Acct 400 final exam answers

1. ACCT 400 Final Exam Answers
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Part 1 of 1 – Final Exam 45.0/ 50.0 Points
The Final Exam has 50 true/false questions, covers Chapters 1 & 2, and 6 through 11, and has a 4
hour time limit.
Question 1 of 50 1.0/ 1.0 Points
oType I subsequent events are always referenced in the audit report.
A.
True
B.
False
Question 2 of 50 1.0/ 1.0 Points
Regardless of the specific form, documentary evidence shows that the receiving process
occurred.

2. A.
True
B.
False
Question 3 of 50 1.0/ 1.0 Points
Preliminary time budget information is compared to actual time worked and is used for purposes
of billing, performance evaluation, and future bidding.
A.
True
B.
False
Question 4 of 50 1.0/ 1.0 Points
Sales returns and allowances remain constant in their magnitude and never need differing levels
of control and approval.
A.
True
B.
False

3. Question 5 of 50 0.0/ 1.0 Points
All assertions apply to every account.
A.
True
B.
False
Question 6 of 50 1.0/ 1.0 Points
Failure to provide the auditor information regarding pending litigation is grounds for a scope
limitation.
A.
True
B.
False
Question 7 of 50 1.0/ 1.0 Points
Detail schedules need to tie to the lead schedule.

4. A.
True
B.
False
Question 8 of 50 1.0/ 1.0 Points
Sampling risk is the risk that your sample is not representative of the population.
A.
True
B.
False
Question 9 of 50 1.0/ 1.0 Points
An auditor’s report on an integrated audit will be unqualified if internal control over financial
reporting does not have any material weaknesses and the financial statements are fairly
presented.
A.
True
B.
False

5. Question 10 of 50 0.0/ 1.0 Points
If a transaction is paid for by credit card, the seller processes the sales transaction with the credit
card issuer when the item is received.
A.
True
B.
False
Question 11 of 50 1.0/ 1.0 Points
The last steps of an integrated audit are to understand the industry and contract with the client to
do the audit.
A.
True
B.
False
Question 12 of 50 1.0/ 1.0 Points
Cash received for sales comes in through several channels.

6.
A.
True
B.
False
Question 13 of 50 1.0/ 1.0 Points
Recalculation is a form of reperformance.
A.
True
B.
False
Question 14 of 50 1.0/ 1.0 Points
When the mail is opened and checks are received, a document called a daily remittance list is
immediately prepared.
A.
True
B.
False

7. Question 15 of 50 1.0/ 1.0 Points
All transactions in the sales and collection cycle need not be recorded at the correct amounts.
A.
True
B.
False
Question 16 of 50 1.0/ 1.0 Points
The audit report must contain explanatory language if there is a going concern issue.
A.
True
B.
False
Question 17 of 50 1.0/ 1.0 Points
One of the first concerns regarding the revenue cycle is that all recorded sales entries are the
result of real transactions that do not meet the criteria for revenue recognition.

8.
A.
True
B.
False
Question 18 of 50 1.0/ 1.0 Points
The Sarbanes-Oxley Act limits the amount of non-attest services that auditors may perform for
public companies they audit.
A.
True
B.
False
Question 19 of 50 1.0/ 1.0 Points
An audit report must be issued whenever an auditor is associated with financial statements.
A.
True
B.
False

9. Question 20 of 50 1.0/ 1.0 Points
Preventative controls are preferred over detective controls.
A.
True
B.
False
Question 21 of 50 0.0/ 1.0 Points
Unfilled orders are taken off the list after they are received and recorded.
A.
True
B.
False
Question 22 of 50 1.0/ 1.0 Points
Deciding that internal controls are effective when they in fact they are not is an example of
assessing control risk too high.

10.
A.
True
B.
False
Question 23 of 50 1.0/ 1.0 Points
The SEC is responsible for setting standards for not-for-profit organizations.
A.
True
B.
False
Question 24 of 50 1.0/ 1.0 Points
Substantive testing can be reduced as a result of ITGC testing performed at year-end.
A.
True
B.
False

11. Question 25 of 50 1.0/ 1.0 Points
Materiality is a measure of magnitude; yet, it is affected by both quantitative and qualitative
factors.
A.
True
B.
False
Question 26 of 50 1.0/ 1.0 Points
The auditor must index the files to conform to the balance sheet.
A.
True
B.
False
Question 27 of 50 1.0/ 1.0 Points
The auditor begins with tests of internal control.

