Devry ACCT555 Midterm

ACCT 555 Midterm(TCO F) The objective of the ordinary audit of financial statements is the expression of an opinion on:(TCO F) Which of the following statements is most correct regarding errors and fraud?(TCO F) If the auditor believes that the financial statements are not fairly stated or is unable to reach an conclusion because of insufficient evidence, the auditor:(TCO F) Auditors accumulate evidence to:(TCO F) Which of the following forms of evidence is most reliable?(TCO F) Analytical procedures are required during which phase(s) of the audit?(TCO F) To be considered reliable evidence, confirmations must be controlled by:(TCO F) When the auditor has reason to believe an illegal act has occurred without any corrective action being taken, the auditor should:(TCO F) Traditionally, confirmations are used to verify:(TCO G) Which of the following is correct with respect to the use of analytical procedures?(TCO G) Which is a liquidity activity ratio?(TCO A) Match the following definitions to the terms.____ Public Company Accounting Oversight Board Auditing Standards____ Generally Accepted Auditing Standards____ Statements on Auditing Standards(TCO B) The following is a portion of a qualified audit report issued for a private company:(TCO C) The following situation involves a possible violation of the AICPA’s Code of Professional Conduct. For each situation, (1) determine the applicable rule number from the Code, (2) decide whether or not the Code has been violated, and (3) briefly explain how the situation violates (or does not violate) the Code.(TCO C) The following situation involves a possible violation of the AICPA’s Code of Professional Conduct. For each situation, (1) determine the applicable rule number from the Code, (2) decide whether or not the Code has been violated, and (3) briefly explain how the situation violates (or does not violate) the Code.(TCO C) Brandt, CPAs has obtained Big-Bucks, a new publicly-held client. Big-Bucks has various accounting-related needs that Brandt, CPAs would like to fulfill. Partner-in-charge D. Brandt has discussed with Big-Bucks the possibility of performing the annual audit of Big-Bucks as well as preparing the tax returns, business plan, quarterly write-up services, and providing consultation on the viability and valuation of mining gas reserves in Tennessee. An outside expert would be hired by Brandt CPAs to provide expert advice to the CPA firm on mining gas reserves. Additionally, Brandt, CPA’s audit manager who will be assigned to this audit has previously been approached by Big-Bucks to come work for the company as Chief Financial Officer. The audit manager has refused the offer, since his cousin’s sister-in-law is a 10 percent shareholder in Big-Bucks and does not want her to have any say in his employment.Under the Sarbanes-Oxley Act of 2002, what issues do you see and how would you advise Brandt, CPAs? Is there ever a time when Brandt, CPAs could perform any of these services for Big-Bucks?(TCO D) There are four major sources of an auditor’s legal liability. One source is liability to the audit client under common law. Briefly summarize the other three sources.(TCO F) Below are 10 documents typically examined during an audit. Classify each document as either internal or external.Type of Document Documents________________ 1. Canceled checks for payments of accounts payable________________ 2. Payroll time cards________________ 3. Duplicate sales invoices________________ 4. Vendors’ invoices________________ 5. Bank statements________________ 6. Minutes of the board of directors’ meetings________________ 7. Signed lease agreements________________ 8. Notes receivable________________ 9. Subsidiary accounts receivable records________________ 10. Remittance advices(TCO G) Discuss the essential activities involved in the initial planning of an audit.