141
Which of the following best describes a 'familiarity threat' to auditor independence?
A
A threat from being too new to the client relationship
B
A threat arising from a long or close relationship with a client leading to excessive trust or reduced professional skepticism
C
A threat from lack of audit experience
D
A threat arising from tax disputes only
142
Which of the following best describes 'self-interest threat' to auditor independence?
A
A threat arising from the auditor having a financial or other personal interest in the client
B
A threat from client complexity alone
C
A threat from regulatory changes
D
A threat from routine documentation requirements
143
Which of the following best describes the purpose of an 'interim audit'?
A
A final audit performed after year-end only
B
Audit procedures performed before the year-end to reduce the workload of the final audit and identify issues early
C
A tax audit conducted by the government
D
An audit performed only for publicly listed companies
144
Which of the following best describes 'walkthrough procedures' in auditing?
A
Physically counting all inventory items
B
Tracing a transaction through the accounting system from initiation to reporting to understand and evaluate a process or control
C
Sending confirmation letters to banks
D
Calculating financial ratios only
145
Which of the following best describes the term 'true-up adjustment' in accounting, often used in budgeting or accrual reversals?
A
A permanent restatement of prior year financials
B
An adjustment made to reconcile estimated figures with actual results once known
C
A tax penalty adjustment
D
A one-time asset revaluation only
146
Which of the following best describes 'horizontal analysis' in financial statement analysis?
A
Comparing line items within a single period as percentages of a base figure
B
Comparing financial statement items across multiple periods to identify trends
C
Comparing a company only to industry averages
D
Analyzing only cash flow statements
147
Which of the following best describes 'vertical analysis' in financial statement analysis?
A
Comparing figures across multiple years only
B
Expressing each line item on a financial statement as a percentage of a base figure, such as total assets or total sales
C
Analyzing only cash transactions
D
Comparing companies in different industries only
148
Which of the following best describes a 'qualified employee benefit expense recognition' principle under accrual accounting, such as for employee bonuses?
A
Bonuses are recognized only when paid in cash
B
Bonuses are recognized as an expense in the period the employee earns them, even if paid later
C
Bonuses are never recorded as expenses
D
Bonuses are always capitalized as assets
149
Which of the following best describes the purpose of 'notes to the financial statements'?
A
To replace the balance sheet
B
To provide additional detail, context, and disclosures that support the figures presented in the main financial statements
C
To list only the company's employees
D
To calculate tax liabilities
150
Which of the following best describes the 'objectivity principle' in accounting?
A
Financial records should be based on verifiable, unbiased evidence rather than personal opinion
B
Financial records should reflect management's optimistic projections
C
Financial records should be adjusted to favor shareholders
D
Financial records should be based solely on estimates