Question 1

Which best describes the documentation completion date?

Options :

A : Forty-five days from the report release date, based on PCAOB standards.

B : Sixty days from the report release date, based on PCAOB standards.

C : Seven years from the report release date, based on auditing standards.

D : Five years from the report release date, based on auditing standards.

Answer: A

Question 2

Morris, CPA, suspects that a pervasive scheme of illegal bribes exists throughout the operations of Worldwide Import-Export, Inc., a new audit client. Morris notified the audit committee and Wor|dwide's legal counsel, but neither could assist Morris in determining whether the amounts involved were material to the financial statements or whether senior management was involved in the scheme. Under these circumstances, Morris should:

Options :

A : Express an unqualified opinion with a separate explanatory paragraph.

B : Disclaim an opinion on the financial statements.

C : Express an adverse opinion on the financial statements.

D : Issue a special report regarding the illegal bribes.

Answer: B

Question 3

An advantage of using statistical over nonstatistical sampling methods in tests of controls is that the statistical methods:

Options :

A : Can more easily convert the sample into a dual-purpose test useful for substantive testing.

B : Eliminate the need to use judgment in determining appropriate sample sizes.

C : Afford greater assurance than a nonstatistical sample of equal size.

D : Provide an objective basis for quantitatively evaluating sample risk.

Answer: D

Question 4

The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to:

Options :

A : Enable the CPA firm to attest to the reliability of the client.

B : Satisfy the CPA firm's duty to the public concerning the acceptance of new clients.

C : Minimize the likelihood of association with clients whose management lacks integrity.

D : Anticipate before performing any fieldwork whether an unqualified opinion can be expressed.

Answer: C

Question 5

A client maintains perpetual inventory records in both quantities and dollars. If the assessed level of control risk is high, an auditor would probably:

Options :

A : Increase the extent of tests of controls of the inventory cycle.

B : Request the client to schedule the physical inventory count at the end of the year.

C : Insist that the client perform physical counts of inventory items several times during the year.

D : Apply gross profit tests to ascertain the reasonableness of the physical counts.

Answer: B