Question 1

Compared to balance sheet accounts, the audit of income statement accounts generally relies more heavily on:

Accepted Answer

A)  tests of detail of balances. 
B)  tests of detail of transactions. 
C)  analytical procedures. 
D)  both tests of detail of balances and of transactions. 
E)  tests of controls. 
A)  tests of detail of balances. 
B)  tests of detail of transactions. 
C)  analytical procedures. 
D)  both tests of detail of balances and of transactions. 
E)  tests of controls.

Question 2

Describe the contents and use of an audit program.

Accepted Answer

An audit program is a list of the audit

Question 3

Each audit program should have a column for all of the following except:

Accepted Answer

A)  audit procedures to be performed. 
B)  a cross-reference to other working papers containing the evidence obtained from each procedure. 
C)  the initials of the auditor who performed each procedure. 
D)  the date the performance of the procedure was completed. 
E)  the test of controls related to each procedure. 
A)  audit procedures to be performed. 
B)  a cross-reference to other working papers containing the evidence obtained from each procedure. 
C)  the initials of the auditor who performed each procedure. 
D)  the date the performance of the procedure was completed. 
E)  the test of controls related to each procedure.

Question 4

In performing tests of details of balances, the auditor would obtain the bank statement directly from the bank, prepare the bank reconciliation, and verify all reconciling items and mathematical accuracy if detection risk was:

Accepted Answer

A)  very high. 
B)  high. 
C)  moderate. 
D)  low. 
E)  very low. 
A)  very high. 
B)  high. 
C)  moderate. 
D)  low. 
E)  very low.

Question 5

Substantive tests must be designed to tests specific audit objectives.
REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provideD.
-Obtain the market value of short term securities as of the balance sheet date from
published records.

Accepted Answer

A) Existence or occurrence 
B) Completeness 
C) Valuation or allocation 
D) Rights and obligations 
E) Presentation and disclosure 
A) Existence or occurrence 
B) Completeness 
C) Valuation or allocation 
D) Rights and obligations 
E) Presentation and disclosure

Question 6

Substantive tests must be designed to tests specific audit objectives.
REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provideD.
-Trace shipping documents to sales invoices.

Accepted Answer

A) Existence or occurrence 
B) Completeness 
C) Valuation or allocation 
D) Rights and obligations 
E) Presentation and disclosure 
A) Existence or occurrence 
B) Completeness 
C) Valuation or allocation 
D) Rights and obligations 
E) Presentation and disclosure

Question 7

When substantive tests are performed before the balance sheet date, at a minimum the auditor should, at or after the balance sheet date:

Accepted Answer

A)  obtain a letter from management stating that no significant changes occurred in the account balances between the two dates. 
B)  perform analytical procedures, including comparison of the account balances at the two dates. 
C)  reconfirm all balances that were confirmed at interim. 
D)  confirm all balances that were not confirmed at interim. 
E)  perform tests of reasonableness on all balances that were not confirmed at interim. 
A)  obtain a letter from management stating that no significant changes occurred in the account balances between the two dates. 
B)  perform analytical procedures, including comparison of the account balances at the two dates. 
C)  reconfirm all balances that were confirmed at interim. 
D)  confirm all balances that were not confirmed at interim. 
E)  perform tests of reasonableness on all balances that were not confirmed at interim.

Question 8

The extent of substantive tests, in practice means the length of time during which substantive tests are to be performed.

Accepted Answer

A) True 
 B)False

Question 9

Detection risk is inversely related to assessed levels of control risk and inherent risk.

Accepted Answer

A) True 
 B)False

Question 10

In obtaining evidence concerning the cash balance, the auditor performs the following procedures: Obtain bank statements directly from bank, prepare bank reconciliation, and verify all reconciling items. In this case, it is most likely that:

Accepted Answer

A)  detection risk is set at moderate to high. 
B)  detection risk is set at low to very low. 
C)  inherent risk is set at low. 
D)  control risk is set at moderate to low. 
E)  detection risk is set at minimum to moderate. 
A)  detection risk is set at moderate to high. 
B)  detection risk is set at low to very low. 
C)  inherent risk is set at low. 
D)  control risk is set at moderate to low. 
E)  detection risk is set at minimum to moderate.

Question 11

Substantive tests must be designed to tests specific audit objectives.
REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provideD.
-Reperform check on accuracy of sales invoice pricing.

Accepted Answer

A) Existence or occurrence 
B) Completeness 
C) Valuation or allocation 
D) Rights and obligations 
E) Presentation and disclosure 
A) Existence or occurrence 
B) Completeness 
C) Valuation or allocation 
D) Rights and obligations 
E) Presentation and disclosure

Question 12

Substantive tests must be designed to tests specific audit objectives.
REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provideD.
-Observe procedures, including segregation of duties, for approving sales orders.

Accepted Answer

A) Existence or occurrence 
B) Completeness 
C) Valuation or allocation 
D) Rights and obligations 
E) Presentation and disclosure 
A) Existence or occurrence 
B) Completeness 
C) Valuation or allocation 
D) Rights and obligations 
E) Presentation and disclosure

Question 13

The nature of substantive tests refers to the type and effectiveness of the auditing procedures to be performed.
REQUIRED: Identify and discuss the three types of substantive procedures, addressing the
relative effectiveness and cost of each.

Accepted Answer

The three types of substantive procedure

Question 14

The focus of tests of details of transactions is on finding deviations from control policies and procedures.

Accepted Answer

A) True 
 B)False

Question 15

An accounting estimate is a guess in the absence of an exact measurement.

Accepted Answer

A) True 
 B)False

Question 16

An audit program should be sufficiently detailed to provide all of the following except:

Accepted Answer

A)  evidential support for the audit opinion. 
B)  an outline of the work to be done. 
C)  a record of the work performed. 
D)  a basis for controlling the audit. 
E)  a basis for supervising the audit. 
A)  evidential support for the audit opinion. 
B)  an outline of the work to be done. 
C)  a record of the work performed. 
D)  a basis for controlling the audit. 
E)  a basis for supervising the audit.

Question 17

Assume the preliminary audit strategy was based on a planned assessed level of control risk at a low level. Based on the final assessed level of control risk, the auditor would need to move substantive tests from interim to year-end and increase the extent of tests of details in order to accommodate a lower acceptable level of detection risk if:

Accepted Answer

A)  the final assessed level of control risk was moderate or high. 
B)  the final assessed level of control risk was low or very low. 
C)  the final assessed level of inherent risk was high or very high. 
D)  the final assessed level of inherent risk was low or very low. 
E)  the final assessed level of analytical procedures risk was moderate of high. 
A)  the final assessed level of control risk was moderate or high. 
B)  the final assessed level of control risk was low or very low. 
C)  the final assessed level of inherent risk was high or very high. 
D)  the final assessed level of inherent risk was low or very low. 
E)  the final assessed level of analytical procedures risk was moderate of high.

Question 18

Analytical procedures are a required form of substantive testing in the testing phase of the audit.

Accepted Answer

A) True 
 B)False

Question 19

The least costly form of testing is usually:

Accepted Answer

A)  tests of controls. 
B)  tests of detail of transactions. 
C)  analytical procedures. 
D)  tests of detail of balances. 
E)  tests of compliance. 
A)  tests of controls. 
B)  tests of detail of transactions. 
C)  analytical procedures. 
D)  tests of detail of balances. 
E)  tests of compliance.

Question 20

Which standards of fieldwork primarily affect substantive tests and tests of controls?

