1.

) Which of the following is not among the

characteristics of the procedures performed in
completing the audit?

A. They are optional since they have only an

indirect impact on the opinion to be expressed
B. They involve many subjective judgments by
the auditor
C. They are performed after the balance sheet
date
D. They are usually performed by audit
managers or other senior members of the audit
team who have extensive audit experience with
the client
2.) An auditor has the responsibility to actively
search for subsequent events that occur
subsequent to the:

A. Balance sheet date

B. Date of the auditor’s report
C. Balance sheet date, but prior to the audit
report
D. Date of the management representation
letter
3.) “Subsequent events” for reporting purposes
are events which occur subsequent to the

A. Financial statement data

B. Date of the auditor’s report
C. Financial statement date but prior to the date
of the auditor’s report
D. Date of the auditor’s report and concern
contingencies which are not reflected in the
financial statements
4.) The primary source of information about
litigation, claims and assessments is obtained by
auditors from the:

A. Client’s lawyers
B. Client’s management
C. Client’s previous auditor
D. All of the above
5.) At the completion of the audit, management is
asked to make a written statement that it is not
aware of any undisclosed contingent liabilities,
this statement would appear in the:

A. Management letter
B. Letter of inquiry
C. Letters testamentary
D. Written management representation
6.) Which of the following statements about a
written representation is not correct?

A. It is optional
B. It is addressed to the auditor
C. It confirms oral representation made by
management
D. It’s date normally coincides with the date of
the audit report
7.) A purpose of a management representation
letter is to reduce

A. Audit risk to an aggregate level of

misstatement that could be considered material
B. An auditor’s responsibility to detect material
misstatements only to the extent that the letter
is relied on
C. The possibility of misunderstanding
concerning management’s responsibility for the
financial statements.
D. The scope of an auditor’s procedures
concerning related party transactions and
subsequent events.
8.) The date of the management representation
letter should coincide with the date of the

A. Balance sheet
B. Latest interim financial statements
C. Auditor’s report
D. Latest related party transactions
9.) A client representation letter is:

A. Prepared on the CPA’s letterhead

B. Addressed to the client
C. Signed by high-level officials (e.g., the
president and chief financial officer).
D. Dated as of the client’s year-end
10.) PSA 570 requires the auditor to evaluate
whether there is a substantial doubt about a
client’s ability to continue as a going concern for
at least:

A. One quarter beyond the balance sheet date

B. One quarter beyond the date of the auditor’s
report
C. One year beyond the balance sheet date
D. One year beyond the date of the auditor’s
report
11.) If, on the basis of the additional procedures
carried out and the information obtained,
including the effect of mitigating circumstances,
the auditor’s judgment is that the entity will not
be able to continue as a going concern, the
financial statements should be prepared using
and appropriate basis; otherwise the auditor will
issue a(n)

A. Disclaimer opinion
B. Qualified opinion
C. Adverse opinion
D. Unmodified opinion with emphasis of matter
paragraph
12.) Most auditors assess inherent risk as high for
related parties and related-party transactions
because

A. Of the accounting disclosure

B. Of the lack of independence between parties
C. Both A and B
D. It is required by generally accepted
accounting principles
13.) The least effective method of identifying
related parties would be

A. An inquiry of management
B. A review of SEC filings
C. A review of the purchases and sales journals
for the period under audit
D. An examination of stockholders’ listings to
identify principal stockholders
14.) Which of the following is not considered a
related party?

A. Affiliated companies
B. Principal owners of the company
C. Line employees of the company
D. Members of company management
15.) Related parties are commonly identified in
which of the following ways?

A. Review of SEC filings

B. Examination of stockholder listings
C. Inquiry of management
D. All of the above
16.) An auditor should examine minutes of the
board of director’s meetings

A. Through the date of the financial statements

B. Through the date of the audit report
C. Only at the beginning of the audit
D. On a test (sample) basis
17.) The corporate minutes are the official record
of the meetings of the board of directors and
stockholders. The minutes typically include
authorizations related to which of the following?

A. Significant acquisition of property, plant and

equipment
B. Dividend payment
C. Corporate officer compensation
D. All of the above
18.) When considering the objectivity of internal
auditors, an independent auditor should

A. Evaluate the quality control program in effect

for the internal auditors
B. Examine documentary evidence of the work
that they performed
C. Test a sample of the transactions and
balances that the internal auditors examined
D. Determine the organizational level to which
the internal auditors report
19.) The auditor is most likely to discover omitted
audit procedures during

A. Preparation of the management letter

B. Follow-up procedures performed in
compliance with Generally Accepted Auditing
Standards
C. The conference held with the client prior to
issuing the audit report
D. A post engagement review performed as part
of the firm’s quality control inspection program
20.) When conditions and events have been identified
which may cast significant doubt on the entity’s
ability to continue as a going concern, the auditor
should consider performing the following procedures
except

A. Review management’s plans for future actions

based on going concern assessment
B. Gather sufficient appropriate evidence to confirm
or dispel whether or not a material uncertainty
exists by carrying out procedures such as considering
the effect of management plans and other mitigating
factors
C. Seek written representations from management
regarding its plans for future actions
D. Issue a report that contains a disclaimer of
opinion
1. A 11.C
2. C 12.C
3. C 13.C
4. B 14.C
5. D 15.D
6. A 16.B
7. C 17.D
8. C 18.D
9. C 19.D
10. C 20.D