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Certification Exam Question 1.

15
An attitude that includes a questioning mind and a critical assessment of audit
evidence is referred to as:
(A) Due professional care.
(B) Professional skepticism.
(C) Reasonable assurance.
(D) Supervision.

Certification Exam Question 1.215


Which of the following elements underlies the application of generally accepted auditing
standards, particularly the standards of fieldwork and reporting?
(A) Internal control.
(B) Corroborating evidence.
(C) Quality control.
(D) Materiality and relative risk

Certification Exam Question 1.3


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) Financial statement assertions.

Certification Exam Question 1.4


Which of the following is a conceptual difference between the attestation standards
and International Standards on Auditing?
(A) The attestation standards provide a framework for the attest function beyond
historical financial statements.
(B) The requirement that the practitioner be independent in mental attitude is omitted
from the attestation standards.
(C) The attestation standards do not permit an attest engagement to be part of a
business acquisition study or a feasibility study.
(D) None of the standards of audit planning are included in the attestation standards.

Certification Exam Question 1.5


Which of the following statements is correct concerning an auditor’s responsibilities
regarding financial statements?
(A) Making suggestions that are adopted about the form and content of an entity’s
financial statements impairs an auditor’s independence.
(B) An auditor may draft an entity’s financial statements based on information from
management’s accounting system.
(C) The fair presentation of audited financial statements in conformity with GAAP is an
implicit part of the auditor’s responsibilities.
(D) An auditor’s responsibilities for audited financial statements are not confined to the
expression of the auditor’s opinion.
Certification Exam Question 1.6
An auditor tests an entity’s control of obtaining credit approval before shipping goods to
customers in support of management’s financial statement assertion of
(A) Valuation or allocation.
(B) Completeness.
(C) Existence or occurrence.
(D) Rights and obligations

Certification Exam Question 1.7


Which of the following is not a component of an entity’s internal control?
(A) Control risk.
(B) Control activities.
(C) Monitoring.
(D) Control environment.

Unit 2

Certification Exam Question 2.1


A group that was established in 2002 by the US Congress to oversee and investigate
the audits and auditors of public companies and sanction both firms and individuals for
violations of laws, regulations, and rules is:
(A) The Public Interest Oversight Board.
(B) The Review Board.
(C) The Public Company Accounting Oversight Board.
(D) The Financial Reporting Council.

C
A

 The auditor does have some responsibility for detecting errors and
fraud.
 The auditor is not “responsible for” detecting all material errors, but is responsible for designing an
audit to provide reasonable assurance of detecting material misstatements.
 Due to the fact that fraudulent activity is frequently concealed, even a properly planned and performed
audit may not detect a material misstatement resulting from fraud.
 The auditor should design the audit to provide reasonable assurance of detecting errors and fraud.

Certification Exam Question 3.1


The auditor with final responsibility for an engagement and one of the assistants has a
difference of opinion about the client’s application of an accounting method. If the
assistant believes it is necessary to be disassociated with the matter’s resolution, the
audit firm’s procedures should enable the assistant to
(A) Refer the disagreement to IFAC’s Quality Review Committee.
(B) Review the conflict with a senior partner in the audit firm.
(C) Discuss the disagreement with the entity’s management or its audit committee.
(D) Report the disagreement to an impartial peer review monitoring team.
Certification Exam Question 3.2
Which of the following statements is correct about independence?
(A) Independence is potentially affected by self-interest, self-review, advocacy,
familiarity and intimidation threats.
(B) Independence is not an element that is considered in the audit process.
(C) Independence is immaterial to the financial statements.
(D) Independence is not a requirement of IFAC’s Code of Ethics.

Certification Exam Question 3.3


An auditor strives to achieve independence in appearance to
(A) Appear to an independent third party not to have compromised their integrity.
(B) Become independent in fact.
(C) Comply with the international auditing standards of fieldwork.
(D) Evaluation of all matters of continuing accounting significance.

Certification Exam Question 3.4


Before accepting an audit engagement a proposed (successor) auditor should make
specific inquiries of the existing (predecessor) auditor regarding the existing auditor’s:
(A) Opinion of any subsequent events occurring since the existing auditor’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 accounting principles between
periods.
(D) Evaluation of all matters of continuing accounting significance.

ertification Exam Question Appendix 10.1


Which of the following best illustrates the concept of sampling risk?
(A) A randomly chosen sample may not be representative of the population as a whole
on the characteristic of interest.
(B) An auditor may select audit procedures that are not appropriate to achieve the
specific objective.
(C) An auditor may fail to recognize errors in the documents examined for the chosen
sample.
(D) The documents related to the chosen sample may not be available for inspection.

Certification Exam Question Appendix 10.2


An advantage of using statistical over non-statistical sampling methods in tests of
controls is that the statistical methods:
(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 non-statistical sample of equal size.
(D) Provide an objective basis for quantitatively evaluating sample risk.
Contingency fees
 Professional services should not be offered or rendered to a client under a contingency
fee.
 A contingency fee is an arrangement whereby no fee will be charged unless a specified
finding or result is obtained, or when the fee is otherwise contingent on the findings or
results of these services.
 Furthermore, fees charged on a percentage or similar basis,
should be regarded as contingent fees. It is easy to see that a contingency fee can
jeopardize the auditor’s independence.
 There are two exceptions to the prohibition of contingency fees.
 First, fees are not considered contingent if fixed by a court or other public authority.
 Secondly, in those countries where charging contingent fees is permitted either by statute or by a
professional member body, such engagements are permitted, but should be limited to those
for which independence is not required (e.g. services other than assurance services).
Commissions
 The auditor also should not take or pay commissions.
 The payment or receipt of a commission by a professional accountant could impair objectivity and
independence.
 Nor should the auditor accept a commission for the referral of the products or services of
others.

Establishing and Negotiating Audit Fees


professional fees should be a fair reflection of the value of the professional services performed for the
client, taking into account:
■ the skill and knowledge required for the type of professional services involved;
■ the level of training and experience of the persons necessarily engaged in performing
the professional services;
■ the time required by each person engaged in performing the professional services;
■ the degree of responsibility that performing those services entails.
These factors can be influenced by the legal, social, and economic conditions of each
country.

An engagement letter is an agreement between the accounting firm and the client for the conduct of the
audit and related services.

 An auditor’s engagement letter documents and confirms his acceptance of the appointment, the
objective and scope of the audit, the extent of auditor responsibilities to the client, and the form of
any reports.
 The engagement letter may affect legal responsibilities to the client.
 In litigation, the auditor may use an engagement letter as a contract stating its scope, responsibilities,
and limitations.
 The letter describes the auditor’s purpose, that the audit entails study of internal control, the time
schedule of the engagement, and fees.
/Certification Exam Question 5.318
Before accepting an audit engagement, a successor (proposed) auditor should make
specific inquiries of the predecessor (existing) auditor regarding:
(A) Disagreements the predecessor had with the client concerning auditing procedures
and accounting principles.
(B) The predecessor’s evaluation of matters of continuing accounting significance.
(C) Opinion of any subsequent events occurring since the predecessor’s audit report
was issued.
(D) The predecessor’s assessments of inherent risk and judgments about materiality.

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