Question

Which is a primary limitation of the audit risk model?

1-Control risk must be adjusted by the auditor, not by an arbitrary estimation.

2-The audit technology achieves precision outside of a mathematical model.

3-Components of audit risk are treated as independent variables even though many interdependencies exist between them.

4-The audit risk model does not adequately consider external forces on the client organization.

Which of the following statements is most correct concerning the reason(s) that U.S. corporations desire and are willing to pay for independent audits of their financial statements?

1-The independent audit lends credibility to the financial statements.

2-All of the answers are equally correct.

3-All corporations organized in the U.S. are required to have independent audits of their financial statements.

4-Bank loans cannot be obtained without submitting audited financial statements.

CPA firms must register with the PCAOB if they wish to perform independent audits of

1-not-for -profit entities.

2-publicly held corporations subject to the SEC.

3-any or all organizations.

4-closely held corporations.

Which of the following organizations grants a license to practice as a CPA?

1-American Institute of Certified Public Accountants.

2-Public Company Accounting Oversight Board.

3-Individual states in the United States.

4-Securities and Exchange Commission.

Management of a publicly held organization subject to the SEC has the responsibility for all of the following except:

1-engagement of a qualified auditor

2-accounting principles used in financial reporting

3-internal control over financial reporting

4-financial statements and disclosures

The primary assertion that is satisfied by physically observing the client's count of inventory is

1-completeness.

2-existence.

3-rights or ownership.

4-valuation.

The control environment includes all of the following except

1-management philosophy and operating style.

2-personnel policies and practices.

3-methods of assigning authority and responsibility.

4-control activities.

Answer 1

1) 3-Components of audit risk are treated as independent variables even though many interdependencies exist between them.

2) 2-All of the answers are equally correct.

3) 2-publicly held corporations subject to the SEC.

4) 1-American Institute of Certified Public Accountants.

5) 3-internal control over financial reporting

6) 2-existence

7) 4-control activities