MODULE 3: Performance Task

1. Broadly defined, the subject matter of any audit consists of

D. Assertions about economic actions and events
2. Management assertions are
D. Implied or expressed representations about classes of transactions and the
related accounts in the financial statements
3. If the auditor were responsible for making certain that all the assertions of
management in the statements were correct
C. Audits would not be economically feasible
4. For all audits of financial statements made in accordance with PSA, the use of
analytical procedures is required to some extent
In the planning stage: Yes
As a substantive test: No
In the review stage: Yes
A. Yes, No, Yes
5. “Unusual fluctuations” occur when
D. Any one of the above three situations may occur
6. Which of the following statements concerning the auditor’s use of assertions is
correct?
A. The auditor may combine the assertions about transactions and events with
the assertions about account balances.
7. The information obtained by the auditor in arriving at the conclusions on which the
audit opinion is based is called:
B. Audit evidence
8. In “auditing” financial accounting data, the primary concern is with
D. Determining whether recorded information properly reflects the economic
events that occurred during the accounting period.
9. The major reason an independent auditor gathers evidence is to
D. Form an opinion on the financial statements
10. Which of the following “decisions” are relevant to the auditor’s evidence
accumulation?
D. All of the above are relevant
11. Evidence may take which of the following forms?
D. Evidence may take any of the above forms
12. Evidence obtained directly by the auditor will not be reliable if
C. The auditor lacks the qualifications to evaluate the evidence
 13. The strongest criticism of the reliability of audit evidence that the auditor physically
observes is that
D. The observation must occur at a specific time, which is often difficult to
arrange.
14. Which of the following forms of evidence is most reliable?
D. Confirmation of receivable balances received from a third party
15. At what point in the audit are tests of details most appropriately designed?
B. Planning
16. The primary emphasis in most tests of details of balances is on the
A. Balance sheet accounts
17. Tests of details of balances are directed to
C. All general ledger accounts for all cycles
18. Tests of details of balances are specific procedures intended to
C. Test for monetary errors in the balances in the financial statements
19. Which one of the following statements is true in deciding on substantive test of
transactions?
C. Some procedures are commonly employed on every audit regardless of the
circumstances.
20. Most auditors prefer to replace tests of details with analytical procedures whenever
possible because
A. The tests of details are more expensive

