MaoEn/USCPA_AUD_Data huggingface dataset:
When a CPA concludes that there is substantial doubt about an entity's ability to continue as a going concern and that doubt remains (is not alleviated by management's plans) and the entity adequately discloses its financial difficulties, an unmodified opinion is appropriate. A separate section with the heading "Substantial Doubt About the Entity's Ability to Continue as a Going Concern," rather than an emphasis-of-matter paragraph, should be added to the auditor's report. This paragraph should include the phrases "substantial doubt" and "going concern."
Choices "C", "B", and "A" are incorrect, per above."
The auditor should consider certain factors in assessing the efficiency and effectiveness of analytical procedures as compared to tests of details. In determining whether and to what extent analytical procedures should be used, which of the following should the auditor consider?
A.
Explanations provided by the client.
B.
Interrelationships of financial information.
C.
Nonfinancial information that may affect financial information.
D.
The nature of the assertion tested.,"Choice "D" is correct. When evaluating whether and to what extent analytical procedures should be used, the auditor should consider the nature of the assertion tested. The other factors the auditor considers are the plausibility and predictability of the data relationship, availability and reliability of data used to develop the expectation, and the precision of the expectation.
Choice "A" is incorrect. Explanations provided by management is not a direct factor when assessing the efficiency and effectiveness of analytical procedures. However, the auditor may consider their explanations when evaluating the results of analytical procedures.
Choice "B" is incorrect. Interrelationships of financial information is not a direct factor that the auditor considers when assessing the efficiency and effectiveness of analytical procedures. However, the auditor may consider this when forming an expectation.
Choice "C" is incorrect. The consideration of nonfinancial information and its effect on the financial information is not a direct factor that the auditor considers when assessing the efficiency and effectiveness of analytical procedures. However, the auditor may consider this when forming an expectation."
Frank wants to evaluate Copeland Distributor's year-end allowance for credit losses. Frank obtains a listing of all customers with open balances as of the end of the fiscal period. Frank decides to age the data to evaluate the reasonableness of the allowance for credit losses balance. What type of data analytic is Frank executing?
A.
Descriptive analytic
B.
Predictive analytic
C.
Prescriptive analytic
D.
Diagnostic analytic,"Choice "A" is correct. Descriptive analytics describe what happened within the data. Aging the accounts receivable data would summarize and describe the data and therefore be a descriptive analytic.
Choice "B" is incorrect. Predictive analytics provide expected or predicted outcomes based on historical data. The analytic Frank uses is only providing a simple descriptive output.
Choice "C" is incorrect. Prescriptive analytics prescribe or recommend actions to be taken based on advanced analytics to reach a desired goal. The analytic Frank uses is only providing a simple descriptive output.
Choice "D" is incorrect. Diagnostic analytics explain why something happened. The analytic Frank uses provides a simple descriptive output and does not explain the drivers or underlying causes of the value of the output."
An audit partner is developing an office training program to familiarize his professional staff with statistical decision models applicable to the audit of dollar value balances. He wishes to demonstrate the relationship of sample sizes to population size and variability and the auditor's specifications as to tolerable misstatement and risk of incorrect acceptance. The partner prepared the following table to show comparative population characteristics and audit specifications of two populations.
Characteristics of
Population 1 Relative
to Population 2
Audit Specifications as to as Sample
from Population 1 Relative to a
Sample from Population 2

Size
Variability
Specified
Tolerable
Misstatement
Specified Risk
of Incorrect
Acceptance
Case 1
Equal
Equal
Equal
Lower
Case 2
Equal
Larger
Larger
Equal
Case 3
Larger
Equal
Smaller
Higher
Case 4
Smaller
Smaller
Equal
Higher
Case 5
Larger
Equal
Equal
Lower
You are to indicate for the specified case from the above table the required sample size to be selected from population 1 relative to the sample from population 2.
In case 4 the required sample size from population 1 is:
A.
Equal to the required sample size from population 2.
B.
Smaller than the required sample size from population 2.
C.
Larger than the required sample size from population 2.
D.
Indeterminate relative to the required sample size from population 2.,"Choice "B" is correct. There are two changes occurring, but they both have the same effect on sample size. A decrease in population variability and an increase in the risk of incorrect acceptance both result in a decrease in the required sample size. Note that the number of items in the population is generally assumed to have virtually no effect on sample size.
Choices "C", "A", and "D" are incorrect, based on the above explanation."
Which of the following factors is most relevant when an auditor considers the client's organizational structure in the context of control risk?
A.
Management's attitude toward information processing and accounting departments.
B.
The organization's recruiting and hiring practices.
C.
The suitability of the client's lines of reporting.
D.
