Deck 2: Auditors Professional Roles and Responsibilities

Question 1

Proper planning and supervision during the performance of an audit encompasses all but which of the following considerations?

A)Obtaining knowledge of the auditee's business
B)Developing an adequate audit plan.
C)Having a complete audit file of working papers documenting the evidence obtained.
D)Ensuring unanimity among members of the audit team concerning audit decisions.

Answer 1

D

Question 2

Because of the risk of material misstatement,an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of ________.

A)objective judgment
B)independent integrity
C)professional skepticism
D)impartial conservatism

Answer 2

C

Question 3

A standard unmodified audit report should be dated ________.

A)no later than the date when the auditor obtained sufficient appropriate audit evidence supporting the auditor's opinion
B)no earlier than the date when the auditor obtained sufficient appropriate audit evidence supporting the auditor's opinion
C)as at the end of the year being reported on
D)as at the end of the year the audit work was done

Answer 3

B

Question 4

Which of the following is the first task that the auditor must accomplish to demonstrate proficiency in auditing?

A)Identify the evidence relevant for the audit of assertions that are made by management in its unaudited financial statements and notes.
B)Design an audit program to obtain sufficient appropriate evidence about assertions management makes in financial statements and notes.
C)Recognize the underlying assertions made by management in the financial statements and notes.
D)Evaluate the evidence gathered in the performance of the audit program and decide whether management's assertions conform to generally accepted accounting principles and reality.

Question 5

In what way does the regulation of public accountants in Canada help to reduce information risk for investors?

A)By guaranteeing the accuracy of the financial statements.
B)By establishing performance and quality control standards that all public accounting firms must follow when conducting audits.
C)By acting as a source of financial compensation for investors when corporate failures occur.
D)By requiring auditors to quantify and set information risk to a uniformly acceptable level.

Question 6

An external auditor is conducting an audit of the financial statements of Camden Corporation.The external auditor is expected to ________.

A)certify the correctness of Camden's financial statements
B)make a 100% examination of Camden's records
C)give an opinion on whether Camden's financial statements are fairly presented in all material respects
D)give an opinion on the attractiveness of Camden for investment purposes and critique the wisdom and legality of its business decisions

Question 7

Control risk is ________.

A)the risk that a material misstatement could occur and not be prevented or detected by the company's internal control policies and procedures
B)the risk that a material misstatement could occur and not be detected by the auditor's audit procedures
C)the risk that the auditor will not be able to complete the audit on a timely basis
D)the risk that the auditor will not properly control the staff on the audit engagement

Question 8

An assurance engagement is one in which a CPA is engaged to ________.

A)issue a written communication expressing a conclusion concerning a subject matter for which an accountable party is responsible
B)provide tax advice or prepare a tax return based on financial information the CPA has not audited or reviewed
C)testify as an expert witness in accounting,auditing,or tax matters,given certain stipulated facts
D)assemble prospective financial statements based on the assumptions of the entity's management without expressing any assurance

Question 9

What information is included in the Key Audit Matters section of the audit report?

A)A listing of matters where management disagreed with the auditor's final assessment.
B)A list of management's assertions regarding the financial statements.
C)A listing of matters that the auditor has judged to be the most significant in the audit of the financial statements.
D)A list of material misstatements identified in the course of the audit of the financial statements.

Question 10

Which of the following statements best explains an unmodified report opinion?

A)The financial statements contain a departure from GAAP.
B)The auditor was unable to complete the work necessary to form a complete opinion.
C)The auditor was not aware of any reasons not to believe the statements are correct.
D)Based on the evidence obtained,the auditor believes the statements are free of material error.

Question 11

The reporting standards require that the auditor explicitly report on whether the financial statements ________.

A)contain adequate disclosure of all material matters
B)are in accordance with GAAP
C)used principles that are appropriate for the circumstances
D)were prepared on a consistent basis with the comparative year

Question 12

Key features of SOX include all of the following except ________.

A)increased penalties for corporate wrongdoers
B)more timely and extensive financial disclosures
C)fewer options of recourse for aggrieved shareholders
D)increased oversight of auditors

Question 13

Joe Smith,CPA,has been operating is own public accounting practice for several years.His expertise is and has always been in auditing medium-sized private companies in the agricultural industry.Recently,he referred a request to audit a large company in the automotive industry to another firm.In so doing,Joe is best demonstrating compliance with which aspect of the ethical requirements set out in CPA Canada's CAS?

A)Objectivity and Independence
B)Competence
C)Due Professional Care
D)Professional Skepticism

Question 14

Three-Party Accountability includes all of the following parties except ________.

A)users
B)practitioners
C)Audit Committee
D)management

Question 15

The primary purpose of obtaining an understanding of the company's internal controls in the financial statement audit is ________.

A)to help the auditors develop the audit program
B)to make suggestions to management to improve internal controls
C)to obtain direct sufficient appropriate audit evidence to afford a reasonable basis for an opinion on the financial statements
D)to determine whether the company has changed any accounting principles

Question 16

Which of the following has been established to oversee the auditors of public companies?

