B. Acy Bachelor of Accountancy Bachelor of Science in Accountancy: Audit 5

Question 1

Which of the following most accurately describes 'tolerable misstatement' in audit sampling?

Accepted Answer

The portion of overall materiality allocated to a specific account balance or class of transactions

Answer

Tolerable misstatement is the application of performance materiality to a specific sampling procedure, representing the maximum error the auditor is willing to accept.

Question 2

Under the AICPA Code of Professional Conduct, which of the following would impair an auditor's independence?

Accepted Answer

Having a direct financial interest in the audit client

Answer

A direct financial interest in an audit client impairs independence regardless of the amount, as it creates a financial stake in the client's reported results.

Question 3

The auditor's responsibility for evaluating going concern under US GAAS requires consideration of conditions and events for a period of:

Accepted Answer

One year from the balance sheet date

Answer

AU-C 570 requires the auditor to evaluate whether conditions raise substantial doubt about the entity's ability to continue as a going concern for one year after the balance sheet date.

Question 4

Which type of control is BEST designed to detect errors after they have already occurred?

Accepted Answer

Detective controls

Answer

Detective controls are designed to identify errors or irregularities that have already occurred, such as bank reconciliations or supervisory reviews.

Question 5

When an auditor issues an unmodified opinion but includes an emphasis-of-matter paragraph, the primary purpose is to:

Accepted Answer

Draw users' attention to a matter disclosed in the financial statements

Answer

An emphasis-of-matter paragraph highlights important information already disclosed in the financial statements without modifying the opinion.

B. Acy Bachelor of Accountancy Practice Test

B. Acy Bachelor of Accountancy Practice Test

B. Acy Bachelor of Accountancy Bachelor of Science in Accountancy: Audit 5