Physical proximity of the accounting function to upper management.,"Choice "C" is correct. The suitability of the client's lines of reporting is an important part of the organizational structure, which in turn is a key component of the control environment. Since the control environment has a pervasive effect on the auditor's risk assessment, consideration of the suitability of the client's lines of reporting is quite relevant in evaluating control risk.
Choice "A" is incorrect. Management's attitude toward the information processing and accounting departments may have some impact on the auditor's assessment of control risk (especially if management tends to override controls), but it is not particularly relevant with respect to consideration of the client's organizational structure.
Choice "B" is incorrect. The organization's recruiting and hiring practices are not particularly relevant with respect to consideration of the client's organizational structure.
Choice "D" is incorrect. The physical proximity of the accounting function to upper management is not particularly relevant with respect to consideration of the client's organizational structure, especially since electronic communications are commonly used."
Which of the following statements is correct concerning probability proportional to size (PPS) sampling, also known as dollar unit sampling?
A.
The auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan.
B.
Overstated units have a lower probability of sample selection than units that are understated.
C.
The sampling distribution should approximate the normal distribution.
D.
The sampling interval is calculated by dividing the number of physical units in the population by the sample size.,"Choice "A" is correct. In PPS sampling, the auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan. The inputs for PPS are tolerable misstatement, risk of incorrect acceptance (reliability factor), and the recorded amount of the population being sampled.
Choice "B" is incorrect. Overstated units have a higher (not lower) probability of sample selection than units that are understated, because with PPS sampling, each item is given a probability of selection in proportion to its recorded amount (probability-proportional-to-size).
Choice "C" is incorrect. The sampling distribution does not have to approximate the normal distribution in order for PPS sampling to be used.
Choice "D" is incorrect. In PPS sampling, the sampling interval is calculated by dividing the recorded amount of the population (not the number of physical units) by the sample size."
Which of the following is an accurate statement regarding audit evidence?
A.
Internal evidence obtained is considered more reliable than external evidence.
B.
Examining a photocopy of a document is less reliable than obtaining a description of a transaction procedure by client management.
C.
Inspecting a sample of a client’s physical inventory is considered more reliable evidence than observing a client’s inventory count.
D.
More assurance can be placed on audit evidence when the results are consistent from multiple sources.,"Choice "D" is correct. This is an accurate statement. If an auditor obtains audit evidence from multiple sources that produce consistent results, he or she can place more assurance on that audit evidence.
Choice "A" is incorrect. This is an inaccurate statement. Obtaining external audit evidence is more reliable than gathering internal audit evidence (which is more reliable than oral evidence).
Choice "B" is incorrect. This is an inaccurate statement. If the auditor obtains a description of a transaction procedure from client management, he or she is gathering oral evidence. Audit evidence in documentary form, such as examining the original document or a photocopy, is deemed more reliable evidence than oral evidence.
Choice "C" is incorrect. This is an inaccurate statement. Both the inspection of inventory and the observation of inventory counts is audit evidence obtained directly by the auditor. Both are considered the most reliable form of evidence."
A country recently experienced a drop in consumer purchases and a rise in business inventories of durable goods. Wages grew slowly and unemployment increased. Business investment in plant and equipment dropped sharply and profits fell. Both interest rates and stock prices fell. Which of the following statements best represents the country's current economy?
A.
Entering an economic "stagflation."
B.
Exiting a depression period.
C.
Exiting an inflationary period.
D.
Amid an economic recession.,"Choice "D" is correct. A recession occurs when economic activity or output, as measured by GDP, declines. A decline in consumer purchases (likely due to slow wage growth), increased unemployment, and falling stock prices indicate an uncertain economic outlook and a reduction of wealth. Rising inventories, decreases in business investment, and falling profits indicate an economy in decline. Falling interest rates represent an attempt to reduce borrowing costs and to spur economic growth.
Choice "A" is incorrect. Stagflation results from a declining output and rising prices.
Choice "B" is incorrect. There is no indication that the current state of the economy shows a recovery from a depression.
Choice "C" is incorrect. There is no indication in the facts given that this economy has exited an inflationary period."
Which of the following types of control best describes procedures to ensure appropriate systems software acquisition?
A.
General.
B.
Information-processing.
C.
Physical.
D.
Monitoring.,"Choice "A" is correct. General controls are policies and procedures that relate to many applications and support the effective functioning and proper operation of the information system. General controls include procedures to ensure appropriate systems software acquisition.
Choice "B" is incorrect. Information-processing controls apply to the processing of individual transactions and help to ensure that transactions occurred, are authorized, and are completely and accurately processed and reported.
Choice "C" is incorrect. Physical controls relate to safeguarding assets, such as using security devices to limit access to programs and restricted areas.
Choice "D" is incorrect. Monitoring controls help assess the quality of control operation."
