1.Developing an understanding of the client’s business and industry is essential to proficiency as discussed in the general standards of GAAS. (Points: 4)
potential bias in providing information.
closeness between a user and the organization.
complexity of the processing systems.
remoteness between a user and the organization.
evaluating evidence against objective criteria
gathering evidence about assertions
proving the accuracy of the books and records
communicating the conclusions reached
complete and contain all important financial disclosures, be free from material misstatements and be presented fairly.
complete and contain all-important financial disclosures, be free from material misstatements and be presented fairly according to GAAP.
complete, be accurate and be presented fairly according to GAAP.
complete and contain all-important financial disclosures, be free from all misstatements and be presented fairly according to the substance of GAAP.
accounting principles used in financial reporting
engagement of a qualified auditor
internal control over financial reporting
financial statements and disclosures
provide individual comments on internal control non-compliance.
become comfortable that the client will pay its audit bills.
assess the risk of possible misstatements in the financial statements.
fact and appearance.
either fact or appearance.
to assess internal control
to comply with the quality assurance standards of GAAS
to determine the effects of misstatements on the users of financial information
to cut down on audit procedures and testing
decision making by auditors in place of management.
internal audit representation on the board of directors.
audit planning to obtain competent and sufficient audit evidence.
accountability back through the system to the shareholders.
follow the rules exactly as they are written.
assess all of their relationships with every client to ensure that independence is intact.
focus on client satisfaction above all other considerations
realize that ethics are only guidelines and a matter of personal judgment.
due professional care and supervision.
scope and nature of services and adequate training.
integrity and independence
public interest, integrity and objectivity.
operating system programs.
access control programs.
user and programming functions
database administrator and data input functions
programmers and authorization of changes
users and certain data access
load balance in the event of heavy traffic across the network.
constantly monitor the network for intrusion and attack.
provide an alternate form of electricity to the corporate facilities.
fail-over to a mirrored storage device in the event of interruption or loss.
Only numbers are allowed to be input into the social security number field and dashes are pre-formatted.
Each sales order is given an identifier that is also tagged to the receipt of goods record, the customer invoice record and the cash receipts record
The purchasing department may order materials up to $5,000 in total before a second electronic authorization is required.
Supplies may not be purchased from any vendor not authorized and existing in the vendor table.
all of the above.
an edit test.
a batch control test.
an output control test.
none of the above.
The number of confirmations returned compared to the number of confirmations sent out.
The corporate credit card is only being used for business transactions.
All customer orders shipped were also invoiced and that cash was received.
Quantities of product F411029 have been accurately counted in the warehouse.
Confirmations returned by bank directly to the auditor.
Letters of communication from the Securities Exchange Commission.
Physical examination of perpetual inventory.
General ledger in a newly developed information system.
the financial statements.
the audit working papers.
the audit report.
the confirmation documentation.
Confirmation of vendors supplying inventory for existence.
Analytical procedures to determine completeness of inventory.
Testing for the valuation of inventory using the FIFO cost flow assumption.
Reading the terms of the arrangements with vendors for disclosure.
the sheer volume of procedures to be applied by the auditor.
the time of year in which the client takes a physical inventory in the warehouse.
the auditor’s judgment that misstatements are probable in certain balances.
the availability of the client’s staff at or near the balance sheet date.
the type of audit opinion to be rendered based upon procedures performed.
the audit procedures that will be performed each year for the client.
how an auditor should think while performing audit procedures.
objectives and procedures to be followed during the audit process.
to prevent litigation by other parties that question the audit performance.
to provide a stand-alone medium that gives audit conclusions and supports the opinion.
to supply a point of reference for all auditors performing the work subsequently.
to supply a point of reference for all auditors performing the work subsequently.
A capital lease is presented as periodic rent expense rather than interest and depreciation.
A deferred tax asset is reduced to zero with a valuation allowance.
A stock option is expensed even though the fair value of the underlying stock on the date of grant was the same as the option’s exercise price.
Revenues for up-front fees are deferred rather than recognized immediately.
The auditor must test for fraud in the planning stage by sampling accounts.
The auditor must consider the likelihood of fraud existing in the company in the planning stage.
The auditor must realize that most people are honest and not automatically assume that fraud exists when planning the audit.
The auditor must not be aggressive in its initial approach to fraud as trust may be lost by the client.
Management demands financial success.
Poor internal control.
Commitments tied to debt covenants.
Management is aggressive in its application of accounting rules.
the sample will not contain characteristics representative of the population such that inferences made about that population will be incorrect.
the population will not contain characteristics representative of the sample such that inferences made about that sample will be incorrect.
Neither A nor B is correct.
Both A and B are correct.
the expected failure rate.
the tolerable error rate.
the allowable risk of assessing control risk too low.
the nonsampling risk
the audit objective.
the method of selecting a sample.
expected misstatement conditions
control failure risk.
expected misstatement in the account balance.
Sales are recorded at the invoice price expected to be collected from customers.
Sales orders have sequential numbering.
Recorded sales transactions are evidenced by valid invoices and shipping documents.
Credits to customer accounts are classified as liabilities.
sales that are recorded improperly.
an estimate of accrued returns that reduces net income.
a reduction of net sales for an increase to the sales returns and allowance account.
consignment goods that are returned and forwarded to third parties.
Number of day’s sales in receivables compared to industry averages.
Inventory turnover for the previous five years.
Number of obsolete units this period compared to last.
Salaries of marketing personnel as a percent of total inventory.
Sales commissions expense.
Repairs and maintenance expense.
determine the compliance of treasury activities with company policy
review procedures for identifying and investing excess funds
review procedures for handling cash receipts
all of the above
Future smoothing of income by releasing the reserves.
Related party transactions that are not recorded at arms-length.
Understatement of assets in the period of recording the liabilities.
Payroll liabilities that are not disclosed in the notes.
timing of the assessment by management.
amortization in years of the goodwill.
clear objective evidence supporting the assessment.
understanding the client’s business and its risks.
BlizzardCraft erroneously treated the acquisition of Simco as a purchase transaction when it should have been a pooling of interests.
Simco should not have amortized goodwill previous to 2002.
Simco’s goodwill should have been written off when purchased by BlizzardCraft in a one-time transaction.
The goodwill related to Simco may have been impaired during 2008.
the president’s son.
an affiliate with common ownership.
stock with beneficial conversion features.
Warrants issued to a consultant for services performed.
Preferred stock that is cumulative and par value is $0.50 per share.
Dividends have not been paid on common stock since inception.
shares exist and have valid stock certificates.
proceeds have been properly distributed between common stock and additional paid-in capital.
dividends have been issued in accordance with the stock indenture agreement as approved by the board.
shareholders actually have the rights to shares issued by the company in exchange for subscribed funds.
Management representation letter.
Inquiry of the CFO.
one year from the audit report date.
one year from the last day of field work.
one year from the balance sheet date.
two years from the balance sheet date.
sending a letter to the client’s attorneys for more information
discussions of the matter with the client and the client’s insurance adjuster.
confirmation with the harmed party regarding the amount that will be claimed.
assessment of proper accrual or disclosure by the client in accordance with SFAS No. 5.
should appear in a footnote.
should appear in a paragraph added before the scope paragraph.
should appear in the opening paragraph.
should appear in a paragraph added before the opinion paragraph.
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