Wilmington University BAC 401#F20-A-WK7-M-TE-QaA AUDITING- WEEK 7- MID-TERM EXAM- QUESTIONS AND ANSWERS.

#F’20-A-WK7-MTE AUDITING- WEEK 7- MID-TERM EXAM- QUESTIONS & ANSWERS 35 QUESTIONS 33 MULTIPLE CHOICE QUESTIONS & 2 Fill in the BLANK QUESTIONS 1. An independent auditor must have which of the following? A. Technical training that is adequate to meet the requirements of a professional. B. A preexisting and well-informed point of view with respect to the audit. C. A background in many different disciplines. D. Experience in taxation that is sufficient to comply with generally accepted auditing standards. 2. Which of the following steps should an auditor perform first to determine the existence of related parties? A. Request a list of all related parties from management. B. Examine invoices, contracts, and purchasing orders. C. Review the company's business structure. D. Review proxy and other materials filed with the SEC. 3. Which of the following procedures is considered a test of controls? A. An auditor interviews and observes appropriate personnel to determine segregation of duties. B. An auditor reviews the entity's check register for unrecorded liabilities. C. An auditor evaluates whether a general journal entry was recorded at the proper amount. D. An author reviews the audit workpapers to ensure proper sign-off. 4. What is an auditor's primary method to corroborate information on litigation, claims, and assessments? A. Reviewing the response from the client's lawyer to a letter of audit inquiry. B. Examining legal invoices sent by the client's attorney. C. Verifying attorney-client privilege through interviews. D. Reviewing the written representation letter obtained from management. 5. Which of the following management roles would typically be acknowledged in a management representation letter? A. Management has the responsibility for the design of controls to detect fraud. B. Management communicates its views on ethical behavior to its employees. C. Management's knowledge of fraud is communicated to the audit committee. D. Management's compensation is contingent upon operating results. 6. What type of evidence would provide the highest level of assurance in an attestation engagement? A. Evidence obtained from independent sources. B. Evidence secured solely from within the entity. C. Evidence obtained indirectly. D. Evidence obtained from multiple internal inquiries. 7. An auditor finds several errors in the financial statements that the client prefers not to correct. The auditor determines that the errors are not material in the aggregate. Which of the following actions by the auditor is most appropriate? A. Determine the errors in the summary of uncorrected errors, and document the conclusion that the errors do not cause the financial statements to be misstated. B. Document the conclusion that the errors do not cause the financial statements to be misstated, but do not summarize uncorrected errors in the working papers. C. Summarize the uncorrected errors in the working papers, but do not document whether the errors cause the financial statements to be misstated. D. Do not summarize the uncorrected errors in the working papers, and do not document a conclusion about whether the uncorrected errors cause the financial statements to be misstated. 8. An accountant compiled the financial statements of a non-issuer in accordance with Statements on Standards for Accounting and Review Services (SSARS). If the accountant has an ownership interest in the entity, which of the following statements is correct? A. The accountant should include the statements "I am not independent with respect to the entity" in the compilation report. B. The accountant should refuse the compilation engagement. C. A report need not be issued for a compilation of a non-issuer. D. The accountant should include the disclaimer "I am an owner of the entity" in the report.