Question 1

A working trial balance is:

Accepted Answer

A)  a listing of the general ledger accounts and their year- end balances. 
B)  a summary of the effect of the auditor's reclassification entries. 
C)  the set of lead schedules. 
D)  a list of the opening subsidiary ledger account balances. 
A)  a listing of the general ledger accounts and their year- end balances. 
B)  a summary of the effect of the auditor's reclassification entries. 
C)  the set of lead schedules. 
D)  a list of the opening subsidiary ledger account balances.

Question 2

ASA 300.05 requires:
The auditor shall plan the audit so that the engagement will be performed in an effective manner.

Accepted Answer

A) True 
 B)False

Question 3

The engagement letter may also include an agreement to provide other services such as tax returns or
management consulting.

Accepted Answer

A) True 
 B)False

Question 4

Material transactions between the client and the client's related parties must be disclosed in the client's financial statements and in the auditor's report.

Accepted Answer

A) True 
 B)False

Question 5

Identify three ways audit software can be used by audit firms to assist in the documentation and recording of the audit process:

Accepted Answer

Three examples of the use of audit softw

Question 6

The auditor's primary concern is the risk of material misstatements in the financial statements due to business risk.

Accepted Answer

A) True 
 B)False

Question 7

Auditors should plan engagements properly to:

Accepted Answer

A)  gain a clear understanding of the client. 
B)  ensure a cost- effective audit. 
C)  avoid client misunderstandings. 
D)  all of the above 
A)  gain a clear understanding of the client. 
B)  ensure a cost- effective audit. 
C)  avoid client misunderstandings. 
D)  all of the above

Question 8

When a successor (new) auditor requests information from a company's previous auditor, and there are legal problems or disputes between the client and the predecessor auditor, the predecessor auditor's response to the new auditor can be limited to stating that no information will be provided.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would NOT be classified as a related- party transaction?

Accepted Answer

A)  Sales of merchandise between affiliated companies 
B)  Exchanges of equipment between two companies owned by the same person 
C)  An advance of one week's salary to an employee 
D)  Loans or credit sales to the principal owner or client 
A)  Sales of merchandise between affiliated companies 
B)  Exchanges of equipment between two companies owned by the same person 
C)  An advance of one week's salary to an employee 
D)  Loans or credit sales to the principal owner or client

Question 10

A common example of a related- party transaction is any transaction between a parent company and its
subsidiary.

Accepted Answer

A) True 
 B)False

Question 11

Good working papers should have common characteristics. Which one of the following is NOT one of those characteristics?

Accepted Answer

A)  Inclusion of a written statement in the form of a conclusion 
B)  Notations directly on the working paper schedules, explaining the work done 
C)  Initialling the preparer's initials on the audit working papers 
D)  Noting the client staff member responsible for the particular area under review 
A)  Inclusion of a written statement in the form of a conclusion 
B)  Notations directly on the working paper schedules, explaining the work done 
C)  Initialling the preparer's initials on the audit working papers 
D)  Noting the client staff member responsible for the particular area under review

Question 12

A measure of the auditor's assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client's internal control is called:

Accepted Answer

A)  acceptable audit risk. 
B)  inherent risk. 
C)  statistical risk. 
D)  control risk. 
A)  acceptable audit risk. 
B)  inherent risk. 
C)  statistical risk. 
D)  control risk.

Question 13

One means of informing the client that the auditor is NOT responsible for the discovery of all acts of fraud is the:

Accepted Answer

A)  engagement letter. 
B)  representation letter. 
C)  responsibility letter. 
D)  client letter. 
A)  engagement letter. 
B)  representation letter. 
C)  responsibility letter. 
D)  client letter.

Question 14

Why should the auditor understand the client's business factors-such as information about related parties?

Accepted Answer

A)  It may indicate areas of increased control risk. 
B)  It may indicate areas of increased client business risk. 
C)  It may indicate areas of increased audit risk. 
D)  It may indicate reasons not to accept the engagement. 
A)  It may indicate areas of increased control risk. 
B)  It may indicate areas of increased client business risk. 
C)  It may indicate areas of increased audit risk. 
D)  It may indicate reasons not to accept the engagement.

Question 15

Why is a tour of the client's facilities helpful in obtaining a better understanding of the client's business operations?

Accepted Answer

A)  It may indicate areas of increased inherent risk. 
B)  It may indicate areas of increased client business risk. 
C)  It may indicate areas of increased audit risk. 
D)  It may indicate reasons not to accept the engagement. 
A)  It may indicate areas of increased inherent risk. 
B)  It may indicate areas of increased client business risk. 
C)  It may indicate areas of increased audit risk. 
D)  It may indicate reasons not to accept the engagement.

Question 16

Client business risk is the risk that the audit client will fail to achieve its objectives.

Accepted Answer

A) True 
 B)False

Question 17

Which one of the following would ordinarily NOT be found in the permanent file?

