Accelerated stock repurchase journal entries

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It created the Public Company Accounting Oversight Board PCAOB as a replacement for the Financial Accounting Standards Board. Definition Which of the following is not correct relating to the Sarbanes-Oxley Act? It toughens penalties for corporate fraud. It restricts the types of consulting CPAs may perform for audit clients.

It eliminates a significant portion of the accounting profession's system of self-regulation. Different interests may exist between the company preparing the statements and the persons using the statements. Which of the following best describes the reason why independent auditors report on financial statements? A management fraud may exist and it is more likely to be detected by independent auditors.

A misstatement of account balances may exist and is generally corrected as the result of the independent auditors' work. Poorly designed internal control may be in existence. Future improvements to accomplish the goals of management. Operational auditing is primarily oriented toward: The accuracy of data reflected in management's financial records. The verification that a company's financial statements are fairly presented. Past protection provided by existing internal control.

A summary of findings rather than assurance is most likely to be included in a n: Definition The Statements on Auditing Standards have been issued by the: Financial Accounting Standards Board. Securities and Exchange Commission. Federal Bureau of Investigation. Definition The risk associated with a company's survival and profitability is referred to as: Statements on Auditing Standards SASs.

Definition The serially-numbered pronouncements issued by the Auditing Standards Board over a period of years are known as: Auditing Statements of Position ASPs. Accounting Series Releases ASRs. Statements on Auditing Principles SAPs. Conducts operational audits and reports the results to Congress. Definition The Government Accountability Office GAO: Is primarily concerned with rapid processing of all accounts payable incurred by the federal government.

Is a multinational organization of professional accountants. Is primarily concerned with budgets and forecasts approved by the SEC. Members, regardless of whether they are in public practice, are required to meet such requirements. Definition Which statement is correct with respect to continuing professional education CPE requirements of members of the AICPA? Only members employed by the AICPA are required to take such courses. Only members in public practice are required to take such courses.

There is no requirement for members to participate in CPE. State Boards of Accountancy. Definition The right to practice as a CPA is given by which of the following organizations? The General Accounting Office. Definition Which of the following terms best describes the audit of a taxpayer's tax return by an IRS auditor?

Professional standards for CPAs. Definition Historically, which of the following has the AICPA been most concerned with providing? Professional guidance for regulating financial markets. Standards guiding the conduct of internal auditors. Staff support to Congress. Definition The organization charged with protecting investors and the public by requiring full disclosure of financial information by companies offering securities to the public is the: Government Accounting Standards Boards.

Understanding as to the reasons for the change of auditors. Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor's: Opinion of any subsequent events occurring since the predecessor's audit report was issued B. Understanding as to the reasons for the change of auditors C. Awareness of the consistency in the application of GAAP between periods D. Evaluation of all matters of continuing accounting significance.

Disagreements with management as to auditing procedures. A successor auditor most likely would make specific inquiries of the predecessor auditor regarding: Specialized accounting principles of the client's industry B. The competency of the client's internal audit staff C. The uncertainty inherent in applying sampling procedures D.

The prospective client's consent to make inquiries of the predecessor auditor, if any. Before accepting an engagement to audit a new client, a CPA is required to obtain: An understanding of the prospective client's industry and business B.

A management representation letter C. A preliminary understanding of the prospective client's control environment D. After performing our preliminary analytical procedures we will discuss with you the other procedures we consider necessary to complete the engagement.

Which of the following statements would least likely appear in an auditor's engagement letter? Fees for our services are based on our regular per diem rates, plus travel and other out-of-pocket expenses. During the course of our audit we may observe opportunities for economy in, or improved controls over, your operations.

Our engagement is subject to the risk that material errors or irregularities, including fraud and defalcations, if they exist, will not be detected. The auditor's responsibility for ensuring that the audit committee is aware of any significant deficiencies that come to the auditor's attention. An auditor is required to establish an understanding with a client regarding the services to be performed for each engagement. This understanding generally includes: Management's responsibility for errors and the illegal activities of employees that may cause material misstatement B.

The auditor's responsibility for ensuring that the audit committee is aware of any significant deficiencies that come to the auditor's attention C. Management's responsibility for providing the auditor with an assessment of the risk of material misstatement due to fraud D. The auditor's responsibility for determining preliminary judgments about materiality and audit risk factors. Management's responsibility for the entity's compliance with laws and regulations.

Which of the following matters generally is included in an auditor's engagement letter? Management's responsibility for the entity's compliance with laws and regulations B. The factors to be considered in settling preliminary judgments about materiality C.

Management's vicarious liability for illegal acts committed by its employees D. The auditor's responsibility to search for significant internal control deficiencies. Management's acknowledgment of its responsibility for maintaining effective internal control.

An auditor's engagement letter should include: Management's acknowledgment of its responsibility for maintaining effective internal control B. The auditor's preliminary assessment of the risk factors relating to misstatements arising from fraudulent financial reporting C.

A reminder that management is responsible for illegal acts committed by employees D. A request for permission to contact the client's lawyer for assistance in identifying litigation, claims, and assessments. A document in an auditor's working papers includes the following statement: However, we will inform you of fraud that comes to our attention, unless it is inconsequential.

Letter of audit inquiry D. Management's responsibility to provide certain written representations to the auditor. An auditor's engagement letter most likely would include a statement regarding: Management's responsibility to provide certain written representations to the auditor B.

Conditions under which the auditor may modify the preliminary judgment about materiality C. Internal control activities that would reduce the auditor's assessment of control risk D. Materiality matters that could modify the auditor's preliminary assessment of fraud risk.

Potential risks of material misstatement. In developing a preliminary audit strategy, an auditor should consider A. Whether the allowance for sampling risk exceeds the achieved upper precision limit B. Findings from substantive tests performed at interim dates C. Whether the inquiry of the client's attorney identifies any litigation, claims, or assessments not disclosed in the financial statements D.

In designing written audit programs, an auditor should establish specific audit objectives that relate primarily to the A. Timing of audit procedures B. Cost-benefit of gathering evidence C. Selected audit techniques D. Determining the extent of involvement of the client's internal auditors.

Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit? Obtaining a written representation letter from the client's management B.

Examining documents to detect illegal acts having a material effect on the financial statements C. Considering whether the client's accounting estimates are reasonable in the circumstances D.

The audit evidence gathered supports the auditor's conclusions. Audit programs should be designed so that A. Most of the required procedures can be performed as interim work. Inherent risk is assessed at a sufficiently low level. The auditor can make constructive suggestions to management. Timing of inventory observation procedures to be performed. The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the A.

Evidence to be gathered to provide a sufficient basis for the auditor's opinion B. Procedures to be undertaken to discover litigation, claims, and assessments C. Pending legal matters to be included in the inquiry of the client's attorney D.

Document the disagreement and ask to be disassociated from the resolution of the matter. A difference of opinion regarding the results of a sample cannot be resolved between the assistant who performed the auditing procedures and the in-charge auditor.

The assistant should A. Accept the judgment of the more experienced in-charge auditor B. Refuse to perform any further work on the engagement C. Document the disagreement and ask to be disassociated from the resolution of the matter D. Notify the client that a serious audit problem exists. Results are consistent with the conclusions to be presented in the auditor's report. The audit work performed by each assistant should be reviewed to determine whether it was adequately performed and to evaluate whether the A.

Auditor's system of quality control has been maintained at a high level. Audit procedures performed are approved in the professional standards.

Audit has been performed by persons having adequate technical training and proficiency as auditors. Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of A. Give guidance to the staff regarding both technical and personnel aspects of the audit.

The senior auditor responsible for coordinating the fieldwork usually schedules a pre-audit conference with the audit team primarily to 1. Give guidance to the staff regarding both technical and personnel aspects of the audit 2.

Provide an opportunity to document staff disagreements regarding technical issues 3. Establish the need for using the work of specialists and internal auditors 4. Discuss staff suggestions concerning the establishment and maintenance of time budgets.

Ordinarily, it would be appropriate to design auditing procedures that would be expected to detect misstatements that aggregate A. Exist independently of the financial statement audit. Inherent risk and control risk differ from detection risk in that they A. Arise from the misapplication of auditing procedures B. May be assessed in either quantitative or nonquantitative terms C.

Exist independently of the financial statement audit D. Can be changed at the auditor's discretion. Assurance provided by substantive tests. The acceptable level of detection risk is inversely related to the A. Assurance provided by substantive tests B. Risk of misapplying auditing procedures C. Preliminary judgment about materiality levels D. Risk of failing to discover material misstatements. Term c Control risk; Detection risk; Inherent risk. Definition Which of the following audit risk components may be assessed in non-quantitative terms?

The entity's financial statements of the prior year. Which of the following would an auditor most likely use in determining the auditor's preliminary judgment about materiality? The results of the initial assessment of control risk B. The anticipated sample size for planned substantive tests C.

The entity's financial statements of the prior year D. The assertions that are embodied in the financial statements. Influence the design of internal control.

In planning an audit of a new client, an auditor most likely would consider the methods used to process accounting information because such methods A. Influence the design of internal control B. Affect the auditor's preliminary judgment about materiality levels C.

Assist in evaluating the planned audit objectives D. Determine the auditor's acceptable level of audit risk. Comparing the financial statements to anticipated results. Which of the following procedures would an auditor most likely perform in planning a financial statement audit? Inquiring of the client's legal counsel concerning pending litigation B.

Comparing the financial statements to anticipated results C. Searching for unauthorized transactions that may aid in detecting unrecorded liabilities D.

Examining computer generated exception reports to verify the effectiveness of internal controls. Knowledge necessary to assess the risk of material misstatement and design further audit procedures. The primary objective of procedure performed to obtain an understanding of the entity and its environment, including its internal control, is to provide an auditor with A.

Knowledge necessary to assess the risk of material misstatement and design further audit procedures B. An evaluation of the consistency of application of management's policies C. A basis for modifying tests of controls D.

Audit evidence to use in assessing inherent risk. When obtaining an understanding of the entity and its environment, including its internal control, the auditor is required to document: The discussion concerning the susceptibility of the financial statements to material misstatement II.

The risk assessment procedures performed A. Neither I nor II. Audit procedures that are effective for detecting an unintentional misstatement may be ineffective for an intentional misstatement that is concealed through collusion.

Which of the following statements describes why a properly designed and executed audit may not detect a material misstatement in the financial statements resulting from fraud? An audit is designed to provide reasonable assurance of detecting material errors, but there is no similar responsibility concerning fraud.

The factors considered in assessing control risk indicated an increased risk of intentional misstatements, but only a low risk of unintentional errors in the financial statements. The auditor did not consider factors influencing audit risk for account balances that have effects pervasive to the financial statements taken as a whole.

An auditor should design the audit to provide reasonable assurance of detecting errors and fraud that are material to the financial statements. Which of the following statements reflects an auditor's responsibility for detecting errors and fraud? An auditor is responsible for detecting employee errors and simple fraud, but not for discovering fraud involving employee collusion or management override.

An auditor should plan the audit to detect errors and fraud that are caused by departures from GAAP. An auditor is not responsible for detecting errors and fraud unless the application of GAAS would result in such detection. The entity's industry is experiencing declining customer demand. Which of the following characteristics most likely would heighten an auditor's concern about the risk of material misstatements in an entity's financial statements? Employees who handle cash receipts are not bonded.

Stock Dividends and Repurchases

Bank reconciliations usually include in-transit deposits. Equipment is often sold at a loss before being fully depreciated. Inability to generate cash flows from operations while reporting substantial earnings growth.

Which of the following factors would most likely heighten the auditor's concern about the risk of fraudulent financial reporting?

Inability to generate cash flows from operations while reporting substantial earnings growth B. Management's lack of interest in increasing the entity's stock trend C. Large amounts of liquid assets that are easily convertible into cash D. In ability to borrow necessary capital without granting debt covenants.

Consider whether the results of audit procedures affect the assessment of the risk of material misstatement due to fraud. Which of the following procedures would an auditor most likely perform during an audit engagement's overall review stage in formulating an opinion on an entity's financial statements? Obtain assurance from the entity's attorney that all material litigation has been disclosed in the financial statements B.

Verify the clerical accuracy of the entity's proof of cash and its bank cutoff statement C. Determine whether inadequate provisions for the safeguarding of assets have been corrected D. The disclosure of fraudulent activities to parties other than the client's senior management and its audit committee is not ordinarily part of the auditor's responsibility.

Which of the following statements is correct concerning an auditor's responsibility to report fraud? The auditor is required to communicate to the client's audit committee all minor fraudulent acts perpetrated by low-level employees, even if the amounts involved are inconsequential.

The disclosure of material management fraud to principle stockholders is when senior management and the board of directors fail to acknowledge the fraudulent activities.

Fraudulent activities involving senior management of which the auditor becomes aware should be reported directly to the SEC. When assessing the risk of material misstatement, an auditor is required to document: The basis for the assessment II. Significant risks identified and the related controls that were evaluated A. Change the timing of substantive tests from year-end to an interim date. As the acceptable level of detection risk increases, the auditor may: Increase the assessed level of control risk B.

Change the assurance provided by tests of controls by using a larger sample size than planned C. Change the timing of substantive tests from year-end to an interim date D. Change the nature of substantive tests from a less effective to a more effective procedure.