MODULE 4: Performance Task

1. The auditor’s judgment as to whether the financial statements are presented fairly,
in all material respects, is made in the context of:
o b. applicable financial reporting framework
2. The auditing profession recognizes the need for uniformity in reporting as a means
of:
o d. promoting credibility of the report in the global marketplace
3. Auditing standards require that the audit report must be titled. This is done in order
to:
o b. distinguish the report from the report that might be issued by others.
4. An auditor has been engaged by the ACE Company to audit the financial statements
of CRC Corporation in conjunction with a loan commitment. The report would most
likely be addressed to:
o d. ACE Company
5. The auditor may address the report to all of the following, except:
o b. the president or the chief executive officer of the client company
6. The audit report is normally addressed to the:
o b. Yes Yes No (seems to be a misinterpretation, possibly needs review)
7. The element of the auditor’s report that identifies the financial statement audited is
the:
o b. introductory paragraph
8. The introductory paragraph of the auditor’s report should:
o a. identify the name of the entity for whom the report is prepared.
9. The responsibility of the management for the preparation and fair presentation of
the financial statements includes all of the following except:
o a. designing, implementing, and maintaining internal control that
prevents collusion among employees.
10. The auditor’s report does not:
• b. state that the audit was conducted in accordance with an identified financial
reporting framework.
11. If the independent auditor expresses an unqualified opinion on the financial
statements, the readers of the audit report can assume that:
• c. All material disagreements between the management and external auditor
regarding acceptability of accounting policies and the methods of their
application were resolved to the auditor’s satisfaction.
12. The appropriate date for the audit report is the one on which the:
• b. auditor has completed all the essential audit procedures
13. The date of the auditor’s report normally coincides with the date:
• c. the management approves the financial statements.
14. The date of the audit report is important because:
• a. The user has a right to expect that the auditor has performed certain
procedures to detect subsequent events that would materially affect the
financial statements through the date of the report.
15. The audit report should be dated:
• d. Later than the balance sheet date.
16. The most common type of audit report contains a(n):
• d. unqualified opinion
17. The three main types of audit reports other than the Unqualified Report are the:
• a. adverse opinion, disclaimer of opinion, and qualified opinion
18. Which of the following is not one of the basic elements of the auditor’s report?
• c. Client’s address
19. How are management’s responsibility and the auditor’s responsibility represented
in the standard auditor’s report?
• a. Explicitly Explicitly
20. The adverse opinion report will be issued by the independent auditor when he/she:
• c. Has knowledge that the financial statements are not in conformity with an
identified financial reporting framework
21. A disclaimer is issued whenever the auditor:
• a. Has been unable to satisfy him/herself that the overall financial statements
are presented fairly.
22. Both disclaimers and adverse opinions are used:
• a. Only when the condition is highly material
23. The auditor may disagree with management about matters such as the acceptability
of accounting policies selected, the methods of their application, or the adequacy of
disclosures in the financial statements. If such disagreements are significant to the
financial statements, the auditor’s report may contain:
• d. YES NO NO (appears to be a misinterpretation, needs review)
24. Which of the following does not properly describe a scope limitation?
• b. the client’s accounting records are inadequate.
 25. An auditor’s report includes the following statement: "The financial statements do
not present fairly the financial position, result of operations, or cash flows in
conformity with generally accepted accounting principles." This report was most
likely issued in connection with financial statements that are:
• c. Misleading
26. When a scope limitation has precluded the auditor from obtaining sufficient
appropriate evidential matter, the report would most likely contain:
• c. Either a disclaimer of opinion or a qualified opinion
27. Under which of the following circumstances is a disclaimer of opinion
inappropriate?
• c. The financial statements fail to contain adequate disclosure concerning
related party transactions
28. When management does not amend the financial statements in circumstances
where the auditor believes they need to be amended and the auditor's report has not
been released to the entity, the auditor should express:
• a. Qualified or adverse opinion
29. An auditor may reasonably issue a qualified opinion for:
• a. Yes Yes (this answer could need clarification)
30. In which of the following situations would an auditor ordinarily choose between
expressing a qualified opinion or an adverse opinion?
• b. The financial statements fail to disclose information that is required by
financial reporting standards.
31. Which of the following best describes professional skepticism?
• B. An attitude of questioning and critically assessing audit evidence.
32. What is the purpose of analytical procedures in auditing?
• A. To identify unusual transactions or trends.
33. Which of the following is an element of quality control for audit firms?
• C. Engagement performance.
34. Which report is issued when financial statements are free from material misstatements?
• A. An unqualified opinion.
35. What does a disclaimer of opinion signify?
• A. The auditor was unable to obtain sufficient appropriate audit evidence.
36. Which of the following is considered audit documentation?
• B. Working papers.
37. What is the purpose of a risk assessment procedure?
• C. To identify and assess risks of material misstatement.
38. What does "going concern" mean?
• C. The entity's ability to continue its operations in the foreseeable future.
39. Which of the following is an example of a test of control?
• D. Reviewing authorization of transactions.
40. What is the primary focus of a compliance audit?
• B. Determining if the entity follows laws and regulations.
41. Which of the following is an ethical requirement for auditors?
• B. Independence.
42. What does an auditor consider in the planning stage?
• D. Understanding the entity and its environment.
43. What is dual-purpose testing?
• C. Performing a procedure that serves as both a test of control and substantive
test.
44. What is the purpose of a management letter?
• A. To communicate internal control deficiencies to management.
45. What is the responsibility of an internal auditor?
• D. To assess the effectiveness of internal controls.
46. What is the primary purpose of an audit committee?
• A. To oversee the financial reporting process and the audit.
47. What does a qualified opinion indicate?
• B. There is a material misstatement, but it is not pervasive.
48. What is the objective of substantive procedures?
 • D. To detect material misstatements in financial statements.
49. What is the significance of sampling in auditing?
• D. To obtain audit evidence when testing an entire population is impractical.
50. Which of the following is an example of an assertion about presentation and disclosure?
• B. All required disclosures are included in the financial statements.
51. What is the purpose of a peer review in auditing?
• A. To ensure audit firms comply with professional standards.
52. What is the primary focus of a performance audit?
• C. Efficiency and effectiveness of operations.
53. What does the term "scope limitation" refer to?
• D. The auditor is unable to gather sufficient audit evidence.
54. Which of the following is an example of fraud?
• C. Intentional misstatement of financial information.
55. What does the term "audit trail" mean?
• B. The sequence of activities to track transactions in financial records.
56. What is an example of an auditor’s professional judgment?
• D. Assessing the materiality of a misstatement.
57. What is the role of an engagement letter?
• B. To document the terms of the audit engagement.
58. Which of the following is NOT a financial statement assertion?
• B. Efficiency.
59. What is the purpose of interim testing in auditing?
• D. To perform procedures before the fiscal year-end.
60. What is the main purpose of an audit program?
• B. To outline the procedures to be performed during the audit.