ACC114: Assurance Principles, Professional Ethics, and Governance

Quiz #1 - Part 1

AUDITING OVERVIEW, PROFESSIONAL STANDARDS & AUDITOR'S RESPONSIBILITY

1. Generally the decision to notify parties outside the client’s organization regarding noncompliance with laws
and regulations is the responsibility of the
a. Independent auditor c. Management
b. Client’s legal counsel d. Internal auditors Ch3 #76

2. These are acts of omissions or commissions by the entity being audited, either intentional or unintentional,
which are contrary to the prevailing laws and regulations
a. Fraud c. Noncompliance
b. Misappropriation d. Defalcation Ch3 #73

3. If the auditor believes that the fraud or error has a material effect on the financial statements but the client is
not willing to correct the misstatement, the auditor would most likely issue a(n)
a. Unmodified report
b. Qualified or adverse opinion
c. Qualified or disclaimer of opinion
d. Unmodified opinion with emphasis of matter paragraph Ch3 #64

4. If the auditor is precluded by the entity from obtaining evidence to evaluate whether fraud or error that may
be material to that financial statements has occurred, the auditor should issue a report that contains
a. An adverse opinion
b. An unmodified opinion
c. Either qualified or adverse opinion
d. Either qualified opinion or a disclaimer of opinion Ch3 #65

5. When the auditor believes a misstatement is or may be the result of the fraud but that the effect of the
misstatements is not material to the financial statements, which of the following steps is required?
a. Consider the implications for other aspects of the audit
b. Resign from the audit
c. Commence a fraud examination
d. Contact regulatory authorities Ch3 #62

6. Which of the following conditions or events increase the risk of error or fraud?
a. Management is dominated by several individuals
b. There are frequent changes of auditors or legal counsel
c. There is a significantly low turnover of senior accounting personnel
d. The entity does not correct internal control deficiencies that it knows about Ch3 #57

7. Which of the following circumstances would least likely cause an auditor to consider whether a material
misstatement exists?
a. The turnover of senior accounting personnel is exceptionally low
b. Management places substantial emphasis on meeting earning projections
c. There are significant unusual transactions near year-end
d. Operating and financing decisions are dominated by one person Ch3 #53

8. Which of the following conditions or events would least likely increase the risk of fraud or error?
 a. Questions with respect to competence or integrity of management
b. Unusual pressures within the entity
c. Unusual transactions
d. Lack of transaction trail Ch3 #49

9. Which of the following conditions identified during fieldwork of an audit is most likely to affect the auditor’s
assessment of the risk of misstatement due to fraud?
a. Checks for significant amounts outstanding at year end
b. Computer generated documents
c. Missing documents

d. Year-end adjusting journal entries Ch3 #50

10. Which of the following most likely to be considered a risk factor relating to fraudulent financial reporting?
a. Domination of management by top executives
b. Large amount of cash processed
c. Negative cash flows from operations
d. Small high-peso inventory items Ch3 #47

11. Which of the following is a category of risk factors that should be considered when assessing risk of
misstatements arising from misappropriation of assets?
a. Condition of internal control |
b. Management characteristics
c. Financial stability of the entity
d. Industry Condition Ch3 #42

12. The most difficult type of misstatement to detect is fraud based on

a. The overrecording of transactions
b. The nonrecording of transactions
c. Recorded transactions in subsidiaries
d. Related party receivable Ch3 #30

13. “The auditor would ordinarily expect to find evidence to support management representations and not assume
that they are necessarily correct”. This is an example of
a. An unprofessional behavior
b. An attitude of professional skepticism
c. Due diligence
d. A rule in the code of professional ethics Ch3 #26

14. Which one of the following terms relates to the embezzling of receipts?
a. Manipulation c. Misappropriation |
b. Misrepresentation d. Misapplication Ch3 #23

15. Which of the following statements best identifies the two types of fraud?
a. Theft of assets and employee fraud
b. Misappropriation of asset and defalcation
c. Management fraud and employee fraud
d. Fraudulent financial reporting and management fraud Ch3 #19
TY

ance with laws

|
Ch3 #76

unintentional,

|
Ch3 #73

s but the client is

Ch3 #64

r error that may

contains
|

Ch3 #65

ffect of the
uired?
|

Ch3 #62

Ch3 #57

a material

Ch3 #53

ror?
 |

Ch3 #49

ct the auditor’s

Ch3 #50

al reporting?
|

Ch3 #47

g risk of

Ch3 #42

Ch3 #30

ns and not assume

Ch3 #26

|
Ch3 #23

Ch3 #19