Control policies and procedures are unlikely to pertain to the assertions. An auditor may decide to perform only substantive procedures for specific assertions because the auditor believes: The entity's control environment, monitoring, and control activities are interrelated. Sufficient audit evidence to support the assertions is likely to be available.

More emphasis on tests of control than substantive tests is warranted. Substantive tests to restrict detection risk for significant transactions classes. Regardless of the assessed level of control risk, an auditor would perform some A. Tests of controls to determine the effectiveness of internal control policies B.

Analytical procedures to verify the design of internal control procedures C. Substantive tests to restrict detection risk for significant transactions classes D. Dual-purpose tests to evaluate both the risk of monetary misstatement and preliminary control risk. Which of the following matters is an auditor required to communicate to an entity's audit committee: Disagreements with management about matters significant to the entity's financial statements that have been satisfactorily resolved II.

Initial selection of significant accounting policies in emerging areas that lack authoritative guidance A. Has a significant effect on the entity's financial reporting process. An auditor is obligated to communicate a proposed audit adjustment to an entity's audit committee only if the adjustment: Has not been recorded before the end of the auditor's field work B.

Has a significant effect on the entity's financial reporting process C. Is a recurring matter that was proposed to management the prior year D. Results from the correction of a prior period's departure from GAAP. The effects of significant accounting policies adopted by management in emerging areas for which there is no authoritative guidance.

Which of the following matters would an auditor most likely communicate to an entity's audit committee? A list of negative trends that may lead to working capital deficiencies and adverse financial ratios B. The level of responsibility assumed by management for the preparation of the financial statements C. Difficulties encountered in achieving a satisfactory response rate from the entity's customers in confirming accounts receivables D. The degree of reliance the auditor placed on the management representation letter.

Which of the following is an auditor not required to communicate to an entity's audit committee? Significant adjustments arising from the audit that were recorded by management B. The basis for the auditor's conclusions about the reasonableness of management's sensitive accounting estimates C. The level of responsibility assumed by the auditor under generally accepted auditing standards D. Bank statements obtained from the client.

Which of the following types of audit evidence is the most persuasive? Prenumbered client purchase order forms B. Client work sheets supporting cost allocations C. Bank statements obtained from the client D. A recalculation of bad debt expense. Which of the following procedures would yield the most appropriate evidence? A scanning of trial balances B. An inquiry of client personnel C. A comparison of beginning and ending retained earnings D. Which of the following procedures would be most effective in reducing attestation risk?

Discussion with responsible individuals B. Examination of evidence C. Inquiries of senior management D. Suspense debits that management believes will benefit future operations. A client uses a suspense account for unresolved questions whose final accounting has not been determined. If a balance remain in the suspense account at year end, the auditor would be most concerned about A. Suspense debits that management believes will benefit future operations B. Suspense debits that the auditor verifies will have realizable value to the client C.

Suspense credits that management believes should be classified as "Current liability" D. Suspense credits that the auditor determines to be customer deposits. An auditor scans a client's investment records for the period just before and just after the year end to determine that any transfers between categories of investments have been properly recorded. The primary purpose of this procedure is to obtain evidence about management's financial statement assertions of A.

The auditor's inventory observation test counts are traced to the client's inventory listing to test for which of the following financial statement assertions? Valuation or Allocation D. Performing analytical procedures designed to disclose differences from expectations. An entity's income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts. The auditor most likely could have detected this misstatement by: Tracing a sample of journal entries to the general ledger B.

Evaluating the effectiveness of internal control policies and procedures C. Investigating the reconciliations between controlling accounts and subsidiary records D. An auditor may achieve audit objectives related to particular assertions by A. Performing analytical procedures B. Adhering to a system of quality control C. Preparing auditor working papers D. Increasing the level of detection risk. Obtain additional evidence regarding the valuation of inventory. At the conclusion of an audit, an auditor is reviewing the evidence gathered in support of the financial statements.

With regard to the valuation of inventory, the auditor concludes that the evidence obtained is not sufficient to support management's representations. Which of the following actions is the auditor most likely to take? Consult with the audit committee and issue a disclaimer of opinion B. Consult with the audit committee and issue a qualified opinion C.

Obtain additional evidence regarding the valuation of inventory D. Obtain a statement from management supporting their inventory valuation. Transactions selected for testing are not supported by proper documentation.

Which of the following circumstances most likely would cause an auditor to consider whether material misstatements exist in an entity's financial statements?

Management places little emphasis on meeting earnings projections. The board of directors makes all major financing decisions. Significant deficiencies previously communicated to management are not corrected. Differences between reconciliations of control accounts and subsidiary records are not investigated. Which of the following circumstances most likely would cause an auditor to suspect that material misstatements exist in a client's financial statements?

The assumptions used in developing the prior year's accounting estimates have changed. Negative confirmation requests yield fewer responses than in the prior year's audit. Management consults with another CPA firm about complex accounting matters. Place limited reliance on the work performed by investing stock market timing system internal auditors.

In planning to use the internal auditors to provide assistance in performing the audit, the independent auditor most likely will A. Place limited reliance on the work performed by the internal auditors B. Decrease the extent of the tests of control needed to support the assessed level of detection risk C. Increase the extent of the procedures needed to reduce control risk to an acceptable level D.

Avoid using the work performed by the internal auditors. Educational background and professional certification of internal auditors. When assessing the internal auditors' competence, the independent CPA should obtain information about the A. Organizational level shanghai stock exchange market cap which internal auditors report B. Educational stock market courses in dubai and professional certification of internal auditors C.

Policies prohibiting internal auditors from auditing areas where relatives are employed in important or audit-sensitive positions D. Policies prohibiting internal auditors from auditing areas where they were recently assigned or are scheduled to be assigned on completion of their responsibilities as internal auditors.

Quality of the internal auditor's working paper documentation. In assessing the competence of the internal auditor, an independent CPA most likely would obtain information about the: Quality of the internal auditor's working paper documentation B.

Organization's commitment to integrity and ethical values C. Influence of management on the scope of the internal auditor's duties D. Organizational level to which the internal auditor reports. Term c Obtaining an understanding of internal control; Performing tests stock market terms black swan event controls; Performing substantive tests.

Definition During an audit, an internal auditor may provide direct assistance to an independent CPA in a Obtaining an understanding of internal control b Obtaining an understanding of internal control; Performing tests of controls c Obtaining an understanding of internal control; Performing tests of controls; Performing substantive tests d None of the above.

Complement, but do not replace, substantive tests designed to support the assertion. When considering the use of management's written representations as audit evidence about the completeness assertion, an auditor should understand that such representations: Complement, but do not replace, substantive tests designed to support the assertion B.

