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ACCT 460 Exam 2 Questions With Correct Answers 2024
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ACCT 460 Exam 2 Questions With Correct Answers 2024
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ACCT 460 Exam 2 Questions With CorrectAnswers 2024
The .existence .of .audit .risk .is .recognized .by .the .statement .in .the .auditor's .standard .report
.that .the:
a. .Auditor .obtains .reasonable .assurance .about .whether .the .financial .statements .are .free
.of .material .misstatements.
b. .Auditor .is .responsible .for .expressing .an .opinion .on .the .financial .statements, .which .are
.the .responsibility .of .management.
c. .Financial .statements .are .presented .fairly, .in .all .material .respects, .in .conformity .with
.GAAP.
d. .Audit .includes .examining, .on .a .test .basis, .evidence .supporting .the .amounts .and
.disclosures .in .the .financial .statements. .- .correct .answer.a. .Auditor .obtains .reasonable
.assurance .about .whether .the .financial .statements .are .free .of .material .misstatements.
Which .of .the .following .factors .would .an .auditor .least .likely .consider .when .assessing .the
.inherent .risk .associated .with .sales .transactions?
a. .Billings .are .made .using .the .percentage-of-completion .method .of .revenue .recognition.
b. .The .nature .of .the .credit .authorization .process.
c. .Some .invoices .are .normally .billed .prior .to .shipments .[which .occur .at .a .later .date].
d. .The .conditions .of .the .sale .allow .for .a .right .of .return .or .the .right .to .modify .the .purchase
.agreement. .- .correct .answer.b. .The .nature .of .the .credit .authorization .process.
The .risk .that .an .auditor's .procedures .will .lead .to .a .conclusion .that .a .material
.misstatement .in .an .account .balance .does .not .exist .when, .in .fact, .a .misstatement .does
.exist, .is .known .as:
a. .Audit .risk.
b. .Detection .risk.
c. .Inherent .risk.
d. .Business .risk. .- .correct .answer.b. .Detection .risk.
One .of .your .clients .recently .upgraded .its .accounting .system .from .a .medium-scale
.general .ledger .package .to .a .complex .state-of-the-art .enterprise .resource .planning
.system. .This .installation .took .place .over .the .last .nine .months .of .the .entity's .fiscal .year
.and .is .nearly .100% .complete .by .the .balance .sheet .date. .Which .of .the .following .best
.describes .the .main .effect .of .this .event .on .the .audit .risk .model .for .the .current .year?
, a. .It .will .likely .increase .the .risk .of .material .misstatement.
b. .It .will .likely .decrease .the .risk .of .material .misstatement.
c. .It .will .likely .decrease .the .audit .risk.
d. .It .will .likely .increase .the .detection .risk. .- .correct .answer.a. .It .will .likely .increase .the .risk
.of .material .misstatement.
Which .of .the .following .would .be .classified .as .an .error?
a. .Misinterpretation .by .management .of .facts .that .existed .when .the .financial .statements
.were .prepared.
b. .Misappropriation .of .assets .for .the .benefit .of .management.
c. .Preparation .of .records .by .employees .to .cover .a .fraudulent .scheme.
d. .Intentional .omission .of .the .recording .of .a .transaction .to .benefit .a .third .party. .- .correct
.answer.a. .Misinterpretation .by .management .of .facts .that .existed .when .the .financial
.statements .were .prepared.
Which .of .the .following .factors .is .least .likely .to .represent .an .opportunity .to .commit .fraud?
a. .The .audit .committee .is .ineffective.
b. .Poor .internal .controls .over .cash .transactions.
c. .The .existence .of .highly .complex .transactions.
d. .Operating .losses .make .a .hostile .takeover .imminent. .- .correct .answer.d. .Operating
.losses .make .a .hostile .takeover .imminent.
The .auditor .obtains .an .understanding .of .the .entity .and .its .environment .by .performing .all
.of .the .following .assessment .procedures .except:
a. .Inquiries .of .management .and .others.
b. .Compute .the .level .of .detection .risk.
c. .Analytical .procedures.
d. .Observation .and .inspections. .- .correct .answer.b. .Compute .the .level .of .detection .risk.
Which .of .the .following .statements .is .false .as .it .relates .to .the .auditor's .responsibility .to
.document .the .risk .assessment?
a. .The .documentation .may .include .the .use .of .questionnaires.
b. .Management's .response .to .high-risk .areas .identified .by .the .auditor .should .be .included
.in .the .documentation.
c. .The .level .of .risk .must .be .set .quantitatively .(i.e., .inherent .risk .is .60%).
d. .All .of .the .above .are .false. .- .correct .answer.c. .The .level .of .risk .must .be .set .quantitatively
.(i.e., .inherent .risk .is .60%).
The .disclosure .of .fraud .to .parties .other .than .the .entity's .senior .management .and .its .audit
.committee .ordinarily .would .be .precluded .by .the .auditor's .ethical .or .legal .obligations .of
.confidentiality. .However, .the .auditor .has .a .duty .to .disclose .the .information .to .parties
.outside .the .entity .in .all .of .the .following .circumstances .except:
a. .A .court .subpoena .in .conjunction .with .a .fraud .investigation.
b. .A .successor .auditor .makes .inquiries .in .determining .whether .to .accept .the
.engagement.
c. .A .Wall .Street .analyst .inquiry .regarding .future .profit .projections.
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