ACCY 610 Auditing Seminar Module 3 Exam 1 Practice Test

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• Which statement best describes Political Representative Legitimacy?
• Which scenario describes when a positive confirmation is most appropriate for AR testing?
• Which statement about the retention period for audit working papers is correct?
• How many NASBA-nominated representatives comprise the ASB?
• When was the Auditing Standards Board established?
• What is substantial doubt in auditing standards in relation to going concern?
• What is the purpose of an auditor's report on ICFR versus FS?
• What is the appropriate treatment of contract modifications under ASC 606/IFRS 15?
• After CAuP was replaced in 1972, what did the group become known as?
• Which scenario favors using positive confirmations over negative confirmations, and what is the expected response rate?
• Which of the following is an advantage of dismantling the PCAOB?
• When is recalculation used in substantive procedures, and what is its purpose?
• What is the purpose of testing inventory during an observation to verify existence and valuation?
• Which procedure best addresses cutoff and completeness in auditing purchases and accounts payable?
• Why is independence important in auditing, and how can independence be impaired?
• Who provides the funding for the PCAOB?
• When was the PCAOB established and why?
• Which statement best describes the role of external evidence from independent sources in terms of reliability?
• In what year did the NYSE and AIA agree on the form of the standard audit report?
• IAASB is not entirely independent of which group?
• A problem with political representative legitimacy?
• What is a key aspect of IAASB's membership makeup?
• Who established the International Auditing and Assurance Standards Board (IAASB) and when?
• How should auditors address contingencies and commitments, such as litigation?
• Which audit opinion is issued when there is a scope limitation or misstatement that is not pervasive?
• What is monetary-unit sampling (MUS) and when is it advantageous?
• What should be included in an audit plan and an engagement letter?
• What is a typical reason for retaining audit working papers for several years?
• What indicators might indicate substantial doubt about an entity's ability to continue as a going concern?
• What is the purpose of re-performance of bank reconciliations during an audit?
• Define professional skepticism and give examples of its application in evaluating evidence and management representations.
• What is a management representation letter and when is it typically obtained?
• The PCAOB was created by the Sarbanes-Oxley Act in what year, and what authority does it have?
• How do you decide whether to issue a clean opinion or a modified opinion?
• Which control is primarily designed to ensure data can be recovered following a disaster?
• Which statement best describes the relationship between planning materiality and performance materiality?
• Describe the main categories of audit evidence and the factors used to evaluate sufficiency and appropriateness.
• A conflict of interest for management occurs in which area?
• Which statement defines sampling risk and nonsampling risk, and how can they be mitigated?
• Which organizations completed Clarification Project?
• What is the auditor's objective in using analytical procedures during planning?
• Legitimacy is defined as which of the following?
• What is the primary purpose of the auditor's risk assessment procedures?
• Which audit opinion could result from a material scope limitation?
• Which phrasing most clearly signals an unconditional requirement in auditing standards?
• When evaluating presentation and disclosure in financial statements, what should be checked?
• The McKesson and Robbins audit failure led to the creation of which committee?
• Who monitors the Public Company Accounting Oversight Board (PCAOB)?
• How can data analytics enhance audit risk assessment and evidence gathering in an exam scenario?
• Which statement best describes an engagement letter?
• Which committee issued the Statements on Auditing Procedure (SAPs)?
• Provide an example of planning-stage analytical procedures and explain what an auditor would do with the results.
• Which set correctly lists the five components of the COSO internal control framework?
• Which statement best reflects the use of unpredictable procedures in fraud risk management?
• Which combination best describes how auditors test for inventory obsolescence and the valuation method applied?
• Which factor is NOT a key consideration when designing a sampling plan to mitigate sampling risk?
• Define planning materiality and performance materiality and explain how they guide audit planning and fieldwork.
• What ethical considerations specific to Module 3 should auditors be mindful of, and how could ethical lapses impact audit quality?
• What is the role of analytical procedures in planning and in substantive testing?
• Which is one of the two basic approaches to standard-setting legitimacy?
• The ASB replaced which prior committee?
• Which statement about accounts receivable assertions and confirmations is incorrect?
• What are dual-purpose tests, and in what situations are they particularly advantageous?
• When should going-concern considerations be reassessed during an audit, and what documentation is expected?
• Legitimacy is defined as which of the following?
• What is compensation for members of the Auditing Standards Board (ASB)?
• What are the key documentation considerations in audit workpapers?
• Which of the following is a reason for professionals to set standards?
• What document did the Federal Reserve Board issue in audit standard-setting in 1917?
• Divergence is most notable in which area?
• Which statement describes the make-up of the PCAOB's membership?
• Which risks typically affect revenue recognition assertions?
• Which of the following is a typical testing approach auditors use to assess segregation of duties?
• A conflict of interest for standard-setters potentially arises when
• When might the auditor issue a going-concern opinion, and what indicators would lead to substantial doubt?
• In audit sampling, what factors determine the required sample size for attribute sampling, and how do they interact?
