MGMT 443 Ch. 12 and 16 Exam 2026
Questions and Answers Graded A+
An auditor concludes that the omission of a substantive procedure considered
necessary at the time of the audit may impair the auditor's current ability to support
the previously expressed opinion. The auditor need not apply the omitted
procedure if
A. The risk of adverse publicity or litigation is low.
B. The results of other procedures that were applied tend to compensate for the
procedure omitted.
C. The auditor's opinion was qualified because of a material misstatement.
D. The results of the subsequent period's tests of controls make the omitted
procedure less important.
(CPA) - Correct answer-B. The results of other procedures that were applied tend
to compensate for the procedure omitted.
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,On March 15, Year 2, Kent, CPA, expressed an unmodified opinion on a client's
audited financial statements for the year ended December 31, Year 1. On May 4,
Year 2, Kent's internal inspection program disclosed that engagement personnel
failed to observe the client's physical inventory. Omission of this procedure impairs
Kent's present ability to support the unmodified opinion. If the shareholders are
currently relying on the opinion, Kent should first
A. Advise management to disclose to the shareholders that Kent's unmodified
opinion should not be relied on.
B. Undertake to apply alternative procedures that would provide a satisfactory
basis for the unmodified opinion.
C. Reissue the auditor's report and add an emphasis-of-matter paragraph describing
the departure from generally accepted auditing standards.
D. Compensate for the omitted procedure by performing tests of controls to reduce
audit risk to an acceptably l - Correct answer-B. Undertake to apply alternative
procedures that would provide a satisfactory basis for the unmodified opinion.
Which of the following circumstances most likely would require an auditor to
apply an omitted procedure after the audit report issuance date?
A. The auditor's report is unsupported as a result of the omitted procedure.
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,B. Generally accepted accounting principles are violated.
C. The client has requested that the procedure be performed.
D. The engagement letter requires the procedure to be performed.
(CPA) - Correct answer-A. The auditor's report is unsupported as a result of the
omitted procedure.
The primary audit objective regarding the purchasing of materials by the client is
to
A. Ascertain that materials paid for are on hand.
B. Observe the annual physical count.
C. Investigate the recording of unusual transactions regarding materials.
D. Determine the reliability of financial reporting by the purchasing function. -
Correct answer-D. Determine the reliability of financial reporting by the
purchasing function.
To minimize the risk that agents in the purchasing department will use their
positions for personal gain, the organization should
A. Require competitive bidding.
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, B. Request internal auditors to confirm selected purchases and accounts payable.
C. Specify that all items purchased must pass value-per-unit-of-cost reviews.
D. Direct the purchasing department to maintain records on purchase prices paid,
with review of such records required every 6 months. - Correct answer-A. Require
competitive bidding.
In a well-designed internal control system, employees in the same department most
likely would approve purchase orders, and also
A. Reconcile the open invoice file.
B. Inspect goods upon receipt.
C. Authorize requisitions of goods.
D. Negotiate terms with vendors.
(CPA) - Correct answer-D. Negotiate terms with vendors.
A university does not have a centralized receiving function for departmental
purchases of books, supplies, and equipment. Which of the following controls will
most effectively prevent payment for goods not received, if performed prior to
invoice payment?
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Questions and Answers Graded A+
An auditor concludes that the omission of a substantive procedure considered
necessary at the time of the audit may impair the auditor's current ability to support
the previously expressed opinion. The auditor need not apply the omitted
procedure if
A. The risk of adverse publicity or litigation is low.
B. The results of other procedures that were applied tend to compensate for the
procedure omitted.
C. The auditor's opinion was qualified because of a material misstatement.
D. The results of the subsequent period's tests of controls make the omitted
procedure less important.
(CPA) - Correct answer-B. The results of other procedures that were applied tend
to compensate for the procedure omitted.
©COPYRIGHT 2026, ALL RIGHTS RESERVED 1
,On March 15, Year 2, Kent, CPA, expressed an unmodified opinion on a client's
audited financial statements for the year ended December 31, Year 1. On May 4,
Year 2, Kent's internal inspection program disclosed that engagement personnel
failed to observe the client's physical inventory. Omission of this procedure impairs
Kent's present ability to support the unmodified opinion. If the shareholders are
currently relying on the opinion, Kent should first
A. Advise management to disclose to the shareholders that Kent's unmodified
opinion should not be relied on.
B. Undertake to apply alternative procedures that would provide a satisfactory
basis for the unmodified opinion.
C. Reissue the auditor's report and add an emphasis-of-matter paragraph describing
the departure from generally accepted auditing standards.
D. Compensate for the omitted procedure by performing tests of controls to reduce
audit risk to an acceptably l - Correct answer-B. Undertake to apply alternative
procedures that would provide a satisfactory basis for the unmodified opinion.
Which of the following circumstances most likely would require an auditor to
apply an omitted procedure after the audit report issuance date?
A. The auditor's report is unsupported as a result of the omitted procedure.
©COPYRIGHT 2026, ALL RIGHTS RESERVED 2
,B. Generally accepted accounting principles are violated.
C. The client has requested that the procedure be performed.
D. The engagement letter requires the procedure to be performed.
(CPA) - Correct answer-A. The auditor's report is unsupported as a result of the
omitted procedure.
The primary audit objective regarding the purchasing of materials by the client is
to
A. Ascertain that materials paid for are on hand.
B. Observe the annual physical count.
C. Investigate the recording of unusual transactions regarding materials.
D. Determine the reliability of financial reporting by the purchasing function. -
Correct answer-D. Determine the reliability of financial reporting by the
purchasing function.
To minimize the risk that agents in the purchasing department will use their
positions for personal gain, the organization should
A. Require competitive bidding.
©COPYRIGHT 2026, ALL RIGHTS RESERVED 3
, B. Request internal auditors to confirm selected purchases and accounts payable.
C. Specify that all items purchased must pass value-per-unit-of-cost reviews.
D. Direct the purchasing department to maintain records on purchase prices paid,
with review of such records required every 6 months. - Correct answer-A. Require
competitive bidding.
In a well-designed internal control system, employees in the same department most
likely would approve purchase orders, and also
A. Reconcile the open invoice file.
B. Inspect goods upon receipt.
C. Authorize requisitions of goods.
D. Negotiate terms with vendors.
(CPA) - Correct answer-D. Negotiate terms with vendors.
A university does not have a centralized receiving function for departmental
purchases of books, supplies, and equipment. Which of the following controls will
most effectively prevent payment for goods not received, if performed prior to
invoice payment?
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