ACCT 555 Midterm

1) (TCO A) Match the following definitions to the appropriate terms.

2) (TCO B) Your CPA firm has completed the fieldwork for the 2009 audit of Sharp Corporation, a private company with an October year-end. You were preparing to draft a standard, unqualified audit report when you discovered that the audit manager on the Sharp engagement owns 10 shares of Sharp's common stock. Prepare the appropriate report.

3) (TCO C) The following situation involves a possible violation of the AICPA's code of professional conduct. For this 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. Your answer should be set up something like this:

Rule # _____ Violation? Yes or No

4) (TCO C) The following situation involves a possible violation of the AICPA's code of professional conduct. For this 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. Your answer should be set up something like this:

Rule # _____ Violation? Yes or No.

Provide a one- or two-line explanation.

Brad Heist, CPA, was traveling from Dallas to Houston, TX, when he was pulled over by a police officer on suspicion of driving under the influence. The Breathalyzer and a subsequent blood test revealed that Brad was definitely impaired. He was convicted in court of driving while under the influence of alcohol (DUI). This was Brad's fourth conviction of DUI in less than a year, a felony under current Texas law. Accordingly, Brad was sentenced to 18 months in prison.

5) (TCO C) Briefly discuss the brainstorming session required by SAS No. 99. Be sure to include a list of ideas that should be addressed in the session.

6) (TCO D) Discuss some of the steps the AICPA and the accounting profession as a whole can and are taking to reduce practitioners' exposure to lawsuits. You answer should provide at least five steps.

7) (TCO F) Match five of the terms (A–H) with the definitions provided below (1–5). A - Audit documentation

B - Audit procedures
C - Audit objectives

D - Analytical procedures
E - Budgets
F - Reliability of evidence
G - Sufficiency of evidence
H - Persuasiveness of evidence

_____ 1: Use of comparisons and relationships to assess the reasonableness of account balances
_____ 2: Detailed instructions for the collection of a type of audit evidence _____ 3: The degree to which evidence can be considered believable or trustworthy

_____ 4: Contains all the information that the auditor considers necessary to conduct an adequate audit and to provide support for the audit report
_____ 5: Determined by the amount of evidence obtained

8) (TCO G) Auditors routinely conduct analytical procedures in the planning, testing, and completion phases of the audit. Identify the primary and secondary purposes of performing analytical procedures in each phase of the audit.