Question 1

Market price per share divided by earnings per share equals ________.

Accepted Answer

A) price-earnings ratio 
B) current ratio 
C) acid test ratio 
D) debt to equity ratio 
A) price-earnings ratio 
B) current ratio 
C) acid test ratio 
D) debt to equity ratio

Question 2

A common risk relating to closing entries is that _______.

Accepted Answer

A) permanent accounts are often closed by mistake 
B) temporary accounts are often closed by mistake 
C) management may override controls relating to adjusting and closing entries 
D) temporary accounts, if closed, will carry a balance over to the subsequent accounting period 
A) permanent accounts are often closed by mistake 
B) temporary accounts are often closed by mistake 
C) management may override controls relating to adjusting and closing entries 
D) temporary accounts, if closed, will carry a balance over to the subsequent accounting period

Question 3

Companies that agree to debt covenants with lenders when taking on loans often make promises to ________ (choose three options).

Accepted Answer

A) maintain specified profitability, liquidity, or other financial ratios 
B) seek the lender's permission before taking on new borrowings 
C) seek the lender's permission before acquiring other companies 
D) maintain high technological standards in its production processes 
A) maintain specified profitability, liquidity, or other financial ratios 
B) seek the lender's permission before taking on new borrowings 
C) seek the lender's permission before acquiring other companies 
D) maintain high technological standards in its production processes

Question 4

An auditor has determined that a client's 'days in receivables' ratio has slowly increased over the last three years.Which of the following could be a possible reason for this?

Accepted Answer

A) The client has hired a collection agency which is extremely efficient at collecting. 
B) The receivables have been secured as collateral for a recent capital asset purchase. 
C) The accounts receivable department has implemented a new IT system, making collections much quicker and more efficient. 
D) The accounts receivable turnover ratio has decreased due to poor internal controls related to credit granting procedures. 
A) The client has hired a collection agency which is extremely efficient at collecting. 
B) The receivables have been secured as collateral for a recent capital asset purchase. 
C) The accounts receivable department has implemented a new IT system, making collections much quicker and more efficient. 
D) The accounts receivable turnover ratio has decreased due to poor internal controls related to credit granting procedures.

Question 5

If an auditor suspects management is overriding controls relating to the closing process, the auditor should _________.

Accepted Answer

A) extend audit procedures to carefully check adjusting and allocating entries that are prepared at the end of the period 
B) extend audit procedures to check all balance sheet accounts 
C) obtain management's written representation in lieu of further audit procedures 
D) make these audit procedures the focus of the audit engagement 
A) extend audit procedures to carefully check adjusting and allocating entries that are prepared at the end of the period 
B) extend audit procedures to check all balance sheet accounts 
C) obtain management's written representation in lieu of further audit procedures 
D) make these audit procedures the focus of the audit engagement

Question 6

Which of the following equals earnings per share (EPS)?

Accepted Answer

A) Profit divided by weighted average common stock shares issued 
B) Market price per share divided by earnings per share 
C) Operating cash flow divided by outstanding shares 
D) Cost of sales divided by average inventory 
A) Profit divided by weighted average common stock shares issued 
B) Market price per share divided by earnings per share 
C) Operating cash flow divided by outstanding shares 
D) Cost of sales divided by average inventory

Question 7

Common factors that influence inherent risk are ________.

Accepted Answer

A) importers and exporters 
B) major suppliers 
C) discounts 
D) all of the above 
A) importers and exporters 
B) major suppliers 
C) discounts 
D) all of the above

Question 8

Which of the following are an evaluation of financial information by studying plausible relationships among both financial and non-financial data?

Accepted Answer

A) Analytical procedures 
B) Closing procedures 
C) Trend analyses 
D) Common-size analyses 
A) Analytical procedures 
B) Closing procedures 
C) Trend analyses 
D) Common-size analyses

Question 9

Auditors check the accuracy of accrual and deferral calculations around _______-end and look at earnings trends to assess whether the reported income is in line with similar prior year periods.

Accepted Answer

The answer of Auditors check the accuracy of accrual and...

Question 10

Processes used by a client when finalizing the accounts for an accounting period are called __________.

Accepted Answer

The answer of Processes used by a client when finalizing...

Question 11

The Price-earnings (PE) ratio could best be defined as __________.

Accepted Answer

A) value of the stock on the open market 
B) closely related to the dividend discount model 
C) how much a stockholder is willing to pay per dollar of earnings 
D) what dividend percentage payout the stock pays 
A) value of the stock on the open market 
B) closely related to the dividend discount model 
C) how much a stockholder is willing to pay per dollar of earnings 
D) what dividend percentage payout the stock pays

Question 12

An auditor is always particularly concerned with a metric that measures how long it takes the client firm to purchase inventory, sell the inventory, and collect the associated receivable.This metric is commonly referred to as _________.

Accepted Answer

A) the gross operating cycle 
B) the financing cycle 
C) the investing cycle 
D) the inventory cycle 
A) the gross operating cycle 
B) the financing cycle 
C) the investing cycle 
D) the inventory cycle

Question 13

When the auditor is engaged at the risk assessment stage of the audit, analytical procedures are rarely used because these would represent substantive procedures.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following equals cash earnings per share (CEPS)?

