 403 Quiz 1 Set 1
a(n):
companies?
with:
7. Which of the following is considered audit evidence?
8. One objective of an operational audit is to:

what type of audit?
to:
14. An accountant:
issued by the:
18. Which of the following statements best describes the primary
purpose of Statements on Auditing Standards?
20. Standards issued by the Public Company Accounting Oversight
Board must be followed by CPAs who audit:

21. Which of the following is not one of the responsibilities of an
auditor under the principles underlying an audit?
22. Hansen Corporation's stock is listed on a national stock exchange
assurance to the:
27. When assessing the risk of material misstatements in the financial
statements,
28. The AICPA has authority to establish standards and rules in all but
which of the following areas?
public is the:
30. The methods used by a CPA firm to ensure that the firm meets is
professional responsibilities to clients and others is:

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of the following?
4. An accountant:
what type of audit?

a(n):
11. A correct relationship among the auditor, the client, and the
external users is:
12. One objective of an operationalaudit is to:
14. In "auditing"financial accounting data, the primary concern is
with:
companies?

20. The form that must be completed and filed with the Securities and
Exchange Commission whenever a company experiences a significant
event that is of interest to public investors is the:
22. To obtain reasonable assurance aboutwhether the financial
statements as a whole are free from material misstatement, the auditor
must fulfill several performance responsibilities, including:
issued by the:
27. The International Standards on Auditing (ISAs):
29. The purpose of establishing quality control policies and procedures
to accept or continue a client relationship is to:
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1. An accountant:
companies?
external users is:
to:
of the following?

with:
14. An examination of part of an organization'sprocedures and
what type of audit?
regulation of:
public is the:

auditing standards?
issued by the:
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ACC 403 Quiz 2 Chp 3-4

1. When there is a justified departure from GAAP which is
considered material, the auditor should issue a(n):
5. When a qualified or adverse opinion is issued, the qualifying
paragraph is inserted:
the:
7. After the auditor determines whether any conditions exist which
require a departure from a standard unqualified report, the next step in
the decision process for audit reports is to:
8. Items that materially affect the comparability of financial
statements generally require disclosure in the footnotes. If the client
refuses to properly disclose the item, the auditor will most likely issue:
9. Auditing standards for public companies are established by the:

10. The standard unqualified audit report for a non-public entity must:
11. The auditor's responsibility section of the standard unqualified
audit report states that the audit is designed to:
12. An adverse opinion is issued when the auditor believes:
14. Whenever the client imposes restrictions on the scope of the audit,
the auditor should be concerned that management may be trying to
prevent discovery of misstatements. In such cases, the auditor will likely
issue a:
profession is:
18. A CPA firm may charge a contingent fee for:
19. When a member observes the profession's technical and ethical
standards and strives to continually improve her competence and quality
of services, she is exercising:
has:

23. ________ means that a person acts according to conscience,
regardless of the situation.
24. The financial interests of a CPA's family members can affect the
CPA's independence. Which of the following parties would not be
included as a "direct financial interest" of the CPA?
for all:
26. The members of a client's "audit committee" should be:
29. In determining independence with respect to any audit engagement,
the ultimate decision as to whether or not the auditor is independent
must be made by the:
30. Rule 301 of the AICPA's Code of Professional Conduct requires
CPAs to maintain the confidentiality of client information. This rule
would be violated if a CPA disclosed information without a client's
consent as a result of a:
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ACC 403 Quiz 2

1. A misstatement in the financial statements can be considered
material if knowledge of the misstatement will affect a decision of:
3. A CPA may wish to emphasize specific matters regarding the
financial statements even though an unqualified opinion will be issued.
Normally, such explanatory information is:
5. An adverse opinion is issued when the auditor believes:
8. The auditor's responsibility section of the standard unqualified
audit report states that the audit is designed to:

11. The explanatory paragraph for a qualified opinion would:
17. Which of the following is required for a firm to designate itself
"Member of the American Institute of Certified Public Accountants" on
its letterhead?
profession is:
for all:
20. Ethics are:
21. Rule 301 of the AICPA's Code of Professional Conduct requires
CPAs to maintain the confidentiality of client information. This rule
would be violated if a CPA disclosed information without a client's
consent as a result of a:
22. Which of the following represents all of the ways a CPA firm can be
organized under Rule 505?

26. The financial interests of a CPA's family members can affect the
CPA's independence. Which of the following parties would not be
included as a "direct financial interest" of the CPA?
28. When determining whether independence is impaired because of an
ownership interest in a client company, materiality will affect
ownership:
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ACC 403 Quiz 3 Chapter 5-6

1. If an auditor fails to fulfill a certain requirement in the contract,
they may be guilty of:
2. Which of the following most accurately describes fraud?
3. Which of the following auditor's defenses usually means
nonreliance on the financial statements by the user?
4. Which of the following most accurately describes constructive
fraud?
usually:
7. The Foreign Corrupt Practices Act (FCPA) of 1977:
8. Privity of contract exists between:
9. The principal issue to be resolved in cases involving alleged
negligence is usually:
11. A CPA is subject to criminal liability if the CPA:
12. To succeed in an action against the auditor, the client must be able
to show that:

13. A common way for a CPA firm to demonstrate a lack of duty to
perform is by use of a(n):
14. The assessment against a defendant of the full loss suffered by a
plaintiff regardless of the extent to which other parties shared in the
wrongdoing is called:
15. Recklessness in the case of an audit is present if the auditor knew
an adequate audit was not done but still issued an opinion, even though
there was no intent to deceive financial statement users. This description
is the legal term for:
18. Which of the following statements is the most correct regarding
errors and fraud?
assertions?
20. The auditor has no responsibility to plan and perform the audit to
obtain reasonable assurance that misstatements, whether caused by
errors or fraud, that are not ________ are detected.
21. In certifying their annualfinancial statements, the CEO and CFO
of a public company certify that the financial statements comply with the
requirements of:
22. Management assertions are:
23. The responsibility for adopting sound accounting policies and
maintaining adequate internal control rests with the:

