Auditing and Assurance Training Trivia 3

Question 1

What is the Sarbanes-Oxley Act Section 404 primarily concerned with?

Accepted Answer

Management's assessment of internal control over financial reporting

Answer

SOX Section 404 requires management to assess and report on the effectiveness of internal control over financial reporting, with the auditor also attesting to that assessment for accelerated filers.

Question 2

Which concept requires auditors to remain mentally independent and avoid relationships that could impair their objectivity?

Accepted Answer

Independence in fact and appearance

Answer

Independence in fact (mental attitude) and in appearance (as perceived by others) are both required so that users can rely on the auditor's report.

Question 3

What does 'going concern' refer to in auditing?

Accepted Answer

Whether an entity can continue operating for at least one year beyond the balance sheet date

Answer

Auditors evaluate whether substantial doubt exists about an entity's ability to continue as a going concern for approximately 12 months after the financial statement date.

Question 4

Which risk model component represents the likelihood that an internal control will fail to prevent or detect a material misstatement?

Accepted Answer

Control risk

Answer

Control risk is the risk that a material misstatement will not be prevented, or detected and corrected, by the entity's internal controls on a timely basis.

Question 5

An external auditor discovers that a client's CEO has been embezzling funds. Under AU-C Section 240, what is the auditor's primary obligation?

Accepted Answer

Communicate findings to appropriate levels of management and those charged with governance

Answer

AU-C 240 requires the auditor to communicate suspected or actual fraud to the appropriate level of management (typically those charged with governance, such as the audit committee).

Auditing and Assurance Training Practice Test

Auditing and Assurance Training Practice Test

Auditing and Assurance Training Trivia 3