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1

The primary evidence regarding year-end bank balances is documented in the
A)Standard bank confirmations.
B)Outstanding check listing.
C)Interbank transfer schedule.
D)Bank deposit lead schedule.
2

Which of the following cash transfers results in a misstatement of cash at December 31, 2000?

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A)12/31/00, 1/4/01, 12/31/00, 12/31/00.
B)1/4/01, 1/5/01, 12/31/00, 1/4/01.
C)12/31/00, 1/5/01, 12/31/00, 1/4/01.
D)1/4/01, 1/11/01, 1/4/01, 1/4/01.
3

When an auditor is unable to inspect and count a client’s investment securities until after the balance sheet date, the bank where the securities are held in a safe-deposit box should be asked to
A)Verify any differences between the contents of the box and the balances in the client’s subsidiary ledger.
B)Provide a list of securities added and removed from the box between the balance sheet date and the security-count date.
C)Confirm that there has been no access to the box between the balance sheet date and the security-count date.
D)Count the securities in the box so that the auditor will have an independent direct verification.
4

Which of the following is the most effective audit procedure for verifying dividends earned on investments in equity securities?
A)Trace deposits of dividend checks to the cash receipts book.
B)Reconcile amounts received with published dividend records.
C)Compare the amounts received with prior-year dividends received.
D)Recompute selected extensions and footings of dividend schedules and compare totals to the general ledger.
5

The scope of an audit is not restricted when an attorney’s response to an auditor as a result of a client’s letter of audit inquiry limits the response to
A)Matters to which the attorney has given substantive attention in the form of legal representation.
B)An evaluation of the likelihood of an unfavorable outcome of the matters disclosed by the entity.
C)The attorney’s opinion of the entity’s experience in recent similar litigation.
D)The probable outcome of asserted claims and pending or threatened litigation.
6

Which of the following forms of documentation is required for an audit in accordance with generally accepted auditing standards?
A)Internal control questionnaire.
B)Client engagement letter.
C)Planning memorandum or checklist.
D)Client representation letter.
7

After an audit report containing an unqualified opinion on a nonpublic client’s financial statements is issued, the auditor hears that the client has decided to sell the shares of a subsidiary that accounts for 30 percent of its revenue and 25 percent of its net income. The auditor should
A)Determine whether the information is reliable and, if it is determined to be reliable, request that revised financial statements be issued.
B)Notify the entity that the auditor’s report may no longer be associated with the financial statements.
C)Describe the effects of this subsequently discovered information in communications with persons known to be relying on the financial statements.
D)Take no action because the auditor has no obligation to make any further inquiries.
8

Which of the following procedures should an auditor generally perform regarding subsequent events?
A)Compare the latest available interim financial statements with the financial statements being audited.
B)Send second requests to the client’s customers who failed to respond to initial accounts receivable confirmation requests.
C)Communicate material weaknesses in internal control to the client’s audit committee.
D)Review the cutoff bank statements for several months after year-end.
9

In which of the following situations would an auditor ordinarily choose between expressing an "except for" qualified opinion and expressing an adverse opinion?
A)The auditor did not observe the entity's physical inventory and is unable to become satisfied as to its balance by other auditing procedures.
B)The financial statements fail to disclose information that is required by generally accepted accounting principles.
C)The auditor is asked to report only on the entity’s balance sheet and not on the other basic financial statements.
D)Events disclosed in the financial statements cause the auditor to have substantial doubt about the entity’s ability to continue as a going concern.
10

Comparative financial statements include the prior year’s statements that were audited by a predecessor auditor whose report is not presented. If the predecessor’s report was unqualified, the successor should
A)Express an opinion on the current year’s statements alone and make no reference to the prior year’s statements.
B)Indicate in the auditor’s report that the predecessor auditor expressed an unqualified opinion.
C)Obtain a letter of representations from the predecessor concerning any matters that might affect the successor’s opinion.
D)Request the predecessor auditor to reissue the prior year’s report.
11

In which of the following situations would a CA’s independence be considered impaired?
  1. Maintains a checking account that is fully insured by a government deposit insurance agency at an audit-client financial institution.
  2. CA has a direct financial interest in an audit client, but the interest is maintained in a blind trust.
  3. CA owns a commercial building and leases it to an audit client. The rental income is material to the CA.
A)1 and 2.
B)2 and 3.
C)1 and 3.
D)1, 2, and 3.