Question 1

The valuation assertion includes:

Accepted Answer

A) The measurement assumption used. 
B) Ensuring all inventory is counted. 
C) Making sure that all receivables relate to sales during the year. 
D) The method of presenting short term and long term liabilities. 
A) The measurement assumption used. 
B) Ensuring all inventory is counted. 
C) Making sure that all receivables relate to sales during the year. 
D) The method of presenting short term and long term liabilities.

Question 2

Three key management assertions about items on the balance sheet are:

Accepted Answer

A) Occurrence, completeness and accuracy. 
B) Classification, existence and cut-off. 
C) Confirmation, presentation and disclosure. 
D) Existence, completeness and presentation. 
A) Occurrence, completeness and accuracy. 
B) Classification, existence and cut-off. 
C) Confirmation, presentation and disclosure. 
D) Existence, completeness and presentation.

Question 3

What is meant by materiality?

Accepted Answer

Materiality is the aggregate amount of e

Question 4

Analytical procedures are one type of evidence gathering procedure.According to auditing standards, there are five general forms of analytical procedures.Auditing standards also provide examples of five sources of information for analytical procedures.
Required:
Describe three of the five general forms of analytical procedures.For each form, describe a typical source of the information for the form.For each source, include any questions or concerns an auditor would have about the reliability or relevancy of the source.

Accepted Answer

A) The five general forms of analytical

Question 5

Relationships on the financial statements that do not make sense may indicate problem areas in the accounts.

Accepted Answer

A) True 
 B)False

Question 6

A bank with a large loan would most likely be interested in materiality based on:

Accepted Answer

A) Operating cash flows. 
B) Normalized net income. 
C) Sales revenue. 
D) Net assets. 
A) Operating cash flows. 
B) Normalized net income. 
C) Sales revenue. 
D) Net assets.

Question 7

Audit risk can be offset by:

Accepted Answer

A) General management. 
B) Engagement management. 
C) Audit management. 
D) Quality management. 
A) General management. 
B) Engagement management. 
C) Audit management. 
D) Quality management.

Question 8

Analytical procedures are required at both the beginning and the end of an audit.

Accepted Answer

A) True 
 B)False

Question 9

The concept of materiality refers to:

Accepted Answer

A) Any misstatement in the financial statements. 
B) The overall degree of risk in an organization. 
C) An amount of misstatement that could lead someone to make a poor decision and suffer a loss. 
D) An amount of risk in an organization sufficient to offset the expected returns of any investment in the company. 
A) Any misstatement in the financial statements. 
B) The overall degree of risk in an organization. 
C) An amount of misstatement that could lead someone to make a poor decision and suffer a loss. 
D) An amount of risk in an organization sufficient to offset the expected returns of any investment in the company.

Question 10

Contrast horizontal and vertical analysis.Give an example of each.

Accepted Answer

Horizontal analysis refers to changes in

Question 11

Being a public profession, auditors are obligated to continue auditing a client once they start.

Accepted Answer

A) True 
 B)False

Question 12

What are auditors referring to when they talk about the nature, timing and extent of audit procedures?

Accepted Answer

A) True 
 B)False

Question 13

How should auditors use the concept of materiality?

Accepted Answer

A) As a guide to assessing inherent risk 
B) As a guide in assessing control risk. 
C) As a guide in deciding to report a deficiency to the audit committee. 
D) As a guide in planning the audit program. 
A) As a guide to assessing inherent risk 
B) As a guide in assessing control risk. 
C) As a guide in deciding to report a deficiency to the audit committee. 
D) As a guide in planning the audit program.

Question 14

An auditor examines an organization's strategy to determine its objectives.After assessing whether the strategy is guiding the whole operation, what steps will the auditor take next? What key management assertion can be affected by any weakness in the strategy?

Accepted Answer

An auditor must consider whether the str

Question 15

Risk in an audit engagement is the probability that the financial statements are misstated.

Accepted Answer

A) True 
 B)False

Question 16

Materiality is primarily a quantitative calculation.

Accepted Answer

A) True 
 B)False

Question 17

The audit objective related to existence is to obtain evidence that the asset, liability or equity exists physically or legally.

Accepted Answer

A) True 
 B)False

Question 18

Decisions involving the proper application of GAAP primarily involve which management assertion? Give some examples.

Accepted Answer

The valuation and allocation assertion o

Question 19

What is the best description of the engagement letter?

Accepted Answer

A) The letter soliciting a potential client. 
B) A letter from a successor auditor to a predecessor auditor asking to review the working papers for the previous year. 
C) The audit contract which may include special requests. 
D) The letter at the end of the audit engagement reviewing any concerns the auditors wish management to be aware of. 
A) The letter soliciting a potential client. 
B) A letter from a successor auditor to a predecessor auditor asking to review the working papers for the previous year. 
C) The audit contract which may include special requests. 
D) The letter at the end of the audit engagement reviewing any concerns the auditors wish management to be aware of.

Question 20

The enquiries of the client that result from preliminary analytical review provide direct evidence about the amounts in the financial statements.

Accepted Answer

A) True 
 B)False

The valuation assertion includes:

Three key management assertions about items on the balance sheet are:

What is meant by materiality?

Relationships on the financial statements that do not make sense may indicate problem areas in the accounts.

A bank with a large loan would most likely be interested in materiality based on:

Audit risk can be offset by:

Analytical procedures are required at both the beginning and the end of an audit.

The concept of materiality refers to:

Contrast horizontal and vertical analysis.Give an example of each.

Being a public profession, auditors are obligated to continue auditing a client once they start.

What are auditors referring to when they talk about the nature, timing and extent of audit procedures?

How should auditors use the concept of materiality?

An auditor examines an organization's strategy to determine its objectives.After assessing whether the strategy is guiding the whole operation, what steps will the auditor take next? What key management assertion can be affected by any weakness in the strategy?

Risk in an audit engagement is the probability that the financial statements are misstated.

Materiality is primarily a quantitative calculation.

The audit objective related to existence is to obtain evidence that the asset, liability or equity exists physically or legally.

Decisions involving the proper application of GAAP primarily involve which management assertion? Give some examples.

What is the best description of the engagement letter?

The enquiries of the client that result from preliminary analytical review provide direct evidence about the amounts in the financial statements.

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Assessing Risks and Internal Control

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters

Exam 6: Preliminary Audit Planning: Understanding the Auditee

The valuation assertion includes:

Three key management assertions about items on the balance sheet are:

What is meant by materiality?

Relationships on the financial statements that do not make sense may indicate problem areas in the accounts.

A bank with a large loan would most likely be interested in materiality based on:

Audit risk can be offset by:

Analytical procedures are required at both the beginning and the end of an audit.

The concept of materiality refers to:

Contrast horizontal and vertical analysis.Give an example of each.

Being a public profession, auditors are obligated to continue auditing a client once they start.

What are auditors referring to when they talk about the nature, timing and extent of audit procedures?

How should auditors use the concept of materiality?

An auditor examines an organization's strategy to determine its objectives.After assessing whether the strategy is guiding the whole operation, what steps will the auditor take next? What key management assertion can be affected by any weakness in the strategy?

Risk in an audit engagement is the probability that the financial statements are misstated.

Materiality is primarily a quantitative calculation.

The audit objective related to existence is to obtain evidence that the asset, liability or equity exists physically or legally.

Decisions involving the proper application of GAAP primarily involve which management assertion? Give some examples.

What is the best description of the engagement letter?

The enquiries of the client that result from preliminary analytical review provide direct evidence about the amounts in the financial statements.

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Assessing Risks and Internal Control

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters