AUD 2024 UPDATE COMPREHENSIVE QUESTIONS
AND CORRECT ANSWERS/STUDY GUIDE GRADE A+
ALL PASSED 2024 EXAM
When there is a significant question about a company's ability to remain a going
concern, the report issued is usually unmodified with an emphasis-of-matter
paragraph.
TRUE
A client imposed scope limitation will generally result in a disclaimer of opinion,
regardless of whether sufficient appropriate audit evidence is gathered using
alternative procedures.
FALSE
Regulation S-X governs the form and content of financial statements filed with
the SEC.
TRUE
Which of the following is not explicitly included in an audit report for a nonpublic
company?
When the auditors are unable to comply with generally accepted auditing Audit
standards, they should issue an opinion that is unmodified, but include an
additional emphasis-of-matter paragraph in the report.
FALSE
A public company's financial statements should be prepared following standards
of the Public Company Accounting Oversight Board.
FALSE
If financial statements fail to disclose a material fact, the auditors may disclose
the information in an emphasis-of-matter paragraph and, depending upon
materiality, issue either a qualified opinion or adverse opinion on the statements.
TRUE
If financial statements contain a material departure from generally accepted
accounting principles, the auditors usually should issue a disclaimer of opinion.
FALSE
A change that the auditor agrees with from one generally accepted accounting
principle to another generally accepted accounting principle that has a pervasive
effect on net income usually results in an adverse opinion by the auditors.
FALSE
reports should be dated as the date on which sufficient appropriate audit
evidence has been collected.
TRUE
A. A statement that the auditor believes that the audit provides a reasonable
basis for expressing negative assurance.
B. A statement that the auditor's responsibility is to express an opinion on the
,financial statements.
C. A statement that the financial statements are the responsibility of
management.
D. A title with the word "independent."
A. A statement that the auditor believes that the audit provides a reasonable basis for
expressing negative assurance.
Because of the risk of material misstatement, an audit of financial statements in
accordance with generally accepted auditing standards should be planned and
performed with an attitude of
a. Objective judgment.
b. Independent integrity.
c. Professional skepticism.
d. Impartial conservatism
c. Professional skepticism.
GAAS require the auditor to plan and perform the audit with an attitude of professional
skepticism, which includes the need to maintain objectivity in applying judgments
throughout the audit. The auditor is required to be independent and to act with integrity
in the performance of the engagement, but not specifically due to the risk of material
misstatement
"In connection with an audit of our financial statements, management has
prepared, and furnished to our auditors a description and evaluation of certain
contingencies."
The foregoing passage most likely is from a(an)
a. Audit inquiry letter to legal counsel.
b. Management representation letter.
c. Audit committee's communication to the auditor.
d. Financial statement footnote disclosure.
a. Audit inquiry letter to legal counsel.
The passage would be included in an audit inquiry letter to legal counsel, written by the
client, asking counsel to provide the auditor with information about legal matters. If it
were in a management representation letter, the sentence would have indicated "We
have provided you with...". There is no reason for the audit committee to include a
comparable sentence in a communication to the auditor.
Which of the following matters generally is included in an auditor's engagement
letter?
a. Management's responsibility for the entity's compliance with laws and
regulations.
b. The factors to be considered in setting preliminary judgments about
materiality.
, c. Management's vicarious liability for noncompliance (illegal acts) committed by
its employees.
d. The auditor's responsibility to search for significant internal control
deficiencies.
a. Management's responsibility for the entity's compliance with laws and regulations.
An understanding established between the auditor and the client will include a section
with the auditor's responsibility to perform the engagement in accordance with GAAS
and management's responsibilities for the preparation and fair presentation of the
financial statements; for designing, implementing, and maintaining internal controls over
financial reporting; for the prevention and detection of fraud; and for the entity's
compliance with applicable laws and regulations.
Which of the following statements is correct concerning materiality in a financial
statement audit?
a. Analytical procedures performed during an audit's review stage usually
decrease materiality levels.
b. If the materiality amount used in evaluating audit findings increases from the
amount used in planning, the auditor should apply additional substantive tests.
c. The auditor's materiality judgments generally involve quantitative, but not
qualitative,considerations.
d. Materiality levels are generally considered in terms of the smallest aggregate
level of misstatement that could be considered material to any one of the
financial statements.
d. Materiality levels are generally considered in terms of the smallest aggregate level of
misstatement that could be considered material to any one of the financial statements.
To minimize audit risk, the risk of issuing an unmodified report when the financial
statements contain a material misstatement, the auditor will consider the smallest
aggregate level of misstatement that could be considered material to any of the financial
statements and measure materiality against that amount.
As materiality amounts increase, larger errors become acceptable and the auditor will
decrease, not increase, substantive testing.
A cooling-off period of how many years is required before a member of an
issuer's audit engagement team may begin working for the registrant in a key
position?
Your Answer:
a. One year.
b. Two years.
c. Three years.
d. Four years
a. One year.
