Audit Quiz ++ Graded Questions and Answers
A - CORRECT ANSWER ✔✔ -An audit of the financial statements of Camden Corporation is
being conducted by an external auditor. The external auditor is expected to:
a) Express an opinion as to the fairness of Camden's financial statements
b) Express an opinion as to the attractiveness of Camden for investment purposes and critique
the wisdom and legality of its business decisions
c) Certify the correctness of Camden's financial statements
d) Make a 100% examination of Camden's records
A - CORRECT ANSWER ✔✔ -Audit committees have been identified as a major factor in
promoting independence in both internal and external auditors. Which of the following is the
most important limitation on the effectiveness of audit committee?
a) Audit committees are composed of independent directors. However, those directors may have
close personal and professional friendships with management
b) Audit committee members are compensated by the organization and thus favor a shareholder's
view
c) Audit committees devote most of their efforts to external audit concerns and do not pay much
attention to internal auditing and the overall control environment
d) Audit committee members do not normally have degrees in the accounting or auditing fields
A - CORRECT ANSWER ✔✔ -Certain individuals may have an attitude, character, or set of
values that permit them to rationalize fraud. Moreover, individuals may have an incentive or be
,under pressure to commit fraud, or circumstances may provide an opportunity. The auditor's
concern about the risk of material misstatements due to fraud is least likely to increased if
management:
a) Consists of many individuals that make operating and financing decisions
b) Commits to unduly agressive forecasts
c) Has an excessive interest in increasing the entity's stock price through use of unduly
aggressive accounting practices
d) Is interested in inappropriate means of minimizing reported earnings for tax-motivated reasons
A - CORRECT ANSWER ✔✔ -In connection with the element of human resources, a CPA
firm's system of quality control should ordinarily provide that all personnel:
a) Participate in professional development activities that enable them to fulfill responsibilities
assigned
b) Possess judgment and motivation
c) Seek assistance from persons having appropriate levels of knowledge, judgment, and authority
d) Demonstrate compliance with peer review directives
A - CORRECT ANSWER ✔✔ -Several sources of US GAAP consulted by an auditor are in
conflict as to the application of an accounting principle. Which of the following should the
auditor consider the most authoritative?
a) FASB Accounting Standards Codification
b) International Financial Reporting Standards (IFRS)
, c) FASB Statements of Financial Accounting Concepts
d) AICPA Issues Papers
A - CORRECT ANSWER ✔✔ -The AICPA peer review standards define three levels of peer
review. The highest level is a(n):
a) System review
b) Engagement Review
c) Report Review
d) Inspection Review
A - CORRECT ANSWER ✔✔ -The nature and extent of a CPA firm's quality control policies
and procedures depend on: 1. The CPA Firm's Size, 2. The Nature of the CPA Firm's Practice, 3.
Cost-Benefit Considerations:
a) Yes, Yes, Yes
b) Yes, Yes, No
c) Yes, No, Yes
d) No, Yes, Yes
A - CORRECT ANSWER ✔✔ -The requirement to promote a culture of quality is most closely
associated with which of the following quality control elements?
a) Leadership responsibilities for quality within the firm
b) Monitoring
A - CORRECT ANSWER ✔✔ -An audit of the financial statements of Camden Corporation is
being conducted by an external auditor. The external auditor is expected to:
a) Express an opinion as to the fairness of Camden's financial statements
b) Express an opinion as to the attractiveness of Camden for investment purposes and critique
the wisdom and legality of its business decisions
c) Certify the correctness of Camden's financial statements
d) Make a 100% examination of Camden's records
A - CORRECT ANSWER ✔✔ -Audit committees have been identified as a major factor in
promoting independence in both internal and external auditors. Which of the following is the
most important limitation on the effectiveness of audit committee?
a) Audit committees are composed of independent directors. However, those directors may have
close personal and professional friendships with management
b) Audit committee members are compensated by the organization and thus favor a shareholder's
view
c) Audit committees devote most of their efforts to external audit concerns and do not pay much
attention to internal auditing and the overall control environment
d) Audit committee members do not normally have degrees in the accounting or auditing fields
A - CORRECT ANSWER ✔✔ -Certain individuals may have an attitude, character, or set of
values that permit them to rationalize fraud. Moreover, individuals may have an incentive or be
,under pressure to commit fraud, or circumstances may provide an opportunity. The auditor's
concern about the risk of material misstatements due to fraud is least likely to increased if
management:
a) Consists of many individuals that make operating and financing decisions
b) Commits to unduly agressive forecasts
c) Has an excessive interest in increasing the entity's stock price through use of unduly
aggressive accounting practices
d) Is interested in inappropriate means of minimizing reported earnings for tax-motivated reasons
A - CORRECT ANSWER ✔✔ -In connection with the element of human resources, a CPA
firm's system of quality control should ordinarily provide that all personnel:
a) Participate in professional development activities that enable them to fulfill responsibilities
assigned
b) Possess judgment and motivation
c) Seek assistance from persons having appropriate levels of knowledge, judgment, and authority
d) Demonstrate compliance with peer review directives
A - CORRECT ANSWER ✔✔ -Several sources of US GAAP consulted by an auditor are in
conflict as to the application of an accounting principle. Which of the following should the
auditor consider the most authoritative?
a) FASB Accounting Standards Codification
b) International Financial Reporting Standards (IFRS)
, c) FASB Statements of Financial Accounting Concepts
d) AICPA Issues Papers
A - CORRECT ANSWER ✔✔ -The AICPA peer review standards define three levels of peer
review. The highest level is a(n):
a) System review
b) Engagement Review
c) Report Review
d) Inspection Review
A - CORRECT ANSWER ✔✔ -The nature and extent of a CPA firm's quality control policies
and procedures depend on: 1. The CPA Firm's Size, 2. The Nature of the CPA Firm's Practice, 3.
Cost-Benefit Considerations:
a) Yes, Yes, Yes
b) Yes, Yes, No
c) Yes, No, Yes
d) No, Yes, Yes
A - CORRECT ANSWER ✔✔ -The requirement to promote a culture of quality is most closely
associated with which of the following quality control elements?
a) Leadership responsibilities for quality within the firm
b) Monitoring