Constitute sufficient evidence to support the assertion when considered in combination with the assessment of control risk C. Replace the assessment of control risk as evidence to support the assertion D. Are not part of the audit evidence considered to support the assertion.

The possibility of a misunderstanding concerning management's responsibility for the financial statements. A purpose of a management representation letter is to reduce A. Audit risk to an aggregate level of misstatement that could be considered material B. An auditor's responsibility to detect material misstatements only to the extent that the letter is relied on C. The possibility of a misunderstanding concerning management's responsibility for the financial statements D.

The scope of an auditor's make money student loan bubble concerning related party transactions and subsequent events. Employees' actions affect the auditor's ability to rely on center gravity stock market data representations.

An auditor how to sell australian shares in nz discovers that a client's employees have paid small bribes to public officials most likely would withdraw from the engagement if the A. Client receives financial assistance from a federal government agency B. Audit evidence that is necessary to prove the illegal acts were committed does not exist C.

Employees' actions affect the auditor's ability to rely on management's representations D. Notes to the financial statements fail to disclose the employees' actions. The date of the management representation letter should be as of the date of the A. Latest interim financial information C. Latest related party transaction. Report on internal control B. Management representation letter D. Management's compliance with contractual agreements that may affect the financial statements.

For which of the following matters should an auditor obtain written management representations? Management's cost-benefit justifications for not correcting internal control weaknesses Past euro dollar exchange rates. Management's knowledge of future plans that may affect the price of the entity's stock C.

Management's compliance with contractual agreements that may affect the financial statements D. Management's acknowledgement of its responsibility for employees' violations of laws. The availability of minutes of stockholders' and directors' meetings. To which of the following matters would materiality limits not apply in obtaining written management representations? The availability of minutes of stockholders' and directors' meetings B. Losses from purchase commitments at prices in excess of market value C.

The disclosure of compensating balance arrangements involving related parties D. Accelerated stock repurchase journal entries of obsolete inventory to net realizable value. No events have occurred subsequent to the balance sheet date that require adjustment to, or disclosure in, the financial statements.

Which of the following expressions most likely would be included in a management representation letter? There are no significant deficiencies identified during the prior-year's audit of which the audit committee of the board of directors is unaware.

We do not intend to provide any information that may be construed to constitute a waiver of the attorney-client privilege D. Certain computer files and other required evidential matter may exist only for a short period of time and only in computer-readable form.

Sufficient audit evidence has been made available to the auditor to permit the issuance of an unqualified opinion. Which of the following statements ordinarily is not included among the written representations made by the chief executive officer and the chief financial officer?

There are no unasserted claims or assessments that our lawyer has advised us are probable of assertion and must be disclosed. We have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities. No events have occurred subsequent to the balance sheet date that would require adjustment to, or disclosure in, the financial statements. Provide the principal support for the auditor's report.

An auditor's working papers serve mainly to: Provide the principal support for the auditor's report B. Satisfy the auditor's responsibilities concerning the Code of Professional Conduct C. Monitor do nurses make more money than sonographers effectiveness of the CPA firm's quality control procedures D.

Document the level of independence maintained by the auditor. The audit working paper that reflects the major components of an amount binomial option tree example in the financial statements is the: Interbank transfer schedule B.

A flowchart depicting the segregation of duties and authorization of transactions. Which of the following is not required documentation in an audit in accordance with GAAS?

A written engagement letter formalizing the level of service to be rendered B. A flowchart depicting the segregation of duties and authorization of transactions C. A written audit program describing the necessary procedures to be performed D.

Written representations from management. Client engagement letter B. Report on compliance with laws and regulations C. Attestation report on an entity's internal control. Borrowing money at an interest rate significantly below the market rate. Which of the following most how to trade slv options would indicate the existence of related parties?

Writing down obsolete inventory just before year-end B. Failing to correct previously identified internal control deficiencies C.

Depending on a single product for the success of the entity D. Selling real estate at a price significantly different from appraised russian stock exchange capitalization. Which of the following events most likely would indicate the existence of related parties?

Granting stock options to key executives at favorable prices B. High turnover of senior management and members of the board of directors C. Failure to correct internal control weaknesses on a timely basis D. Obtain an understanding of the business purpose of the transaction. After determining that a related party transaction has, in fact, occurred, an auditor should A. Add a separate paragraph to the auditor's standard report to explain the transaction B.

Perform analytical procedures to verify whether similar transactions occurred, but were not recorded C. Obtain an understanding of the business purpose of the transaction D. Substantiate that the transaction was consummated on terms equivalent to an arm's-length transaction. The business structure may be deliberately designed to obscure related party transactions.

An auditor searching for related party transactions should obtain an understanding of each subsidiary's relationship to the total entity because A.

Intercompany transactions may have been consummated on terms equivalent to arm's-length transactions. This may reveal whether particular transactions would have taken place if the parties had not been related. This may permit the audit of intercompany balances to be performed as of concurrent dates. Reviewing confirmations of compensating balance arrangements. Which of the following procedures most likely could assist an auditor in identifying related party transactions?

Performing tests of controls highlow binary options scam the segregation of duties B. Evaluating the reasonableness of management's accounting estimates C. Reviewing confirmations of compensating balance arrangements D. Scanning the accounting records of recurring transactions. Stating that a particular related party transaction occurred on terms equivalent to those that would have prevailed in an arm's-length transaction.

An auditor most likely would modify an unqualified opinion if student stock trader cheats entity's notes to the financial statements include a not on related party transactions A.

Disclosing loans to related parties at interest rates significantly below prevailing market rates B. Describing an exchange of real estate for similar property in a nonmonetary related party transaction C.

Stating that a particular related party transaction occurred on terms equivalent to those that would have prevailed in an arm's-length transaction D. Presenting the dollar volume of related party transactions and the effects of any change in the method of establishing terms from prior periods. Perpetuate and conceal errors and fraud. Proper segregation of duties reduces the opportunities to allow persons to be in positions to both A. Journalize entries and prepare financial statements B.

Record cash receipts and cash disbursements C. Establish internal controls and authorize transactions D. Affects management's financial statement assertions. In an audit of financial statements, an auditor's primary consideration regarding an internal control policy or procedure is whether the policy or procedure A. Reflects management's philosophy and operating style B. Affects management's financial statement assertions Past euro dollar exchange rates. Provides adequate safeguards over access to assets D.

Enhances management's decision-making processes. The overall attitude and awareness of an entity's board of directors concerning the importance of internal control usually is reflected in its A.

System of segregation of duties C. Safeguards over access to assets. Management is dominated by one individual. Management philosophy and operating style most likely would have indian stock market bse listed companies significant influence on an entity's control environment when A.