25. When an auditor knows that an illegal act has occurred, she must:
26. The most important general ledger account included in and
affecting several cycles is the:
29. When dealing with laws and regulations that do not have a direct
effect on the financial statements, the auditor:
30. Which of the following is the auditor least likely to do when aware
of an illegal act?
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2. The assessment against a defendant of that portion of the damage
caused by the defendant's negligence is called:
3. In connection with the audit of financial statements, an
independent auditor could be responsible for failure to detect a material
fraud if:
fraud?
6. The preferred defense in third party suits is:
7. A broad interpretation of the rights of third-party beneficiaries
holds that users that the auditor should have been able to foresee as
being likely users of financial statements have the same rights as those
with privity of contract. This is known as the concept of:
8. The expectation gap:
9. In the auditing environment, failure to meet auditing standards is
often:
12. The principal issue in cases involving alleged negligence is usually:

15. The standard of due care to which the auditor is expected to adhere
to in the performance of the audit is referred to as the:
of an illegal act?
18. When an auditor believes that an illegal act may have occurred, the
auditor should first:
20. Auditors accumulate evidence to:
22. In testing for cutoff, the objective is to determine:
24. The objective of an audit of the financial statements is an
expression of an opinion on:
25. An audit must be performed with an attitude of professional
skepticism. Professional skepticism consists of two primary components:
a questioning mind and:
27. Fraudulent financial reporting is most likely to be committed by
whom?
assertions?

29. Which of the following would most likely be deemed a direct-effect
illegal act?
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1. The Foreign Corrupt Practices Act (FCPA) of 1977:
often:
the work of others on whom they rely. This would not include:

9. In an action against a CPA in a jurisdiction that follows the
Ultramares doctrine, lack of privity is a viable defense provided the
plaintiff:
the following?
12. In connection with the audit of financial statements, an independent
auditor could be responsible for failure to detect a material fraud if:
13. The principal issue in cases involving alleged negligence is usually:
16. Tests of details of balances are specific audit procedures that are
intended to:

requirements of:
27. Which of the following assertions is described as "this assertion
addresses whether all transactions that should be included in the
financial statements are in fact included"?
errors and fraud?
30. Auditors accumulate evidence to:

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the work of others on whom they rely. This wouldnot include:
2. In an action against a CPA in a jurisdiction that follows the
Ultramares doctrine, lack of privity is a viable defense provided the
plaintiff:
6. To succeed in an action against the auditor, the client must be able
to show that:

usually:
the following?
called:
often:
16. If a client has violated federal tax laws:

assertions?
requirements of:

**********************************************************
ACC 403 Quiz 4 Chapter 9
materiality to the:
3. If an auditor establishes a relatively high level for materiality, then
the auditor will:
4. Auditors frequently refer to the terms audit assurance, overall
company clients:
6. Why do auditors establish a preliminary judgment about
materiality?
7. Inherent risk and control risk:
8. As the risk of material misstatement increases, detection risk
should:

9. When management has an adequate level of integrity for the
auditor to accept the engagement but cannot be regarded as completely
honest in all dealings, auditors normally:
10. As the acceptable level of detection risk increases, an auditor may
change the:
11. When the auditor is attempting to determine the extent to which
external users rely on a client's financial statements, they may consider
several factors except for:
12. When auditors allocate the preliminary judgment about materiality
to account balances, the materiality allocated to any given account
balance is referred to as:
13. If it is probable that the judgment of a reasonable person will be
changed or influenced by the omission or misstatement of information,
then that information is, by definition of FASB Statement No. 2:
14. When taken together, the concepts of risk and materiality in
auditing:
15. Inherent risk is ________ related to detection risk and ________
related to the amount of audit evidence.
**********************************************************
ACC 403 Quiz 4

1. Auditors are ________ to document the known and likely
misstatements in the financial statements under audit.
2. To what extent do auditors typically rely on internal controls of
their public company clients?
4. If planned detection risk is reduced, the amount of evidence the
auditor accumulates will:
5. Inherent risk is ________ related to detection risk and ________
related to the amount of audit evidence.
change the:
company clients:
8. Amounts involving fraud are usually considered ________
important than unintentionalerrors of equal dollar amounts.
9. As the risk of material misstatement increases, detection risk
should:
10. If an auditor establishes a relatively high level for materiality, then
the auditor will:
11. The scope paragraph of the standard unqualified auditor's report
states that "… the standards require that we plan and perform the audit
to obtain ________ assurance about whether the financial statements
are free of material misstatement." What type of assurance is given?

12. When allocating performance materiality:
13. ________ misstatements are those where the auditor can determine
the amount of the misstatement in the account.
14. Auditing standards ________ that the basis used to determine the
preliminary judgment about materiality be documented in the audit files.
15. Auditors are responsible for determining whether financial
statements are materially misstated, so upon discovering a material
misstatement they must bring it to the attention of:
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ACC 403 Quiz 5 Chapters 10-11
1. Which of the following components of the control environment
define the existing lines of responsibility and authority?
3. Reasonable assurance allows for:

4. Narratives, flowcharts, and internal control questionnaires are
three common methods of:
6. Proper segregation of functional responsibilities calls for
separation of:
7. When the auditor attempts to understand the operation of the
accounting system by tracing a few transactions through the accounting
system, the auditor is said to be:
8. The PCAOB places responsibility for the reliability of internal
controls over the financial reporting process on:
9. When determining what type of report to issue on internal control
under Section 404:
11. Two key concepts that underlie management's design and
implementation of internal control are:
12. The employee in charge of authorizing credit to the company's
13. A five-step approach can be used to identify deficiencies,
significant deficiencies, and material weaknesses. The first step in this
approach is:
14. Internal controls can never be regarded as completely effective.
Even if company personnel could design an ideal system, its
effectiveness depends on the:

