Which of the following items of information that comes to an auditor’s attention wouldbe most likely to suggest non-compliance with laws and regulations?
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1 .“The materiality level calculated at the planning stage should NOT be revised during laterstages of the audit.”Is this statement true or false?
A True B False
2 .The auditor of Woodferns Agencies Co is facing a legal claim for negligence. It is allegedthat a fraud was perpetrated by the manager at one of the smallest of the company’s 80branches. The auditor had not visited that branch for three years as he had adopted arotational testing approach. As a consequence the fraud had gone undetected for two years.What is the auditor’s BEST defence against the claim?
A Audit documentation shows that the audit was carried out in accordance withInternational Standards on Auditing B An up-to-date letter of engagement which points out to the directors that the auditshould not be relied upon to detect all frauds which may exist C Written representations from manageme...
3 .Which of the following procedures is NOT likely to result in the discovery of possiblenon-compliance with laws and regulations?
A Making inquiries of management or the entity’s lawyer B Reviewing internal control questionnaires C Performing tests of details of transactions
4 .A material fraud was discovered at Conner Co shortly after the auditor had presented anunmodified audit report to the annual general meeting. His standard letter of engagementindicated that he “would plan the audit so as to have reasonable expectation of detectingmaterial misstatements in the financial statements resulting from errors or fraud”, but alsostated that the primary responsibility for the prevention and detection of fraud lay withmanagement.Which of the following statements most accurately reflects the likelihood of the auditorbeing held liable for the failure to find the fraud?
A He is likely to be liable because his engagement letter accepted specificresponsibility to find material misstatements B He is likely to be found liable if he found indications of a possible fraud butdismissed them as immaterial having failed to adequately investigate them C He is likely to be hel...
5 .An auditor has discovered a $10,000 wages fraud by a director of a listed company. Theamount is not material in relation to the financial statements of the company and the auditorhas determined that the fraud does not constitute money laundering.To whom does the auditor have a primary duty to report this matter to?
A Those charged with governance B The company’s shareholders C The tax authorities
7 .The following situations are all covered by general controls:(1) Changes to data files(2) Program changes(3) Continuity of operationsWhich general control would be appropriate to all three scenarios above?
A Password protection B Back-up procedures C Authorisation D One-for-one checking
8 .Which of the following is an example of a general control in a computerised accountingsystem?
A The sales department matches a list of computer-produced invoices to its copies ofthe manual input documents which originated the production of the invoice B The personnel department review a monthly printout of all changes to payrollstanding data which is then checked against manual records C The...
9 .Which of the following procedures is considered a test of controls?
A Reviewing cash payments after the year end for unrecorded liabilities B Evaluating whether a liability was recorded at the proper amount C Interviewing and observing appropriate personnel to determine segregation of duties
10 .When planning the audit of the purchases cycle, which of the following internal controlsshould the auditor test in order to ensure that liabilities are not understated?
A Goods inwards records (GRNs) are matched to invoices and regularly reviewed foritems in respect of which no invoice has been received. An authorised list ofunmatched GRNs is produced at the end of each month B Invoices are authorised as matched with goods inwards/service received notesbefore being...
