ACC 409 AUDITING EXAM STUDY QUESTIONS AND
ANSWERS WITH COMPLETE SOLUTIONS GRADED A++
An AICPA member who is not in public practice is not subject to any of the
Principles of Professional Conduct.
False
Which of the following situations would be a violation of the client confidentiality
standard?
a. To respond to the information request of a major shareholder
b. To respond to a quality review request of the state board of accountancy
c. To initiate a complaint with the AICPA's ethics division
d. To ensure adequate disclosure in accordance with GAAP
To respond to the information request of a major shareholder
Rights theory focues on evaluating actions in terms of the fundamental rights of
the parties involved
True
What is the highest goal for auditor independence?
To be independent in fact and appearance
Julie, an auditor for B&D, has an auto loan with FNB, her audit client. Which best
describes her independence status?
a. Impaired because Julie has a direct financial interest in FNB
,b. Impaired because Julie has a material indirect financial interest in FNB
c. Not impaired as Julie has an immaterial financial interest in FNB
d. Not impaired because Julie is permitted to take normal loans from FNB
d. Not impaired because Julie is permitted to take normal loans from FNB
Auditors discover the controller has been creating fictional sales. Who should the
auditors make aware of this issue?
Chairman of the audit committee
Which of the following items are registered audit firms not required to report to
the audit committee?
a. Critical accounting policies and practices
b. Alternative treatments within GAAP considered by management
c. A list of all audit procedures performed
d. Significant written communication between the audit firm and management
c. A list of all audit procedures performed
Which of the following is not one of managements responsibility?
a. Developing financial and other reports that meet the needs of users
b. Engaging a qualified auditor
c. Implementing effective internal controls
d. Implementing an effective ethical environment
b. engaging a qualified auditor
, List the five phases of an audit performed for purposes of providing an opinion
on financial statements and internal control effectiveness
1. Making client acceptance and continuance decisions (most important)
2. Performing risk assessment
3. Obtaining evidence about internal control operating effectiveness
4. Obtaining substantive evidence about accounts, disclosures, and assertions
5. Completing the audit and making reporting decisions
List the five assertions
1. Existence
2. Completeness
3. Rights and obligations
4. Valuation
5. Presentation and disclosure
The auditors job is to obtain evidence related to these management assertions for
each significant account and disclosure in the financial statement.
True
Existence assertion
Addresses whether all assets and liabilities recorded in financial statements exists.
Relevant when management has incentive to OVERSTATE the ending balance
Common acct: Inventory, fixed assets, (revenue & asset accounts)
Completeness assertion
ANSWERS WITH COMPLETE SOLUTIONS GRADED A++
An AICPA member who is not in public practice is not subject to any of the
Principles of Professional Conduct.
False
Which of the following situations would be a violation of the client confidentiality
standard?
a. To respond to the information request of a major shareholder
b. To respond to a quality review request of the state board of accountancy
c. To initiate a complaint with the AICPA's ethics division
d. To ensure adequate disclosure in accordance with GAAP
To respond to the information request of a major shareholder
Rights theory focues on evaluating actions in terms of the fundamental rights of
the parties involved
True
What is the highest goal for auditor independence?
To be independent in fact and appearance
Julie, an auditor for B&D, has an auto loan with FNB, her audit client. Which best
describes her independence status?
a. Impaired because Julie has a direct financial interest in FNB
,b. Impaired because Julie has a material indirect financial interest in FNB
c. Not impaired as Julie has an immaterial financial interest in FNB
d. Not impaired because Julie is permitted to take normal loans from FNB
d. Not impaired because Julie is permitted to take normal loans from FNB
Auditors discover the controller has been creating fictional sales. Who should the
auditors make aware of this issue?
Chairman of the audit committee
Which of the following items are registered audit firms not required to report to
the audit committee?
a. Critical accounting policies and practices
b. Alternative treatments within GAAP considered by management
c. A list of all audit procedures performed
d. Significant written communication between the audit firm and management
c. A list of all audit procedures performed
Which of the following is not one of managements responsibility?
a. Developing financial and other reports that meet the needs of users
b. Engaging a qualified auditor
c. Implementing effective internal controls
d. Implementing an effective ethical environment
b. engaging a qualified auditor
, List the five phases of an audit performed for purposes of providing an opinion
on financial statements and internal control effectiveness
1. Making client acceptance and continuance decisions (most important)
2. Performing risk assessment
3. Obtaining evidence about internal control operating effectiveness
4. Obtaining substantive evidence about accounts, disclosures, and assertions
5. Completing the audit and making reporting decisions
List the five assertions
1. Existence
2. Completeness
3. Rights and obligations
4. Valuation
5. Presentation and disclosure
The auditors job is to obtain evidence related to these management assertions for
each significant account and disclosure in the financial statement.
True
Existence assertion
Addresses whether all assets and liabilities recorded in financial statements exists.
Relevant when management has incentive to OVERSTATE the ending balance
Common acct: Inventory, fixed assets, (revenue & asset accounts)
Completeness assertion