Which of the following factors is most relevant when an auditor considers the client's organizational structure in the context of control risk?
A.
Management's attitude toward information processing and accounting departments.
B.
Physical proximity of the accounting function to upper management.
C.
The organization's recruiting and hiring practices.
D.
The suitability of the client's lines of reporting.,"Choice "D" is correct. The suitability of the client's lines of reporting is an important part of the organizational structure, which in turn is a key component of the control environment. Since the control environment has a pervasive effect on the auditor's risk assessment, consideration of the suitability of the client's lines of reporting is quite relevant in evaluating control risk.
Choice "B" is incorrect. The physical proximity of the accounting function to upper management is not particularly relevant with respect to consideration of the client's organizational structure, especially since electronic communications are commonly used.
Choice "C" is incorrect. The organization's recruiting and hiring practices are not particularly relevant with respect to consideration of the client's organizational structure."
What is the most likely course of action that an auditor would take after determining that performing substantive tests on inventory will take less time than performing tests of controls?
A.
Perform both tests of controls and substantive tests on inventory.
B.
Assess control risk at a low level.
C.
Perform only substantive tests on inventory.
D.
Perform only tests of controls on inventory.,"Choice "C" is correct. If it would take less time or be more efficient to perform substantive tests than it would to perform tests of controls, and if there is no other reason to test controls (i.e., if there is not a high degree of electronic processing), the auditor would not be likely to test controls.
Choice "A" is incorrect. If it would take less time to perform substantive tests than it would to perform tests of controls, and if there is no other reason to test controls (i.e., if there is not a high degree of electronic processing), the auditor would not be likely to test controls.
Choice "B" is incorrect. In order to assess control risk at a low level, tests of controls would need to be performed. However, if it is more efficient to perform substantive tests, the auditor would not be likely to test controls.
Choice "D" is incorrect. Substantive procedures are always be necessary for all assertions relevant to material transaction classes, account balances, and disclosures. Assuming inventory is material, tests of controls alone would not be sufficient."
If interim substantive procedures for an account identified no exceptions, which of the following would the auditor not perform on that account at year-end?
A.
Substantive analytical procedures of the period since the interim testing date.
B.
Reconciliation of year-end balances to interim balances.
C.
Tests of details of activity during the period since the interim testing date.
D.
Tests of details for the entire year under audit.,"Choice “D” is correct. If interim substantive procedures for an account identified no exceptions, then the auditor does not need to test details for the entire year under audit at year-end.
Choice “A” is incorrect. If substantive procedures are performed at an interim date, the auditor would apply substantive procedures, such as performing substantive analytical procedures, during the period since the interim testing date. Note: Substantive procedures include tests of details and substantive analytical procedures.
Choice “B” is incorrect. An auditor should reconcile year-end balances to interim dates. This procedure is performed as part of the roll-forward procedures. For example, the client may have a revenue amount at interim (01/01–09/30) of $100,000, and then at year-end (the period of 01/01–12/31) the revenue amount is $150,000. The auditor would verify that the amount related to 01/01–09/30 is still $100,000, and then would apply substantive procedures to the remainder, $50,000, which occurred from 10/01–12/31.
Choice “C” is incorrect. If substantive procedures are performed at an interim date, the auditor would apply substantive procedures, such as testing the details, to the period since the interim testing date. Note: Substantive procedures include tests of details and substantive analytical procedures."
Which of the following is an inaccurate statement as it pertains to the auditor’s consideration of significant risks during an audit?
A.
It exists when the inherent risk is exceptionally high.
B.
The auditor uses professional judgment to identify whether a particular risk of material misstatement is a significant risk.
C.
Inherent risk is the only consideration.
D.
The impact of the client’s controls related to the perceived risk is a determinant for deciding the level of significance.,"Choice "D" is correct. This represents a false statement. When determining whether a risk is significant or not, the auditor should ignore the impact of the client’s controls related to that risk.
Choice "A" is incorrect. When the inherent risk is exceptionally high, the auditor would consider the risk as significant.
Choice "B" is incorrect. Ultimately the auditor must use his or her professional judgment when determining if a given risk of material misstatement is a significant risk.
Choice "C" is incorrect. The auditor determines whether a risk is significant (or not) by its inherent risk alone."
PCAOB standards state that the relevance of audit evidences depends on all but which of the following?
A.
Whether the audit procedure is designed to test for an understatement or overstatement.
B.
The timing of the audit procedure.
C.
Whether the audit procedure is designed to directly test an assertion.
D.
The auditor's risk assessment.,"Choice "D" is correct. The auditor's risk assessment affects the nature, extent, and timing of audit procedures, but does not determine the relevance of audit evidence.
