Question 1

Current professional auditing standards mandate the use of analytical procedures during the testing phase of the audit.

Accepted Answer

Analytical procedures are required during the planning and review phases of an audit, but their use during the testing phase is not mandated; it is at the auditor's discretion based on the auditor's judgment and the specific circumstances of the audit.

Question 2

Which of the following statements regarding the letter of representation is not correct?
A)It is prepared on the client's letterhead.
B)It is addressed to the CPA firm.
C)It is signed by high-level corporate officials,usually the president and chief financial officer.
D)It is optional,not required,that the auditor obtain such a letter from management.

Accepted Answer

The letter of representation is required by auditing standards and must be obtained by the auditor from management. It is a written statement from management to the auditor that outlines management's responsibility for the financial statements and asserts that all information provided to the auditor is correct and complete. The letter is usually prepared on the client's letterhead, addressed to the CPA firm, and signed by high-level corporate officials, usually the president and chief financial officer.

Question 3

Besides the search for contingent liabilities and the review for subsequent events,the auditor has four important final evidence accumulation responsibilities,all of which are required by current professional auditing standards.Discuss each of these four responsibilities.

Accepted Answer

The answer of Besides the search for contingent liabilities and...

Question 4

Current professional auditing standards require the performance of analytical procedures during the planning and completion phases of the audit.

Accepted Answer

Current professional auditing standards indeed require the performance of analytical procedures during the planning and completion phases of the audit. Analytical procedures involve the evaluation of financial information through analysis of plausible relationships among financial and non-financial data. These procedures help auditors identify areas that may require further investigation, and also help in assessing the overall reasonableness of financial statement amounts.

Question 5

Which of the following statements is correct?
A)A letter of representation is documentation of management's acceptance of responsibility for the financial statements and is deemed to be reliable evidence.
B)A letter of representation is not deemed to be reliable evidence because of the potential incompetence of management.
C)A letter of representation is not deemed to be reliable evidence because it is a written statement from a nonindependent source.
D)A letter of representation is documentation of the CPA's acceptance of responsibility for the audit of the financial statement and is deemed to be reliable.

Accepted Answer

A letter of representation is a written statement from management confirming their responsibility for the financial statements and the accuracy and completeness of the information provided to the auditor. However, it is not considered reliable evidence because it comes from a nonindependent source, which is management. The auditor should seek additional corroborative evidence when relying on the letter of representation.

Question 6

Which of the following audit procedures would most likely assist an auditor in identifying conditions and events that may indicate there could be substantial doubt about an entity's ability to continue as a going concern?
A)review compliance with the terms of debt agreements
B)confirmation of accounts receivable from principal customers
C)reconciliation of interest expense with debt outstanding
D)confirmation of bank balances

Accepted Answer

Reviewing compliance with the terms of debt agreements can help the auditor identify any potential issues or defaults that could indicate the entity is experiencing financial difficulties and may not be able to continue as a going concern. The other options listed are more focused on verifying specific financial balances or transactions and may not provide as much insight into the entity's ability to continue operations.

Question 7

A management representation letter is
A)prepared on the CPA's letterhead.
B)addressed to the client.
C)signed by high-level corporate officials.
D)dated as of the balance sheet date.

Accepted Answer

A management representation letter is signed by high-level corporate officials, such as the CEO or CFO, and is used to provide written assurances to the auditor about the accuracy and completeness of financial statements and other information. The letter is usually prepared by the client company and addressed to the auditor, and it should be dated as close as possible to the date of the auditor's report. It is not prepared on the CPA's letterhead as it is a client-prepared document.

Question 8

Which of the following is not a reason why the auditor requests that the client provide a letter of representation?
A)Professional auditing standards require the auditor to obtain a letter of representation.
B)It impresses upon management its responsibility for the accuracy of the information in the financial statements.
C)It provides written documentation of the oral responses already received to inquiries of management.
D)It determines the type of opinion the auditor will issue on the financial statements.

Accepted Answer

The letter of representation does not determine the type of opinion the auditor will issue on the financial statements. The opinion is based on the overall audit findings and the auditor's assessment of the financial statements. However, the other options are valid reasons for why the auditor requests a letter of representation.

Question 9

Refusal by a client to prepare and sign the representation letter would require the auditor to issue a(n)
A)qualified opinion or a disclaimer of opinion.
B)adverse opinion or a disclaimer of opinion.
C)qualified or an adverse opinion.
D)unqualified opinion with an explanatory paragraph.

Accepted Answer

The refusal by a client to prepare and sign the representation letter is a limitation on the scope of the audit. This limitation prevents the auditor from obtaining sufficient appropriate audit evidence. As a result, the auditor may issue a qualified opinion if the matter is material but not pervasive, or a disclaimer of opinion if the matter is both material and pervasive.

Question 10

Auditing standards require auditors to evaluate whether there is substantial doubt about a client's ability to continue as a going concern.One of the most important audit procedures to perform to assess the going concern question is
A)analytical procedures.
B)confirmations from creditors.
C)statistical sampling procedures.
D)tests of internal controls.

Accepted Answer

Analytical procedures involve the analysis of financial statements, ratios, and trends to identify unusual transactions or events, and inconsistencies that may indicate financial difficulties. This helps auditors assess the risk of the entity not continuing as a going concern.

