Question 1

An indirect effect is an audit situation in which noncompliance with laws and regulations ________ (choose two options).

Accepted Answer

A) does not have an explicit impact on amounts and disclosures in the financial statements 
B) could require the creation of a contingent liability or an additional disclosure 
C) has an explicit impact on amounts and disclosures in the financial statements 
D) does not require the creation of a contingent liability or an additional disclosure 
A) does not have an explicit impact on amounts and disclosures in the financial statements 
B) could require the creation of a contingent liability or an additional disclosure 
C) has an explicit impact on amounts and disclosures in the financial statements 
D) does not require the creation of a contingent liability or an additional disclosure

Question 2

How well current assets cover current liabilities is indicated by the ________ratio.

Accepted Answer

The answer of How well current assets cover current liabilities...

Question 3

When the economy is poor, a fall in profits can easily be explained to shareholders when most companies in the industry are also experiencing a decline in earnings; therefore, therefore when the economy is poor there is a tendency within an entity to _______.

Accepted Answer

A) maximize write-offs 
B) maximize profits 
C) minimize revenues 
D) minimize profits 
A) maximize write-offs 
B) maximize profits 
C) minimize revenues 
D) minimize profits

Question 4

DanSpring Collections is a collections business located in Des Moines, IA.DanSpring frequently makes changes to the invoicing software programming to update customer pricing and discounts.Explain the steps that DanSpring can take to avoid errors in making these programming changes.

Accepted Answer

Programs may need to be changed due to c

Question 5

The term _______ refers to an affiliate, principal owner, manager, or other party that is not independent of the entity.

Accepted Answer

A) related party 
B) primary beneficiary 
C) third party 
D) other beneficiary 
A) related party 
B) primary beneficiary 
C) third party 
D) other beneficiary

Question 6

Of the following scenarios, which would most likely result in an audit firm not accepting an engagement?

Accepted Answer

A) Some internal controls related to credit granting procedures are not operating effectively. 
B) IT systems and architecture are antiquated and not capable of current processing and recording requirements. 
C) Significant related party transactions, of which the auditor has been advised, are a routine part of business. 
D) The client has advised that the auditor will be unable to confirm certain inventories with no valid reason given. 
A) Some internal controls related to credit granting procedures are not operating effectively. 
B) IT systems and architecture are antiquated and not capable of current processing and recording requirements. 
C) Significant related party transactions, of which the auditor has been advised, are a routine part of business. 
D) The client has advised that the auditor will be unable to confirm certain inventories with no valid reason given.

Question 7

Which of the following is/are among the procedures used by auditors to identify related parties?

Accepted Answer

A) Review financial statements of competitors. 
B) Trace inventory quantities from the floor to the ledger. 
C) Gain an understanding of the industry. 
D) Review correspondence from the client's advisors, such as attorneys or consultants. 
A) Review financial statements of competitors. 
B) Trace inventory quantities from the floor to the ledger. 
C) Gain an understanding of the industry. 
D) Review correspondence from the client's advisors, such as attorneys or consultants.

Question 8

What is the typical means by which an auditor outlines the details of the engagement, and communicates this to the client's management?

Accepted Answer

A) An audit plan 
B) Audit working papers 
C) Engagement letter 
D) Risk assessment 
A) An audit plan 
B) Audit working papers 
C) Engagement letter 
D) Risk assessment

Question 9

Which of the following factors indicate higher inherent risks?

Accepted Answer

A) Industry subject to changing trends 
B) Demand is not seasonal 
C) Industry has low chance of technological obsolescence 
D) Steady profitability 
A) Industry subject to changing trends 
B) Demand is not seasonal 
C) Industry has low chance of technological obsolescence 
D) Steady profitability

Question 10

Can an auditor place complete reliance on internal control to the exclusion of other audit procedures?

Accepted Answer

An auditor cannot place comple

Question 11

_______ ratios generally reflect a company's ability to generate earnings with its assets.

Accepted Answer

The answer of _______ ratios generally reflect a company's ability...

Question 12

When the auditor is considering the risk of material misstatement, they will attempt to identify major risks, determine how these risks could relate to fraud or error, consider the importance of the risks, and ______.

Accepted Answer

A) notify management of these risks 
B) attempt to immediately resolve any identified risks 
C) determine the probability that the identified risks might result in material misstatements 
D) determine who is responsible for each identified risk 
A) notify management of these risks 
B) attempt to immediately resolve any identified risks 
C) determine the probability that the identified risks might result in material misstatements 
D) determine who is responsible for each identified risk

Question 13

Ability of cash flows from operations to cover current debt and dividends = ________.

Accepted Answer

A) sustainable cash flow from operations/ (current portion of financing debt + dividends) 
B) (sustainable cash flow from operations/ current portion of financing debt) - dividends 
C) (current portion of financing debt + dividends)/ sustainable cash flow from operations 
D) current portion of financing debt + (dividends/ sustainable cash flow from operations) 
A) sustainable cash flow from operations/ (current portion of financing debt + dividends) 
B) (sustainable cash flow from operations/ current portion of financing debt) - dividends 
C) (current portion of financing debt + dividends)/ sustainable cash flow from operations 
D) current portion of financing debt + (dividends/ sustainable cash flow from operations)

Question 14

If auditors believe their client is under pressure to smooth its income and not report any unexpected increases, which of the following risks are likely with regard to current income? (choose two options)

Accepted Answer

A) Exclusion of revenues earned just before year-end 
B) Inclusion of expenses incurred after year-end 
C) Inclusion of revenues earned just before year-end 
D) Exclusion of expenses incurred after year-end 
A) Exclusion of revenues earned just before year-end 
B) Inclusion of expenses incurred after year-end 
C) Inclusion of revenues earned just before year-end 
D) Exclusion of expenses incurred after year-end

Question 15

Should the client have internal controls in place to ensure related parties are being identified?

