Accounting Audit Final Exam MCQs 2015

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Accounting Audit Final Exam MCQs 2015Report this Question as InappropriateQuestion 1A 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 ayear.Nonfederal entities that expend $500,000 or more in federal awards in a year.Question 2During a review of the financial statements of a nonpublic entity, the CPA finds that the financialstatements contain a material departure fromgenerally accepted accounting principles. Ifmanagement refuses to correct the financial statement presentations, the CPA shouldDisclose the departure in a separate paragraph of the reportIssue an adverse opinionAttach a footnote explaining the effects of the departureIssue a compilation reportQuestion 3A CPA auditing an electric utility wishes to determine whether all customers are being billed.The CPA's best direction of test is from theMeter department records to the billing (sales) registerBilling (sales) register to the meter department recordsAccounts receivable ledger to the billing (sales) registerBilling (sales) register to the accounts receivable ledgerQuestion 4Generally, loss contingencies that are judged to be remote:Should be disclosed in the footnotesShould be recorded in the financial statementsShould not be disclosed in the footnotesShould be recorded in the financial statements and the footnotesQuestion 5For an engagement in which the auditor performs a set of agreed-upon procedures, the auditorshould do any of the following except

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Compare the procedures to be applied to the specified users’ written requirementsDiscuss the procedures with a representative of the usersPerform procedures similar to those applied in areview engagementReview contracts or correspondence from the specified usersQuestion 6The auditor’s best course of action with respect to “other financial information” included in anannual report containing the auditor’s report is toIndicate in the auditor’s report that the “other financial information” is unauditedConsider whether the “other financial information” is accurate by performing a limited reviewObtain written representations from management as to the material accuracy of the “otherfinancial information.”Read and consider the manner of presentation of the “other financial informationQuestion 7An auditor’s study and evaluation of the internal accounting control system made in connectionwith an annual audit is usually not sufficient to express an opinion on an entity’s system becauseThe evaluation of weaknesses is subjective enough that an auditor should not express an opinionon the internal accounting controls alone.The audit cost-benefit relationship permits an auditor to express only reasonable assurance thatthe 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 evaluatedQuestion 8Before issuing a report on the compilation of financial statements of a nonpublic entity, theaccountant shouldApply analytical procedures to selected financial data to discover any material misstatements.Corroborate at least a sample of the assertions management has embodied in the financialstatements.Inquire of the client’s personnel whether the financial statements omit substantially alldisclosures.Read the financial statements to consider whether the financial statements are free from obviousmaterial errors

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Question 9Auditors are more concerned with the occurrence assertion for revenues than the completenessassertion because:Clients are more likely to overstate than understate revenuesClients are more likely to understate than overstaterevenuesIt is difficult to determine when services have been performedThe allowance for doubtful accounts often is understatedQuestion 10In auditing accounts payable, an auditor's procedures most likely would focus primarily onmanagement'sassertion ofExistenceRights and obligationsCompletenessValuation and allocationQuestion 11Once a CPA has determined that accounts receivable have increased because of slow collectionin a "tight money" environment, the CPA would be likely toIncrease the balance in the allowance for bad debts accountReview the going concern ramificationsRequire the client to tighten their credit policyExpand tests regarding the collectability of receivablesQuestion 12In the first audit of a client, because of the client’s record retention policies, an auditor was notable to gather sufficient evidence about the consistent application of accounting principlesbetween the current and the prior year, as well as the amounts of assets or liabilities at thebeginning of the current year. If the amounts in question could materially affect current operatingresults, the auditor wouldBe unable to express an opinion on the current year’s results of operations and cash flowsExpress a qualified opinion on the financial statements because of a client-imposed scopelimitationWithdraw from the engagement and refuse to be associated with the financial statements

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