15. Sarbanes-Oxley requires management to issue an internal control
report that includes two specific items. Which of the following is one of
these two requirements?
16. A company is concerned with the theft of cash after the sale has
been recorded. One way in which fraudsters conceal the theft is by a
process called "lapping." Which of the following best describes lapping?
17. Fraud is more prevalent in smaller businesses and not-for-profit
18. Fictitious revenues:
19. Misappropriation of assets is normally perpetrated by:
20. When assessing the risk for fraud, the auditor must be cognizant of
the fact that:
22. Analytical procedures can be very effective in detecting inventory
fraud. Which of the following analytical procedures would not be useful
in detecting fraud?
23. Most cases of fraudulent reporting involve:
24. Which of the following is a factor that relates to attitudes or
rationalization to commit fraudulent financial reporting?
25. Which of the following parties is responsible for implementing
internal controls to minimize the likelihood of fraud?
26. Company management is often under pressure to increase revenue

27. Which of the following is not a factor that relates to opportunities
to misappropriate assets?
28. Who is most likely to perpetrate fraudulent financial reporting?
30. ________ is fraud that involves theft of an entity's assets.
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ACC 403 Quiz 5 week 7
1. . Which of the following deficiency exists if a necessary control
is missing or not properly formulated?

7. Which of the following activities would be least likely to strengthen
a company's internal control?
8. When the auditor attempts to understand the operation of the
accounting system by tracing a few transactions through the accounting
system, the auditor is said to be:
9. In performing the audit of internal control over financial reporting
the auditor emphasizes internal control over class of transactions
because:
11. When considering internal controls, an important point to consider
is that:
12. Proper segregation of functionalresponsibilities calls for
separation of:
13. Management must disclose material weaknesses in internal control
in its audit report:
approach is:
under Section 404:

in detecting fraud?
17. Which of the following best defines fraud in a financial statement
auditing context?
18. Which of the following would the auditor be most concerned about
regarding a heightened risk of intentional misstatement?
19. Which of the following is least likely to uncover fraud?
20. Which party has the primary responsibility to oversee an
organization'sfinancial reporting and internal control process?
21. ________ is fraud that involves theft of an entity's assets.
24. Which of the following is a factor that relates to incentives or
pressures to commit fraudulent financial reporting?
25. Fraud awareness training should be:
27. Which of the following questions is the auditor not required to ask
company management when assessing fraud risk?
28. Auditors need to exhibit professional skepticism when auditing a
client. This auditing standard is best expressed by which of the
following?

companies that:
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ACC 403 Quiz 5
2. When assessing whether the financial statements are auditable, the
auditor must consider:
3. Which of the following deal with ongoing or periodic assessment of
the quality of internal control by management?
4. Audit evidence regarding the separation of duties is normally best
obtained by:

5. Management must disclose material weaknesses in internal control
in its audit report:
separation of:
is that:
8. Which of the following deficiency exists if a necessary control is
missing or not properly formulated?
because:
13. Which of the following is not one of the three primary objectives of
effective internal control?
14. The auditors primary purpose in auditing the client's system of
internal control over financial reporting is:

companies that:
in detecting fraud?
the fact that:
26. Companies may intentionally understate earnings when income is
high to create ________ that may be used in future years to increase
earnings.
27. Most cases of fraudulent reporting involve:
28. Which of the following questions is the auditor notrequired to ask

auditing context?
**********************************************************
2. The most important outputcontrol is:
3. When the client changes the computer software:
4. A ________ is responsible for controlling the use of computer
programs, transaction files and other computer records and
documentation and releases them to the operators only when authorized.
5. The approach to auditing where the auditor does not test
automated controls to reduce assessed control risk is called:
6. In an IT system, automated equipment controls or hardware
controls are designed to:

7. Which of the following tests determines that every field in a record
has been completed?
machine languageis:
9. One of the unique risks of protecting hardware and data is:
10. A database management system:
11. Auditors:
12. A control that relates to all parts of the IT system is called a(n):
13. Controls which are built in by the manufacturer to detect
equipment failure are called:
15. Programmers should be allowed access to:
17. The reliance the auditor places on substantive tests in relation to
the reliance placed on internal control varies in a relationship that is
ordinarily:
18. Collectively, procedures performed to obtain an understanding of
the entity and its environment, including internal controls, represent the
auditor's:
19. The document that details the specific audit procedures for each
type of test is the:
20. If tests of controls support the control risk assessment, then
________ in the audit risk model is increased.

perform?
22. If no material differences are found using analytical procedures
and the auditor concludes that misstatements are not likely to have
occurred:
23. Transaction related audit objectives would most likely be
24. Many auditors perform extensive analytical procedures on audits
because:
25. Tests of controls are directed toward the control's:
26. The purpose of tests of controls is to provide reasonable assurance
that the:
27. The primary emphasis in most tests of details of balances is on the:
28. Analytical procedures must be performed in:
29. Which of the following further audit procedures are used to
determine whether all six transaction-related audit objectives have been
achieved for each class of transactions?
30. When the auditor has completed the tests of details of balances and
enters phase 4 of the audit process, she must still perform audit
procedures for which of the following?
**********************************************************

4. The continued integration of IT in accounting systems can impact a
company by:
5. Output controls need to be designed for which of the following
data integrity objectives?
9. Which of the following controls prevent and detect errors while
transaction data are processed?

12. Which of the following computer-assisted auditing techniques
inserts an audit module in the client's application system to identify
specific types of transactions?
from:
15. Auditors:
16. Risk assessment procedures are performed by auditors during an
audit in order to:
17. At what point in the audit process are tests of details most
appropriately designed?
that the:
19. An increased extent of tests of controls is most likely to occur when:
22. The auditor would design which of the following audit tests to
detect possible monetary errors in the financial statements?
24. In order to promote audit efficiency the auditor considers cost in
selecting audit tests to perform. Which of the following audit tests would
be the most costly?