• How many ASB members come from the big four firms?
• What is the size of the IAASB board?
• Who oversees the International Auditing and Assurance Standards Board (IAASB)?
• How are analytical procedures used in planning and in final evaluation, and what characteristics make an analytical procedure effective?
• Which of the following statements about impairment indicators is accurate?
• Which procedure best addresses cut-off and completeness in auditing purchases?
• The Committee on Auditing Procedure (CAuP) was created in response to which event?
• What is the size of the Public Company Accounting Oversight Board (PCAOB)?
• Which body issues the Statements on Auditing Standards (SASs)?
• In payroll cycle control testing, which control demonstrates proper authorization for changes to payroll?
• Describe the typical audit opinions and their criteria.
• How should audit evidence be documented to comply with standards?
• The PCAOB initially adopted interim PCAOB audit standards from which body?
• COSO Internal Control Framework includes five components. Which option is NOT a component?
• When was the International Auditing and Assurance Standards Board established, and what do they issue?
• What is cutoff in financial reporting and when can misstatements occur at year-end?
• Which of the following is NOT listed as a disadvantage of dismantling the PCAOB?
• How do auditors test the design and operating effectiveness of internal controls over financial reporting?
• What IT controls are typically tested in a financial statement audit?
• ISA adoption status.
• Who provides funding for the Auditing Standards Board (ASB)?
• Which types of audit evidence are generally considered most reliable?
• What does Responsibility to Consider indicate?
• What are the typical steps involved in impairment of assets when indicators exist?
• Which of the following best describes the approach to fraud risk factors?
• Which statement is true?
• What are the pronouncements of the IAASB?
• What should audit documentation include to ensure traceability to audit assertions?
• Which procedure is most aligned with testing counts at year-end in inventory auditing?
• IAASB is part of which umbrella organization?
• How does planning more effective substantive procedures affect detection risk and overall audit risk?
• What is the appointment process for the ASB?
• Which is a characteristic of the language of auditing standards?
• How can analytical procedures serve as substantive procedures, and what characteristics strengthen their effectiveness?
• Which sources are typically reviewed to identify contingencies?
• Which component is exemplified by segregation of duties in internal controls?
• What steps would you take to assess revenue recognition risk?
• One result of the Clarification Project?
• Which component of the COSO framework is primarily concerned with identifying threats and risks within the entity and its environment?
• Which condition is indicative of a material weakness in ICFR?
• Which of the following describes how auditors should evaluate accounting estimates and management's assumptions?
• Which option best matches an assertion with its example among the eight financial statement assertions?
• What is professional skepticism and why is it important in auditing?
• Which procedure best tests the completeness of accounts payable?
• Which of the following is an example of external, auditor-obtained evidence?
• What is cut-off testing, and what misstatements do they help detect?
• Which description best reflects the PCAOB's consideration in standard-setting?
• Which scenario would most likely impair an auditor's independence?
• How should testing of controls and substantive procedures be documented to ensure audit traceability?
• What is the compensation policy for IAASB members?
• How would you audit accounts receivable and the allowance for doubtful accounts?
• What is the purpose of substantive testing of details for the payroll cycle?
• Who are the three audit standard-setters relevant in the United States?
• Which of the following is an example of a control activity within the COSO framework?
• Which of the following is a way standards protect the profession's interest?
• How do you set materiality in a group (consolidated) audit?
• What is the purpose of including cross-references in audit workpapers?
• Which procedures would an auditor perform to test management's significant accounting estimates?
• Who provides funding for the IAASB?
• Which of the following is a typical IT general control activity?
• Which of the following is a limitation of bank confirmations?
• In asset verification, what does rights and obligations verify as compared with ownership?
• How are final analytical procedures used in conjunction with the overall review?
• What is an integrated audit, and what additional opinion is issued?
• What is a stated objective in IAASB's appointment process?
• Which element is typically included in the engagement letter at the outset?
• Differentiate general IT controls from application controls and provide examples relevant to an audit.
• What is the difference between reperformance and recalculation in audit testing?
• Which statement about evidence reliability is true?
• Why is revenue recognition commonly a high-risk area, and what procedures help mitigate?
• What does Presumptively Mandatory indicate in auditing standards language?
• Which organization is primarily responsible for setting standards for audits of public companies in the United States?
• Which assertion best matches the statement 'All payables are recorded'?
• What is the purpose of confirmations, and what are common limitations?
• ISAs serve as the basis for what in international accounting firms?
• What was the effect of the Clarification Project?
• Which statement best describes sampling risk and how it is mitigated in an audit sampling design?
• In an integrated audit, which of the following is true?
• What factors does the PCAOB consider in its proposed standards?
• When are bank confirmations used, and what limitations should auditors be aware of?
• Which of the following best describes sufficiency and appropriateness of audit evidence?
• Where are the PCAOB's Auditing Standards applicable?
• How are IAASB members appointed?
• Which statement correctly pairs an organization with the standards it issues?
• What is the difference between inherent risk and control risk?
