Question 1

Which of the following statements regarding agreed-upon procedures is FALSE?

Accepted Answer

Agreed-upon procedures do not amount to an audit. While they may use some audit techniques and procedures, the scope and nature of the work is defined by the agreed-upon procedures engagement, which is significantly narrower than that of an audit.

Question 2

An operational audit would NOT include determining ________.

Accepted Answer

Determining whether the entity has complied with laws and regulations is the focus of a compliance audit, not an operational audit. An operational audit focuses on the efficiency and effectiveness of an organization's operations and processes.

Question 3

In a direct reporting engagement, the assertions ________.

Accepted Answer

C

Question 4

In a(n) ________ engagement, the practitioner offers a conclusion on the accountable party's written assertion.

Accepted Answer

In an attest engagement, the practitioner offers a conclusion on the accountable party's written assertion. The other options are not relevant to this type of engagement.

Question 5

The most common reporting framework in Canada is the ________.

Accepted Answer

The most common reporting framework in Canada is the fair presentation framework, which is based on the International Financial Reporting Standards (IFRS). This framework requires financial statements to present a true and fair view of the company's financial position, performance, and cash flows. The other frameworks listed (compliance, special purpose, and prospective) are less commonly used in Canada.

Question 6

The objective of internal auditing is service to ________.

Accepted Answer

The objective of internal auditing is to provide service to the organization as a whole, not just to a specific department, management or audit committee.

Question 7

In 20X2, Marg Levy, CPA, performed an environmental audit of Scoop Mining. As a result of that engagement, she prepared a report which included several recommendations to improve compliance with environmental protection laws. In 20X2, Ms. Levy has been approached to perform another audit of environmental protection procedures, some of which are based on her earlier recommendations. Which of the following statements is TRUE?

Accepted Answer

Independence concerns are less critical in non-financial audits, such as environmental compliance audits, compared to financial statement audits. This allows auditors to review the implementation of their own recommendations in areas like environmental compliance without compromising their independence.

Question 8

Comparing the data on a fraud suspect's spending with known income is an extended procedure known as ________.

Accepted Answer

The extended procedure of comparing the data on a fraud suspect's spending with their known income is called expenditure analysis, since it involves a detailed review of the individual's expenditures to determine if they align with their income. Horizontal analysis involves comparing financial data across time periods, while vertical analysis involves comparing financial data within a single time period. Surveillance involves monitoring a suspect's activities and movements, but is not directly related to financial analysis.

Question 9

The purpose of an operational audit is to ________.

Accepted Answer

The purpose of an operational audit is to assess the economy, efficiency, and effectiveness of resources and objectives, which may include evaluating internal controls but is not the primary focus. Detecting material misstatements in financial statements is the purpose of a financial audit, while providing assurance on fair presentation of financial statements is the purpose of an attestation engagement.

Question 10

Economy is related to ________.

Accepted Answer

Economy is related to price variance, which refers to the difference between the actual price paid for a product or service and the expected or budgeted price. This variance can impact the cost of goods sold and overall profitability of a business. The other choices are not directly related to economy.

Question 11

The term significance as used in the assurance standards refers to ________.

Accepted Answer

The answer of The term significance as used in the...

Question 12

Forensic accounting can be defined as ________.

Accepted Answer

Forensic accounting involves the application of accounting and auditing skills in an action under civil or criminal law, such as investigating possible fraud or financial misconduct. Designing internal controls and calculating estimates used in financial reports are not specific to forensic accounting.

Question 13

In the audit of financial statements, which of the following procedures would the auditor call an "extended procedure?"

Accepted Answer

Extended procedures in auditing go beyond the normal scope of the audit to investigate unusual or unexpected balances or transactions. Measuring the time lag between the recording of cash receipts and their deposit into the bank account is an example of an extended procedure because it involves a detailed examination of the timing and handling of cash, which might be undertaken if there were concerns about the handling of cash receipts.

Question 14

Auditors of governmental units would be presumed to be lacking in independence if they were ________.

Accepted Answer

Auditors need to maintain independence from the political process in order to maintain integrity and impartiality in their review of government programs. If an auditor is a member of a political party that has taken a position against the program being audited, they would not be considered independent. The other choices do not directly relate to lack of independence.

Question 15

Horizontal analysis can be used in fraud detection by ________.

Accepted Answer

Horizontal analysis involves comparing financial statement amounts and ratios across multiple periods. By doing so, analysts can identify significant changes in amounts or ratios that may indicate fraudulent activity. For example, if there is a significant increase in expenses over several periods without a corresponding increase in revenues, it may indicate that funds are being misused or misappropriated. Therefore, option B is the best choice for fraud detection using horizontal analysis.

Question 16

Before reporting on the financial statements of a Canadian entity that have been prepared in accordance with the accounting principles of another country, an auditor practising in Canada should ________.

Accepted Answer

Before reporting on the financial statements of a Canadian entity that have been prepared in accordance with the accounting principles of another country, an auditor practising in Canada should understand the accounting principles that are generally accepted in the other country. This will enable the auditor to assess whether the financial statements comply with the accounting principles used in that country and report accordingly. Option B is incorrect because the auditor only needs to be certified by the appropriate auditing or accountancy board of Canada, not the other country. Option C is incorrect because notifying management that the auditor is required to deny an opinion is not a sufficient action to take; the auditor should assess whether the financial statements comply with the accounting principles used in the other country and report on that basis. Option D is also incorrect because the auditor should not recast the financial statements according to Canadian GAAP; the auditor should assess whether the financial statements comply with the accounting principles used in the other country and report on that basis.

Question 17

A good reason for involving fraud auditors in the planning of a regular audit of financial statements is ________.

Accepted Answer

Fraud auditors are experts in identifying fraud risk factors and detecting fraud. Involving them in the planning of a regular audit can help identify areas of high risk and develop appropriate procedures to address those risks, ultimately improving the quality and effectiveness of the audit.

Question 18

When independent CPAs in public practice take engagements to audit governmental units or entities that receive financial assistance from governmental units, they must follow ________.

Accepted Answer

When auditing governmental units or entities that receive financial assistance from governmental units, independent CPAs in public practice must follow both GAAS and the Governmental Auditing Standards (also known as the Yellow Book or GAGAS). This is because GAAS only applies to audits of private entities, while governmental audits also have specific standards and requirements established by the federal government.

Question 19

One of the key differences between a financial statement audit and a value for money (VFM) audit is ________.

Accepted Answer

VFM audits typically have a specific mandate established through legislation or contracts, whereas the mandate for a financial statement audit is typically broader and requires the auditor to use professional judgment to define specific objectives. Standards for both types of audits are established by professional associations. Sufficient appropriate evidence must be obtained in both types of audits to support the auditor's report.

Question 20

A financial ________ depends on one or more hypothetical assumptions.

Accepted Answer

A projection is a financial statement that is based on hypothetical assumptions about future events. A projection can be used to estimate future revenues, expenses, and profits for a business or individual.

Quiz 21: Other Professional Accounting Services and Reports, Including Fraud