Question 1

The third generic step in a financial statement audit has the strongest relationship to one of the ___ standards in GAAS.
A)General
B)Field work
C)Reporting
D)Environmental

Accepted Answer

The third generic step in a financial statement audit is the performance of fieldwork, which involves gathering sufficient and appropriate evidence to support the auditor's opinion. This step is directly related to the Fieldwork standard in GAAS, which requires auditors to plan and perform their work to obtain reasonable assurance about whether the financial statements are free from material misstatement.

Question 2

The third generic step in a financial statement audit could benefit from:
A)Interviews.
B)Flowcharts.
C)Both A and B.
D)Neither A nor B.

Accepted Answer

The third generic step in a financial statement audit involves obtaining an understanding of the client's internal control. This can be achieved through a combination of interviews and flowcharts. Interviews allow the auditor to gather information about the client's control environment, while flowcharts can provide a visual representation of the client's system of internal control. Therefore, both options A and B would be beneficial in this step.

Question 3

Verifying the frequency of bank reconciliations and reconciling the latest bank statement are examples of actions an auditor might take in which generic steps of the financial statement audit process?
A)First and second
B)Second and third
C)Third and fourth
D)Second and fourth

Accepted Answer

The answer of Verifying the frequency of bank reconciliations and...

Question 4

A systems flowchart could be helpful in fulfilling which generally accepted auditing standards?
A)Internal control
B)Evidence
C)Both A and B
D)Neither A nor B

Accepted Answer

A systems flowchart is helpful in fulfilling both the generally accepted auditing standards of internal control and evidence gathering. It can provide a visual representation of a company's systems and processes, allowing auditors to evaluate the effectiveness of internal controls and gather evidence on the accuracy and completeness of transactions.

Question 5

Consider the statements below as you answer the next question: • The chief financial officer of TNL Corporation is a certified public accountant.• OBP Corporation's internal audit manager is a certified fraud examiner.• CPQ Corporation maintains a set of systems flowcharts that describe current business processes.• DKM Corporation encrypts all data transmitted over its wireless network.Which statements relate to the third generic step in a financial statement audit?
A)TNL and DKM
B)TNL and CPQ
C)DKM and CPQ
D)TNL, DKM and CPQ

Accepted Answer

The third generic step in a financial statement audit involves understanding the entity and its environment, including its internal control. CPQ's maintenance of systems flowcharts and DKM's encryption of data relate to understanding and assessing internal controls.

Question 6

A company's business processes were at the managed level of the capability maturity model in 2011 and at the optimized level of the capability maturity model in 2012. Which of the following statements is most true?
A)Based on the generally accepted auditing standard of consistency, the auditors must disclose the change.
B)The auditors must issue an unqualified opinion since the organization's processes are not chaotic.
C)Both A and B are true.
D)Neither A nor B is true.

Accepted Answer

The answer of A company's business processes were at the...

Question 7

Which of the following generic steps in a financial statement audit should occur last?
A)Issue the audit report.
B)Perform compliance testing.
C)Review the internal control system.
D)Evaluate management's credentials.

Accepted Answer

Issuing the audit report should occur last in the financial statement audit process as it is the final step in the auditor's work and provides the auditor's opinion on the financial statements. The other options listed are steps that should occur earlier in the audit process.

Question 8

Consider the statements below as you answer the next question: • The chief financial officer of TNL Corporation is a certified public accountant.• OBP Corporation's internal audit manager is a certified fraud examiner.• CPQ Corporation maintains a set of systems flowcharts that describe current business processes.• DKM Corporation encrypts all data transmitted over its wireless network.Which corporation is most likely to receive an unqualified opinion on its financial statements?
A)TNL
B)DKM
C)Either CPQ or OBP
D)Cannot be determined from the information given

Accepted Answer

The information provided does not directly relate to the criteria for receiving an unqualified opinion on financial statements, which typically involves the fair presentation of financial statements in accordance with accounting standards.

Question 9

Internal controls:
A)Have four broad purposes.
B)Are key elements of the third step in a financial statement audit.
C)Both A and B.
D)Neither A nor B.

Accepted Answer

Internal controls have four broad purposes (to safeguard assets, maintain accurate financial records, promote operational efficiency and effectiveness, and ensure compliance with legal and regulatory requirements), and they are a key element of the third step in a financial statement audit (which is testing internal controls).

Question 10

Consider the statements below as you answer the next question: • The chief financial officer of TNL Corporation is a certified public accountant.• OBP Corporation's internal audit manager is a certified fraud examiner.• CPQ Corporation maintains a set of systems flowcharts that describe current business processes.• DKM Corporation encrypts all data transmitted over its wireless network.Which corporation will require the least amount of compliance testing?
A)CPQ
B)OBP
C)Either TNL or DKM
D)Cannot be determined from the information given

Accepted Answer

The answer of Consider the statements below as you answer...

Question 11

In the first generic step of financial statement audits, the auditor should assess:
A)The internal control system.
B)Management's integrity.
C)Both A and B.
D)Neither A nor B.

Accepted Answer

The answer of In the first generic step of financial...

Question 12

Which of the following upholds at least one generally accepted auditing field work standard?
A)Using the COSO framework to evaluate internal controls.
B)Allowing members of an audit team to choose their supervisor independently.
C)Both A and B.
D)Neither A nor B.

Accepted Answer

The answer of Which of the following upholds at least...