The internal auditor reports directly to management B. Management forex balikbayan box chicago dominated by one individual C. Accurate management job descriptions delineate specific duties D. The audit committee actively oversees the financial reporting process. Management is dominated by on individual who is also a shareholder. Management's attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity's usd to inr rate today environment when A.

External policies established by parties outside the entity affect its accounting practices. Internal auditors have direct access to the board of directors and the entity's management. The audit committee is active in overseeing forex rate today in philippines entity's financial reporting policies. The adequacy of the accounting records.

Which of the following factors most likely would influence an auditor's determination of the auditability of an entity's financial statements? The complexity of the accounting system B. The existence of related party transactions C. The adequacy of the accounting records D. The operating effectiveness of control procedures. Internal control policies and procedures may be ineffective due to mistakes in judgment and personal. When considering internal control, an auditor should be aware of the concept of reasonable assurance, which recognizes that A.

Internal control policies and procedures may be ineffective due to mistakes in judgment and personal carelessness. Adequate safeguards over access to assets and records should permit an entity to maintain proper accountability. Establishing and maintaining internal control westfield chermside trading hours new years day an important responsibility of management.

The cost of an entity's internal control should not exceed the benefits expected to be derived. The integrity of the entity's management is suspect. Which of the following auditor concerns most likely could be so serious that the auditor concludes that a profitable trading strategy binary options autotrader statement audit cannot be conducted?

The entity has no formal written code of conduct. Procedures requiring segregation of duties are subject to management override. Management fails to modify prescribed controls for changes in conditions. The chief financial officer waived approvals on all checks broker in kingdom stock united states one vendor to expedite payment.

Which of the following events occurring in the year under audit would most likely indicate that internal controls utilized in previous years may be inadequate in the year under audit?

The entity announced that the internal audit function would be eliminated after the balance sheet date. The audit committee chairperson unexpectedly resigned during the year under audit.

The frequency of accounts payable check runs was changed from biweekly to weekly. Entity's 5 min binary options vs regular trading strategy to process and summarize financial data.

An auditor would most likely be concerned with internal control policies and procedures that provide reasonable assurance about the A. Methods average exchange rate chf gbp assigning production tasks to employees B.

Appropriate prices the entity should charge for its products C. Efficiency of management's decision-making process D. The amount of time budgeted to complete the engagement. Which of the following factors would least likely affect the extent of the auditor's consideration of the client's internal controls? The amount of time budgeted to complete the engagement B. The size and complexity of the client C. The nature of specific relevant controls D.

The auditor's prior experience with client operations. Search for significant deficiencies in the operation of the entity's internal control. In obtaining an understanding of an entity's internal control in a financial statement audit, an auditor is not obligated to A.

Determine whether control procedures have been placed in operation B. Perform procedures to understand the design of internal control policies C. Document the understanding of the entity's internal control D. Design of the policies and procedures pertaining to the internal control components. In obtaining an understanding of an entity's internal control policies and procedures that are relevant to audit planning, and auditor is required to obtain knowledge about the A.

Design of the policies and procedures pertaining to the internal control components B. Effectiveness of the policies and procedures that have been placed in operation C. Consistency with which the policies and procedures are currently being applied D. Control procedures related to each principal transaction class and account balance.

Process used to prepare significant accounting estimates. An auditor should obtain sufficient knowledge of an entity's accounting system to understand the A. Safeguards used to limit access to computer facilities B. Process used to prepare significant accounting estimates C. Procedures used to assure proper authorization of transactions D. Policies used to detect the concealment of fraud. Management may establish appropriate procedures but not enforce compliance with them.

When obtaining an understanding of an entity's internal control, an auditor should concentrate on the implementation of the procedures because A. The procedures may be operating effectively but may not be documented.

Management may implement procedures whose costs exceed their benefits. The procedures may be so inappropriate that no reliance is contemplated by the auditor. Observation of client personnel. Which sec pattern day trader definition the cambridge new york livestock auction techniques most likely would provide an auditor with the most assurance about the effectiveness of the operation of an internal control procedure?

Confirmation with outside parties B. Inquiry of client personnel C. Recomputation of account balance amounts D. Evaluate whether internal control procedures operated effectively. The objective of tests of details of transactions performed as tests of controls is to A. Monitor the design and use of entity documents such as prenumbered shipping forms. Determine whether internal control policies and procedures have been commonwealth bank weekend trading victoria in operation.

Detect material misstatements in the account balances of the financial statements. Client records documenting the use of cashmans bookmakers twitter programs. Which of the following types of evidence would an auditor most likely examine to determine whether internal control policies and procedures are operating as designed?

Gross margin information regarding the client's industry B. Confirmations of receivables verifying account balances C. Client records documenting the use of computer programs D. Anticipated results documented in budgets or forecasts. Preparation of system flowcharts. Which of the following audit techniques ordinarily would provide an auditor with the least assurance about the operating effectiveness of an internal control activity?

Inquiry of client personnel B. Inspection of documents and reports C. Observation of client personnel D. If the auditor uses prior audit evidence for several controls, the auditor should test a sufficient portion of them in each audit so that each is tested every third audit.

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Which of the following statements is correct concerning the use of prior audit evidence regarding the operating effectiveness of controls? If the auditor plans to rely on controls that have changed since they were last tested, the auditor should test those controls at least once every three years.

If the auditor plans to rely on controls that have not changed since they were last tested, the auditor should test those controls at least every other year. If the auditor plans to rely on controls that mitigate a significant risk, those controls should be tested at least every other year.

The auditor need not search for deficiencies how to trade forex using camarilla pivot should document and communicate any significant deficiencies and material weaknesses that are discovered. Which of the following statements describes an auditor's obligation to identify deficiencies in the design or operation of internal control?

The auditor should design and apply tests of controls to discover deficiencies that could result in material misstatements. The auditor need not search for deficiencies unless management requests an attestation that "no significant deficiencies were identified in the audit. The auditor should search for deficiencies if the auditor expects to rely on controls. An auditor may communicate some deficiencies during an audit in addition to after the audit's completion.

Which of the following statements is correct concerning deficiencies in internal control identified in an audit of financial statements? An auditor is required to search for control deficiencies during an audit.

All significant deficiencies are also considered to be material weaknesses. An auditor may report that no significant deficiencies were noted during an audit.

Evidence of a lack of objectivity by those responsible for accounting decisions. Which of the following matters would an auditor most likely consider to be a significant deficiency to be communicated to management and those selling royal mail shares bought direct with governance?

Management's failure to renegotiate unfavorable long-term purchase commitments B. Recurring operating losses that may indicate going concern problems C. Evidence of a lack of objectivity by those responsible for accounting decisions D.

Management's current plans to ava forex peace army its ownership equity in the entity.

