PA D251 questions with verified answers
A client made a decision to discontinue a major line of business after the balance
sheet date. How should an auditor treat this type of subsequent event ?
a. Disclose and adjust the year - end financial statements
b. Adjust the year - end financial statements
c. Disclose the information in the notes to the financial statements
d. Adjust but do not disclose the information in the year - end financial
statements Ans✓✓✓ c. Disclose the information in the notes to the financial
statements
An auditor concludes that an illegal act has been committed, the act has a
material effect on the financial statements, and the act has not been properly
disclosed. What should the auditor do?
a. Issue a waiver
b. Issue a disclaimer
c. Issue an adverse opinion
d. Issue a limited opinion Ans✓✓✓ c. Issue an adverse opinion
An auditor determines overall materiality of $500,000 would be material to the
income statement and $1,000,000 would be material to the balance sheet. Which
amount would an auditor typically assess performance materiality to be for this
client?
a. $1,000,000
,b. 75% of $1,000,000
c. 75% of $500,000
d. $500,000 Ans✓✓✓ c. 75% of $500,00
An auditor has determined performance materiality has been set too high at the
beginning of the audit. Which procedures should this auditor consider to detect
misstatements?
a. The auditor should perform additional substantive audit procedures
b. The auditor should perform additional control audit procedures.
c. The auditor should perform fewer control audit procedures
d. The auditor should perform fewer substantive procedures Ans✓✓✓ a. The
auditor should perform additional substantive audit procedures
An auditor is reviewing the shipping policy of a large supply company . The title to
goods shipped is not changed until the retailer sells the goods to their customers.
Which primary concern should the auditor have about this practice?
a. The projected volume of the client's inventory to be sold at the retailer's
location
b. The staging of the client's inventory at the retailer's location
c. The amount of the client's inventory stored at the retailer's location
d. The marketing strategy to Ans✓✓✓ c. The amount of the client's inventory
stored at the retailer's location
At which percentage do auditors commonly set posting materiality?
, a. 5 % of planning materiality
b. 6 % of performance materiality
c. 5 % of performance materiality
d. 6 % of planning materiality Ans✓✓✓ a. 5 % of planning materiality
During an annual audit of a client with a fiscal year-end of December 31, an
auditor reviews disbursement records for January 1 of the following fiscal year.
The auditor examines the disbursement records to determine if the client
recorded a related liability in the fiscal year ending December 31. Which
management assertion should be a primary concem while the auditor is
performing this procedure?
a. Presentation and disclosure
b. Completeness
c. Valuation
d. Relevance Ans✓✓✓ b. Completeness
During an engagement, an auditor may be unable to gather sufficient supporting
evidence in order to issue an unqualified opinion. Which agency or organization,
with limited exceptions, will only accept an unqualified opinion?
a. Governmental Accounting Standards Board (GASB)
b. American Institute of Certified Public Accountants (AICPA)
c. Securities and Exchange Commission (SEC)
d. Public Company Accounting Oversight Board ( PCAOB ) Ans✓✓✓ c. Securities
and Exchange Commission (SEC)
A client made a decision to discontinue a major line of business after the balance
sheet date. How should an auditor treat this type of subsequent event ?
a. Disclose and adjust the year - end financial statements
b. Adjust the year - end financial statements
c. Disclose the information in the notes to the financial statements
d. Adjust but do not disclose the information in the year - end financial
statements Ans✓✓✓ c. Disclose the information in the notes to the financial
statements
An auditor concludes that an illegal act has been committed, the act has a
material effect on the financial statements, and the act has not been properly
disclosed. What should the auditor do?
a. Issue a waiver
b. Issue a disclaimer
c. Issue an adverse opinion
d. Issue a limited opinion Ans✓✓✓ c. Issue an adverse opinion
An auditor determines overall materiality of $500,000 would be material to the
income statement and $1,000,000 would be material to the balance sheet. Which
amount would an auditor typically assess performance materiality to be for this
client?
a. $1,000,000
,b. 75% of $1,000,000
c. 75% of $500,000
d. $500,000 Ans✓✓✓ c. 75% of $500,00
An auditor has determined performance materiality has been set too high at the
beginning of the audit. Which procedures should this auditor consider to detect
misstatements?
a. The auditor should perform additional substantive audit procedures
b. The auditor should perform additional control audit procedures.
c. The auditor should perform fewer control audit procedures
d. The auditor should perform fewer substantive procedures Ans✓✓✓ a. The
auditor should perform additional substantive audit procedures
An auditor is reviewing the shipping policy of a large supply company . The title to
goods shipped is not changed until the retailer sells the goods to their customers.
Which primary concern should the auditor have about this practice?
a. The projected volume of the client's inventory to be sold at the retailer's
location
b. The staging of the client's inventory at the retailer's location
c. The amount of the client's inventory stored at the retailer's location
d. The marketing strategy to Ans✓✓✓ c. The amount of the client's inventory
stored at the retailer's location
At which percentage do auditors commonly set posting materiality?
, a. 5 % of planning materiality
b. 6 % of performance materiality
c. 5 % of performance materiality
d. 6 % of planning materiality Ans✓✓✓ a. 5 % of planning materiality
During an annual audit of a client with a fiscal year-end of December 31, an
auditor reviews disbursement records for January 1 of the following fiscal year.
The auditor examines the disbursement records to determine if the client
recorded a related liability in the fiscal year ending December 31. Which
management assertion should be a primary concem while the auditor is
performing this procedure?
a. Presentation and disclosure
b. Completeness
c. Valuation
d. Relevance Ans✓✓✓ b. Completeness
During an engagement, an auditor may be unable to gather sufficient supporting
evidence in order to issue an unqualified opinion. Which agency or organization,
with limited exceptions, will only accept an unqualified opinion?
a. Governmental Accounting Standards Board (GASB)
b. American Institute of Certified Public Accountants (AICPA)
c. Securities and Exchange Commission (SEC)
d. Public Company Accounting Oversight Board ( PCAOB ) Ans✓✓✓ c. Securities
and Exchange Commission (SEC)