Accepted Answer

A) Operating cash flow divided by outstanding shares 
B) Profit divided by weighted average common stock shares issued 
C) Market price per share divided by earnings per share 
D) Market price per share divided by operating cash flow 
A) Operating cash flow divided by outstanding shares 
B) Profit divided by weighted average common stock shares issued 
C) Market price per share divided by earnings per share 
D) Market price per share divided by operating cash flow

Question 15

Which of the following describes the board of directors of a company?

Accepted Answer

A) Represent the shareholders of the company. 
B) Ensure the company is run to benefit the employees. 
C) Are all full-time employees of the company. 
D) Do not include the chief executive officer. 
A) Represent the shareholders of the company. 
B) Ensure the company is run to benefit the employees. 
C) Are all full-time employees of the company. 
D) Do not include the chief executive officer.

Question 16

Auditing arrangements and procedures should be specified in the management letter sent to the client by the auditors.

Accepted Answer

A) True 
 B)False

Question 17

Which two of the following industry-level and business environment factors present higher inherent risks? (choose two options)

Accepted Answer

A) A new industry with little or no government support 
B) Heavily regulated industry with special taxes and unique regulations 
C) Demand is not seasonal which provides steady revenue flow 
D) Industry minimally affected by trends 
A) A new industry with little or no government support 
B) Heavily regulated industry with special taxes and unique regulations 
C) Demand is not seasonal which provides steady revenue flow 
D) Industry minimally affected by trends

Question 18

Auditors of private companies that do not have an audit committee or even a board of directors should communicate with _________.

Accepted Answer

A) those charged with governance 
B) executive directors 
C) non-executive directors 
D) none of these answer choices are correct 
A) those charged with governance 
B) executive directors 
C) non-executive directors 
D) none of these answer choices are correct

Question 19

If the current year accounts receivable is larger than last year but the allowance for doubtful accounts is the same, what account needs to be audited carefully and why?

Accepted Answer

If the current year accounts receivable

Question 20

Which of the following are processes used by a client when finalizing the accounts for an accounting period?

Accepted Answer

A) Closing procedures 
B) Analytical procedures 
C) Audit strategies 
D) Assurance services 
A) Closing procedures 
B) Analytical procedures 
C) Audit strategies 
D) Assurance services

Market price per share divided by earnings per share equals ________.

A common risk relating to closing entries is that _______.

Companies that agree to debt covenants with lenders when taking on loans often make promises to ________ (choose three options).

An auditor has determined that a client's 'days in receivables' ratio has slowly increased over the last three years.Which of the following could be a possible reason for this?

If an auditor suspects management is overriding controls relating to the closing process, the auditor should _________.

Which of the following equals earnings per share (EPS)?

Common factors that influence inherent risk are ________.

Which of the following are an evaluation of financial information by studying plausible relationships among both financial and non-financial data?

Auditors check the accuracy of accrual and deferral calculations around _______-end and look at earnings trends to assess whether the reported income is in line with similar prior year periods.

Processes used by a client when finalizing the accounts for an accounting period are called __________.

The Price-earnings (PE) ratio could best be defined as __________.

An auditor is always particularly concerned with a metric that measures how long it takes the client firm to purchase inventory, sell the inventory, and collect the associated receivable.This metric is commonly referred to as _________.

When the auditor is engaged at the risk assessment stage of the audit, analytical procedures are rarely used because these would represent substantive procedures.

Which of the following equals cash earnings per share (CEPS)?

Which of the following describes the board of directors of a company?

Auditing arrangements and procedures should be specified in the management letter sent to the client by the auditors.

Which two of the following industry-level and business environment factors present higher inherent risks? (choose two options)

Auditors of private companies that do not have an audit committee or even a board of directors should communicate with _________.

If the current year accounts receivable is larger than last year but the allowance for doubtful accounts is the same, what account needs to be audited carefully and why?

Which of the following are processes used by a client when finalizing the accounts for an accounting period?

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

Market price per share divided by earnings per share equals ________.

A common risk relating to closing entries is that _______.

Companies that agree to debt covenants with lenders when taking on loans often make promises to ________ (choose three options).

An auditor has determined that a client's 'days in receivables' ratio has slowly increased over the last three years.Which of the following could be a possible reason for this?

If an auditor suspects management is overriding controls relating to the closing process, the auditor should _________.

Which of the following equals earnings per share (EPS)?

Common factors that influence inherent risk are ________.

Which of the following are an evaluation of financial information by studying plausible relationships among both financial and non-financial data?

Auditors check the accuracy of accrual and deferral calculations around _______-end and look at earnings trends to assess whether the reported income is in line with similar prior year periods.

Processes used by a client when finalizing the accounts for an accounting period are called __________.

The Price-earnings (PE) ratio could best be defined as __________.

An auditor is always particularly concerned with a metric that measures how long it takes the client firm to purchase inventory, sell the inventory, and collect the associated receivable.This metric is commonly referred to as _________.

When the auditor is engaged at the risk assessment stage of the audit, analytical procedures are rarely used because these would represent substantive procedures.

Which of the following equals cash earnings per share (CEPS)?

Which of the following describes the board of directors of a company?

Auditing arrangements and procedures should be specified in the management letter sent to the client by the auditors.

Which two of the following industry-level and business environment factors present higher inherent risks? (choose two options)

Auditors of private companies that do not have an audit committee or even a board of directors should communicate with _________.

If the current year accounts receivable is larger than last year but the allowance for doubtful accounts is the same, what account needs to be audited carefully and why?

Which of the following are processes used by a client when finalizing the accounts for an accounting period?

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