1. Please read all instructions and questions carefully before responding. 2. There are ___ points available on this exam, allocated as follows: ________ multiple choice/true-false questions (__ points), _____ short answer questions (__ points) and _____ essay questions (__ points). 3. Keep track of the time remaining to complete the exam and allocate that time wisely. Do not devote disproportionate time to any one question or section. 4. GOOD LUCK!
MULTIPLE CHOICE/TRUE-FALSE QUESTIONS
For each question, please select the best answer. Clearly mark your selection (A, B, C, D or E, as applicable) on the accompanying Scantron form. If more than one letter (or no letter) is selected for a particular question, no credit will be given for that question.
1. Which of the following is not a Sarbanes-Oxley requirement for audit committees?
A. The audit committee should view itself as the “client” of the external auditor. B. The audit committee must be chaired by the chair of the board of directors. C. Audit committee members must be financially literate. D. Audit committee members must be outside directors.
2. There are several reasons why users of information desire assurance services from accountants. Which of the following is not such a reason?
A. the potential bias of management in providing information that will help them B. such services are required by federal law C. the remoteness of users of information D. the complexity of business transactions
3. *The auditor concludes that a public company has significant deficiencies in its internal controls over financial reporting. Which of the following is a proper response to this finding?
A. Expand the planned testing of account balances to consider the types of errors that might occur because of the deficiency. B. Report the deficiencies to management and the audit committee. C. Report the deficiencies in the report to shareholders. D. All of the above. E. A and B only.
4. *Audit risk is
A. the risk that an auditor will give an unqualified (clean) opinion on financial statements that are materially misstated. B. set by the auditor. C. affected by the engagement risk of the client. D. All of the above
E. A and C only
5. *Which of the following is not a component of COSO’s internal control framework?
A. control environment
B. risk assessment
C. auditor attestation
D. information and communication
6. True or false: The AICPA independence rule is violated by any direct or indirect ownership interest (by a “covered member”) in a client.
7. *An auditor’s test of transaction processing whereby the auditor is evaluating both the operation and effectiveness of controls and the correctness and completeness of processing and posting to an account balance is
A. a test of controls.
B. a substantive test.
C. a dual-purpose test.
D. an analytical review procedure.
8. The AICPA’s ten generally accepted auditing standards are broken down into general standards, fieldwork standards and reporting standards. Which of the following is not a general standard?
A. technical training and proficiency
C. understanding the entity and its internal controls
D. due professional care
9. *Which of the following types of risk is not assessed by the auditor?
A. detection risk
B. inherent risk
C. control risk
D. engagement risk
10. Which of the following statements concerning corporate governance is true?
A. The objective of financial reporting is to provide useful information to interested users. B. Corporate governance is a process by which the owners and creditors exert control over the resources of the enterprise. C. Managers of organizations are hired by Boards of Directors to perform responsibilities such as the implementation of internal control. D. All of the above. E. A and C only.
11. *There are a number of tools auditors...
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