Question 1

Within the generally accepted auditing standards, the general standards relate primarily to:

Accepted Answer

The general standards within the generally accepted auditing standards (GAAS) primarily relate to the qualifications of the auditor and the quality of the auditor's work. These standards emphasize the need for auditors to have adequate technical training and proficiency, maintain independence in mental attitude, and exercise due professional care during the performance of the audit and the preparation of the report.

Question 2

Which of the following would not be found in the introductory paragraph of the standard audit report?

Accepted Answer

A reference to generally accepted auditing standards is typically found in the auditor's responsibilities section or in a separate section discussing the basis of the audit opinion, not in the introductory paragraph. The introductory paragraph usually includes the entity audited, the specific financial statements audited, a statement about management's responsibility for the financial statements, and the auditor's responsibility to express an opinion on the financial statements.

Question 3

The introductory paragraph in the standard audit report identifies all of the following except:

Accepted Answer

The introductory paragraph in the standard audit report typically identifies the entity audited, the dates of the statements, the auditor's responsibility for the opinion, and management's responsibility for the statements. It does not mention the existence of the management responsibility letter.

Question 4

Which of the following is an incorrect statement concerning one of the field work standards?

Accepted Answer

Audit planning aims at both effectiveness and efficiency. Saying it has little effect on efficiency is incorrect because efficient planning can significantly reduce the time and resources needed for an audit, without compromising its effectiveness.

Question 5

Statements on auditing standards (SAS's) are interpretations of?

Accepted Answer

Statements on Auditing Standards (SAS's) are interpretations of generally accepted auditing standards, providing guidance to auditors on how to apply these standards in their work.

Question 6

Auditing is based on the assumption that financial data are verifiable. Data are verifiable when two or more qualified individuals,

Accepted Answer

Verifiability in auditing means that different independent auditors can reach similar conclusions about the financial data, ensuring the data's reliability and credibility.

Question 7

SAS 59 establishes auditor responsibility for evaluating whether there is any doubt about the entity's ability to continue as a going concern for a reasonable period of time. This reasonable period of time is defined as:

Accepted Answer

The answer of SAS 59 establishes auditor responsibility for evaluating...

Question 8

According to SAS 54, the auditor's responsibility for illegal acts having a direct and material effect on the determination of financial statement amounts is:

Accepted Answer

The auditor's responsibility for illegal acts that have a direct and material effect on the determination of financial statement amounts is the same as it is for errors or fraud, according to SAS 54. This standard outlines that auditors should consider the risk of material misstatement due to either fraud or illegal acts in the same manner as they would for errors in the financial statements.

Question 9

The scope paragraph in the standard audit report uses all of the following terms except:

Accepted Answer

The term "conclusive basis" is not used in the scope paragraph of the standard audit report. The scope paragraph typically refers to the audit being conducted in accordance with generally accepted auditing standards, involves examining evidence on a test basis, considering the audit's assessment of the risks of material misstatement, and evaluating the appropriateness of accounting policies and significant estimates made by management.

Question 10

The use of the phrase "present fairly, in all material respects" in the opinion paragraph is most closely associated with which of the following concepts from the scope paragraph?

Accepted Answer

The answer of The use of the phrase "present fairly,...

Question 11

The essence of the due care standard is that the auditor should not be guilty of:

Accepted Answer

The due care standard requires auditors to perform their duties with the necessary level of care and diligence, avoiding negligence in their work.

Question 12

Required auditor communication to the Audit Committee concerning illegal acts detected includes:

Accepted Answer

The auditor is required to communicate all illegal acts detected to the Audit Committee.

Question 13

The public companies accounting oversight board's (PCAOB) rule making process requires the adopted rules to be submitted to ____________ for approval?

Accepted Answer

The answer of The public companies accounting oversight board's (PCAOB)...

Question 14

When the auditor concludes that there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, and this fact is adequately disclosed in the notes to the financial statements, the auditor's report should express:

Accepted Answer

When there is substantial doubt about an entity's ability to continue as a going concern but the issue is adequately disclosed in the financial statement notes, the auditor typically issues an unqualified opinion but adds an explanatory paragraph to highlight the going concern uncertainty. This approach is meant to draw attention to the note disclosures without qualifying the opinion on the financial statements as a whole.

Question 15

Which of the following organizations does the Auditing and Attest Standards Team belong to?

Accepted Answer

The Auditing and Attest Standards Team is part of the American Institute of Certified Public Accountants (AICPA), which is responsible for setting standards for audits and attestation engagements.

Question 16

The primary purpose of the audit is to provide reasonable assurance that the financial statements are fairly presented in accordance with

Accepted Answer

The primary purpose of an audit is to provide reasonable assurance that the financial statements are fairly presented in accordance with Generally Accepted Accounting Principles (GAAP), ensuring their accuracy and reliability for stakeholders.

Question 17

Which of the following best describes the relationship that should exist between the external auditor and the management of the client company?

Accepted Answer

The relationship should be based on mutual trust and respect to facilitate open communication and cooperation, while maintaining professional skepticism.

Question 18

If the client refuses to accept an audit report that is qualified due to the known existence of an illegal act, the auditor should:

Accepted Answer

If the client refuses to accept a qualified audit report due to an illegal act, the auditor should withdraw from the engagement and communicate the reasons to the audit committee in writing, as this maintains professional integrity and fulfills the auditor's responsibility to report significant issues to those charged with governance.

Question 19

In the opinion paragraph of the standard audit report, the phrase "in our opinion," really means:

Accepted Answer

The phrase "in our opinion" in the context of an audit report signifies that the auditors are "reasonably satisfied" with the financial statements based on the audit evidence obtained. It does not imply a guarantee, certification, absolute certainty, or a promise.

Question 20

There are several paragraphs included in the auditor's standard report in internal control over financial reporting. Which paragraph defines internal control over financial reporting?

Accepted Answer

The definition paragraph in the auditor's standard report on internal control over financial reporting specifically defines what is meant by internal control over financial reporting. This paragraph is crucial for setting the context and understanding the scope and limitations of the auditor's assessment.

Quiz 2: Financial Statement Audits and