Note: These exam questions were extracted from several exams given over the years. Therefore, some questions may seem repetitive. It is recommended that you read each question carefully, though, as some may have subtle differences. Also, please do not be alarmed if this page has not been updated recently. Due to the nature of the material covered, exam questions do not change radically over time.

1. Be knowledgeable in the different types of communications that take place between the various parties of the audit engagement, including author, addressee, whether required to comply with GAAS, and timing.
   


2. Auditor's examinations of financial statements consist largely of testing and sampling as opposed to detailed complete reviews.
   

   a.	Why do auditors rely upon sampling and testing?
   b.	Delineate the differences between sampling and nonsampling risk. Include in your remarks, specific information related to how these risks are controlled.

   
   


3. Compare and contrast judgemental and statistical sampling. Include in your remarks, information relating to:
   

   a.	Sample size determination
   b.	Sample selection
   c.	Sample evaluation
   d.	Relative advantages of statistical versus judgemental sampling.

   
   


4. Complete the following matrices relating to decision outcomes from attribute and variable sampling AND discuss the meaning and significance to the auditor of incorrect decisions. Note: I will not reproduce these matrices. They are in your text and they were presented in class on the chalkboard. Reference: Risk of Assessing Control Risk Too Low/Risk of Assessing Control Risk Too High and Risk of Incorrect Acceptance/Rejection.
   


5. The second fieldwork standard requires an auditor to have an understanding of his client's internal control structure to plan the audit and determine the NET of tests to be performed.
   
   

   a.	Define and discuss what consititutes internal control structure.
   b.	What are the objectives of the internal control structure?
   c.	What group has responsibility for establishing and maintaining the internal control structure?
   d.	Relate cost/benefit analysis of internal controls and reportable conditions to the overall corporate objective.
   e.	What techniques are used by auditors to document their understanding of the internal control structure? What are the relative advantages of each?
   f.	Assuming that the auditor's preliminary assessment of control risk is less than the maximum, what courses of actions are then appropriate for the auditor?

   
   


6. Relate the Mosaic Theory of Audit Evidence to the third fieldwork standard.
   


7. Relate the concepts of materiality and risk to the amount and type of audit evidence required to support an auditor's opinion.
   



8. a.	Define subsequent events.
   b.	Describe the auditor's responsibility for subsequent events.

   
   


9. Discuss the auditor's responsibility for subsequent events. Include in your remarks a full definition of what constitutes a subsequent event. Use a time line to illustrate your understanding of the concept.
   


10. List and describe the levels of assurance that an auditor/accountant may provide on annual historical financial statements of public and nonpublic companies.
    


11. Discuss management's responsibility with regard to the corporate internal control structure as a consequence of the Foreign Corrupt Practices Act of 1977.
    



12. a.	Define the term "subsequent event" as used in the accounting and auditing literature.
    b.	Give two examples of each type of subsequent event.
    c.	State how each type of subsequent event is treated in the financial statements.
    d.	List three audit procedures that are routinely performed by auditors to search out and identify subsequent events.

    
    


13. Describe the auditor/accountant's fieldwork or evidence gathering responsibilities under authoritative professional standards (GAAS or SSARS) before each level of assurance is provided.
    


14. If, after assessing control risk and performing tests of controls, the auditor concludes that there are no reportable conditions in the client's internal control structure and that tested controls are working effectively, is it necessary for the auditor to perform additional audit evidence gathering procedures? Explain.
    


15. State the type of report (unqualified, unqualified with an explanatory paragraph, qualified, disclaimer, or adverse) AND the paragraphs that would depart from the standard unqualified report, if any, in each of the following cases. All cases are material and adequately disclosed in the financial statements, unless otherwise specifically stated.
    

    a.	The auditor has substantial doubt as to the ability of a client to continue as a going concern.
    b.	The client's attorney refuses to respond to the letter of inquiry regarding contingent liabilities.
    c.	The client does not disclose a significant pending lawsuit. The auditor evaluates the probability of material loss as reasonably possible and the client's position is that the probability of loss is remote.
    d.	The client's chief financial officer refuses to sign the management representation letter. The client's chief executive officer/operating officer does sign.
    e.	The client maintains its financial accounting records in accordance with the provisions of the Internal Revenue Code. The client uses the standard names for its financial statements, i.e., balance sheet, income statement.

    
    


16. Comment on management responsibilities for establishing and maintaining internal control. Include in your discourse consideration of management's objective of maximizing shareholder wealth and their need to demonstrate good faith efforts to comply with laws and regulations governing minimal levels of internal control. Specifically, what has been the apparent influence of the FCPA on public company internal controls? (Think specifically about the issues of efficiency and effectiveness and potential conflicts among objectives.)
    


17. What is a "dual dated" audit report? Whay are such reports issued?
    


18. Compare the level of assurance provided in audit, review, and compilation reports. Define the term "level of assurance" and relate the level of assurance provided to the depth and scope of evidence gathering fieldwork procedures.
    


19. Every standard three paragraph unqualified audit report issued provides an implicit conditional warrant by the auditor that the reporting entity is viable as a going concern. Discuss the truth of this assertion in light of SAS No. 59's requirements.
    


20. Discuss the relationship between the independent auditor and the client's internal auditors. Relate GAAS fieldwork standards to the independent auditor/internal auditor relationship.
    


21. Discuss the difficulty auditors confront in gathering evidence about contingencies. Enclose in your remarks consideration of the SFAS No. 5 definitions and the fieldwork procedures relied upon by auditors to unearth contingencies.
    


22. Discuss the inherent conflicts between the American Bar Association and the AICPA in the area of litigation/claims/assessment disclosures. How have these conflicts been resolved?