Accepted Answer

A)  The first standard primarily affects substantive tests and the third primarily affects tests of controls. 
B)  The second standard primarily affects substantive tests and the third primarily affects tests of controls. 
C)  The third standard primarily affects substantive tests and the second primarily affects tests of controls. 
D)  All of the fieldwork standards equally affect substantive tests and tests of controls. 
E)  None of the fieldwork standards affect substantive tests or tests of controls. 
A)  The first standard primarily affects substantive tests and the third primarily affects tests of controls. 
B)  The second standard primarily affects substantive tests and the third primarily affects tests of controls. 
C)  The third standard primarily affects substantive tests and the second primarily affects tests of controls. 
D)  All of the fieldwork standards equally affect substantive tests and tests of controls. 
E)  None of the fieldwork standards affect substantive tests or tests of controls.

Compared to balance sheet accounts, the audit of income statement accounts generally relies more heavily on:

Describe the contents and use of an audit program.

Each audit program should have a column for all of the following except:

In performing tests of details of balances, the auditor would obtain the bank statement directly from the bank, prepare the bank reconciliation, and verify all reconciling items and mathematical accuracy if detection risk was:

Substantive tests must be designed to tests specific audit objectives. REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provideD. -Trace shipping documents to sales invoices.

When substantive tests are performed before the balance sheet date, at a minimum the auditor should, at or after the balance sheet date:

The extent of substantive tests, in practice means the length of time during which substantive tests are to be performed.

Detection risk is inversely related to assessed levels of control risk and inherent risk.

In obtaining evidence concerning the cash balance, the auditor performs the following procedures: Obtain bank statements directly from bank, prepare bank reconciliation, and verify all reconciling items. In this case, it is most likely that:

Substantive tests must be designed to tests specific audit objectives. REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provideD. -Reperform check on accuracy of sales invoice pricing.

The nature of substantive tests refers to the type and effectiveness of the auditing procedures to be performed. REQUIRED: Identify and discuss the three types of substantive procedures, addressing the relative effectiveness and cost of each.

The focus of tests of details of transactions is on finding deviations from control policies and procedures.

An accounting estimate is a guess in the absence of an exact measurement.

An audit program should be sufficiently detailed to provide all of the following except:

Analytical procedures are a required form of substantive testing in the testing phase of the audit.

The least costly form of testing is usually:

Which standards of fieldwork primarily affect substantive tests and tests of controls?

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters

Exam 12: Audit Procedures in Response to Assessed Risks: Substantive Tests

Compared to balance sheet accounts, the audit of income statement accounts generally relies more heavily on:

Describe the contents and use of an audit program.

Each audit program should have a column for all of the following except:

In performing tests of details of balances, the auditor would obtain the bank statement directly from the bank, prepare the bank reconciliation, and verify all reconciling items and mathematical accuracy if detection risk was:

Substantive tests must be designed to tests specific audit objectives. REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provideD. -Trace shipping documents to sales invoices.

When substantive tests are performed before the balance sheet date, at a minimum the auditor should, at or after the balance sheet date:

The extent of substantive tests, in practice means the length of time during which substantive tests are to be performed.

Detection risk is inversely related to assessed levels of control risk and inherent risk.

In obtaining evidence concerning the cash balance, the auditor performs the following procedures: Obtain bank statements directly from bank, prepare bank reconciliation, and verify all reconciling items. In this case, it is most likely that:

Substantive tests must be designed to tests specific audit objectives. REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provideD. -Reperform check on accuracy of sales invoice pricing.

The nature of substantive tests refers to the type and effectiveness of the auditing procedures to be performed. REQUIRED: Identify and discuss the three types of substantive procedures, addressing the relative effectiveness and cost of each.

The focus of tests of details of transactions is on finding deviations from control policies and procedures.

An accounting estimate is a guess in the absence of an exact measurement.

An audit program should be sufficiently detailed to provide all of the following except:

Analytical procedures are a required form of substantive testing in the testing phase of the audit.

The least costly form of testing is usually:

Which standards of fieldwork primarily affect substantive tests and tests of controls?

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters