Accounting Final Exam (Complete Solution) - 91648

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Question1 Not yet answered Marked out of 8.00 Question text Which ASB balance assertion is of the most importance to auditors for long-term liabilities? Select one: a. Existence b. Rights & Obligations c. Valuation d. Completeness Question2 Not yet answered Marked out of 8.00 Question text Which of the following management assertions for long-term liabilities is related to the ASB balance assertion of completeness? Select one: a. All material long-term liabilities are recorded. b. Disclosures of maturities for the next five years are accurate and adequate. c. Terms, conditions, and restrictions relating to noncurrent debt are adequately disclosed. d. New long-term liabilities and debt extinguishments are properly authorized. Question3 Not yet answered Marked out of 8.00 Question text In the audit of notes payable, an auditor testing the ASB balance assertion of accuracy and valuation most likely would Select one: a. Select a sample of notes payable and vouch cash receipt to the bank statement. b. Read directors' and finance committee's minutes for authorization of financing transactions. c. Select a sample of paid notes and trace interest expense to the general ledger account. d. Select a sample of paid notes and recalculate interest expense for the period under audit. Question4 Not yet answered Marked out of 8.00 Question text During an audit of an entity's stockholders' equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify the ASB presentation and disclosure assertion of Select one: a. Completeness b. Understandability c. Occurrence. d. Rights and Obligations. Question5 Not yet answered Marked out of 8.00 Question text In confirming with an outside agent, such as a financial institution, that the agent is holding investment securities in the client's name, an auditor most likely gathers evidence in support of ASB balance assertion of existence and Select one: a. Rights & obligations b. Completeness c. Valuation d. Accuracy Question6 Not yet answered Marked out of 8.00 Question text The focus of controls in the finance and investment cycle is on Select one: a. Physical security of assets. b. Prenumbered documents c. Computer controls over transactions. d. Proper authorizations and competent personnel. Question7 Not yet answered Marked out of 8.00 Question text Keeping track of securities owners for payment of interest or dividends is usually done by the company's Select one: a. Transfer Agent b. Register c. Broker d. Treasurer Question8 Not yet answered Marked out of 8.00 Question text Records of stock and bond certificates are usually maintained by the company's Select one: a. Treasurer b. Transfer Agent c. Chief Financial Officer d. Register Question9 Not yet answered Marked out of 8.00 Question text A related party is a person or entity that Select one: a. Is a member of the company's management. b. Does business with the company. c. Has a family tie to a management member. d. Can exert significant influence over or be influenced by the company. Question10 Not yet answered Marked out of 8.00 Question text To whom should written representations be addressed? a. Auditors b. Board of directors c. Client d. Stockholders Question11 Not yet answered Marked out of 7.00 Flag question Question text If auditors are appointed on January 3, 2012, the date of the financial statements is December 31, 2012, the date of the auditors' report is February 7, 2013 and the audit report release date is March 3, 2013, what is the appropriate date of the written representations? a. January 3, 2012 b. December 31, 2012 c. February 7, 2013 d. March 3, 2013 Question12 Not yet answered Marked out of 8.00 Question text Orange Corporation was audited for the year ended December 31. The audit was completed on January 25; prior to the release of the report, auditors learned of a two-for-one stock split on February 1. If dual dating is used, what are the proper dates for the auditors' reports? a. December 31 and January 25 b. January 25 and February 1 c. January 25 and February 15 d. February 1 and February 25 Question13 Not yet answered Marked out of 8.00 Question text Interim testing normally occurs between what two dates? Select one: a. Date of the financial statements and audit report release date. b. End of the year under audit and date of the auditors' report. c. Beginning of the year under audit and audit report release date. d. Beginning of the year under audit and date of the financial statements. Question14 Not yet answered Marked out of 8.00 Question text Which party should request a letter regarding litigation, claims, and assessments from the client's attorney? Select one: a. Attorney b. Securities and Exchange Commission or other regulatory body. c. Client d. Auditors Question15 Not yet answered Marked out of 8.00 Question text Which of the following reporting options is available if the client refuses to provide written representations to auditors? Select one: a. Qualified opinion or disclaimer of opinion. b. Qualified or adverse opinion c. Unqualified or qualified opinion d. Disclaimer of opinion or adverse opinion Question16 Not yet answered Marked out of 8.00 Question text Why is it the client's decision to record adjustments to the financial statements? Select one: a. Auditors often do not have sufficient client-specific expertise to record adjustments to the financial statements b. Having auditors adjust the financial statements would impair independence with respect to the client. c. The financial statements are the responsibility of the client's management. d. The client will ultimately suffer any losses related to misstated financial statements Question17 Not yet answered Marked out of 8.00 Question text Subsequent events occur between which two dates? Select one: a. Date of the auditors' report and audit report release date. b. Date of the financial statements and audit report release date. c. Date of the financial statements and date of the auditors' report. d. Audit report release date and beginning of subsequent year's audit. Question18 Not yet answered Marked out of 8.00 Question text Which of the following conditions or set of circumstances would not ordinarily raise questions about the entity's ability to continue as a going concern: Select one: a. Negative cash flow from operations for each of the last three years. b. Failure to meet forecasted earnings per share. c. Legal proceedings that may have a significant negative impact on the entity. d. Default on a loan due in the previous year. Question19 Not yet answered Marked out of 8.00 Question text Long and Short, CPAs, were auditing Island Corporation for the year ended December 31, 2012. On January 11, 2013, a major customer of Island Corporation declared bankruptcy as the result of an uninsured loss due to a major fire in its warehouse on January 8, 2013. As a result, a material accounts receivable from the customer was determined to be uncollectible. Long and Short, CPAs, would expect the client to Select one: a. Treat the loss as a subsequent event and provide a footnote about the loss in the 2012 financial statements b. Treat the loss as a subsequent event and adjust the 2012 financial statements to record the loss on uncollectible accounts c. File a lawsuit against the customer in hopes of collecting some of the money owed to the client d. Record the loss on uncollectible accounts as a routine transaction in the year 2013 Question20 Not yet answered Marked out of 8.00 Question text The _____________________________ paragraph of the auditors' report on the entity's financial statements indicates that an audit has been conducted and identifies the financial statements the auditors examined. Introductory Question21 Not yet answered Marked out of 8.00 Flag question Question text When a scope limitation exists and the auditors have not been able to obtain sufficient appropriate evidence on a particular account balance or disclosure, the auditors must choose between a(n) _____________________________ opinion and a(n) _____________________________ of opinion on the entity's financial statements. qualified, disclaimer of Question22 Not yet answered Marked out of 8.00 Flag question Question text When the auditors lack independence, a(n) ______________________________________ opinion is issued on the fairness of the entity's financial statements. disclaimer of opinion Question23 Not yet answered Marked out of 8.00 Question text The scope paragraph of the standard report on the entity's financial statements does not include the statement Select one: a. "An audit also includes assessing the accounting principles used and significant estimates made by management...." b. "Those standards require that we plan and perform the audit to obtain reasonable assurance...." c. "In conformity with accounting principles generally accepted in the United States of America…." d. "We believe that our audits provide a reasonable basis for an opinion." Question24 Not yet answered Marked out of 8.00 Question text If financial statements contain a material but nonpervasive departure from generally accepted accounting principles, the auditors should render a(n) Select one: a. Disclaimer of opinion b. Adverse opinion with reference to departure. c. Qualified opinion with reference to departure. d. Adverse opinion with scope limitation reference. Question25 Not yet answered Marked out of 8.00 Question text Auditors will issue an adverse opinion when Select one: a. A qualified opinion cannot be rendered because the auditors lack independence. b. A severe scope limitation has been imposed by the entity. c. A violation of generally accepted accounting principles is sufficiently material and pervasive that a qualified opinion is not justified. d. The entity's ability to continue as a going concern is subject to substantial doubt. Question26 Not yet answered Marked out of 8.00 Question text When auditors render an adverse opinion on the entity's financial statements, the Select one: a. Auditors do not possess all necessary evidence. b. Departures do not need to be explained in the auditors' report. c. Introductory and scope paragraph should not be modified. d. Auditors require less evidence to support the opinion. Question27 Not yet answered Marked out of 8.00 Question text You are an auditor on an engagement. You observe your client take a physical count of their inventory. What is the primarily purpose of this audit procedure? Select one: a. Assist the client in taking test counts of year-end inventory. b. Determine whether inventory contains obsolete goods. c. Verify independently the physical counts obtained by the client. d. Test and observe the client's physical count of inventory. Question28 Not yet answered Marked out of 8.00 Question text You are an auditor on an engagement. You select an inventory item on your client’s warehouse floor, test count it, and trace the count to the final inventory compilation. You are most likely testing the PCAOB assertion of __________ Select one: a. Completeness b. Rights and Obligations c. Valuation d. Existence Question29 Not yet answered Marked out of 8.00 Question text You are an auditor on an engagement. You select a product maintained in the finished goods warehouse. You count the product and compare this amount with the amount to the finished goods perpetual inventory subsidiary account. Which ASB balance assertion are you most likely testing? Select one: a. Existence b. Rights and Obligations c. Completeness d. Valuation Question30 Not yet answered Marked out of 8.00 Question text Susan is an auditor on an engagement. Susan would most likely make inquiries of production and sales personnel concerning possible obsolete or slow-moving inventory to support management's financial statement (PCAOB) assertion of ______ Select one: a. Existence or occurrence b. Rights and obligations c. Valuation or allocation d. Presentation and disclosure Question31 Not yet answered Marked out of 8.00 Flag question Question text Susan is an auditor on an engagement. Her client is a manufacture. To determine her client's planned timing of production of a product, she will review the ________ Select one: a. Sales forecast b. Production plan c. Purchases journal d. Inventory reports Question32 Not yet answered Marked out of 8.00 Flag question Question text You are an auditor on an engagement. The risk that your own procedures will lead to the decision that material misstatements do not exist in the financial statements when in fact such misstatements do exist is _______ risk a. Audit risk b. Inherent risk c. Control risk d. Detection risk Question33 Not yet answered Marked out of 8.00 Question text The Sarbanes-Oxley Act of 2002 prohibits public accounting firms from providing which of the following services to an audit client? Select one: a. All of these services are prohibited. b. Valuation services. c. Internal audit services. d. Bookkeeping services. Question34 Not yet answered Marked out of 8.00 Question text The Sarbanes-Oxley Act of 2002 generally prohibits public accounting firms from Select one: a. Auditing the firm's own work on an audit client. b. Providing tax consulting to an audit client without audit committee approval. c. All of these activities are prohibited d. Acting in a managerial decision-making role for an audit client. Question35 Not yet answered Marked out of 8.00 Question text The likelihood that material misstatements may have entered the accounting system and not been detected and corrected by the client's internal control is referred to as Select one: a. Risk of material misstatement. b. Inherent risk. c. Control risk. d. Detection risk.
Solution Description

