CLICK TO GET ANSWERS ACC 460 Final Exam 1) Determining whether amounts are in conformity with generally accepted accounting principles addresses the proper measurement of assets, liabilities, revenues, and expenses, which includes all of the following EXCEPT the A. consistency in applying accounting principles. B. reasonableness of management’s accounting estimates. C. proper application of valuation principles, such as cost, net reliable value, market value, and present value. D. reasonableness of management’s accounting policies. 2) The completeness assertion would be violated if A. unbilled shipments occurred during the period. B. fictitious sales transactions were included in accounts receivable. C. the allowance for doubtful accounts was understated. D. disclosure in the statements of pledged receivables was inadequate. 3) The concept of materiality is defined by the Financial Accounting Standards Board (FASB) in terms of the judgment of the A. FASB members. B. auditor. C. preparer. D. users. 4) Section 11 of the Securities Act of 1933 uses the term material fact to limit the amount of information required. Under the Act, the standard used to determine an item’s materiality A. may be found in FASB pronouncements.acc 460 final exam B. is the auditor’s professional judgment. C. has been established by the SEC as a percent of net income or of total assets. D. is the average prudent investor. 5) Anyone identified to the auditor by name prior to the audit who is the principal recipient of the auditor’s report is a 6) Individuals or entities the auditor knew or should have known and would rely on the audit report in making business and investment decisions are 7) Statements on auditing standards (SAS) are interpretations of what?
8) What level of assurance does the reader of a private company financial statement receive on the companyâ€™s system of internal controls? 9) Which of the following best describes the relationship that should exist between the external auditor and the management of the client company? Acc 460 final exam answer 10) Statement on Quality Control Standards No. 2 identifies certain quality control elements that should be considered when performing which types of services? 11) Internal auditors are primarily involved with 12) When providing audit services, the certified public accountant (CPA) is expected to be 13) With respect to audit objectives, the term validity relates to which of the assertions below? 14) The five management assertions outlined in generally accepted auditing standards include all of the following EXCEPT 15) Specific audit objectives are normally 16) The assessment of inherent risk requires considering matters that have a pervasive effect on assertions for all or many accounts and matters that may pertain only to assertions for specific accounts. Which of the following is an example of a specific account matter? 17) The risk that the auditor will NOT detect a material misstatement that exists in an assertion is 18) The susceptibility of an assertion to a material misstatement, assuming there are no controls, is 19) Auditor changes result from a variety of factors EXCEPT 20) The third phase of the audit involves performing audit tests. The primary purpose of this step is to obtain evidence about the acc 460 final exam 21) Before accepting an engagement, the auditor should evaluate whether other conditions exist that raise questions as to the prospective clientâ€™s auditability. Which of the following factors would be least likely to cause concern about an entityâ€™s auditability? 22) When setting the level of materiality on a particular engagement, the auditor must consider 23) In making preliminary judgments about materiality, the auditor initially determines the aggregate level of materiality for each statement. For planning purposes, the auditor should use the
24) In a normal audit, the relationship between the level of materiality used to plan the engagement and the level of materiality used to evaluate evidence is that 25) Which of the following is NOT one of the fundamental concepts in the COSO report’s definition of internal control? 26) Which of the following is an INCORRECT quotation from the second field work standard? 27) The Committee of Sponsoring Organizations (COSO) report identified five interrelated components of internal control. Since then, a sixth category has been identified, which is 28) The nature of tests of controls relates to the type of evidence obtained. Which of the following is NOT an example of a type of evidence relevant to tests of controls? 29) Which of the following tests of controls would be most effective in testing controls designed to prevent checks from being issued or recorded for the wrong amount? 30) Which of the following statements is TRUE about an auditor’s responsibility to communicate with respect to a public company’s internal controls? 31) Which of the following is NOT a characteristic of management's philosophy and operating style? 32) An effective accounting system should identify and record only the valid transaction of the entity that occurred in the current period, which relates to the 33) Management’s risk assessment should include the following special consideration of risks that may arise from changed circumstances EXCEPT 34) In performing tests of details of balances, the auditor would obtain the bank statement directly from the bank, prepare the bank reconciliation, and verify all reconciling items and mathematical accuracy if detection risk was 35) When evaluating the planned level of substantive tests for each significant financial statement assertion, the auditor will consider the evidence obtained from all of the following EXCEPT 36) Who is responsible for establishing the process and controls for preparing accounting estimates? 37) Probability-proportional-to-size (PPS) sampling should NOT be used when 38) PPS sampling should NOT be used when
39) PPS sampling would most likely NOT be cost-effective in 40) Which of the following is NOT a hardware and systems software control? 41) Public Company Accounting Oversight Board (PCAOB) standards require the auditor to evaluate the effectiveness of the audit committee as part of understanding the control environment and monitoring. Which of the following is NOT a factor the auditor should consider in making this evaluation? 42) Which of the following is NOT recognized as a type of general controls?