Quiz Detail

Q1 . A CPA has received an attorney's letter in which no significant disagreements with the client's assessments of contingent liabilities were noted. The resignation of the client's lawyer shortly after receipt of the letter should alert the auditor that:

A An adverse opinion will be necessary.

B Undisclosed unasserted claims may have arisen.

C The auditor must begin a completely new examination of contingent liabilities.

D The attorney was unable to form a conclusion with respect to the significance of litigation, claims, and assessments.

Q2 . You are a CPA retained by the manager of a cooperative retirement village to do "write-up work." You are expected to prepare unaudited financial statements with each page marked "unaudited" and accompanied by a disclaimer of opinion stating no audit was performed. In performing the work, you discover that there are no invoices to support a claim for a $25,000 disbursement. The manager informs you that all the disbursements are proper. What should you do?

A Submit the expected statements but omit $25,000 of unsupported disbursements.

B Include the unsupported disbursements in the statements since you are not expected to make an audit.

C Obtain from the manager a written statement that you informed him of the missing invoices and include his assurance that the disbursements are proper.

D Notify the owners that some of the claimed disbursements are unsupported and withdraw if the situation is not satisfactorily resolved.

Q3 . The concept of limited assurance is provided for in which of the following engagements?

A Audit

B Review

C Compilation

D Agreed-upon procedures

Q4 . Professional standards prohibit which one of the following types of engagements for prospective financial statements from being undertaken?

A A compilation

B A review

C An examination

D An agreed-upon procedures engagement

Q5 . A company guarantees the debt of an affiliate. Which of the following best describes the audit procedure that would make the auditor aware of the guarantee?

A Review minutes and resolutions of the board of directors.

B Review prior year's audit files with respect to such guarantees.

C Review the possibility of such guarantees with the chief accountant.

D Review the legal letter returned by the company's outside legal counsel.

Q6 . Auditors frequently audit statements that were prepared on a comprehensive basis of accounting other than GAAP. When this occurs:

A Generally accepted auditing standards apply to these engagements and the reporting requirements differ.

B Generally accepted auditing standards apply to these engagements and the reporting requirements are the same as well.

C Generally accepted auditing standards do not apply to these examinations and the reporting requirements differ also.

D Generally accepted auditing standards do not apply to this engagement and the reporting requirements remain the same for the CPA.

Q7 . The standards which govern the CPA's association with unaudited financial statements of private companies are the:

A AICPA's Code of Professional Conduct.

B Statements on Auditing Standards (SASs).

C Statements of Standards on Attestation Engagements (SSAEs).

D Statements on Standards for Accounting and Review Services (SSARS).

Q8 . 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:

A Management letter.

B Letter of inquiry.

C Letters testamentary.

D Management letter of representation.

Q9 . Which are prospective financial statements that present an entity's expected financial position, results of operations, and cash flows, to the best of the responsible party's knowledge and belief?

A Forecasts ProjectionsYes Yes

B Forecasts ProjectionsNo No

C Forecasts ProjectionsYes No

D Forecasts ProjectionsNo Yes

Q10 . The process of "final evidence accumulation" is always done late in the engagement. Which one of the following would be done the earliest in the engagement?

A Final analytical procedures

B Search for contingent liabilities

C Evaluate the going concern assumption

D Acquire the client's letter of representation

Q11 . Distribution of which of the following types of reports is limited?

A Audit

B Review

C Agreed-upon procedures

D Examination

Q12 . As a CPA you have been asked to examine an entity's financial projections. Acceptance of the engagement would be appropriate if distribution is limited to:

A Stockholders of record as of the date of the report.

B Potential investors and creditors by posting on the Company's website.

C General public by posting on the company's website.

D A financial institution for which the company is negotiating a loan.

Q13 . Which of the following is a significant risk to the auditor regarding an audit in a highly automated information environment?

A Does not place enough reliance on the processed information

B Places too much reliance on the processed information

C Processed information may not reveal the sources of the information

D Does not understand the processed information produced by the automated environment

Q14 . Elise-Greer, LLP is an affiliate of the audit client and is audited by another firm of auditors. Which of the following is most likely to be used by the auditor to obtain assurance that all guarantees of the affiliate's indebtedness have been detected?

A Send the standard bank confirmation request to all of the client's lender banks.

B Review client minutes and obtain a representation letter.

C Examine supporting documents for all entries in intercompany accounts.

D Obtain written confirmation of indebtedness from the auditor of the affiliate.

Mc For Auidt Final