Question 1

By definition,proper professional skepticism on an audit requires $\begin{array}{c}
\begin{array}{c}
\
\
A.\
B.\
C.\
D.\
\end{array}
\begin{array}{c}
Questioning\
\underline{mind}\
No\
No\
Yes\
Yes\
\end{array}
\begin{array}{c}
\text{Subjective assessment}\ 
\underline{\text{of audit evidence}}\
No\
Yes\
No\
Yes\
\end{array}
\end{array}$

Accepted Answer

The answer of By definition,proper professional skepticism on an audit...

Question 2

The body that issues international pronouncements providing auditing procedural and reporting guidance is the:

Accepted Answer

The International Auditing and Assurance Standards Board (IAASB) issues international pronouncements that provide auditing procedural and reporting guidance. The other options may exist but the IAASB is the most prominent and recognized international body in this field.

Question 3

When a Statement Auditing Standards uses the word "should" relating to a requirement,it means that the auditor:

Accepted Answer

When the Statement Auditing Standards use the word "should" relating to a requirement, it means that the auditor must comply with the requirement unless there is a valid reason not to do so and the auditor documents that alternative actions can achieve the same objectives as compliance with the requirement. Therefore, option B is the correct answer. Option A is incorrect because the word "should" does not mean that the requirement must be fulfilled under all circumstances. Option C is incorrect because considering whether to follow the advice based on the exercise of professional judgment in the circumstances is what the auditor does regardless of whether the requirement uses the word "should" or not. Option D is incorrect because the auditor cannot change responsibilities as prescribed by professional standards.

Question 4

Which of the following best describes a portion of the auditors' responsibility regarding noncompliance with laws by clients?

Accepted Answer

The auditors have a responsibility to design audit procedures to detect material misstatements in the financial statements caused by noncompliance with laws and regulations. If such noncompliance is discovered, the auditors should take appropriate actions, which may include notifying appropriate parties within the client's organization, considering the effect on the financial statements, and determining whether disclosure is required. The auditors are not responsible for discovering all noncompliance, but only those that could have a material effect on the financial statements.

Question 5

An unconditional responsibility to follow an AICPA professional standard exists when the professional standard uses the term(s) $$\begin{array} { l l l } 
& \text { Should } & \text { Should } \
\text { A) } & \text { Yes } & \text { Yes } \
\text { B) } & \text { Yes } & \text { No } \
\text { C) } & \text { No } & \text { Yes } \
\text { D) } & \text { No } & \text { No }
\end{array}$$

Accepted Answer

The answer of An unconditional responsibility to follow an AICPA...

Question 6

Which of the following is not an underlying premise of an audit?

Accepted Answer

The premise that management and auditors have responsibility for the preparation of financial statements in accordance with the applicable financial reporting framework is not an underlying premise of an audit, but rather a responsibility of those involved in financial reporting. An underlying premise of an audit is that the financial statements are the responsibility of management, and that the auditor's role is to express an opinion on the financial statements.

Question 7

The auditors' report for a nonpublic company should indicate:

Accepted Answer

The answer of The auditors' report for a nonpublic company...

Question 8

Which of the following is not included in the auditors' standard unmodified audit report?

Accepted Answer

The answer of Which of the following is not included...

Question 9

To present fairly in conformity with generally accepted accounting principles the financial statements should:

Accepted Answer

The answer of To present fairly in conformity with generally...

Question 10

Which of the following is not included as a part of the description of the auditor's responsibility in a nonpublic company unmodified report?

Accepted Answer

The auditor's responsibility in a nonpublic company unmodified report includes B, C, and D, but not necessarily A. While the audit should be performed in accordance with generally accepted accounting principles, this is not necessarily explicitly included in the description of the auditor's responsibility. Rather, it is typically noted elsewhere in the report or assumed as a given.

Question 11

A requirement to design recruitment processes and procedures to help the firm select individuals meeting minimum academic requirements established by the firm is an example of a quality control procedure in the area of:

Accepted Answer

This requirement pertains to human resources, specifically recruitment processes and procedures, which fall under the quality control procedures for managing the firm's personnel.

