It is acceptable under generally accepted auditing standards for an audit team to

It is acceptable under generally accepted auditing standards for an audit team to

a. assess inherent risk at zero and perform a minimum of detection work
b. assess control risk at zero and perform a minimum of detection work
c. decide that audit risk can be 40 percent
d. assess risk of material misstatement at high and achieve an acceptably low audit risk by performing extensive detection work


Answer: d. assess risk of material misstatement at high and achieve an acceptably low audit risk by performing extensive detection work

Auditors are not responsible for accounting estimates with respect to

a. determining the reasonableness of estimates
b. determining that estimates are adequately disclosed in the financial statements
c. determining that estimates are presented in conformity with GAAP
d. making the estimates


Answer: d. making the estimates

An audit strategy contains

a. documentation of the assertions under audit, the evidence obtained, and the conclusions reached
b. reconciliation of the account balances in the financial statements with the account balances in the client's general ledger
c. specifications of procedures the auditors believe appropriate for the financial statements under audit
d. specifications of auditing standards relevant to the financial statements being audited


Answer: c. specifications of procedures the auditors believe appropriate for the financial statements under audit

Auditing standards do not require auditors of financial statements to

Auditing standards do not require auditors of financial statements to

a. assess the risk of occurrence of errors and frauds
b. understand the nature of errors and frauds
c. report all errors and frauds found to police authorities
d. design audits to provide reasonable assurance of detecting errors and frauds


Answer: c. report all errors and frauds found to police authorities

Enterprise risk management is the responsibility of:

a. company management
b. the external auditors
c. the company's insurance providers
d. all of the answers are correct


Answer: a. company management

Failure to meet company objectives is a result of

a. audit risk
b. inherent risk
c. information risk
d. business risk


Answer: d. business risk

When planning an audit, which of the following is not a factor that affects auditors' decisions about the quantity,

When planning an audit, which of the following is not a factor that affects auditors' decisions about the quantity, type, and content of audit documentation?

a. the auditors' judgment about materiality
b. the auditors' judgment about their independence with regard to the client
c. the existence of new sales contracts important for the client's business
d. the auditors' need to document compliance with generally accepted auditing standards


Answer: b. the auditors' judgment about their independence with regard to the client

When initiating communications with predecessor auditors, prospective auditors should expect

a. to take responsibility for obtaining the client's consent for the predecessor to give information about prior audits
b. to obtain copies of some or all of the predecessor auditor's audit documentation
c. to conduct interviews with the partner and manager in charge of the predecessor public accounting firm's engagement
d. all of the answers are correct


Answer: d. all of the answers are correct

Generally accepted auditing standards require that auditors always prepare and use

a. the written time budgets and schedules for performing each audit
b. a written audit plan
c. a written client consent to discuss audit matters with prospective auditors
d. a written planning memorandum explaining the auditors' understanding of the client's business


Answer: b. a written audit plan

An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited

An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. If the auditor concludes that the financial statements do not require revision, but the entity refuses to revise or eliminate the material inconsistency, the auditor may 

A. Issue an "except for" qualified opinion after discussing the matter with the entity's board of directors.
B. Consider the matter closed since the other information is not in the audited financial statements.
C. Disclaim an opinion on the financial statements after explaining the material inconsistency in a separate explanatory/emphasis-of-matter paragraph.
D. Revise the auditor's report to include a separate explanatory/emphasis-of- matter paragraph describing the material inconsistency.


Answer: Revise the auditor's report to include a separate explanatory/emphasis-of- matter paragraph describing the material inconsistency.

An auditor's report on financial statements prepared in accordance with a basis of accounting other than generally accepted accounting principles should include all of the following except: 

A. An opinion as to whether the basis of accounting used is appropriate under the circumstances.
B. An opinion as to whether the financial statements are presented fairly in conformity with the other basis of accounting.
C. Reference to the note to the financial statements that describes the basis of presentation.
D. A statement that the basis of presentation is a basis of accounting other than generally accepted accounting principles.


Answer: An opinion as to whether the basis of accounting used is appropriate under the circumstances.

Which of the generally accepted auditing standards of reporting would not normally apply to special reports such as cash basis statements? 

A. First standard.
B. Second standard.
C. Third standard.
D. Fourth standard.


Answer: First standard.