Question 11

An auditor must obtain written client representations that might be signed by all but which of the following?
A)treasurer
B)chief financial officer
C)vice president of operations
D)chief executive officer

Accepted Answer

All of the listed positions are typically authorized to provide written client representations except for the vice president of operations, who may not have the necessary authority or knowledge of the relevant financial information.

Question 12

Auditing standards require the auditor's assessment of going concern issues.

Accepted Answer

Auditing standards require the auditor to evaluate the entity's ability to continue as a going concern for a reasonable period of time, usually not less than one year from the date of the financial statements. This assessment is important because it affects the auditor's opinion on the financial statements and is crucial information for users of the financial statements in their decision-making.

Question 13

Auditing standards require that the auditor evaluate whether there is a substantial doubt about a client's ability to continue as a going concern for at least
A)one quarter beyond the balance sheet date.
B)one quarter beyond the date of the auditor's report.
C)one year beyond the balance sheet date.
D)one year beyond the date of the auditor's report.

Accepted Answer

Auditing standards require that the auditor evaluate whether there is a substantial doubt about a client's ability to continue as a going concern for at least one year beyond the balance sheet date. This requirement is stated in the Generally Accepted Auditing Standards (GAAS) and is based on the responsibility of the auditor to assess the client's ability to continue operating in the foreseeable future. The one-year period allows the auditor to consider the impact of events that may happen after the balance sheet date but before the issuance of the financial statements.

Question 14

Auditing standards require the auditor to ________ other information included in annual reports pertaining directly to the financial statements.
A)audit
B)express an opinion on
C)read
D)analyze

Accepted Answer

Auditing standards require the auditor to read other information included in annual reports pertaining directly to the financial statements, in order to determine if there are any material inconsistencies with the information presented in the financial statements. However, the auditor is not required to express an opinion on or analyze this other information.

Question 15

List four specific matters that should be included in a client representation letter.

Accepted Answer

The answer of List four specific matters that should be...

Question 16

What two steps must an auditor take if they have reservations about the audit client continuing as a going concern?

Accepted Answer

The answer of What two steps must an auditor take...

Question 17

Which of the following is correct regarding supplementary information?
A)The auditor must express an opinion on the supplementary information.
B)When reporting on supplementary information,the auditor uses a different materiality threshold from that used in forming an opinion on the basic financial statements.
C)If the auditor's report on the audited financial statements contains an adverse opinion,the auditor can still issue an unqualified opinion on the supplementary information.
D)The auditor can issue a separate report on the supplementary information;it does not need to be part of the report on the financial statements.

Accepted Answer

The answer of Which of the following is correct regarding...

Question 18

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.

Accepted Answer

The statement that management is not aware of any undisclosed contingent liabilities is a representation made by management, and would therefore appear in the management letter of representation. The letter of inquiry is a letter sent by the auditor to the client requesting information, while letters testamentary are legal documents that appoint an executor to handle a deceased person's estate.

Question 19

Which of the following is not one of the categories of items included in the letter of representation?
A)subsequent events
B)completeness of information
C)recognition,measurement,and disclosure
D)materiality

Accepted Answer

The letter of representation (or management representation letter) typically includes categories such as subsequent events, completeness of information, and recognition, measurement, and disclosure. Materiality, while a crucial concept in auditing and accounting, is not a category of items included in the letter of representation. The letter is meant to confirm certain aspects of the financial statements and related disclosures, rather than to discuss the concept of materiality itself.

Question 20

State the three purposes of the management representation letter.

Accepted Answer

The answer of State the three purposes of the management...

Quiz 24: Completing the Audit

Current professional auditing standards mandate the use of analytical procedures during the testing phase of the audit.

Which of the following statements regarding the letter of representation is not correct?

Besides the search for contingent liabilities and the review for subsequent events,the auditor has four important final evidence accumulation responsibilities,all of which are required by current professional auditing standards.Discuss each of these four responsibilities.

Current professional auditing standards require the performance of analytical procedures during the planning and completion phases of the audit.

Which of the following statements is correct?

Which of the following audit procedures would most likely assist an auditor in identifying conditions and events that may indicate there could be substantial doubt about an entity's ability to continue as a going concern?

A management representation letter is

Which of the following is not a reason why the auditor requests that the client provide a letter of representation?

Refusal by a client to prepare and sign the representation letter would require the auditor to issue a(n)

Auditing standards require auditors to evaluate whether there is substantial doubt about a client's ability to continue as a going concern.One of the most important audit procedures to perform to assess the going concern question is

An auditor must obtain written client representations that might be signed by all but which of the following?

Auditing standards require the auditor's assessment of going concern issues.

Auditing standards require that the auditor evaluate whether there is a substantial doubt about a client's ability to continue as a going concern for at least

Auditing standards require the auditor to ________ other information included in annual reports pertaining directly to the financial statements.

List four specific matters that should be included in a client representation letter.

What two steps must an auditor take if they have reservations about the audit client continuing as a going concern?

Which of the following is correct regarding supplementary information?

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

Which of the following is not one of the categories of items included in the letter of representation?

State the three purposes of the management representation letter.