26. A procedure designed to test for monetary misstatements directly
affecting the correctness of financial statement balances is a:
auditor's:
28. Management implements internal controls to ensure that all
required footnote disclosures are accurate. Auditors tests those controls
to provide evidence supporting the ________ presentation.
29. Which of the following is ordinarily designed to detect material
dollar errors on the financial statements?
**********************************************************

3. An example of a physical control is:
4. Old and new systems operating simultaneously in all locations is a
test approach known as:
6. A ________ total represents the summary total of codes from all
records in a batch that do not represent a meaningful total.
7. Which of the following describes the process of implementing a
new system in one part of the organization, while other locations
continue to use the current system?
9. The continued integration of IT in accounting systems can impact a
company by:
11. Controls that are designed for each software application and are
intended to help a company satisfy the transaction-related audit
objectives are:
from:
machine languageis:

15. ________ is not a risk specific to the IT environments.
perform?
be the most costly?
23. Which of the following procedures would most likely be performed
in response to the auditor's assessment of the risk of monetary
misstatements in the financial statements?
occurred:

ordinarily:
29. An exception or deficiency found in a test of controls:
**********************************************************
ACC 403 Quiz 6
1. An example of a physical control is:
2. The auditor's objective in determining whether the client's
automated controls can correctly handle valid and invalid transactions
as they arise is accomplished through the:

machine languageis:
6. When the client changes the computer software:
8. Which of the following tests determines that every field in a record
has been completed?
9. Security controls should require that users enter a(n) ________
before being allowed access to software and other related data files.
from:

18. Risk assessment procedures are performed by auditors during an
audit in order to:
occurred:
20. The primary emphasis in most tests of details of balances is on the:
ordinarily:
24. The auditor would design which of the following audit tests to
detect possible monetary errors in the financial statements?
perform?
27. You are auditing Rodgers and Company. After performing
substantive analytical procedures you conclude that, for the accounts
tested, the client's balance appears reasonable. This may indicate that:

that the:
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ACC 403 Quiz 7 Chapter 14 -15
1. The document that accompanies the customer's payment is the:
2. Before goods are shipped on account, a properly authorized
person must:
3. Credit memos are normally issued to:

5. The auditor's objectives for the sales and cash collections activities
when the client is primarily an e-commerce business as compared to a
"bricks and mortar" business are:
7. What event initiates a transaction in the sales and collection cycle?
8. To test for recorded sales for which there were no actual
shipments, the auditor vouches from the:
9. Generally, when is the earliest point in the sales and collection
cycle in which revenue can be recognized?
balance is the:
12. Most companies recognize sales revenue when:
13. Which of the following is not a business function within the "Sales"
class of transactions?
14. When an employee who is authorized to make customer entries in
the accounts receivable subsidiary ledger, purposefully enters cash
received into the wrong customer's account that employee may be
suspected of:

17. Which of the following is the risk that audit tests will not uncover
existing exceptions in a sample?
18. There are three phases in both statistical and nonstatistical
sampling. The first phase is to:
19. Attributes sampling is based on the ________ distribution, in which
each possible sample in the population has one of two possible values,
such as yes or no.
20. The acceptable risk of overreliance:
22. Which of the following occurrences would be least likely to warrant
further audit attention for the auditor?
23. Which of the following is the risk that an auditor will reach an
incorrect conclusion because a sample is not representative of the
population?
24. When auditors wish to evaluate a sample statistically, an
acceptable selection method is:
25. When the auditor goes through a population and selects items using
nonprobabilisticselection methods, without regard to their size, source,
or other distinguishing characteristics, it is called:
26. If the auditor decides to assess control risk at the moderate level in
a private company audit, when in previous years the auditor set control
risk at the maximum level, then tests of controls for the current year
would be:

method is:
28. The exception rate the auditor will permit in the population and
still be willing to reduce the assessed level of control risk is called the:
30. Attributes sampling would be an appropriate method to use on
which one of the following procedures in an audit program?o:
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2. A ________ is a document that is matched with the customer order
to assure that the correct quantity and type of goods are shipped.

5. Which of the following is not one of the five classes of transactions
included in the sales and collection cycle?
balance is the:
7. Which of the following is an account that is not affected by the
sales and collection cycle?
8. Some companies have customers send payments directly to an
address maintained by a bank. This is called a(n) ________ system.
13. The total of the individual account balances in the accounts
receivable subsidiary ledger should equal the:
14. Most companies recognize sales revenue when:
15. The ________ is a contract between a carrier (e.g., a trucking
company) and the seller of goods that dictates the details surrounding
the shipment of goods.

which one of the following procedures in an audit program?
17. When using statistical sampling, the auditor would most likely
require a smaller sample if the:
18. The exception rate the auditor will permit in the population and
still be willing to reduce the assessed level of control risk is called the:
20. Auditors often use the ________ to determine the estimated
population exception rate.
21. Which of the following is the risk that an auditor will reach an
incorrect conclusion because a sample is not representative of the
population?
method is:
25. The process which requires the calculation of an interval and then
selects the items based on the size of the interval is:
26. Simple random sampling:
27. A sample in which the characteristics of the sample are the same as
those of the population is a(n):

would be:
29. There are three phases in both statistical and nonstatistical
sampling. The first phase is to:
30. Rodgers CPA believes that the rate of client billing errors is 4%
and has established a tolerable deviation rate of 6%. In auditing client
invoices Rodgers should use:
**********************************************************
ACC 403 Quiz 7
1. The document that accompanies the customer's payment is the:
2. Before goods are shipped on account, a properly authorized
person must:
3. The document that requires adjustments to the customers
subsidiary ledger account is the:

5. The total of the individual account balances in the accounts
receivable subsidiary ledger should equal the:
9. In the accounts receivable subsidiary ledger the length of time the
account has been due can be useful to the client and the auditor in
preparing the:
10. A ________ is a document that indicates a request for merchandise
by a customer.
13. A document that initiates shipment of goods and indicates the
description of the merchandise, the quantity shipped, and customer
name and address is the:
16. When the computed upper exception rate is greater than the
tolerable exception rate, it is necessary for the auditor to take specific

action. Which of the following courses of action would be most difficult
to justify?
17. The advantage of systematic sample selection is that:
would be:
20. Which of the following is the risk that audit tests will not uncover
existing exceptions in a sample?
26. The sample exception rate equals:

30. The process which requires the calculation of an interval and then
selects the items based on the size of the interval is:
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ACC 403 Quiz 8 Chapters 16-17
1. A listing of the balances in the accounts receivable master file at
the balance sheet date, by total balance outstanding and by the amount
of time the component parts have been outstanding,is the:
2. Which of the following is the principle "weakness" of using
negative confirmations for your tests of details of balances for accounts
receivable?

