MULTIPLE CHOICE QUESTIONS FROM CPA EXAMINATIONS
6-21 (OBJECTIVE 6-1) The following questions concern the reasons auditors do audits.
Choose the best response.
a. The major reason an independent auditor gathers audit evidence is to
(1) form an opinion on the financial statements.
(2) detect fraud.
(3) evaluate management.
(4) assess control risk.
b. Which of the following best describes the reason why an independent auditor reports
on financial statements?
(1) A misappropriation of assets may exist, and it is more likely to be detected by
independent auditors.
(2) Different interests may exist between the company preparing the statements and
the persons using the statements.
(3) A misstatement of account balances may exist and is generally corrected as the
result of the independent auditor’s work.
(4) Poorly designed internal controls may be in existence.
c. Because of the risk of material misstatement, an audit should be planned and per-
formed with an attitude of
(1) professional skepticism.
(2) independent integrity.
(3) objective judgment.
(4) impartial conservatism.
6-22 (OBJECTIVE 6-3) The following questions deal with errors and fraud. Choose the best
response.
a. An independent auditor has the responsibility to design the audit to provide reason- able assurance of detecting errors and fraud that might have a material effect on the financial statements. Which of the following, if material, is a fraud as defined in auditing standards?
(1) Misappropriation of an asset or groups of assets
(2) Clerical mistakes in the accounting data underlying the financial statements
(3) Mistakes in the application of accounting principles
(4) Misinterpretation of facts that existed when the financial statements were
prepared
b. What assurance does the auditor provide that errors and fraud that are material to the
financial statements will be detected?
Errors Fraud
(1) Limited Negative
(2) Reasonable Reasonable
(3) Limited Limited
(4) Reasonable Limited
THE AUDIT PROCESS
c. Which of the following statements describes why a properly designed and executed
audit may not detect a material misstatement in the financial statements resulting
from fraud?
(1) The auditor did not consider factors influencing audit risk for account balances
that have effects pervasive to the financial statements taken as a whole.
(2) Audit procedures that are effective for detecting unintentional misstatements may
be ineffective for an intentional misstatement that is concealed through collusion.
(3) An audit is designed to provide reasonable assurance of detecting material errors,
but there is no similar responsibility concerning fraud.
(4) The factors considered in assessing control risk indicated an increased risk of in-
tentional misstatements, but only a low risk of unintentional misstatements.
6-23 (OBJECTIVE 6-8) The following questions deal with management assertions. Choose
the best response.
a. An auditor reviews aged accounts receivable to assess likelihood of collection to sup-
port management’s assertion about account balances of
(1) existence.
(2) completeness.
(3) accuracy, valuation, and allocation.
(4) rights and obligations.
b. An auditor will most likely review an entity’s periodic accounting for the numeri-
cal sequence of shipping documents to ensure all documents are included to support
management’s assertion about classes of transactions of
(1) occurrence.
(2) classification.
(3) accuracy.
(4) completeness.
c. In the audit of accounts payable, an auditor’s procedures will most likely focus pri-
marily on management’s assertion about account balances of
(1) existence.
(2) completeness.
(3) accuracy, valuation, and allocation.
(4) classification
