AICPA CPA-Auditing Quiz 2 Topic 2 Questions 6-10

Question: 1

Which of the following types of audit evidence generally is the most reliable?

AInquiries made of management.

BConfirmation of account information.

CAnalytical procedures.

DReview of prior-year audit procedures.

Show Answer

Question: 2

Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit?

AObtaining a written representation letter from the client's management.

BExamining documents to detect illegal acts having a material effect on the financial statements.

CConsidering whether the client's accounting estimates are reasonable in the circumstances.

DDetermining the extent of involvement of the client's internal auditors.
Explanation
Choice 'd' is correct. The auditor considers several factors in planning the nature, timing and extent of auditing procedures. One of these factors is the extent of involvement of the client's internal auditors.
Choice 'a' is incorrect. Representation letters are obtained by the auditor at the end of the audit. The representation letter should not be dated earlier than the date of the auditor's report.
Choice 'b' is incorrect. The auditor does not perform tests to detect illegal acts during the planning process.
Choice 'c' is incorrect. The auditor does obtain and evaluate evidence to support significant accounting estimates, but this occurs subsequent to initial planning.

Show Answer

Question: 3

The accounts receivable turnover ratio increased significantly over a two-year period. This trend could indicate that:

AThe accounts receivable aging has deteriorated.

BThe company has eliminated its discount policy.

CThe company is more aggressively collecting customer accounts.

DCustomer sales have substantially decreased.

Show Answer

Question: 4

An accountant's compilation report on a financial forecast should include a statement that:

AThe forecast should be read only in conjunction with the audited historical financial statements.

BThe accountant expresses only limited assurance on the forecasted statements and their assumptions.

CThere will usually be differences between the forecasted and actual results.

DThe hypothetical assumptions used in the forecast are reasonable in the circumstances.

Show Answer

Question: 5

An annual shareholders' report includes audited financial statements and contains supplementary information required by GAAP. Is it permissible for the auditor to report on such information?

ANo, because such reporting may lead to the belief that the auditor is responsible for the information.

BNo, because the auditor has no responsibility to read the other information in a document containing audited financial statements.

CYes, provided the report provides negative assurance only.

DYes, provided the auditor performs sufficient audit procedures to determine whether the information is fairly stated, in all material respects, in relation to the financial statements.

Show Answer

AICPA CPA-Auditing Quiz:2 Topic:2 Questions:6-10