Advanced Auditing Final Exam With Correct Solutions

The auditor's judgment concerning the overall fairness of the presentation of financial position, results of operations, and cash flows is applied within the framework of: A: quality control. B: generally accepted auditing standards, which include the concept of materiality. C: the auditor's evaluation of the audited company's internal control. D: the applicable financial reporting framework (i.e., GAAP in the United States). - D: the applicable financial reporting framework (i.e., GAAP in the United States). Inquiries of warehouse personnel concerning possible obsolete or slow moving inventory items provide assurance about the PCAOB assertion of: A: completeness. B: existence. C: presentation. D: valuation. E: rights and obligations. - D: valuation. Assurance services involve all of the following, except: A: relevance as well as the reliability of information. B: non financial information as well as traditional financial statements. C: providing absolute rather than reasonable assurance. D: electronic databases as well as printed reports. - C: providing absolute rather than reasonable assurance. According to PCAOB Auditing Standard No. 2201 (AS 2201), the auditor should identify significant accounts and disclosures and their relevant assertions. Which of the following financial statement assertions is not explicitly identified in AS 2201? A: Completeness. B: Valuation or allocation. C: Accuracy. D: Existence or occurrence. E: All of these are assertions identified in AS 5. - C: Accuracy. Which of the following is a management assertion regarding account balances at the period end? A: Transactions and events that have been recorded have occurred and pertain to the entity. B: Transactions and events have been recorded in the proper accounts. C: The entity holds or controls the rights to assets, and liabilities are obligations of the entity. D: Amounts and other data related to the transactions and events have been recorded appropriately. - C: The entity holds or controls the rights to assets, and liabilities are obligations of the entity. Which of the following is not included in the American Accounting Association (AAA) definition of auditing? A: Potential conflict of interest. B: Systematic process. C: Assertions about economic actions. D: Established criteria. - A: Potential conflict of interest. The audit objective that footnotes in the financial statements should be clear and expressed such that the information is easily conveyed to the readers of the financial statements is related most closely with which of the ASB presentation and disclosure assertions? A: Occurrence. B: Rights and obligations. C: Comprehensibility. D: Understandability. - C: Comprehensibility. The audit objective that all the transactions and accounts presented in the financial statements represent real assets, liabilities, revenues, and expenses is related most closely to which of the PCAOB assertions? A: Existence or occurrence. B: Rights and obligations. C: Completeness. D: Presentation and disclosure. - A: Existence or occurrence. The process of a CPA obtaining a certificate and license in a state other than the state in which the CPA's certificate was originally obtained is referred to as A: substantial equivalency. B: quid pro quo. C: relicensing. D: re-examination. - A: substantial equivalency. The confirmation of an account payable balance selected from the general ledger provides primary evidence regarding which management assertion? A: Completeness. B: Valuation. C: Allocation. D: Existence. - D: Existence Which of the following best demonstrates the concept of professional skepticism? A. Relying more extensively on external evidence rather than internal evidence. B. Focusing on items that have a more significant quantitative effect on the entity's financial statements. C. Critically assessing verbal evidence received from the entity's management. D. Evaluating potential financial interests held by auditors in the client. - C. Critically assessing verbal evidence received from the entity's management.