A)Canadian Coalition for Good Governance.
B)Canadian Public Accountability Board.
C)The SOX Board.
D)The Canadian Securities Commission.

Question 17

Several sources of GAAP consulted by an auditor are in conflict as to the application of an accounting principle.Which of the following should the auditor consider to be the most authoritative?

A)CPA Canada Handbook.
B)CPA Canada Exposure Drafts.
C)Industry practice.
D)Federal legislation.

Question 18

According to generally accepted auditing standards (GAAS),the overall objective of a financial statement audit is ________.

A)to enable the auditor to express an opinion as to whether the financial statements are prepared in accordance with generally accepted accounting principles
B)to reduce audit risk to an acceptably low level
C)to determine whether the financial principles adopted by management in preparing the financial statements are acceptable
D)to obtain reasonable assurance that the financial statements taken as a whole are free from misstatement,whether due to fraud or error

Question 19

Assurance standards can be applied to which of the following types of engagement?

A)Attestation engagements
B)Direct reporting engagements
C)Both direct reporting and attestation engagements
D)Tax planning and consulting engagements

Question 20

Auditors try to achieve independence in appearance in order to ________.

A)maintain public confidence in the profession
B)become independent in appearance and in fact
C)comply with the generally accepted auditing standards
D)maintain an unbiased mental attitude

Question 21

A report giving conclusions about a firm's compliance with quality control standards is typical of which of the following?

A)Practice inspection.
B)Quality inspection.
C)Peer review.
D)Quality review.

Question 22

Under CAS 200 the objective of the financial statement audit is strictly to be able to express an opinion on whether the statements are prepared in conformity to Canadian GAAP.

Question 23

The general standard of GAAS relates primarily to the personal integrity and professional qualifications of auditors.

Question 24

Control risk is the risk that an accounting firm's quality control standards will not be adequate.

Question 25

According to IFAC,which of the following is not one of the elements of quality control?

A)Relevant ethical requirements.
B)Monitoring.
C)Acceptance and continuance of client relationships.
D)Due professional care.

Question 26

The fourth reporting standard requires the audit report to comment on the consistency of the accounting principles used in preparing the financial statements.

Question 27

Audit committees monitor management's financial reporting responsibilities.

Question 28

In establishing a quality control system,which area should be of a secondary nature?

A)Creating an independence and objectivity checklist.
B)Creating a program for continuing professional education.
C)Creating an internal review process.
D)Controlling access to client files.

Question 29

The term "unqualified audit opinion" is commonly used when referring to an audit report having which characteristic?

A)The auditor who performed the audit was not properly licensed as a CPA.
B)The auditor has no need to call attention to anything wrong with the audit work or the financial statements.
C)The auditor conducted the audit according to a different set of standards than GAAS.
D)That auditor is reporting on financial statements that are not limited to specific reporting period.

Question 30

Williams & Co. ,a large international CPA firm,will be subject to an external peer review.The peer review will most likely be performed by ________.

A)employees and partners of Williams & Co.who are not associated with the particular audits being reviewed
B)employees and partners of another CPA firm,hired by Williams & Co.
C)peer review staff of the Ontario Securities Commission
D)peer review staff of CPA Canada

Question 31

The CPA Canada Handbook recommendations are a step-by-step list of procedures auditors have to complete for each engagement.

Question 32

To audit public companies in Canada,an auditor must be a CPA with a public accounting license and have their firm register with the CPAB.

Question 33

The GAAS examination standards relating to the audit of financial statements,mandates each of the following requirements,except for

A)Plan and perform an audit to reduce audit risk to an acceptably low level.
B)Obtain reasonable assurance that the financial statements,taken as whole,are free of all misstatements
C)Conduct an audit that is in accordance with CASs.
D)Obtain a conclusive amount of audit evidence to support your audit opinion.

Question 34

Which of the following is not one of the three elements of the U.S.Auditing Standards AU Section 150?

A)General Standards
B)Reporting Standards
C)Standards of Fieldwork
D)Examination Standards

Question 35

A prospectus is the information,usually including financial information,about a firm that accompanies any new issuance of shares in a regulated securities market.

Question 36

The assessment of materiality has a pervasive impact on the audit.

Question 37

Audit risk is the risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.

Question 38

In Canada,although the CPA designation is the sole nationally recognized public accounting designation,individual provinces regulate the requirements for the practice of public accounting.

Question 39

Practice standards are a general set of standards intended to guide the audits of financial statements.

Question 40

Reliance on self-regulation of the accounting profession has changed as a result of its perceived failure to detect the problems leading to the corporate scandals of 2002/2003.

Question 41

The examination standard CAS 200 requires that auditors obtain a conclusive amount of evidence to support their audit opinion

Question 42

Explain the effect major corporate failures and financial reporting scandals - such as Enron and WorldCom,has contributed towards shaping the auditing environment of today.

Question 43

What is the difference between audit procedures and audit standards?

Question 44

What are practice inspections and why are they performed?

Question 45

Practice inspection is something a new auditor does as part of his or her training program.