Under the clarity standards, the application and other explanatory material in a
standard is:
AND CORRECT ANSWERS/STUDY GUIDE GRADE A+
ALL PASSED 2024 EXAM
When there is a significant question about a company's ability to remain a going
concern, the report issued is usually unmodified with an emphasis-of-matter
paragraph.
TRUE
A client imposed scope limitation will generally result in a disclaimer of opinion,
regardless of whether sufficient appropriate audit evidence is gathered using
alternative procedures.
FALSE
Regulation S-X governs the form and content of financial statements filed with
the SEC.
TRUE
Which of the following is not explicitly included in an audit report for a nonpublic
company?
When the auditors are unable to comply with generally accepted auditing Audit
standards, they should issue an opinion that is unmodified, but include an
additional emphasis-of-matter paragraph in the report.
FALSE
A public company's financial statements should be prepared following standards
of the Public Company Accounting Oversight Board.
FALSE
If financial statements fail to disclose a material fact, the auditors may disclose
the information in an emphasis-of-matter paragraph and, depending upon
materiality, issue either a qualified opinion or adverse opinion on the statements.
TRUE
If financial statements contain a material departure from generally accepted
accounting principles, the auditors usually should issue a disclaimer of opinion.
FALSE
A change that the auditor agrees with from one generally accepted accounting
principle to another generally accepted accounting principle that has a pervasive
effect on net income usually results in an adverse opinion by the auditors.
FALSE
reports should be dated as the date on which sufficient appropriate audit
evidence has been collected.
TRUE
A. A statement that the auditor believes that the audit provides a reasonable
basis for expressing negative assurance.
B. A statement that the auditor's responsibility is to express an opinion on the
,financial statements.
C. A statement that the financial statements are the responsibility of
management.
D. A title with the word "independent."
A. A statement that the auditor believes that the audit provides a reasonable basis for
expressing negative assurance.
Because of the risk of material misstatement, an audit of financial statements in
accordance with generally accepted auditing standards should be planned and
performed with an attitude of
a. Objective judgment.
b. Independent integrity.
c. Professional skepticism.
d. Impartial conservatism
c. Professional skepticism.
GAAS require the auditor to plan and perform the audit with an attitude of professional
skepticism, which includes the need to maintain objectivity in applying judgments
throughout the audit. The auditor is required to be independent and to act with integrity
in the performance of the engagement, but not specifically due to the risk of material
misstatement
"In connection with an audit of our financial statements, management has
prepared, and furnished to our auditors a description and evaluation of certain
contingencies."
The foregoing passage most likely is from a(an)
a. Audit inquiry letter to legal counsel.
b. Management representation letter.
c. Audit committee's communication to the auditor.
d. Financial statement footnote disclosure.
a. Audit inquiry letter to legal counsel.
The passage would be included in an audit inquiry letter to legal counsel, written by the
client, asking counsel to provide the auditor with information about legal matters. If it
were in a management representation letter, the sentence would have indicated "We
have provided you with...". There is no reason for the audit committee to include a
comparable sentence in a communication to the auditor.
Which of the following matters generally is included in an auditor's engagement
letter?
a. Management's responsibility for the entity's compliance with laws and
regulations.
b. The factors to be considered in setting preliminary judgments about
materiality.
, c. Management's vicarious liability for noncompliance (illegal acts) committed by
its employees.
d. The auditor's responsibility to search for significant internal control
deficiencies.
a. Management's responsibility for the entity's compliance with laws and regulations.
An understanding established between the auditor and the client will include a section
with the auditor's responsibility to perform the engagement in accordance with GAAS
and management's responsibilities for the preparation and fair presentation of the
financial statements; for designing, implementing, and maintaining internal controls over
financial reporting; for the prevention and detection of fraud; and for the entity's
compliance with applicable laws and regulations.
Which of the following statements is correct concerning materiality in a financial
statement audit?
a. Analytical procedures performed during an audit's review stage usually
decrease materiality levels.
b. If the materiality amount used in evaluating audit findings increases from the
amount used in planning, the auditor should apply additional substantive tests.
c. The auditor's materiality judgments generally involve quantitative, but not
qualitative,considerations.
d. Materiality levels are generally considered in terms of the smallest aggregate
level of misstatement that could be considered material to any one of the
financial statements.
d. Materiality levels are generally considered in terms of the smallest aggregate level of
misstatement that could be considered material to any one of the financial statements.
To minimize audit risk, the risk of issuing an unmodified report when the financial
statements contain a material misstatement, the auditor will consider the smallest
aggregate level of misstatement that could be considered material to any of the financial
statements and measure materiality against that amount.
As materiality amounts increase, larger errors become acceptable and the auditor will
decrease, not increase, substantive testing.
A cooling-off period of how many years is required before a member of an
issuer's audit engagement team may begin working for the registrant in a key
position?
Your Answer:
a. One year.
b. Two years.
c. Three years.
d. Four years
a. One year.
Under the clarity standards, the application and other explanatory material in a
standard is:
