18 Questions
Why does the need for assurance services arise?
Because there is a potential bias in providing information
What is required of a CPA before accepting an engagement to audit a new client?
Understanding of the prospective client's industry and business
When does management philosophy and operating style significantly influence an entity's control environment?
When management is dominated by one individual
Which of the following is considered adequate documentation in an internal control system?
Accounting clerk initials on the bank reconciliation
What is the correct concern regarding an auditor's assessment of control risk?
Control risk affects detection risk
What is the primary purpose of audit evidence?
To ensure reasonable assurance in financial statements
What does the auditor gather evidential matter in order to do?
Form an opinion with respect to financial assertions
What is the auditor’s responsibility for the detection of client’s noncompliance with laws and regulations compared to errors or fraud?
Greater than for errors or fraud
Which term refers to the measure of the quantity of audit evidence considered necessary to achieve the predetermined acceptable level of detection risk?
Sufficiency
What does 'reasonable assurance' mean in auditing?
Gathering of the audit evidence necessary for the auditor to conclude that there are no material misstatements in the financial statements, taken as a whole
In auditing, what does the auditor aim to achieve by gathering evidential matter?
Minimize any errors or fraud in financial reporting
When it comes to the auditor’s responsibility regarding compliance with laws and regulations, what is true?
Auditors should ensure compliance but only if it directly impacts financial assertions
How should a change in accounting principles that has no material effect on the current year's financial statements but is expected to have a material effect in later years be disclosed?
A footnote to the financial statements in the first year in which the effect becomes substantial.
Which function is considered the least function of the Board of Accountancy?
Preparation of the contents of the CPA licensure examinations and rating of the examination papers.
What is NOT a step that an audit firm should take prior to accepting an audit engagement?
Determining the firm's ability to use due professional care.
What specific inquiries should a successor auditor make of a predecessor auditor before accepting an audit engagement?
Opinion of any subsequent events occurring since the predecessor’s audit report was issued.
Which of the following is NOT a financial assertion that auditors consider during an audit?
Auditor's opinion on future performance
What is one key aspect of audit evidence that helps auditors reduce detection risk?
Utilizing evidence from external sources as well as from internal documents.
Test your knowledge on management's responsibility for decline and discussing issues with the audit committee. The quiz also covers the concept of audit evidence sufficiency and its importance. Questions include topics like fraud detection, management stewardship evaluation, and forming opinions on financial statements.
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