12. A.
True
B.
False
Question 28 of 50 1.0/ 1.0 Points
The integrity of management plays a key role in deciding whether or not to accept a client.
A.
True
B.
False
Question 29 of 50 1.0/ 1.0 Points
Since much of a health-care provider’s collections are paid by third-party payers, it is important
for the health-care provider to verify the patient’s insurance coverage before providing services.
A.
True
B.
False

13. Question 30 of 50 1.0/ 1.0 Points
The cutoff assertion refers to the distinction between the company and its subsidiaries and related
entities.
A.
True
B.
False
Question 31 of 50 1.0/ 1.0 Points
When checks are received in the mail, they should immediately be restrictively endorsed and a
daily remittance list should be prepared concurrently.
A.
True
B.
False
Question 32 of 50 1.0/ 1.0 Points
Publically-traded company refers to any SEC registrant.

14. A.
True
B.
False
Question 33 of 50 1.0/ 1.0 Points
If a client changes auditors, the new auditors may have to reissue the audit report for the previous
year.
A.
True
B.
False
Question 34 of 50 1.0/ 1.0 Points
An Unbilled Services account can be used to capture services that are provided before and during
the surgery that have not yet been billed. The Unbilled Services account is most important at the
end of the fiscal period so that proper revenue is recorded.
A.
True
B.
False

15. Question 35 of 50 1.0/ 1.0 Points
Auditors perform walkthroughs as an efficient way to gain an understanding of ICFR and assess
design effectiveness.
A.
True
B.
False
Question 36 of 50 1.0/ 1.0 Points
Currently, the primary authoritative body that regulates individual CPAs is the Congress of the
United States.
A.
True
B.
False
Question 37 of 50 1.0/ 1.0 Points
Obsolete inventory is an example of inherent risk.

16.
A.
True
B.
False
Question 38 of 50 1.0/ 1.0 Points
The seller will not hear from a customer when a cash payment the customer made is not posted
to the customer’s account balance.
A.
True
B.
False
Question 39 of 50 1.0/ 1.0 Points
Deciding that internal controls are not effective when they in fact they are is an example of
assessing control risk too low.
A.
True
B.
False

17.
Question 40 of 50 1.0/ 1.0 Points
Computers are the primary resources used on an audit.
A.
True
B.
False
Question 41 of 50 0.0/ 1.0 Points
CPAs who perform financial statement audits of public companies are responsible for the
accuracy of the client’s financial statements.
A.
True
B.
False
Question 42 of 50 1.0/ 1.0 Points
Audit steps for the revenue cycle are anchored in the overall audit plan.

18.
A.
True
B.
False
Question 43 of 50 1.0/ 1.0 Points
Materiality is first set at the account balance level and is then aggregated to the financial
statement level.
A.
True
B.
False
Question 44 of 50 1.0/ 1.0 Points
Problems that come from social engineering are the result of a lack of internal controls.
A.
True
B.
False

19. Question 45 of 50 0.0/ 1.0 Points
Controls are needed to ensure that goods are received on a timely basis and bills are sent out for
all goods that are received.
A.
True
B.
False
Question 46 of 50 1.0/ 1.0 Points
The contract between the audit firm and client is called the engagement letter.
A.
True
B.
False
Question 47 of 50 1.0/ 1.0 Points
Physical vaulting refers to the control procedure involving the capture of transactions that by-
passed the firewall.

20.
A.
True
B.
False
Question 48 of 50 1.0/ 1.0 Points
An unfilled order report is an internal document listing customer orders that have received credit
approval but have not been shipped.
A.
True
B.
False
Question 49 of 50 1.0/ 1.0 Points
If the unadjusted difference resulting from projecting the error rate to the account balance is less
than the tolerable misstatement, the auditor may choose to ignore the error.
A.
True
B.
False

21.
Question 50 of 50 1.0/ 1.0 Points
Generally accepted auditing standards refer to those standards that have been adopted by the
PCAOB.
A.
True
B.
False