5. Which of the following audit procedure would normally be
included in the audit plan when auditing the allowance for doubtful
accounts?
6. For most audits, a proper cash receipts cutoff is less important
than the sales cutoff because the improper cutoff of cash:
cycle are:
or listing?
11. Which of the following is likely to be determined first when
performing tests of details for accounts receivable?
12. For cash receipts, the occurrence transaction-related audit
objective affects which of the following balance-related audit objective?
13. The most effective audit evidence gathered for accounts receivable
is the:
or incorrect is a:

in the sample is:
could therefore:
19. One of the steps involved in planning the sample for the tests of
details of balances is to:
20. You are auditing Nelson and Company and determined that the
sample results support a conclusion that the account is materially
misstated, when in fact it was not misstated. This illustrates the risk of:
23. If the population is not considered acceptable, one step the auditor
is likely to take is to:
25. As the amount of misstatements expected in the population
approaches tolerable misstatement, the planned sample size will:
26. If an auditor concludes that internal controls are likely to be
effective, the preliminary assessment of control risk can be reduced,

leading to which of the following impacts on the acceptable risk of
incorrect acceptance?
**********************************************************

uncovered by:
6. Which of the following audit procedure would normally be
included in the audit plan when auditing the allowance for doubtful
accounts?
remember is:
audit objective of:
9. Because of its central role in auditing of accounts receivable,
which of the following would normally be one of the first items tested?
or listing?

could therefore:
19. In estimating the population misstatement, the first step in
projecting from the sample to the population is to:
21. The final step in the evaluation of the audit results is the decision
to:

26. When using monetary unit sampling, the recorded dollar
population is a definition of all the items in the:
29. When defining the population and the sampling unit for tests of
details of balances:
balance, the acceptable risk of incorrect acceptance:le size will:
**********************************************************
. If the client's internal control for recording sales returns and

uncovered by:
remember is:
audit objective of:

or incorrect is a:

to:
in the sample is:
**********************************************************
ACC 403 quiz 8

or listing?
remember is:
or incorrect is a:

audit objective of:
in the sample is:

could therefore:
**********************************************************
ACC 403 Quiz Chapters 21-24

1. Testing the information on the aged trial balance for detail tie-in is
a necessary audit procedure, which would normally include:
receivable?
or listing?
6. Tests of which balance-related audit objective are normally
performed first in an audit of the sales and collection?
7. The correct accounting for accounts receivable accounts with
credit balances, provided they are significant, would be:
9. In performing your audit you noticed that often times goods are
shipped that are not matched with the corresponding sales invoice. This
control deficiency could cause:
determine whether invoices were prepared. This test is performed to
satisfy the audit objective of:

12. The audit procedure of tracing sales invoices to shipping
documents will provide the auditor evidence that:
14. For most audits, inherent risk for accounts receivable is moderate
or low except for which balance-related audit objectives?
15. Cutoff misstatements occur when:
16. Tests for rates of occurrence are appropriately used in all but
which of the following situations?
20. What is the purpose of applying stratified sampling to a
population?
to:

29. Which of the following does not have to be considered in
determining the initial sample size of a test of details?
30. The auditor’s principal objective when using a sample of tests of
details of balances is whether the:
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ACC 403 Quiz Set 4

companies?
what type of audit?
6. An accountant:
to:
external users is:
a(n):

16. Historically auditing standards have been organized into three
categories, including:
issued by the:
public is the:
regulation of:

assurance to the:
27. The Statements on Auditing Standards issued by the Auditing
Standards Board:
29. Which of the following is not one of the responsibilities of an
auditor under the principles underlying an audit?
30. When assessing the risk of material misstatements in the financial
statements,
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ACC 403 Quiz 6

Week 8 Quiz 6 ACC 403
Question 1
________ is not a risk specific to the IT environments.
Question 2
The approach to auditing where the auditor does not test automated
controls to reduce assessed control risk is called:Question 3
When the client changes the computer software:
.
Question 4
Which of the following computer-assisted auditing techniques inserts an
audit module in the client's application system to identify specific types
of transactions?
Question 5
The auditor's objective in determining whether the client's automated
controls can correctly handle valid and invalid transactions as they
arise is accomplished through the:

Question 6
Output controls need to be designed for which of the following data
integrity objectives?
Question 7
Which of the following is a component of general controls?
Question 8
Controls which are built in by the manufacturer to detect equipment
failure are called:
Question 9
Controls that are designed for each software application and are
objectives are:
Question 10
In an IT system, automated equipment controls or hardware controls are
designed to:
Question 11
General controls may include firewalls which are used to protect from:

Question 12
One of the unique risks of protecting hardware and data is:
Question 13
Security controls should require that users enter a(n) ________ before
being allowed access to software and other related data files.
Question 14
The most important outputcontrol is:
Question 15
Controls which are designed to assure that the information processed by
the computer is authorized, complete, and accurate are called:
Question 16
When the auditor has completed the tests of details of balances and
Question 17
Analytical procedures:

Question 18
Risk assessment procedures are performed by auditors during an audit
in order to:
Question 19
In order to promote audit efficiency the auditor considers cost in
be the most costly?
Question 20
The reliance the auditor places on substantive tests in relation to the
reliance placed on internal control varies in a relationship that is
ordinarily:
Question 21
Collectively, procedures performed to obtain an understanding of the
entity and its environment, including internal controls, represent the
auditor's:
Question 22
A system walkthrough is primarily used to help the auditor:
Question 23

In the context of an audit of financial statements, substantive tests are
audit procedures that:
Question 24
The auditor would design which of the following audit tests to detect
possible monetary errors in the financial statements?
Question 25
Presentation and disclosure related audit objectives would be performed
in which phase of the audit process?
Question 26
You are auditing Rodgers and Company. After performing substantive
analytical procedures you conclude that, for the accounts tested, the
client's balance appears reasonable. This may indicate that:
Question 27
Which of the following further audit procedures are used to determine
whether all six transaction-related audit objectives have been achieved
for each class of transactions?
Question 28

Analytical procedures must be performed in:
Question 29
The primary emphasis in most tests of details of balances is on the:
Question 30
Management implements internal controls to ensure that all required
footnote disclosures are accurate. Auditors tests those controls to
provide evidence supporting the ________ presentation.
**********************************************************
ACC 403 Week 2 Quiz 1
to:

of the following?
3. An accountant:
companies?
what type of audit?
with:
a(n):
external users is:

public is the:
assurance to the:
auditing standards?
21. Historically auditing standards have been organized into three
categories, including:

30. The International Standards on Auditing (ISAs):
**********************************************************

1. If the phrase "except for" is present in the opinion paragraph of
the audit report, the auditor has issued a(n):
2. The term "explanatory paragraph" was replaced in the AICPA
auditing standards with:
6. Items that materially affect the comparability of financial
statements generally require disclosure in the footnotes. If the client
refuses to properly disclose the item, the auditor will most likely issue:
the:
11. A CPA may wish to emphasize specific matters regarding the
financial statements even though an unqualified opinion will be issued.
Normally, such explanatory information is:
12. The standard unqualified audit report for public entities includes
the following three paragraphs:
13. When there is uncertainty about a company's ability to continue as
a going concern, the auditor's concern is the possibility that the client

may not be able to continue its operations or meet its obligations for a
"reasonable period of time." For this purpose, a reasonable period of
time is considered not to exceed:
17. The CPA must not subordinate his or her professional judgment to
that of others in any:
19. Of the four parts of the AICPA's Code of Professional Conduct,
which part is enforceable?
21. A CPA firm:

for all:
29. According to the Principles section of the Code of Professional
Conduct, all members:
**********************************************************

2. A CPA is subject to criminal liability if the CPA:
the following?
called:
7. The standard of due care to which the auditor is expected to
adhere to in the performance of the audit is referred to as the:

fraud?
often:
15. The expectation gap:
errors and fraud?
21. Tests of details of balances are specific audit procedures that are
intended to:
22. "The auditor should not assume that management is dishonest, but
the possibility of dishonesty must be considered." This is an example of:
24. The essence of the attest function is to:

26. Fraudulent financial reporting is most likely to be committed by
whom?
27. The objective of an audit of the financial statements is an
expression of an opinion on:
29. If a client has violated federal tax laws:
of an illegal act?
**********************************************************
ACC 403 Week 5 Midterm Exam Part 1
companies?

with:
regulation of:
9. The "Principles Underlying an Audit in Accordance with
Generally Accepted Auditing Principles" provides a framework to help
auditors:
14. The audit report date on a standard unqualified report indicates:

17. When a qualified or adverse opinion is issued, the qualifying
paragraph is inserted:
profession is:
22. The CPA must not subordinate his or her professional judgment to
that of others in any:
23. When CPAs are able to maintain their actual independence, it is
referred to as independence in:
24. In determining independence with respect to any audit engagement,
the ultimate decision as to whether or not the auditor is independent
must be made by the:
The AICPA's Code of Professional Conduct requires independence for
all:
**********************************************************
ACC 403 Week 5 Midterm Part 2

fraud?
6. The assessment against a defendant of the full loss suffered by a
plaintiff regardless of the extent to which other parties shared in the
wrongdoing is called:
of an illegal act?

13. The evaluations of financial information through analysis of
plausible relationships among financial and nonfinancial data is the
definition of:
18. Which of the following is not a characteristic of the reliability of
evidence?
19. ________ is the auditor's examination of the client's documents and
records to substantiate that the information is included in the financial
statements.
21. An auditor should examine minutes of the board of directors'
meetings:
22. A related party transaction may be indicated when another
company:

23. Initial audit planning involves four matters. Which of the following
is not
one of these?
24. The audit team gathers information about a new client's business
and industry in order to obtain:
25. Which of the following normally signs the engagement letter for an
audit of a private company?
**********************************************************
1. If planned detection risk is reduced, the amount of evidence the
auditor accumulates will:

should:
materiality to the:
7. To what extent do auditors typically rely on internal controls of
their public company clients?
8. When the auditor is attempting to determine the extent to which
external users rely on a client's financial statements, they may consider
several factors except for:
9. When taken together, the concepts of risk and materiality in
auditing:
10. When auditors allocate the preliminary judgment about materiality
to account balances, the materiality allocated to any given account
11. Auditors frequently refer to the terms audit assurance, overall
13. If an auditor believes the chance of financial failure is high and
there is a corresponding increase in business risk for the auditor,
acceptable audit risk would likely:
14. Auditing standards ________ that the basis used to determine the
preliminary judgment about materiality be documented in the audit files.

15. Auditors typically rely on internal controls of their private company
clients:
**********************************************************
ACC 403 Week 6 Quiz Chapter 9
The scope paragraph of the standard unqualified auditor's report states
that "… the standards require that we plan and perform the audit to
obtain ________ assurance about whether the financial statements are
free of material misstatement." What type of assurance is given?
When auditors allocate the preliminary judgment about materiality to
account balances, the materiality allocated to any given account
To what extent do auditors typically rely on internal controls of their
public company clients?
As the risk of material misstatement increases, detection risk should:
As the acceptable level of detection risk increases, an auditor may
change the:

Inherent risk is ________ related to detection risk and ________ related
to the amount of audit evidence.
Inherent risk is often high for an account such as:
When dealing with audit risk:
Auditors are ________ to document the known and likely misstatements
in the financial statements under audit.
Amounts involving fraud are usually considered ________ important
than unintentionalerrors of equal dollar amounts.
When the auditor is attempting to determine the extent to which external
users rely on a client's financial statements, they may consider several
factors except for:
Auditors are responsible for determining whether financial statements
are materially misstated, so upon discovering a material misstatement
they must bring it to the attention of:
If an auditor believes the chance of financial failure is high and there is
a corresponding increase in business risk for the auditor, acceptable
audit risk would likely:
Inherent risk and control risk:
If it is probable that the judgment of a reasonable person will be
changed or influenced by the omission or misstatement of information,
then that information is, by definition of FASB Statement No. 2:
**********************************************************

. An act of two or more employees to steal assets and cover their theft by
misstating the accounting records would be referred to as:
3. Which of the following components of the control environment define
the existing lines of responsibility and authority?
5. Audit evidence regarding the separation of duties is normally best
obtained by:
6. When assessing whether the financial statements are auditable, the
auditor must consider:
7. To issue a report on internal control over financial reporting for a
public company, an auditor must:
8. Internal controls can never be regarded as completely effective. Even
if company personnel could design an ideal system, its effectiveness
depends on the:

11. Which of management's assertions with respect to implementing
internal controls is the auditor primarily concerned?
is that:
under Section 404:
earnings.
auditing context?
20. Auditing standards specifically require auditors to identify ________
as a fraud risk in most audits
in detecting fraud?

22. Company management is often under pressure to increase revenue
23. Which of the following is not a factor that relates to opportunities to
26. Research indicates that the most effective way to prevent and deter
fraud is to:
companies that:
29. Which of the following is a factor that relates to attitudes or
rationalization to commit fraudulent financial reporting?
the fact that:
**********************************************************
ACC 403 Week 7 Quiz

2. Which of the following components of the control environment
define the existing lines of responsibility and authority?
3. Which of the following is not one of the three primary objectives of
effective internal control?
4. Internal controls can never be regarded as completely effective.
Even if company personnel could design an ideal system, its
effectiveness depends on the:
because:
approach is:
separation of:

is that:
11. Sarbanes-Oxley requires management to issue an internal control
report that includes two specific items. Which of the following is one of
these two requirements?
12. To issue a report on internal control over financial reporting for a
public company, an auditor must:
14. An act of two or more employees to steal assets and cover their
theft by misstating the accounting records would be referred to as:
15. Which of the following deal with ongoing or periodic assessment of
the quality of internal control by management?
the fact that:
earnings.
19. Fraud awareness training should be:

21. Which of the following questions is the auditor not required to ask
companies that:
23. When dealing with revenue frauds:
30. Which party has the primary responsibility to oversee an
organization'sfinancial reporting and internal control process?
**********************************************************
ACC 403 Week 8 Quiz 6 Chapters 12-13

2. Controls which are designed to assure that the information
processed by the computer is authorized, complete, and accurate are
called:
6. Which of the following describes the process of implementing a
new system in one part of the organization, while other locations
continue to use the current system?
9. Output controls need to be designed for which of the following
data integrity objectives?

objectives are:
12. Old and new systems operating simultaneously in all locations is a
test approach known as:
machine languageis:
perform?

24. Which of the following further audit procedures are used to
determine whether all six transaction-related audit objectives have been
achieved for each class of transactions?
25. Many auditors perform extensive analytical procedures on audits
because:
be the most costly?
ordinarily:
**********************************************************
ACC 403 Week 9 Quiz 7 Chapter 14 & 15

2. When designing audit procedures, tracing of source documents to
the customers subsidiary ledger and subsequently to the general ledger
is done to satisfy what assertion?
4. A ________ is a document that indicates a request for
merchandise by a customer.
balance is the:

10. An effective procedure to test for unbilled shipments is to trace
from the:
11. When assessing risk control, the auditor must do all of the
following except:
15. Some companies have customers send payments directly to an
address maintained by a bank. This is called a(n) ________ system.
which one of the following procedures in an audit program?
20. Which of the following is the exception rate that the auditor expects
to find before testing?
22. When the auditor goes through a population and selects items using
nonprobabilisticselection methods, without regard to their size, source,
or other distinguishing characteristics, it is called:

23. The risk which the auditor is willing to take in accepting a control
as being effective when the true population exception rate is greater
than a tolerable rate is the:
25. The acceptable risk of overreliance:
29. When using statistical sampling, the auditor would most likely
require a smaller sample if the:
method is:
**********************************************************

A document that initiates shipment of goods and indicates the
description of the merchandise, the quantity shipped, and customer
name and address is the:
When an employee who is authorized to make customer entries in the
accounts receivable subsidiary ledger, purposefully enters cash received
into the wrong customer's account that employee may be suspected of:
Before goods are shipped on account, a properly authorized person
must:
In the accounts receivable subsidiary ledger the length of time the
account has been due can be useful to the client and the auditor in
preparing the:
The document that requires adjustments to the customers subsidiary
ledger account is the:
The total of the individual account balances in the accounts receivable
subsidiary ledger should equal the:
An effective procedure to test for unbilled shipments is to trace from the:
When assessing risk control, the auditor must do all of the following
except:
________ tests are for omitted transactions, while ________ tests are
for nonexistent transactions.
A document sent to each customer showing his or her beginning

balance is the:
Credit memos are normally issued to:
Generally, when is the earliest point in the sales and collection cycle in
which revenue can be recognized?
Most companies recognize sales revenue when:
What critical event must take place before goods can be shipped in
When designing audit procedures, tracing of source documents to the
customers subsidiary ledger and subsequently to the general ledger is
done to satisfy what assertion?
Which of the following is the exception rate that the auditor expects to
find before testing?
Which of the following is the risk that an auditor will reach an incorrect
conclusion because a sample is not representative of the population?
A sample in which the characteristics of the sample are the same as
Rodgers CPA believes that the rate of client billing errors is 4% and has
established a tolerable deviation rate of 6%. In auditing client invoices
Rodgers should use:
When auditors wish to evaluate a sample statistically, an acceptable
selection method is:
Auditors often use the ________ to determine the estimated population
exception rate.
The most serious shortcoming of the haphazard sample selection method
is:

The advantage of systematic sample selection is that:
Attributes sampling would be an appropriate method to use on which
one of the following procedures in an audit program?
When the computed upper exception rate is greater than the tolerable
exception rate, it is necessary for the auditor to take specific action.
Which of the following courses of action would be most difficult to
justify?
One of the causes of nonsampling risk is:
The sample exception rate equals:
In systematic sample selection, the population size is divided by the
Which of the following would have the least impact in determining
sample size?
When using statistical sampling, the auditor would most likely require a
smaller sample if the:
**********************************************************
ACC 403 Week 10 Quiz 8 - Part 1 Chapter 16

receivable?
cycle are:
audit objective of:
uncovered by:

12. The most effective audit evidence gathered for accounts receivable
is the:
13. A type of positive confirmation known as a blank confirmation:
15. For sales, the occurrence transaction-related audit objective affects
which of the following balance-related audit objective?
**********************************************************
ACC 403 Week 10 Quiz 8 - Part 2 Chapter 17
could therefore:

3. The auditors principal objective when using a sample of tests of
details of balances is whether the:
to:
9. When the sample selection is done using probability proportional
to size sample selection (PPS):
10. When using monetary unit sampling, the recorded dollar
population is a definition of all the items in the:
11. When defining the population and the sampling unit for tests of
details of balances:

**********************************************************
ACC 403 Week 10 quiz 8
For cash receipts, the occurrence transaction-related audit objective
affects which of the following balance-related audit objective?
The most effective audit evidence gathered for accounts receivable is
the:
Which of the following is the principle "weakness" of using negative
confirmations for your tests of details of balances for accounts
receivable?
Because of its central role in auditing of accounts receivable, which of
the following would normally be one of the first items tested?
Tests of which balance-related audit objective are normally performed
first in an audit of the sales and collection?

If the client's internal control for recording sales returns and allowances
is evaluated as ineffective:
The net realizable value of accounts receivable is equal to:
The audit procedure that provides the auditor with the most appropriate
evidence when performing test of details of balances for accounts
receivable is:
The understatement of sales and accounts receivable is best uncovered
by:
Confirmation of accounts receivable selected from the trial balance is
the most common test of details of balances for the ________ of
Audit procedures designed to uncover credit sales made after the client's
fiscal year end that relate to the current year being audited provide
evidence for which of the following audit objective?
An auditor selects a sample from the file of shipping documents to
audit objective of:
A type of positive confirmation known as a blank confirmation:
Which of the following audit procedure would normally be included in
the audit plan when auditing the allowance for doubtful accounts?
For sales, the occurrence transaction-related audit objective affects
which of the following balance-related audit objective?
The allowance for sampling risk when no misstatements are found in the
sample is:
Monetary unit sampling is not particularly effective at detecting:

The auditor is concerned with the audited value rather than the error
amount of each item in the sample when using:
The auditors principal objective when using a sample of tests of details
of balances is whether the:
The client's trial balance has a balance of $410,000 for merchandise
inventory. As the auditor you are willing to accept a balance that is
within $20,000 of either side of the recorded balance. You compute a
95% confidence interval of $395,000 to $425,000. You could therefore:
If an auditor concludes that internal controls are likely to be effective,
the preliminary assessment of control risk can be reduced, leading to
which of the following impacts on the acceptable risk of incorrect
acceptance?
When using monetary unit sampling, the recorded dollar population is a
definition of all the items in the:
The final step in the evaluation of the audit results is the decision to:
One of the steps involved in planning the sample for the tests of details
of balances is to:
If the population is not considered acceptable, one step the auditor is
likely to take is to:
In monetary unit sampling, a sampling interval of 900 means that:
If no exceptions were found in the substantive tests of transactions:
The appropriate assumption to make regarding the overall percent of
error in those population items containing an error is:

The method used to measure the estimated total error amount in a
Which of the following is not a type of statistical method that provides
results in dollar terms?
**********************************************************
ACC 403 Week 11 FINAL EXAM PART 1
should:
change the:

approach is:
is that:
because:
14. When analyzing accounts for fraud risk:
objectives are:

auditor's:
**********************************************************
ACC 403 Week 11 FINAL EXAM PART 2

7. Which of the following occurrences would be least likely to
warrant further audit attention for the auditor?
method is:
or incorrect is a:
12. For most audits, a proper cash receipts cutoff is less important than
the sales cutoff because the improper cutoff of cash:

could therefore:
in the sample is:
21. Inventory is a complex area to audit for all but which of the
following reasons?
22. ________ is normally characterized as a difficult and complex
account to audit.

23. If an auditor were concerned with obtaining evidence about the
appropriateness of the value of inventory, which of the following tests
would be most appropriate?
24. When labor is a significant part of inventory, verifying the proper
accounting of these costs should be tested in the:
25. Comparing the physical counts with the perpetual inventory master
files satisfies the balance-related audit objective of:
26. When should auditors generally assess a client's ability to continue
as a going concern?
27. The letter of representation obtained from an audit client should
be:
28. After the balance sheet date, but prior to the issuance of the audit
report, the client suffers an uninsured loss of their inventory as a result
of a fire. The amount of the loss is material. The auditor should:
29. Refusal by a client to prepare and sign the representation letter
would require the auditor to issue a:
30. When using the probability threshold for contingencies, the
likelihood of the occurrence of the event is classified as:
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