FAC Finance and Accounting Auditing & Risk Review 2

Question 1

Which type of audit opinion is issued when financial statements contain a material misstatement that is pervasive to the overall financial statements?

Accepted Answer

Adverse opinion

Answer

Qualified opinion

Answer

Disclaimer of opinion

Answer

Unmodified opinion

Question 2

In enterprise risk management (ERM), the COSO framework identifies how many interrelated components?

Accepted Answer

8

Answer

5

Answer

6

Answer

10

Question 3

A company's board audit committee is reviewing a situation where the external auditor also provides tax consulting services. This creates which type of threat to auditor independence?

Accepted Answer

Self-interest threat

Answer

Advocacy threat

Answer

Self-review threat

Answer

Familiarity threat

Question 4

When assessing inherent risk during an audit, which factor would MOST increase the assessed level?

Accepted Answer

Complex transactions involving significant estimates

Answer

Strong internal controls over financial reporting

Answer

Stable industry with low regulatory oversight

Answer

Long-tenured management with no turnover

Question 5

Under the Sarbanes-Oxley Act (SOX) Section 404, management must assess the effectiveness of internal control over financial reporting (ICFR) as of which date?

Accepted Answer

The end of the most recent fiscal year

Answer

The date the auditor's report is issued

Answer

The date the audit engagement begins

Answer

Any date chosen by management

Question 6

In a risk-based audit approach, which sequence correctly reflects the audit planning process?

Accepted Answer

Understand entity → assess risk → design audit procedures

Answer

Perform substantive tests → assess risk → understand internal controls

Answer

Design audit procedures → identify risks → perform tests of controls

Answer

Gather evidence → assess risk → issue opinion

Question 7

Which internal control activity is BEST described as comparing actual financial results with budgeted amounts and investigating significant variances?

Accepted Answer

Performance reviews

Answer

Segregation of duties

Answer

Physical safeguards

Answer

Information processing controls