Accepted Answer

A) Yes, and the client is required to disclose them. 
B) No, not necessarily. 
C) Yes, but the client in under no obligation to disclose them. 
D) None of these answer choices are correct. 
A) Yes, and the client is required to disclose them. 
B) No, not necessarily. 
C) Yes, but the client in under no obligation to disclose them. 
D) None of these answer choices are correct.

Question 16

Which three of the following reasons could increase inherent risk? (choose three options)

Accepted Answer

A) Client offers warranties on its products. 
B) Client has larger number of locations and operations are decentralized. 
C) Client's transactions are complex and unique. 
D) Client takes advantage of discounts offered by suppliers. 
A) Client offers warranties on its products. 
B) Client has larger number of locations and operations are decentralized. 
C) Client's transactions are complex and unique. 
D) Client takes advantage of discounts offered by suppliers.

Question 17

During your audit of Cookie Factory, Inc.for the year ended December 31, 2020, you discover that Cookie Factory incorrectly booked a December 31, 2020 credit sale in January 2021.Explain how this error will impact the Income Statement and Balance Sheets for the years ending December 31, 2020 and 2021.

Accepted Answer

The year ended December 31 2020 income w

Question 18

Which of the following engagement planning procedures would most likely assist the auditor in identifying related-party transactions before the balance-sheet date?
- Interviewing internal auditors about their reporting responsibilities.
- Reviewing accounting records for recurring transactions occurring near year-end.
- Inspecting communications with the client's legal counsel regarding recorded contingent liabilities.
- Scanning the minutes for significant transactions with members of the board of directors.

Accepted Answer

Scanning the minutes for signi

Question 19

The use of IT in accounting processes includes _________.

Accepted Answer

A) customer acquisition 
B) transaction initiation 
C) employee performance reviews 
D) interviewing accounting personnel 
A) customer acquisition 
B) transaction initiation 
C) employee performance reviews 
D) interviewing accounting personnel

Question 20

An audit committee is a sub-committee of the board of directors.

Accepted Answer

A) True 
 B)False

An indirect effect is an audit situation in which noncompliance with laws and regulations ________ (choose two options).

How well current assets cover current liabilities is indicated by the ________ratio.

When the economy is poor, a fall in profits can easily be explained to shareholders when most companies in the industry are also experiencing a decline in earnings; therefore, therefore when the economy is poor there is a tendency within an entity to _______.

DanSpring Collections is a collections business located in Des Moines, IA.DanSpring frequently makes changes to the invoicing software programming to update customer pricing and discounts.Explain the steps that DanSpring can take to avoid errors in making these programming changes.

The term _______ refers to an affiliate, principal owner, manager, or other party that is not independent of the entity.

Of the following scenarios, which would most likely result in an audit firm not accepting an engagement?

Which of the following is/are among the procedures used by auditors to identify related parties?

What is the typical means by which an auditor outlines the details of the engagement, and communicates this to the client's management?

Which of the following factors indicate higher inherent risks?

Can an auditor place complete reliance on internal control to the exclusion of other audit procedures?

_______ ratios generally reflect a company's ability to generate earnings with its assets.

When the auditor is considering the risk of material misstatement, they will attempt to identify major risks, determine how these risks could relate to fraud or error, consider the importance of the risks, and ______.

Ability of cash flows from operations to cover current debt and dividends = ________.

If auditors believe their client is under pressure to smooth its income and not report any unexpected increases, which of the following risks are likely with regard to current income? (choose two options)

Should the client have internal controls in place to ensure related parties are being identified?

Which three of the following reasons could increase inherent risk? (choose three options)

The use of IT in accounting processes includes _________.

An audit committee is a sub-committee of the board of directors.

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iaudit Risk and Audit Strategy

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Tests of Controls

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing the Purchases Cycle and Payroll Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Reporting on the Audit

Filters

Exam 4: Risk Assessment Part Iiunderstanding the Client

An indirect effect is an audit situation in which noncompliance with laws and regulations ________ (choose two options).

How well current assets cover current liabilities is indicated by the ________ratio.

When the economy is poor, a fall in profits can easily be explained to shareholders when most companies in the industry are also experiencing a decline in earnings; therefore, therefore when the economy is poor there is a tendency within an entity to _______.

DanSpring Collections is a collections business located in Des Moines, IA.DanSpring frequently makes changes to the invoicing software programming to update customer pricing and discounts.Explain the steps that DanSpring can take to avoid errors in making these programming changes.

The term _______ refers to an affiliate, principal owner, manager, or other party that is not independent of the entity.

Of the following scenarios, which would most likely result in an audit firm not accepting an engagement?

Which of the following is/are among the procedures used by auditors to identify related parties?

What is the typical means by which an auditor outlines the details of the engagement, and communicates this to the client's management?

Which of the following factors indicate higher inherent risks?

Can an auditor place complete reliance on internal control to the exclusion of other audit procedures?

_______ ratios generally reflect a company's ability to generate earnings with its assets.

When the auditor is considering the risk of material misstatement, they will attempt to identify major risks, determine how these risks could relate to fraud or error, consider the importance of the risks, and ______.

Ability of cash flows from operations to cover current debt and dividends = ________.

If auditors believe their client is under pressure to smooth its income and not report any unexpected increases, which of the following risks are likely with regard to current income? (choose two options)

Should the client have internal controls in place to ensure related parties are being identified?

Which three of the following reasons could increase inherent risk? (choose three options)

The use of IT in accounting processes includes _________.

An audit committee is a sub-committee of the board of directors.

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iaudit Risk and Audit Strategy

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Tests of Controls

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing the Purchases Cycle and Payroll Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Reporting on the Audit

Filters