Ac555 Midterm Exam

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1.| Question :| (TCO F) The objective of the ordinary audit of financial statements is the expression of an opinion on:|
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| Student Answer:| | the fairness of the financial statements | | | | the accuracy of the financial statements |
| | | the accuracy of the annual report |
| | | the balance sheet and income statement |
| Instructor Explanation:| Chapter 6, p. 134.|
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| Points Received:| 5 of 5 |
| Comments:| |
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2.| Question :| (TCO F) If the auditor believes that the financial statements are not fairly stated or is unable to reach an conclusion because of insufficient evidence, the auditor:|
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| Student Answer:| | should withdraw from the engagement | | | | should request an increase in audit fees so that more resources can be used to conduct the audit | | | | has the responsibility of notifying financial statement users through the auditor's report | | | | should notify regulators of the circumstances |

| Instructor Explanation:| Chapter 6, p. 135.|
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| Points Received:| 5 of 5 |
| Comments:| |
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3.| Question :| (TCO F) Which of the following statements is true of a public company's financial statements?|
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| Student Answer:| | Sarbanes-Oxley requires only the CEO to certify the financial statements. | | | | Sarbanes-Oxley requires only the CFO to certify the financial statements. | | | | Sarbanes-Oxley requires the CEO and CFO to certify the financial statements. | | | | Sarbanes-Oxley requires neither the CEO nor the CFO to certify the financial statements. | | Instructor Explanation:| Chapter 6, p. 136.|

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| Points Received:| 5 of 5 |
| Comments:| |
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4.| Question :| (TCO F) The auditor's best defense when material misstatements are not uncovered is to have conducted the audit:|
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| Student Answer:| | in accordance with auditing standards | | | | as effectively and as reasonably possible |
| | | in a timely manner |
| | | only after an adequate investigation of the management team | | Instructor Explanation:| Chapter 6, pp. 135-136.|
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| Points Received:| 5 of 5 |
| Comments:| |
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5.| Question :| (TCO F) Which of the following is not a characteristic of the reliability of evidence?|
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| Student Answer:| | Qualification of individual providing information | | | | Auditor's direct knowledge |
| | | Degree of subjectivity |
| | | Degree of objectivity |
| Instructor Explanation:| Chapter 7, pp. 172-173.|
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| Points Received:| 5 of 5 |
| Comments:| |
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6.| Question :| (TCO F) Which of the following forms of evidence is most reliable?|
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| Student Answer:| | General ledger account balances | | | | Confirmation of accounts receivable balance received from a customer | | | | An internal memo explaining the issuance of a credit memo | | | | Copy of month-end adjusting entries |

| Instructor Explanation:| Chapter 7, pp. 172-173.|
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| Points Received:| 5 of 5 |
| Comments:| |
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7.| Question :| (TCO F) The Auditing Standards Board has concluded that analytical procedures are so important that they are required during:|
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| Student Answer:| | planning and test of control phases | | | | planning and completion phases |
| | | test of control and completion phases |
| | | planning, test of control, and completion phases | | Instructor Explanation:| Chapter 7, p. 170.|
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| Points Received:| 5 of 5 |
| Comments:| |
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8.| Question :| (TCO F) To be considered reliable evidence, confirmations must be controlled by:|
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| Student Answer:| | a client employee responsible for accounts receivable | | | | a financial statement auditor |
| | | a client's internal audit department |
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