Increase the assessment of control risk and increase the extent of substantive tests. After testing a client's internal control activities, an auditor discovers a material weakness in the operation of a client's internal controls. Under these circumstances the auditor most likely would A. Issue a disclaimer of opinion about the internal controls as part of the auditor's report B. Increase the assessment of control risk and increase the extent of substantive tests C.

Issue a qualified opinion of this finding as part of the auditor's report D. Euro sterling exchange rate graph live from audit because the internal controls are ineffective.

The significant deficiency has not been corrected. A previously communicated significant deficiency ordinarily should be communicated again if A. The deficiency has a material effect on the auditor's assessment of control risk. The entity accepts that degree of risk because of cost-benefit considerations.

There has been major turnover in upper-level management and the board of directors. Observing the employees as they apply control procedures. Audit evidence concerning segregation of duties ordinarily is best obtained weekly forex trading signals A. Performing tests double bollinger bands afl transactions that corroborate management's financial statement assertions B.

Observing the employees as they apply control procedures C. Obtaining a flowchart of activities performed by available personnel D. Developing audit objectives that reduce control risk.

Deter dishonestly by making employees aware that insurance companies may investigate and prosecute dishonest acts. Employers bond employees who handle cash receipts because fidelity bonds accelerated stock repurchase journal entries the possibility of employing dishonest individuals and A. Protect employees who make unintentional errors from possible monetary damages resulting from their errors B.

Deter dishonestly by making employees aware that insurance companies may investigate and prosecute dishonest acts C. Facilitate an independent monitoring of the receiving and depositing of cash receipts D. Force employees in position of trust to take periodic vacations and rotate their assigned duties. An auditor who uses a transaction cycle approach to assessing control risk most likely would test control activities related to transactions involving the sale of goods to customers with the A.

Collection of receivables B. Purchase of merchandise inventory C. Payment of accounts payable D. Sale of long-term debt. Perform the planned auditing procedures closer to the balance sheet date. Ecn forex metatrader other planning considerations equal, a decrease in the amount of misstatements in a class of transactions that an auditor could tolerate most likely would cause the auditor to A. Apply the planned substantive tests prior to the balance sheet date B.

Perform the planned auditing procedures closer to the balance sheet date C. Increase the assessed level of control risk for relevant financial statement assertions D.

Decrease the extent of auditing procedures to be applied to the class of transactions. In the review of client invoices the auditor should use A. In performing tests of controls over authorization of cash disbursements, which of the following statistical sampling methods would be most appropriate?

Which of the following sampling methods would be used to estimate a numerical estimate of a population, such as a dollar how to bid in binary option trading Inspecting employee time cards for proper approval by supervisors.

For which of the following audit tests would an auditor most likely use attribute sampling? Selecting accounts receivable for confirmation of account balances B.

Inspecting employee time cards for proper approval by supervisors C. Making an independent estimate of the amount of a LIFO inventory D.

Examining invoices in support of the valuation of fixed asset additions. In confirming a client's accounts receivable in prior years, an auditor found that there were many differences between the recorded account balances and the confirmation replies.

These differences, which were not misstatements, required substantial time to resolve. In defining the sampling unit for the current year's audit, the auditor most likely would choose A. Individual overdue balances B. Small account balances D. Estimate whether the dollar amount of inventory is reasonable. An auditor examining inventory most likely would use variables sampling rather than attributes sampling to A. Identify whether inventory items are properly priced B.

Estimate whether the dollar amount of inventory is reasonable C. Discover whether misstatements exist in inventory records D. Determine whether discounts for inventory are properly recorded. The control procedures are operating effectively.

Samples to test internal control procedures are intended to provide a basis for an auditor to conclude whether A. The financial statements are materially misstated. The risk of incorrect acceptance is too high.

Materiality for planning purposes is at a sufficiently low level. An auditor desired to test credit approval on 10, sales invoices processed during the year. The auditor estimated from previous experience that about 2. A sample of invoices was examined and 7 of them were lacking approval.

The allowance for sampling risk was: The cost and effort of selecting additional sample items is low. An auditor may decide to increase the risk of incorrect rejection when A. Increased reliability from the sample is desired. Many differences audit value minus recorded value are expected. Initial sample results do not support the planned level of control risk. Does not support the auditor's planned assessed level of control risk when the true operating effectiveness of the internal control justifies such an assessment.

The likelihood of assessing control risk too high is the risk that the sample selected to test controls A. Does not support the auditor's planned assessed level of control risk when the true operating effectiveness of the internal control justifies such an assessment B.

Contains misstatement that could be material to the financial statements when aggregated with misstatements in other account balances or transactions classes C. Contains proportionately fewer monetary errors or deviations from prescribed internal control structure policies or procedures than exist in the balance or class as a whole D.

Does not support the tolerable error for some or all of management's assertions. More than the deviation rate in the auditor's sample. As a result of tests of controls, an auditor assessed control risk too low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was A. Less than the risk of assessing control risk too low, based on the auditor's sample B. Less than the deviation rate in the auditor's sample C. More than the risk of assessing control risk too low, based on the auditor's sample D.

Control risk based on the auditor's sample is greater than the true operating effectiveness of the client's control activity. As a result of tests of controls, an auditor assesses control risk too high. This incorrect assessment most likely occurred because A.

Control risk based on the auditor's sample is less than the true operating effectiveness of the client's control activity. The auditor believes that the control activity relates to the client's assertions when, in fact, it does not. The auditor believes that he control activity will reduce the extent of substantive testing when, in fact, it will not.

Term c the allowable risk of assessing control risk too low. An auditor should consider the tolerable rate of deviation when determining the number of check requests to select for a test to obtain assurance that all check requests have been properly authorized.

The auditor should also consider a the average dollar value of the check requests; the allowable risk of assessing control risk too low b the average dollar value of the check requests c the allowable risk of assessing control risk too low d None of the above. The sampling unit in a test of controls pertaining to the existence of payroll transactions ordinarily is a an A. Clock card or time ticket B.

Employee Form W-2 C. Employee personnel record D. Be related to preliminary judgments about materiality levels. When planning a sample for a substantive test of details, an auditor should consider tolerable misstatement for the sample. This consideration should A.

Be related to the auditor's business risk B. Not be adjusted for qualitative factors C. Be related to preliminary judgments about materiality levels D.

Not be changed during the audit process. Stratify the cash disbursements population so that the unusually large disbursements are selected. Which of the following courses of action would an auditor most likely follow in planning a sample of cash disbursements if the auditor is aware of several unusually large cash disbursements? Set the tolerable rate of deviation at a lower level than originally planned. Increase the sample size to reduce the effect of the unusually large disbursements.

Continue to draw new samples until all unusually large disbursements appear in the sample. When using classical variables sampling for estimation, an auditor normally evaluates the sampling results by calculating the possible error in either direction.