Accepted Answer

A)  The name of the predecessor auditor 
B)  Systems documentation 
C)  Past years' analytical working papers 
D)  Related party details 
A)  The name of the predecessor auditor 
B)  Systems documentation 
C)  Past years' analytical working papers 
D)  Related party details

Question 18

Notations on working papers are accomplished by the use of:

Accepted Answer

A)  tick marks. 
B)  cross reference numbers. 
C)  sticky notes. 
D)  the auditor's initials. 
A)  tick marks. 
B)  cross reference numbers. 
C)  sticky notes. 
D)  the auditor's initials.

Question 19

The auditor needs to understand the control environment (management and governance) because:

Accepted Answer

A)  develop the overall audit plan. 
B)  management's ability to identify and respond to risk affects the risk of material misstatements in the financial report. 
C)  set materiality levels and assess acceptable audit risk. 
D)  all of the above 
A)  develop the overall audit plan. 
B)  management's ability to identify and respond to risk affects the risk of material misstatements in the financial report. 
C)  set materiality levels and assess acceptable audit risk. 
D)  all of the above

Question 20

Discuss each of the five steps involved in accepting an audit engagement and initial planning.

Accepted Answer

The five steps involved in 'preplanning'

A working trial balance is:

ASA 300.05 requires: The auditor shall plan the audit so that the engagement will be performed in an effective manner.

The engagement letter may also include an agreement to provide other services such as tax returns or management consulting.

Material transactions between the client and the client's related parties must be disclosed in the client's financial statements and in the auditor's report.

Identify three ways audit software can be used by audit firms to assist in the documentation and recording of the audit process:

The auditor's primary concern is the risk of material misstatements in the financial statements due to business risk.

Auditors should plan engagements properly to:

When a successor (new) auditor requests information from a company's previous auditor, and there are legal problems or disputes between the client and the predecessor auditor, the predecessor auditor's response to the new auditor can be limited to stating that no information will be provided.

Which of the following would NOT be classified as a related- party transaction?

A common example of a related- party transaction is any transaction between a parent company and its subsidiary.

Good working papers should have common characteristics. Which one of the following is NOT one of those characteristics?

A measure of the auditor's assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client's internal control is called:

One means of informing the client that the auditor is NOT responsible for the discovery of all acts of fraud is the:

Why should the auditor understand the client's business factors-such as information about related parties?

Why is a tour of the client's facilities helpful in obtaining a better understanding of the client's business operations?

Client business risk is the risk that the audit client will fail to achieve its objectives.

Which one of the following would ordinarily NOT be found in the permanent file?

Notations on working papers are accomplished by the use of:

The auditor needs to understand the control environment (management and governance) because:

Discuss each of the five steps involved in accepting an audit engagement and initial planning.

Demand for Audit and Assurance Services

Auditors Legal Environment

Audit Quality and Ethics

Audit Responsibilities and Objectives

Audit Evidence

Materiality and Risk

Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Completing Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling

Audit of Transaction Cycles and Financial Statement Balances I

Audit of Transaction Cycles and Financial Statement Balances II

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters

Exam 6: Audit Planning and Documentation

A working trial balance is:

ASA 300.05 requires: The auditor shall plan the audit so that the engagement will be performed in an effective manner.

The engagement letter may also include an agreement to provide other services such as tax returns or management consulting.

Material transactions between the client and the client's related parties must be disclosed in the client's financial statements and in the auditor's report.

Identify three ways audit software can be used by audit firms to assist in the documentation and recording of the audit process:

The auditor's primary concern is the risk of material misstatements in the financial statements due to business risk.

Auditors should plan engagements properly to:

When a successor (new) auditor requests information from a company's previous auditor, and there are legal problems or disputes between the client and the predecessor auditor, the predecessor auditor's response to the new auditor can be limited to stating that no information will be provided.

Which of the following would NOT be classified as a related- party transaction?

A common example of a related- party transaction is any transaction between a parent company and its subsidiary.

Good working papers should have common characteristics. Which one of the following is NOT one of those characteristics?

A measure of the auditor's assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client's internal control is called:

One means of informing the client that the auditor is NOT responsible for the discovery of all acts of fraud is the:

Why should the auditor understand the client's business factors-such as information about related parties?

Why is a tour of the client's facilities helpful in obtaining a better understanding of the client's business operations?

Client business risk is the risk that the audit client will fail to achieve its objectives.

Which one of the following would ordinarily NOT be found in the permanent file?

Notations on working papers are accomplished by the use of:

The auditor needs to understand the control environment (management and governance) because:

Discuss each of the five steps involved in accepting an audit engagement and initial planning.

Demand for Audit and Assurance Services

Auditors Legal Environment

Audit Quality and Ethics

Audit Responsibilities and Objectives

Audit Evidence

Materiality and Risk

Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Completing Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling

Audit of Transaction Cycles and Financial Statement Balances I

Audit of Transaction Cycles and Financial Statement Balances II

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters