In which of the following situations would member taka not be in a conflict of interest?

Midterm Questions

1.Which of the following presumptions is correct about the reliability of audit

evidence?

1.Effective internal control provides more assurance about the reliability of audit

evidence.

2.The auditor notices significant fluctuations in key elements of the company’s

financial statements. If management is unable to provide an acceptable

explanation, the auditor should

1.Perform additional audit procedures to investigate the matter further.

3.As a result of analytical procedures, the independent auditor determines that the

gross profit percentage has declined from 30% in the preceding year to 20% in

the current year. The auditor should

1.Consider the possibility of a misstatement in the financial statements.

4.If the objective of an auditor’s test of details is to detect a possible

understatement of sales, the auditor most likely would trace transactions from the

1.Shipping documents to the sales invoices.

5.If the objective of a test of details is to detect overstatements of sales, the auditor

should trace transactions from the

1.Accounting records to the source documents.

6.Which of the following procedures would an auditor most likely perform to verify

management’s assertion of completeness?

1.Compare a sample of shipping documents to related sales invoices.

7.A retailing entity uses the Internet to execute and record its purchase

transactions. The entity’s auditor recognizes that the documentation of details of

transactions will be retained for only a short period of time. To compensate for

this limitation, the auditor most likely would

1.Perform tests several times during the year, rather than only at year-end.

8.Auditors try to identify predictable relationships when using analytical

procedures. Relationships involving transactions from which of the following

accounts most likely would yield the highest level of evidence?

1.Interest expense

9.Which of the following factors would least influence an auditor’s consideration of

the reliability of data for purposes of analytical procedures?

1.Whether the data were processed in a computerized system or in a manual

accounting system.

10.Which of the following is the most reliable analytical procedure to verify the year-

end financial statement balances of a wholesale business?

I.2: Diagnostic Assessment1.Which of the following is true regarding the Principles of Professional Conduct?a.To live up to the Code of Professional Conduct, members may have to workhard, but they do not have to sacrifice their own best interests.b.Members must not only be competent in the provision of professional services;they must also cooperate with other members to improve the art of accounting.c.Due care in the audit area is satisfied if a member knows generally acceptedaccounting principles and generally accepted accounting standards inside andout.d.Because the Code of Professional Conduct does not expressly prohibit amember from moonlighting as a circus trapese performer, a member couldperform at a local bar as "Sam the Flying CPA."

2.Which of the following are sources of safeguards that might reduce a threat ofnoncompliance with the code to an acceptable level?

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3.In which of the following situations would member Takanotbe in a conflict of interest?

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4.Son is a junior auditor from ABC Accounting Firm's audit team at client MammothCorporation. Son believes that Mammoth's CFO is mischaracterizing some important

What are potential consequences to the firm when there is an independence impairment?

What is the role of a code of professional conduct and standards of ethical behavior for accountants and auditors?

What impairs auditor independence?

In which of the following circumstances is a registered public accounting firms independence impaired with respect to an issuer?