Question 13

Consider the statements below as you answer the next question: • The chief financial officer of TNL Corporation is a certified public accountant.• OBP Corporation's internal audit manager is a certified fraud examiner.• CPQ Corporation maintains a set of systems flowcharts that describe current business processes.• DKM Corporation encrypts all data transmitted over its wireless network.Which statements relate to the second generic step in a financial statement audit?
A)TNL and OBP
B)TNL and CPQ
C)OBP and CPQ
D)TNL, OBP and CPQ

Accepted Answer

The answer of Consider the statements below as you answer...

Question 14

In which generic step of a financial statement audit is the auditor most likely to verify the frequency of bank reconciliations?
A)First
B)Second
C)Third
D)Fifth

Accepted Answer

The verification of the frequency of bank reconciliations falls under the third step of a financial statement audit, which involves the testing of the company's transactions and balances. This step focuses on verifying the completeness and accuracy of the financial information presented in the statements, including bank reconciliations. The frequency of these reconciliations is important as it ensures that all transactions are properly recorded and any discrepancies are identified and resolved in a timely manner. Therefore, the auditor is most likely to verify the frequency of bank reconciliations during this step.

Question 15

Following the model presented in the text, the second generic step in a financial statement audit is:
A)Assess management's integrity.
B)Evaluate management's credentials.
C)Review the internal control system.
D)Uphold generally accepted auditing standards.

Accepted Answer

The answer of Following the model presented in the text,...

Question 16

Joe was a recent graduate of Big State University's accounting program. He was assigned to an audit team managed by Pam, a licensed CPA. Based on those two statements alone, which of the following is most true?
A)At least one of the "general" GAAS is upheld.
B)At least one of the "field work" GAAS is upheld.
C)Both A and B are true.
D)Neither A nor B is true.

Accepted Answer

Joe is a recent graduate and Pam is a licensed CPA. This means that Pam is responsible for ensuring that the audit team follows GAAS. Therefore, both general and field work GAAS are upheld.

Question 17

An inexperienced auditor verified the computation of depreciation on a machine, but did not actually see the machine. The auditor's actions led to a weakness in the ___ generic step of a financial statement audit.
A)Second
B)Third
C)Fourth
D)Fifth

Accepted Answer

The fourth generic step of a financial statement audit involves gathering evidence. By not physically inspecting the machine, the auditor failed to gather sufficient appropriate audit evidence to support the depreciation computation, which is a key aspect of this step.

Question 18

Critical thinking is important in:
A)The design of accounting information systems.
B)The implementation of accounting information systems.
C)Auditing.
D)All of the above.

Accepted Answer

Critical thinking is important in all aspects of accounting information systems, from designing them to implementing them and auditing them. It is crucial to be able to analyze and evaluate information, identify issues, and come up with solutions in each of these phases.

Question 19

The last generic step in a financial statement audit has the strongest relationship to one of the ___ standards in GAAS.
A)General
B)Field work
C)Reporting
D)Documentation

Accepted Answer

The last generic step in a financial statement audit involves reporting on the findings and conclusions of the audit. This step has a strong relationship to the reporting standard in GAAS, which requires that the auditor's report clearly convey the nature and scope of the audit, the auditor's opinion on the financial statements, and any necessary disclosures or explanations.

Question 20

Pam is a licensed CPA; her husband, Greg, is a major shareholder in a corporation audited by Pam's firm. If Pam is involved in the audit of that firm:
A)She will likely be in violation of at least one of the "general" GAAS.
B)She will likely be in violation of at least one of the "field work" GAAS.
C)She will likely be in violation of at least one of the "reporting" GAAS.
D)Its stock price will change due to the related party transaction.

Accepted Answer

According to the AICPA's Code of Professional Conduct, a CPA cannot provide audit services to a company if a close family member has a significant financial interest in that company. This creates a conflict of interest and undermines the independence of the auditor. Therefore, Pam would be in violation of the "general" GAAS, which require independence in fact and appearance, if she is involved in the audit of the corporation in which her husband is a major shareholder.

Quiz 17: Auditing and Evaluating the Ais

The third generic step in a financial statement audit has the strongest relationship to one of the ___ standards in GAAS.

The third generic step in a financial statement audit could benefit from:

Verifying the frequency of bank reconciliations and reconciling the latest bank statement are examples of actions an auditor might take in which generic steps of the financial statement audit process?

A systems flowchart could be helpful in fulfilling which generally accepted auditing standards?

A company's business processes were at the managed level of the capability maturity model in 2011 and at the optimized level of the capability maturity model in 2012. Which of the following statements is most true?

Which of the following generic steps in a financial statement audit should occur last?

Internal controls:

In the first generic step of financial statement audits, the auditor should assess:

Which of the following upholds at least one generally accepted auditing field work standard?

In which generic step of a financial statement audit is the auditor most likely to verify the frequency of bank reconciliations?

Following the model presented in the text, the second generic step in a financial statement audit is:

Joe was a recent graduate of Big State University's accounting program. He was assigned to an audit team managed by Pam, a licensed CPA. Based on those two statements alone, which of the following is most true?

An inexperienced auditor verified the computation of depreciation on a machine, but did not actually see the machine. The auditor's actions led to a weakness in the ___ generic step of a financial statement audit.

Critical thinking is important in:

The last generic step in a financial statement audit has the strongest relationship to one of the ___ standards in GAAS.

Pam is a licensed CPA; her husband, Greg, is a major shareholder in a corporation audited by Pam's firm. If Pam is involved in the audit of that firm: