Comprehensive Review in Accounting

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|AUDITING THEORY | | | |Comprehensive Reviewer | |Preliminary Grading Period |

SET 1
1. An independent financial statement audit is important to financial statements users because it: a. Objectively examines and reports on special-purpose financial statements. b. It reduces cost of capital

c. Objectively examines and reports on general-purpose financial statements. d. Objectively reports on the accuracy of information in the financial statements.

2. In relation to auditing, which of the following is a correct phrase? a. Auditing communicates results to management.
b. Auditing involves obtaining evidence regarding action and events. c. Auditing evaluates assertions regarding evidence.
d. Auditing subjectively obtains and evaluates evidence.

3. Which of the following is not an output of an independent audit engagement? a. Management letter.
b. Audit report.
c. Engagement letter.
d. Audited financial statements.

4. The best description of the auditor’s responsibility with respect to audited financial statement is: a. The auditor's responsibility on fair presentation of financial statements is limited only up to the date of the audit report. b. The auditor is responsible for detecting misstatements on the financial statements. c. The responsibility over the financial statements rests with the management. d. The auditor's responsibility is limited to the expression of opinion on the financial statements.

5. When a CPA expresses an opinion on the financial statements, his responsibilities extend to a. The underlying wisdom of the client's management decision. b. Active participation in the implementation of the advice given to the client. c. An ongoing responsibility for the client's solvency.

d. Whether the results of the client's operating decisions are fairly presented in the financial statements.

6. The accuracy of information included in the footnotes that accompany the audited financial statements of a company whose shares are traded on a stock exchange is the primary responsibility of a. The stock exchange officials.

b. The company's management.
c. The independent auditor.
d. The Securities and Exchange Commission.

7. The responsibility for adopting sound accounting policies, maintaining adequate internal control, and making fair representations in the financial statements rests a. With management
b. With the independent auditor
c. Equally with management and the auditor
d. With the internal audit department.

8. Audit standards require an auditor to:
a. Perform procedures that are designed to detect all instances of fraud. b. Provide reasonable assurance that the financial statements are not materially misstated. c. Issue an unqualified opinion only when the auditor is satisfied that no instances of fraud have occurred. d. Design the audit program to meet financial statement users' expectations concerning fraud.

9. Generally, the decision to notify parties outside the client's organization regarding an illegal act is the responsibility of the a. Outside legal counsel.
b. Independent auditor.
c. Management.
d. Internal auditors.

10. If requested to perform a review engagement for a nonpublic entity in which an accountant has an immaterial direct financial interest, the accountant is a. Independent because the financial interest is immaterial and,...
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