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King, CPA, was engaged to audit the financial statements of Newton Company after its fiscal year had ended. King neither observed the inventory count nor confirmed the receivables by direct communication with debtors, but was satisfied concerning both after applying alternative procedures.King’s auditor’s report most likely contained a(n)

(A)Qualified opinion

(B)Disclaimer of opinion.

(C)Unmodified opinion.

(D)Unmodified opinion with an other-matter paragraph.

The Correct Answer

According to COSO, which of the following components addresses the need to respond in an organized manner to significant changes resulting from international exposure, acquisitions, or executive transitions?

(A)Control activities (B)Risk assessment (C)Monitoring activities (D)Information and communication

Correct Answer: B

If Jenny's Bakery purchased an insurance policy, assuming the accrual accounting method is still being used, when would the company report the cost of the policy as an expense?

(A)When Jenny signs the policy (B)When payment is made (C)When the bakery receives the benefits of the policy (D)When the bakery receives payments from the insurance company (E)When the invoice is received

Correct Answer: C

Which of the following is subtracted from net sales to determine gross profit?

(A)Mark one answer: (B)Cost of goods sold (C)Expenses (D)Both cost of goods sold and expenses (E)Cost of goods sold, expenses, and taxes (F)Taxes

Correct Answer: A

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