This statistical concept is known as A. A principal advantage of statistical methods of attribute sampling over nonstatistical methods is that they provide a scientific basis for planning the A. Risk of assessing control risk too low B. Expected population deviation rate C. Measure the sufficiency of the audit evidence obtained. An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to A.

Eliminate the risk of nonsampling errors B. Reduce the level of audit risk and materiality to a relatively low amount C.

Measure the sufficiency of the audit evidence obtained D. Minimize the failure to detect errors and fraud. Lower than assessing control risk too low for the larger population. Given random selection, the same sample size, and the same precision requirement for the testing of two unequal populations, the risk of assessing control risk too low on the smaller population is A. Higher than assessing control risk too low for the larger population B.

Indeterminate relative to assessing control risk too low for the larger population C. Lower than assessing control risk too low for the larger population D. The same as assessing control risk too low for the larger population. May occur in a systematic pattern, thus destroying the sample randomness. An auditor may use a systematic sampling technique with a start at any randomly selected item when performing a test of controls with respect to control over cash receipts.

The biggest disadvantage of this type of sampling is that the items in the population A. Must be systematically replaced in the population after sampling B. May occur in a systematic pattern, thus destroying the sample randomness C. Must be recorded in a systematic pattern before the sample can be drawn D.

May systematically occur more than once in the sample. The population has highly variable recorded amounts. In statistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups if A. Probability proportional to size PPS sampling is used. The auditor's estimated tolerable misstatement is extremely small. The standard deviation of recorded amounts is relatively small.

Term a Variability in the dollar amounts of inventory items; Risk of incorrect acceptance. An auditor is determining the sample size for an inventory observation using mean-per-unit estimation, which is a variables sampling plan.

To calculate the required sample size, the auditor usually determines the a Variability in the dollar amounts of inventory items; Risk of incorrect acceptance b Variability in the dollar amounts of inventory items c Risk of incorrect acceptance d None of the above.

To determine the sample size for a test of controls, an auditor should consider the tolerable deviation rate, the allowable risk of assessing control risk too low, and the A. Expected deviation rate B. Upper precision limit C. Risk of incorrect acceptance D.

Risk of incorrect rejection. In the evaluation of this sample, the auditor decided to increase the level of preliminary assessment of control risk because the A.

Expected deviation rate 2. Has been properly voided. An auditor is testing internal control procedures that are evidenced on an entity's vouchers by matching random numbers with voucher numbers. If a random number matches the number of a voided voucher, that voucher ordinarily should be replaced by another voucher in the random sample if the voucher A.

Constitutes a deviation B. Has been properly voided C. Cannot be located D. Represents an immaterial dollar amount. Modify the planned assessed level of control risk because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate.

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Modify the planned assessed level of control risk because the tolerable rate plus the allowance for sampling risk exceeds the expected population deviation rate. Accept the sample results as support for the planned assessed level of control risk because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate. Accept the sample results as support for the planned assessed level of control risk because the tolerable rate less the allowance for sampling risk equals the expected population deviation rate.

In planning a statistical sample for a test of controls, an auditor increased the expected population deviation rate from the prior year's rate because of the results of the prior year's tests of controls and the overall control environment.

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The auditor most likely would then increase the planned A. Allowance for sampling risk C. Risk of assessing control risk too low D. Sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate. An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when the A.

Sample rate of deviation plus the allowance for sampling risk equals the tolerable rate. Sample rate of deviation is less than the expected rate of deviation used in planning the sample. Tolerable rate less the allowance for sampling risk exceeds the sample rate of deviation. In determining the number of documents to select for a test to obtain assurance that all sales returns have been properly authorized, an auditor should consider the tolerable rate of deviation from the control activity.

The auditor should also consider: The likely rate of deviations II. The allowable risk of assessing control risk too high A. An auditor needs to estimate the dollar amount of the standard deviation of the population to use classical variables sampling.

Which of the following statements is correct concerning the auditor's use of statistical sampling? The selection of zero balances usually does not require special sample design considerations when using PPS sampling.

A classical variables sample needs to be designed with special considerations to include negative balances in the sample. An assumption of PPS sampling is that the underlying accounting population is normally distributed. The calculated audit amounts are approximately proportional to the client's book amounts. The use of the ratio estimation sampling technique is most effective when A. A relatively small number of differences exist in the population. Estimating populations whose records consist of quantities, but not book values.

Large overstatement differences and large understatement differences exist in the population. Term a Expected amount of misstatement; Measure of tolerable misstatement. Which of the following sample planning factors would influence the sample size for a substantive test of details for a specific account?

The auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan. Which of the following statements is correct concerning probability-proportional-to-size PPS sampling, also known as dollar-unit sampling?

The sampling distribution should approximate the normal distribution. Overstated units have a lower probability of sample selection than units that are understated. The sampling interval is calculated by dividing the number of physical units in the population by the sample size. Inclusion of zero and negative balances generally does not require special design considerations. Which of the following would be an advantage in using classical variable sampling rather than PPS sampling?

An estimate of the standard deviation of the population's recorded amounts is not required. The auditor rarely needs the assistance of a computer program to design an efficient sample.

Any amount that is individually significant is automatically identified and selected. If this were the only error discovered by the auditor, the projected error of this sample would be A.

Interpretations of Rule prohibit covered members from owning any stock or other direct investment in audit clients. Covered members include a. All of the above are prohibited. Contingent fees based on savings due to implementation of an information system. Commissions for referring a review client to an insurance agency for additional insurance coverage.

Preparation of a tax return and receive fees based upon the refund received by the client. The client must hire an external CPA to approve all of the journal entries prepared by the auditor. Which of the following conditions is not necessary? The CPA must not assume a management role or function. The client must accept responsibility for the financial statements. To emphasize auditor independence from management, many corporations a.

The auditor is not independent. Definition Which of the following statements is true with respect to the PCAOB and SEC's concept of independence when an auditor both prepares financial statements and audits those financial statements for a client? The auditor is independent if he or she is able to maintain a level of professional detachment. The auditor can audit the financial statements only if the audit process does not culminate in the expression of an opinion on the financial statements.

The auditor cannot audit the financial statements since a lack of integrity exists. Safeguards implemented by the client. Definition Which of the following is not a broad category of threat to auditor independence? Prohibited for clients for whom attestation services are provided. Contingency fee based pricing of accounting services is: Always strictly prohibited in public accounting practice. Never restricted in public accounting practice.

Considered an act discreditable to the profession. A partner in the Oklahoma City office, who does not work on the audit, previously served as controller for the audit client. Which of the following is least likely to impair a CPA firm's independence with respect to a nonpublic audit client in the Oklahoma City office of a national CPA firm?

