ACC504 Mid-Term Review: Advanced Auditing Concepts and Application

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ACC504 Mid-Term Review: Advanced Auditing Concepts and ApplicationACC504 Mid Term Advanced AuditingReport this Question as InappropriateQuestion1. What is the term used to identify the risk that the client's financial statements may bematerially false and misleading?A. Business risk.B. Information risk.C. Client risk.D. Risk assessment.2. The audit objective that all transactions are recorded in the proper account is related mostclosely to which one of the ASB transaction assertions?A. Occurrence.B. Completeness.C. Accuracy.D. Classification.3. Assurance services involve all of the following exceptA. Relevance as well as the reliability of information.B. Nonfinancial information as well as traditional financial statements.C. Providing absolute rather than reasonable assurance.D. Electronic databases as well as printed reports.4. An attestation engagement is one in which a CPA is engaged toA. Issue a report on subject matter or an assertion about the subject matter that is theresponsibility of another party.B. Provide tax advice or prepare a tax return based on financial information the CPA has notaudited or reviewed.C. Testify as an expert witness in accounting, auditing, or tax matters, given certain stipulatedfacts.D. Assemble prospective financial statements based on the assumptions of the entity'smanagement without expressing any assurance.5. The process by which a CPA obtains a certificate and license in a state other than the state inwhich the CPA's certificate was originally obtained is referred to asA. Substantial equivalency.B. Quid pro quo.C. Relicensing.D. Re-examination6. Which of the followingwould be considered an assurance engagement?A. Giving an opinion on a prize promoter's claims about the amount of sweepstakes prizes

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awarded in the past.B. Giving an opinion on the conformity of the financial statements of a university with generallyaccepted accounting principles.C. Giving an opinion on the fair presentation of a newspaper's circulation data.D. Giving assurance about the average drive length achieved by golfers with a client's golf balls.E. All of the above.7. Bankers who are processing loan applications from companies seeking large loans willprobably ask for financial statements audited by an independent CPA becauseA. Financial statements are too complex to analyze themselves.B. They are too far away from company headquarters to perform accounting and auditingthemselves.C. The consequences of making a bad loan are very undesirable.D. They generally see a potential conflict of interest between company managers who want toget loans andthe bank's needs for reliable financial statements.8. The Sarbanes-Oxley Act of 2002 prohibits public accounting firms from providing which ofthe following services to an audit client?A. Bookkeeping services.B. Internal audit services.C. Valuation services.D. All of the above.9. The risk to investors that a company's financial statements may be materially misleading iscalledA. Client acceptance risk.B. Information risk.C. Moral hazard.D. Business risk.10. Substantial equivalency refers toA.An auditor's tendency not to believe management's assertions without sufficientcorroboration.B. Providing consulting work for another firm's audit client in exchange for the other firm'sproviding consulting services to one of your clients.C. The waiving of certification exam parts for an individual holding an equivalent certificationfrom another professional organization.D. Permitting a CPA to practice in another state without having to obtain a license in that state.11. Which of the following bestdescribes the relationship between auditing and attestationengagements?A. Auditing is a subset of attestation engagements that focuses on the certification of financialstatements.

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B. Attestation is a subset of auditing that provides lower assurance than that provided by an auditengagement.C. Auditing is a subset of attestation engagements that focuses on providing clients with adviceand decision support.D. Attestation is a subset of auditing that improves the quality of information, or its context, fordecision makers.12. Which of the following best describes the focus of the following engagements?A. Option AB. Option BC. Option CD. Option D13. Which of the following is anexample of a regulatory auditor?A. Internal auditors.B. Big 4 auditors.C. U.S. Internal Revenue Service auditors.D. Operational auditors.14. The definition of performance audits does not includeA. Economy audits.B. Efficiency audits.C. Financial audits.D. Program audits.15. CPA certificates and licenses to practice are issued by theA. AICPA.B. States or territories.C. AICPA Examinations Division.D. GAO.16. The attestation standards do not require the attestation report to include a statement thatA. Provides a conclusion whether the subject matter is presented in conformity with establishedor stated criteria.B. Indicates that the practitioner has significant reservations about the engagement.C. Identifies the subject matter or assertion being reported on.D. Indicates that the accountant assumes no responsibility to update the report.17. Control risk isA. The probability that a material misstatement could not be prevented or detected by the entity'sinternal control policies and procedures.B. The probability that a material misstatement could occur and not be detected by auditors'procedures.C. The risk that auditors will not be able to complete the audit on a timely basis.D. The risk that auditors will not properly control the staff on the audit engagement.18. Which of the following is an element of a system of quality control that should be considered

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