SEC and IRS, Multiple Choices Questions, accounting homework help

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42 Multiple Choices Questions – Please highlight the correct answer within an hour

1

Which of
the following are independent private-sector standard-setting bodies?

  • SEC and IRS

  • National Association of
    State Boards of Accountancy and the American Accounting Association

  • AICPA and IIA

  • FASB and the Governmental Accounting
    Standards Board

    2. When
    providing audit services, the certified public accountant (CPA) is expected to
    be

  • an advocate for the general
    public.

  • independent of the client.

  • indifferent to the effect
    of the financial statements and the audit report.

  • an advocate for the client.

    3. Public
    Company Accounting Oversight Board (PCAOB) standards require the auditor to
    evaluate the effectiveness of the audit committee as part of understanding the
    control environment and monitoring. Which of the following is NOT a factor the
    auditor should consider in making this evaluation?

  • Compensation practices with
    respect to members of the audit committee

  • The audit committee’s responsiveness
    to issues raised by the auditor

  • The clarity with which the
    audit committee’s responsibilities are articulated

  • The independence of the audit committee from
    management

    4. What
    level of assurance does the reader of a private company financial statement
    receive on the company’s system of internal controls?

  • Negative

  • None

  • Reasonable

  • Positive

    5) Section
    18 liability is relatively narrow in scope because it relates to a false or
    misleading statement in documents filed with the

  • Internal Revenue Service
    (IRS).

  • FASB.

  • American Institute of
    Certified Public Accountants (AICPA).

  • Securities and Exchanges Commission (SEC).

    6. The risk that the auditor may unknowingly fail to appropriately
    modify his or her opinion on financial statements that are materially misstated
    is

  • audit risk.

  • control risk.

  • tests of details risk.

  • analytical procedures risk.

    7. Which of the following management
    responsibilities is NOT established under PCAOB standards?

  • To perform cost-benefit
    analysis with respect to internal controls relating to assertions having a
    material effect on the financial statements

  • To present a written
    assessment of the effectiveness of the company’s internal control over
    financial reporting as of the end of the company’s most recent fiscal year

  • To evaluate the
    effectiveness of the company’s internal control over financial reporting using
    suitable criteria

  • To accept responsibility for the
    effectiveness of the company’s internal control over financial reporting

    8. The third phase of the audit involves
    performing audit tests. The primary purpose of this step is to obtain evidence
    about the

  • integrity of management.

  • effectiveness of
    management.

  • effectiveness of the
    internal control structure and fairness of the financial statements.

  • effectiveness of the internal control
    structure.

    9. Which
    of the following assertions is NOT made by management in placing an item in the
    financial statements?

  • Rights and obligations

  • Presentation and disclosure

  • Direct controls

  • Existence or occurrence

    10. When evaluating the planned level of
    substantive tests for each significant financial statement assertion, the
    auditor will consider the evidence obtained from all of the following EXCEPT

  • assessing inherent risk.

  • assessing detection risk.

  • evidence of effectiveness
    of computer control procedures and related follow-up.

  • procedures to understand
    the business and industry, and related completed analytical procedures.

  • evidence about the effectiveness of internal
    controls gained while obtaining an understanding of internal controls.

    11. Probability-proportional-to-size (PPS) sampling should NOT be used
    when

  • the number of units in the
    population is unknown at the start of sampling.

  • book values for sampling
    units are not available.

  • the variability of the
    population is unknown.

  • transactions and balances are tested for
    overstatement.

    12. Specific audit objectives are normally

  • derived from the categories
    of management’s financial statement assertions.

  • the same as the categories
    of management’s financial statement assertions.

  • developed for each item in
    the financial statements and derived from the categories of management’s
    financial statement assertions.

  • developed for each item in the financial
    statements.

    13. When setting the level of materiality on a
    particular engagement, the auditor must consider

  • both the unique
    circumstances pertaining to the entity and the users’ information needs.

  • the users’ information
    needs.

  • neither the unique
    circumstances pertaining to the entity nor the users’ information needs.

  • the unique circumstances pertaining to the
    entity.

    14. The completeness assertion would be violated
    if

  • unbilled shipments occurred
    during the period.

  • disclosure in the
    statements of pledged receivables was inadequate.

  • the allowance for doubtful
    accounts was understated.

  • fictitious sales transactions were included
    in accounts receivable.

    15. The risk that a material misstatement that
    could occur in an assertion will NOT be prevented or detected on a timely basis
    by the entity’s internal controls is

  • audit risk.

  • inherent risk.

  • control risk.

  • rejection risk.

    16. Before accepting an engagement, the auditor
    should evaluate whether other conditions exist that raise questions as to the
    prospective client’s auditability. Which of the following factors would be
    least likely to cause concern about an entity’s auditability?

  • Important evidence
    available only in electronic form

  • Related party transactions

  • Lack of audit trail

  • Disregard of responsibility to maintain
    adequate internal controls

    17. In the audit risk model, audit sampling
    applies to

  • detection risk.

  • control risk and detection
    risk.

  • inherent risk and control
    risk.

  • inherent risk and detection risk.

    18. An inaccurate form of the audit risk model
    would show that

  • detection risk may be
    determined from audit risk, inherent risk, and control risk.

  • increases in control risk
    will cause decreases in detection risk.

  • detection risk is inversely
    related to inherent risk.

  • detection risk is inversely
    related to audit risk.

  • audit risk is directly related to all other
    risks in the model.

    19. There are several paragraphs in the auditor’s
    standard report in internal control over financial reporting. Which paragraph
    defines internal control over financial reporting?

  • Inherent limitations

  • Definition

  • Introductory

  • Scope

    20. If reported sales for 2010 erroneously
    include sales that occur in 2011, the assertion violated on the 2010 statements
    would be

  • valuation or allocation.

  • existence or occurrence.

  • completeness.

  • presentation and disclosure.

    21. Which of the following is NOT a
    characteristic of management’s philosophy and operating style?

  • Conscientiousness and
    conservatism in developing accounting estimates

  • Monitoring policies for
    developing and modifying accounting systems

  • Approach to taking and
    monitoring business risks

  • Its attitudes and actions toward financial
    reporting

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