Question1

Not yet answered

Marked out of 8.00

Question text

Which ASB balance assertion is of the most importance to auditors for long-term liabilities?

Select one:

a. Existence

b. Rights & Obligations

c. Valuation

d. Completeness

Question2

Not yet answered

Marked out of 8.00

Question text

Which of the following management assertions for long-term liabilities is related to the ASB balance assertion of completeness?

Select one:

a. All material long-term liabilities are recorded.

b. Disclosures of maturities for the next five years are accurate and adequate.

c. Terms, conditions, and restrictions relating to noncurrent debt are adequately disclosed.

d. New long-term liabilities and debt extinguishments are properly authorized.

Question3

Not yet answered

Marked out of 8.00

Question text

In the audit of notes payable, an auditor testing the ASB balance assertion of accuracy and valuation most likely would

Select one:

a. Select a sample of notes payable and vouch cash receipt to the bank statement.

b. Read directors' and finance committee's minutes for authorization of financing transactions.

c. Select a sample of paid notes and trace interest expense to the general ledger account.

d. Select a sample of paid notes and recalculate interest expense for the period under audit.

Question4

Not yet answered

Marked out of 8.00

Question text

During an audit of an entity's stockholders' equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify the ASB presentation and disclosure assertion of

Select one:

a. Completeness

b. Understandability

c. Occurrence.

d. Rights and Obligations.

Question5

Not yet answered

Marked out of 8.00

Question text

In confirming with an outside agent, such as a financial institution, that the agent is holding investment securities in the client's name, an auditor most likely gathers evidence in support of ASB balance assertion of existence and

Select one:

a. Rights & obligations

b. Completeness

c. Valuation

d. Accuracy

Question6

Not yet answered

Marked out of 8.00

Question text

The focus of controls in the finance and investment cycle is on

Select one:

a. Physical security of assets.

b. Prenumbered documents

c. Computer controls over transactions.

d. Proper authorizations and competent personnel.

Question7

Not yet answered

Marked out of 8.00

Question text

Keeping track of securities owners for payment of interest or dividends is usually done by the company's

Select one:

a. Transfer Agent

b. Register

c. Broker

d. Treasurer

Question8

Not yet answered

Marked out of 8.00

Question text

Records of stock and bond certificates are usually maintained by the company'

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