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Auditing Procedures

6. Which of the following combinations of procedures would an auditor be most likely to perform to obtain evidence about fixed-asset additions?
a.Inspecting documents and physically examining assets.
b. Recomputing calculations and obtaining written management representations.
c. Observing operating activities and comparing balances to prior period balances.
d. Confirming ownership and corroborating transactions through inquiries of client personnel.

7. In which of the following circumstances would an auditor usually choose between issuing a qualified opinion and issuing a disclaimer of opinion?
a. Departure from generally accepted accounting principles.
b. Inadequate disclosure of accounting policies.
c. Inability to obtain sufficient competent evidential matter.
d. Unreasonable justification for a change in accounting principle.

8. All of the following nonaudit services are identified by the SEC as impairing an auditor's independence except
a. Information systems design and implementation.
b. Human resource services.
c. Management functions.
d. Valuations and appraisals for tax purposes.

9. Under the new SEC rules regarding independence, which of the following must a client disclose?
a. Only fees for the external audit.
b. Only fees for internal and external audit services provided by the audit firm.
c. Fees for the external audit, systems implementation and design, and nonaudit services performed by the audit firm.
d. Only fees for systems implementation and design, and nonaudit services performed by the audit firm.

10. In which of the following situations would a CPA's independence be considered impaired?
1. The CPA maintains a checking account that is fully insured by a government deposit insurance agency at an audit-client financial institution.
2. The CPA has a direct financial interest in an audit client, but the interest is maintained in a blind trust.
3. The CPA owns a commercial building and leases it to an audit client. The rental income is material to the CPA.
a. 1 and 2.
b. 2 and 3.
c. 1 and 3.
d. 1, 2, and 3.

Solution Preview

For one of the questions, Question 9 I think, I gave you a source to look at because the source is quite expansive on the subject. For the others, I also tried to add some sources, so you can read up more on the topics as well.

6. Procedures an auditor would most likely perform to verify fixed assets:

ANS: Fixed assets include buildings, machinery and equipment. An auditor is most likely to use Substantive analytic procedures to make sure that the fixed asset does indeed exist. Example of such procedures are inspecting documents and ...

Solution Summary

The solution explains SEC rules about auditor independence and sources for finding more information