A partner in the Oklahoma City office owns an immaterial amount of stock in the client. A partner in the Chicago office is also the vice president of finance for the audit client. A distinguishing mark of a profession is its acceptance of responsibility to the public.

Which of the following statements best describes why the profession of certified public accountants has deemed it essential to promulgate a code of professional conduct and to establish a mechanism for enforcing observation of the code?

A prerequisite to success is the establishment of an ethical code that stresses primarily the professional's responsibility to clients and colleagues. A requirement of most state laws calls for the profession to establish a code of ethics. An essential means of self-protection for the profession is the establishment of flexible ethical standards by the professions. Considered discreditable to the profession.

A CPA's retention of client records as a means of enforcing payment of an audit fee is: Considered acceptable by the AICPA Code of Professional Conduct.

Ill advised since it would impair the CPA's independence with respect to the client. A violation of generally accepted auditing standards.

Payable if the audit of the financial statements led to a loan. The AICPA Code of Professional Conduct would be violated if a CPA accepted a fee that was: Fixed by a public authority. Based on a price quotation submitted in competitive bidding. Based on performing work relating to judicial proceedings. When an accountant is not independent, the accountant is precluded from issuing a: Warranting the infallibility of the work performed.

Competence as a certified public accountant includes all of the following except: Having the technical qualifications to perform an engagement. Possessing the ability to supervise and to evaluate the quality of staff work.

Consulting others if additional technical information is needed. A CPA-shareholder of the client corporation. The AICPA Code of Professional Conduct states that a CPA shall not disclose any confidential information obtained in the course of a professional engagement except with the consent of the client. This rule should be understood to preclude a CPA from responding to an inquiry made by: The trial board of the AICPA.

An investigative body of a state CPA society. An AICPA voluntary quality review body. Yes, because the stock would be considered a direct financial interest and, consequently, materiality is not a factor.

A CPA sole practitioner purchased stock in a client corporation and placed it in a trust as an educational fund for the CPA's minor child. The trust securities were not material to the CPA but were material to the child's personal net worth. Would the independence of the CPA be considered to be impaired with respect to the client? Yes, because the stock would be considered an indirect financial interest that is material to the CPA's child. No, because the CPA would not be considered to have a direct financial interest in the client.

No, because the CPA would not be considered to have a material indirect financial interest in the client. An audit partner in the Eloi office.

ABC Company is audited by the Phoenix office of Willingham CPAs. Which of the following individuals would be least likely to be considered a "covered member" by the independence standard?

Staff assistant on the audit. A tax partner in Phoenix who performs no attest services for ABC Company or for any other clients. The partner in charge of Willingham CPAs she does no work on the ABC Company Audit.

Which of the following statements is true with respect to the PCAOB and SEC's concept of independence when an auditor both prepares financial statements and audits those financial statements for a client? Appearance of independence may be lacking. A small CPA firm provides audit services to a large local company. Almost eighty percent of the CPA firm's revenues come from this client. Which statement is most likely to be true? The small CPA firm does not have the proficiency to perform a larger audit.

The situation is satisfactory if the auditor exercises due skeptical negative assurance care in the audit. The CPA's father is president of the audit client. Which of the following family relationships is most likely to impair a CPA's independence with respect to a particular audit client on which the CPA works as a "covered member"? A close relative has a material investment in that client of which the CPA is not aware.

A cousin has an immaterial investment in the client of which the CPA is aware. The CPA's spouse participates in a savings plan sponsored by the client. An unacceptable risk of non-independence exists. AICPA independence requirements suggest that a CPA should evaluate whether a particular threat to independence would lead a reasonable person, aware of all the relevant facts, to conclude that: A questioning mind reveals doubt as to independence.

The accountant is definitely not independent. There is substantial cause for a legal finding of non-independence. Consider the threat from the perspective of a reasonable an informed third party who has knowledge of all the relevant information.

If the AICPA Code of Professional Conduct does not specifically address a threat to auditor independence the auditor should: Conclude that the threat is not significant unless proven so.

Conclude that the threat results in a lack of independence unless it can be shown that no impairment of independence occurs. Consult the Statements on Auditing Standards for guidance. Supporting records not reflected in the client's records e.

Which of the following statements is correct? Client prepared records e. CPA working papers are the joint property of the CPA and the client.

CPA working papers that include copies of client's records are not available to third parties under any circumstances. Staff assistants assigned to the engagement. Which of the following types of employees must be independent of an audit client? Senior auditors assigned to the office that performs the audit. Managers assigned to an office that does not participate in the engagement. All firm professionals, regardless of their position.

Statements on Responsibilities in Tax Practice. Which of the following are not enforceable under the AICPA Code of Professional Conduct? Statements on Auditing Standards. Statements on Standards for Accounting and Review Services. Statements of Standards for Consulting Services. Performance of bookkeeping services for the client.

The AICPA allows an auditor to perform which of the following services for an audit client: Authorization of transactions for the client. Preparation of client source documents.

Preparation and posting of journal entries without the client's approval. A partner in the firm has an investment in a mutual fund that has a direct interest in the client.

Which of the following is least likely to impair independence with respect to an audit client? The client owes the firm for two prior years' audit fees. A partner in the CPA firm is the son of the president of the client. The wife of a partner in the firm has a small direct financial interest in the client.

Prohibiting a client's new CPA firm from reviewing the audit working papers after the client has requested the CPA to do so.

Which of the following acts by a CPA would not necessarily be considered an act discreditable to the profession under Rule of the AICPA Code of Professional Conduct? Engaging in discriminatory employment practices. Robbing a convenience store. Knowingly signing a false tax return. Advertising including an indication that the firm has a close relationship with several tax court judges. Which of the following forms of advertising would most likely to be considered to be a violation of Rule of the AICPA Code of Professional Conduct?

Advertising including the types of services offered and the standard fees for the services. Advertising including the experience of the firm's professional staff. Advertising including the percentage of the firm's staff that have CPA certificates. Revoke the offending member's CPA certificate. If a CPA violates the AICPA Code of Professional Conduct, the AICPA Trial Board may do all of the following, except: Admonish the offending member. Suspend the offending member.

Expel the offending member. A "covered member" owns an immaterial amount of stock in an audit client. Which of the following acts by a CPA would be most likely to be a violation of the AICPA Code of Professional Conduct? Assisting a client in preparing a financial forecast. Forming a professional corporation to practice as a CPA. Accepting a fee in a tax matter relating to an administrative proceeding.

The covered member continues to hold an immaterial indirect financial interest in the client. In which of the following circumstances would a covered member be considered independent when performing the audit of the financial statements of a new client for the year ended December 31, 20X3?

The covered member resigned on January 17, 20X3 from the board of directors of the client, prior to accepting the new audit engagement.