Time: 3 Hours
Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 2 marks each
What is the role of the Canadian Public Accountability Board? 1) 2) 3) 4) To develop auditing standards for the CICA Handbook To conduct inspections of accounting firms to assess their ability to protect the public interest To recommend audit firms to members of the general public To review audit reports before they are issued at the end of an external audit
b. Which of the following is true concerning external and internal auditors? 1) 2) 3) 4) c. Both types of auditors need to be independent to function effectively. Both may be employees of the company being audited. Both focus on the audit of financial statements. Only the external auditor has a duty of care.
Which of the following best describes an auditor’s engagement risk? 1) 2) 3) 4) Engagement risk is the risk that the auditor may be sued. The 3 components of engagement risk are inherent risk, control risk, and detection risk. Engagement risk is the risk that the auditor may not be paid for the audit engagement. Engagement risk cannot be controlled by the auditor, therefore the auditor must be very careful about which audit engagements to accept.
d. What is the purpose of the introductory paragraph of the standard audit report? 1) 2) 3) 4) To identify GAAS as the standard used by the auditor To make the reader aware that the auditor has examined the records only on a test basis To advise the reader that the auditor only provides reasonable assurance To identify the financial statements covered by the auditor’s report and to distinguish the responsibilities between management and the auditor
What audit opinions would be possible when the audited company refuses to record adequate amortization for fixed assets? Assume the amount in question exceeds materiality. 1) 2) 3) 4) Only unqualified or adverse opinions are possible. Only qualified or adverse opinions are possible. Only adverse or denial opinions are possible. Only qualified or unqualified opinions are possible.
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Which of the following would be associated with a review engagement? 1) 2) 3) 4) Substantive and compliance testing Notice to reader report Conformity with GAAP and GAAS Negative assurance
g. Which of the following is an auditor responsible for concerning the detection of illegal activities of an audit client? 1) Assess the inherent risk of material misstatements due to illegal acts 2) Monitor legal requirements and ensure that the client’s operating procedures are designed to meet these requirements, for the period under audit 3) Ensure that the client appoints an audit committee 4) Ensure that the client’s internal auditors act in an ethical manner h. Which of the following is true when an auditor replaces another auditor who withdrew from the engagement due to the client’s illegal activities? 1) The predecessor auditor must ensure that the successor auditor is qualified to conduct the audit. 2) The successor auditor should ask the predecessor auditor’s permission to accept the audit engagement. 3) The predecessor auditor is under no obligation to provide information to the successor auditor. 4) The predecessor auditor should advise the successor auditor if the client refuses to allow information to be disclosed to the successor auditor. i. Which of the following is related to the management assertion of ownership? 1) 2) 3) 4) j. The allocation of joint costs Determining the lower of cost...