Question 12

A requirement that working papers be reviewed by the supervisor,and any deficiencies be discussed with the preparer is an example of a quality control procedure in the area of:

Accepted Answer

The requirement of reviewing working papers and discussing deficiencies with the preparer falls under engagement performance, which includes quality control procedures related to the planning, execution, and supervision of engagements.

Question 13

When the auditors express an opinion on financial statements their responsibilities extend to:

Accepted Answer

When auditors express an opinion on financial statements, their responsibility is to determine whether the financial statements are fairly presented in all material respects, and whether they are in accordance with the applicable financial reporting framework. Therefore, auditors are responsible for assessing whether the results of their client's operating decisions are fairly presented in the financial statements. The other options listed are not within the scope of the auditor's responsibilities.

Question 14

Which of the following is explicitly included as a part of the description of management's responsibility in an unmodified audit report?

Accepted Answer

Management's responsibility explicitly includes the design, implementation, and maintenance of internal control, as stated in the standard unmodified audit report language. Choices A, B, and D are not explicitly included in the management's responsibility statement.

Question 15

Which of the following is accurate,as indicated in the principles underlying an audit?

Accepted Answer

The principle of audit is that an auditor cannot provide absolute assurance that the financial statements are free from material misstatement. This is due to the fact that an audit is conducted on a test basis and cannot examine every single transaction or event that has taken place during a given period. Therefore, even after an audit, there is still some level of risk that the financial statements contain material misstatements. Choices A and C are inaccurate, and choice D only partially reflects the principle of audit as management is responsible for preparing accurate financial statements, but auditors are responsible for auditing those statements to provide reasonable assurance about their accuracy.

Question 16

The auditors who find that the client has committed an illegal act would be most likely to withdraw from the engagement when the:

Accepted Answer

Auditors have a responsibility to communicate illegal acts discovered during their audit to several parties, including the client's management. If management fails to take an appropriate corrective action, then it poses a serious problem for the auditors regarding the reliability and integrity of the client's financial statements. Therefore, auditors would most likely withdraw from the engagement if management fails to take appropriate corrective actions.

Question 17

Primary responsibility for the financial statements lies with: $$\begin{array} { l c c } 
& \text { Auditors } & \text { Management } \
\text { A) } & \text { Yes } & \text { Yes } \
\text { B) } & \text { Yes } & \text { No } \
\text { C) } & \text { No } & \text { Yes } \
\text { D) } & \text { No } & \text { No }
\end{array}$$

Accepted Answer

Primary responsibility for the financial statements lies with management, which is responsible for preparing the financial statements in accordance with the applicable accounting standards. While auditors are responsible for expressing an opinion on the financial statements, they do not have primary responsibility for their preparation. Therefore, option C is the best choice.

Question 18

An audit should be designed to obtain reasonable assurance of detecting material misstatements due to:

Accepted Answer

An audit should be designed to obtain reasonable assurance of detecting material misstatements due to errors, fraud, and noncompliance with laws with a direct effect on financial statement amounts. This means that the auditor should focus on identifying material misstatements that are due to errors or fraud, as well as any noncompliance with laws or regulations that has a direct impact on the financial statements. Noncompliance with all laws is not necessary to be the focus of the audit.

Question 19

An audit performed in accordance with generally accepted auditing standards generally should:

Accepted Answer

According to generally accepted auditing standards, an audit cannot provide absolute assurance that all instances of noncompliance with laws and regulations will be detected. The auditor can only provide reasonable assurance by conducting appropriate audit procedures and relying on internal controls. Therefore, the auditor's report should explicitly state that the audit provides reasonable, not absolute, assurance. Choices A, B, and C are not correct because they suggest that the audit can detect all instances of noncompliance, which is not feasible or expected.

Question 20

The Auditing Standards Board's guidance on matters such as the purpose of an audit,the premise of an audit,and auditor personal responsibilities is included in:

Accepted Answer

The guidance on matters such as the purpose of an audit, premise of an audit, and auditor personal responsibilities is included in the Principles Underlying an Audit Conducted in Accordance with GAAS. The 10 Generally Accepted Auditing Standards provide the framework for conducting an audit, while the Code of Professional Conduct sets ethical standards for auditors. Accounting Series Releases provide interpretive guidance on accounting issues.

Quiz 2: Professional Standards