Choice "A" is incorrect. The relevance of audit evidence depends in part on whether the audit procedure is designed to test for an understatement or overstatement.
Choice "B" is incorrect. The relevance of audit evidence depends in part on the timing of the audit procedure.
Choice "C" is incorrect. The relevance of audit evidence depends in part on whether the audit procedure is designed to directly test an assertion. If the audit procedures is designed to directly test an assertion and the evidence doesn't tell us anything about that assertion, then the evidence would not be relevant."
The auditor should consider certain factors in assessing the efficiency and effectiveness of analytical procedures as compared to tests of details. In determining whether and to what extent analytical procedures should be used, which of the following should the auditor consider?
A.
Interrelationships of financial information.
B.
The nature of the assertion tested.
C.
Explanations provided by the client.
D.
Nonfinancial information that may affect financial information.,"Choice "B" is correct. When evaluating whether and to what extent analytical procedures should be used, the auditor should consider the nature of the assertion tested. The other factors the auditor considers are the plausibility and predictability of the data relationship, availability and reliability of data used to develop the expectation, and the precision of the expectation.
Choice "A" is incorrect. Interrelationships of financial information is not a direct factor that the auditor considers when assessing the efficiency and effectiveness of analytical procedures. However, the auditor may consider this when forming an expectation.
Choice "C" is incorrect. Explanations provided by management is not a direct factor when assessing the efficiency and effectiveness of analytical procedures. However, the auditor may consider their explanations when evaluating the results of analytical procedures.
Choice "D" is incorrect. The consideration of nonfinancial information and its effect on the financial information is not a direct factor that the auditor considers when assessing the efficiency and effectiveness of analytical procedures. However, the auditor may consider this when forming an expectation."
In an audit of a nonissuer's defined benefit pension plan, which of the following procedures most effectively tests that benefit payments to plan participants are paid in accordance with the plan document?
A.
Recalculating benefits for selected participants based on the plan provisions using relevant service and salary history to support the recorded benefits paid to the participants.
B.
Testing the accuracy and completeness of benefit payments made to plan participants and comparing the benefit payments recorded in the general ledger to the benefit payment records in participant records.
C.
Sending confirmations to plan participants to ascertain that the amount paid to them in the fiscal year is the same as recorded in the general ledger account related to benefit payments.
D.
Inquiring of the plan administrator about the internal control procedures in place to ensure that the benefit payments to plan participants are paid in accordance with the plan provisions.,"Choice "A" is correct. Recalculation of benefits based on the plan provisions would be an effective procedure to provide evidence that benefit plan payments were accurate and appropriate based on the relevant plan documents.
Choice "B" is incorrect. Comparing benefit payments to participant records would confirm that the amounts recorded in the general ledger reconcile to the amounts received by participants, but this would not provide evidence that the payments and general ledger amounts were accurate based on the relevant plan documents.
Choice "C" is incorrect. Sending confirmation to plan participants would confirm that the amounts recorded in the general ledger reconcile to the amounts received by participants, but this would not provide evidence that the payments and general ledger amounts were accurate based on the relevant plan documents.
Choice "D" is incorrect. Inquiry alone would not be sufficient to provide evidence that benefit plan payments were appropriate based on the relevant plan documents."
An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to:
A.
Measure the sufficiency of the audit evidence obtained.
B.
Minimize the failure to detect errors and fraud.
C.
Reduce the level of audit risk and materiality to a relatively low amount.
D.
Eliminate the risk of nonsampling errors.,"Choice "A" is correct. Statistical sampling helps the auditor to measure the sufficiency of the audit evidence because the auditor can quantify the audit risk, thus assisting in limiting it to an acceptable level.
Choice "B" is incorrect. The use of statistical sampling does not necessarily minimize the failure to detect errors and fraud.
Choice "C" is incorrect. Audit risk can be reduced to a relatively low level with non-statistical sampling. Materiality is not affected by the sampling method used.
Choice "D" is incorrect. Nonsampling errors relate to the improper evaluation of evidence by the auditor and are not dependent on the sampling method used."
When using classical variables sampling for estimation, an auditor normally evaluates the sampling results by calculating the possible error in either direction. This statistical concept is known as:
A.
Projected error.
B.
Reliability.
C.
Standard deviation.
D.
Precision.,"Choice "D" is correct. The statistical concept of precision is used to describe the auditor's evaluation of sampling results by calculating the possible error in either direction.
Choice "A" is incorrect. Projected error is the auditor's best estimate of the error in the total population based upon evaluating the actual error rate in the sample results. The auditor then adds an allowance for sampling risk to develop a "precision interval" within which the population is expected to fall.
Choice "B" is incorrect. Reliability measures how frequently the procedure used will yield differences between the estimated value and the population value.