• What is the auditor's approach to evidence from service organizations?
• In the PCAOB standard-setting process, the final standard must be approved by the SEC.
• In evaluating IT general controls, which activities should be considered and tested for effectiveness?
• Which term indicates that auditors should consider performing an action, rather than mandatory?
• What factor makes dismantling difficult?
• Which act established the PCAOB's funding source?
• Who approves ASB nominations?
• What are the pronouncements issued by the Auditing Standards Board (ASB)?
• Who funds the International Foundation for Ethics and Audit (IFEA)?
• Which of the following statements describes the primary assertions related to revenue recognition?
• What is the board size for the ASB?
• Where are ISAs applicable?
• Which statement best illustrates how standards protect the public interest?
• Which indicators would suggest impairment of long-lived assets?
• Which statement accurately distinguishes errors from fraud and describes a typical audit response?
• Which statement about tests of controls and substantive procedures is correct?
• What is the appointment process for the PCAOB?
• What types of indicators typically trigger asset impairment testing?
• How do you audit accounting estimates such as allowances or impairment?
• Which option represents the Presentation/Disclosure assertion?
• When assessing going concern in times of financial distress, which items should the auditor review to determine viability?
• How would you test year-end accruals and prepayments?
• In what situations would an auditor engage external specialists, and what factors determine reliance on their work?
• Why are related-party transactions considered high-risk, and what procedures should auditors perform?
• In the Audit Risk Model AR = IR × CR × DR, which statement is true about reducing audit risk?
• ASB composition includes a mix of groups. Which option best reflects the makeup?
• Which procedures are commonly used to test inventory existence and valuation?
• Which statement best describes a material weakness in ICFR and its communication?
• What is a direct outcome of standards increasing or maintaining quality in practice?
• The Cohen Commission examined the expectations gap in which year?
• Which entity approves the final PCAOB standard?
• How should an audit team evaluate and reconcile evidence from multiple sources when forming conclusions?
• Regarding PCAOB board employment, which statement is true?
• Why is management override of controls a significant risk, and what tests might an auditor perform to detect it?
• Which action exemplifies professional skepticism when evaluating management representations?
• What is the difference between substantive analytical procedures and tests of details?
• How do you audit disclosures related to intangible assets?
• Distinguish between tests of controls and substantive procedures and explain when an auditor would perform each.
• In what year did the New York Stock Exchange start requiring audits of its listed companies?
• Which statement best describes the sequence of steps for revenue recognition under ASC 606/IFRS 15?
• State the basic audit risk model and explain how detectives risk is controlled by planning substantive procedures.
• Which procedure is typically used to audit cash and bank reconciliations?
• Which practice is NOT a typical mitigation for independence threats in auditing?
• How do you assess impairment of long-lived assets?
• When is fieldwork typically performed across multiple periods and why is timing important?
• What is reperformance, and which is an example of its use in testing controls?
• Cut-off tests help detect misstatements; which example would indicate improper cut-off?
• Which statement correctly describes recognition criteria for intangible assets during an audit?
• Identify common fraud risk factors auditors consider and outline procedures to address them.
• Which procedure is most directly associated with testing cost flow assumptions and obsolescence reserves in inventory?
• What is the purpose of audit documentation, and what key elements should it include?
• Which example best illustrates the COSO control environment component?
• How should an auditor address sufficiency and appropriateness of audit evidence?
• What is a general approach to improve sufficiency and appropriateness of audit evidence?
• How should auditors handle evidence from service organizations or outsourced processes?
• Which AR assertion is primarily concerned with the measurement of the balance?
• What pronouncements are issued by the PCAOB?
• Which of the following describes the appropriate disclosure treatment for contingencies?
• What happened to the Auditing Standards Executive Committee after its creation?
• What characteristics of unusual or significant transactions require enhanced audit procedures, and what procedures might be used?
• Which problem is associated with political representative legitimacy?
• Which statement best describes journal entry testing as a fraud-detection procedure?
• Which statement best describes Legitimacy in standard-setting?
• The Treadway Commission examined fraud in which year, prompting new standards from the profession?
• What is the role of planning materiality in setting audit procedures?
• Which statement best describes materiality and the roles of planning materiality and performance materiality?
• What are the benefits and limitations of using external confirmations for accounts receivable, and how should auditors respond to nonresponses?
• Which statement accurately describes the PCAOB's CPA requirements for its members?
• CAuP was replaced in 1972 by which committee?
• What is the difference between sufficiency and appropriateness of audit evidence, and what factors affect each?
• Which of the following is NOT typically used to test internal controls?
• Two basic approaches to standard-setting legitimacy
• What is the purpose of the risk assessment procedures in planning an audit, and what key steps are typically performed?
• What is the compensation arrangement for PCAOB members?
• Planning materiality is often set at the outset using base metrics. Which option correctly states this concept?
• What is a standard in a professional context?
• How do auditors test impairment of long-lived assets and what indicators suggest impairment?
• What describes divergence in standards?
• What process of standard-setting does the PCAOB follow?