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Accounting Audit Final Exam MCQs 2015

Multiple-choice questions covering key auditing and accounting principles.

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    Accounting Audit Final Exam MCQs 2015 Report this Question as Inappropriate Question 1 A single audit is required of: A federal or nonfederal entity that receives more than $500,000 in a year. A nonfederal entity that received more than $100,000 in a year. Nonfederal entities that expend $500,000 or more in federal awards in a year. Question 2 During a review of the financial statements of a nonpublic entity, the CPA finds that the financial statements contain a material departure from generally accepted accounting principles. If management refuses to correct the financial statement presentations, the CPA should Disclose the departure in a separate paragraph of the report Issue an adverse opinion Attach a footnote explaining the effects of the departure Issue a compilation report Question 3 A CPA auditing an electric utility wishes to determine whether all customers are being billed. The CPA's best direction of test is from the Meter department records to the billing (sales) register Billing (sales) register to the meter department records Accounts receivable ledger to the billing (sales) register Billing (sales) register to the accounts receivable ledger Question 4 Generally, loss contingencies that are judged to be remote: Should be disclosed in the footnotes Should be recorded in the financial statements Should not be disclosed in the footnotes Should be recorded in the financial statements and the footnotes Question 5 For an engagement in which the auditor performs a set of agreed - upon procedures, the auditor should do any of the following except

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    Compare the procedures to be applied to the specified users’ written requirements Discuss the procedures with a representative of the users Perform procedures similar to those applied in a review engagement Review contracts or correspondence from the specified users Question 6 The auditor’s best course of action with respect to “other financial information” included in an annual report containing the auditor’s report is to Indicate in the auditor’s report that the “other financial information” is unaudited Consider whether the “other financial information” is accurate by performing a limited review Obtain written representations from management as to the material accuracy of the “other financial information.” Read and consider the manner of presentation of the “other financial information Question 7 An auditor’s study and evaluation of the internal accounting control system made in connection with an annual audit is usually not sufficient to express an opinion on an entity’s system because The evaluation of weaknesses is subjective enough that an auditor should not express an opinion on the internal accounting controls alone . The audit cost - benefit relationship permits an auditor to express only reasonable assurance that the system operates as designed . Management may change the internal accounting controls to correct weaknesses . Only those controls on which an auditor intends to rely are reviewed, tested, and evaluated Question 8 Before issuing a report on the compilation of financial statements of a nonpublic entity, the accountant should Apply analytical procedures to selected financial data to discover any material misstatements . Corroborate at least a sample of the assertions management has embodied in the financial statements . Inquire of the client’s personnel whether the financial statements omit substantially all disclosures . Read the financial statements to consider whether the financial statements are free from obvious material errors

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    Question 9 Auditors are more concerned with the occurrence assertion for revenues than the completeness assertion because: Clients are more likely to overstate than understate revenues Clients are more likely to understate than overstate revenues It is difficult to determine when services have been performed The allowance for doubtful accounts often is understated Question 10 In auditing accounts payable, an auditor's procedures most likely would focus primarily on management's assertion of Existence Rights and obligations Completeness Valuation and allocation Question 11 Once a CPA has determined that accounts receivable have increased because of slow collection in a "tight money" environment, the CPA would be likely to Increase the balance in the allowance for bad debts account Review the going concern ramifications Require the client to tighten their credit policy Expand tests regarding the collectability of receivables Question 12 In the first audit of a client, because of the client’s record retention policies, an auditor was not able to gather sufficient evidence about the consistent application of accounting principles between the current and the prior year, as well as the amounts of assets or liabilities at the beginning of the current year. If the amounts in question could materially affect current operating results, the auditor would Be unable to express an opinion on the current year’s results of operations and cash flows Express a qualified opinion on the financial statements because of a client - imposed scope limitation Withdraw from the engagement and refuse to be associated with the financial statements

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