Question 1

The reason auditors accumulate evidence is to:

Accepted Answer

A)  satisfy the requirements of the Corporations Act. 
B)  justify the conclusions they have otherwise reached. 
C)  defend themselves in the event of a lawsuit. 
D)  enable them to reach conclusions about the fairness of the financial statements and issue an appropriate audit report. 
A)  satisfy the requirements of the Corporations Act. 
B)  justify the conclusions they have otherwise reached. 
C)  defend themselves in the event of a lawsuit. 
D)  enable them to reach conclusions about the fairness of the financial statements and issue an appropriate audit report. D

Question 2

Discuss the differences between errors, fraud, and illegal acts.Give an example of each.

Accepted Answer

The primary difference between errors and fraud is that errors are unintentional misstatements of the financial statements, whereas fraud involves intentional misstatements.Illegal acts are violations of laws or government regulations, other than fraud.An example of an error is a mathematical mistake when footing the columns in the sales journal.An example of fraud is the creation of fictitious accounts receivable.An example of an illegal act is the dumping of toxic waste in violation of Federal environmental protection laws.

Question 3

Which of the following is an example of the classification and understand ability assertion?

Accepted Answer

A)  Financial and other information is appropriately presented and described, and disclosures are clearly expressed. 
B)  Transactions and events have been recorded in the correct accounting period. 
C)  All disclosures that should have been included in the financial statements have been included. 
D)  Disclosed events and transactions have occurred and pertain to the entity. 
A)  Financial and other information is appropriately presented and described, and disclosures are clearly expressed. 
B)  Transactions and events have been recorded in the correct accounting period. 
C)  All disclosures that should have been included in the financial statements have been included. 
D)  Disclosed events and transactions have occurred and pertain to the entity. A

Question 4

If the auditor has obtained a reasonable level of assurance about the fair presentation of the financial statements through understanding internal control, assessing control risk, testing controls, and performing analytical procedures, then the auditor:

Accepted Answer

A)  can significantly reduce the test of details. 
B)  needs to do additional tests of controls so that the assurance level can be increased. 
C)  can issue an unqualified opinion. 
D)  can write the engagement letter. 
A)  can significantly reduce the test of details. 
B)  needs to do additional tests of controls so that the assurance level can be increased. 
C)  can issue an unqualified opinion. 
D)  can write the engagement letter.

Question 5

ASA 300 requires an auditor to gain a reasonable understanding of the client's:

Accepted Answer

A)  industry but not business. 
B)  business and industry. 
C)  business but not industry. 
D)  specific entity structure but not its business or industry. 
A)  industry but not business. 
B)  business and industry. 
C)  business but not industry. 
D)  specific entity structure but not its business or industry.

Question 6

Audits are conducted by performing tests of transactions and separate tests on closing balances in the balance sheet.

Accepted Answer

A) True 
 B)False

Question 7

The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to:

Accepted Answer

A)  management for the statements and the auditor for the notes. 
B)  the auditor. 
C)  management. 
D)  both management and the auditor equally. 
A)  management for the statements and the auditor for the notes. 
B)  the auditor. 
C)  management. 
D)  both management and the auditor equally.

Question 8

Audits are expected to provide a higher degree of assurance for the detection of material irregularities, such as management fraud, than is provided for an equally material error.

Accepted Answer

A) True 
 B)False

Question 9

An auditor should recognise that the application of auditing procedures may produce evidential matter indicating the possibility of errors or fraud; therefore, an auditor should:

Accepted Answer

A)  extend the work to audit most recorded transactions and records of an entity. 
B)  design audit tests to detect unrecorded transactions. 
C)  not depend on internal accounting control features that are designed to prevent or detect errors or irregularities. 
D)  plan and perform the engagement with an attitude of professional scepticism. 
A)  extend the work to audit most recorded transactions and records of an entity. 
B)  design audit tests to detect unrecorded transactions. 
C)  not depend on internal accounting control features that are designed to prevent or detect errors or irregularities. 
D)  plan and perform the engagement with an attitude of professional scepticism.

Question 10

A directors' declaration in accordance with the Corporations Act must state the directors are satisfied the financial statements:

Accepted Answer

A)  comply with applicable accounting standards. 
B)  give a true and fair view. 
C)  are in accordance with the Act. 
D)  all of the above 
A)  comply with applicable accounting standards. 
B)  give a true and fair view. 
C)  are in accordance with the Act. 
D)  all of the above

Question 11

The completeness assertion concerns whether recorded transactions included in the financial statements actually occurred.

Accepted Answer

A) True 
 B)False

Question 12

Although management has the responsibility for the preparation of the financial statements and the accompanying notes, it is acceptable for an auditor to draft the financial statements for the client or to offer suggestions for clarification.

Accepted Answer

A) True 
 B)False

Question 13

The cycle approach to segmenting an audit:

Accepted Answer

A)  requires different audit teams to ensure objectivity. 
B)  keeps closely related types of transactions and account balances in the same segment. 
C)  divides the different operation areas of the client's business operations. 
D)  all of the above 
A)  requires different audit teams to ensure objectivity. 
B)  keeps closely related types of transactions and account balances in the same segment. 
C)  divides the different operation areas of the client's business operations. 
D)  all of the above

Question 14

Which of the following statements BEST describes the auditor's responsibility regarding the detection of fraud? The auditor has

Accepted Answer

A)  equal responsibility for detecting errors, fraud, and indirect-effect illegal acts. 
B)  greater responsibility for detecting material errors than fraud. 
C)  greater responsibility for detecting material errors than fraud and direct-effect illegal acts. 
D)  equal responsibility for detecting errors, fraud, and direct-effect illegal acts. 
A)  equal responsibility for detecting errors, fraud, and indirect-effect illegal acts. 
B)  greater responsibility for detecting material errors than fraud. 
C)  greater responsibility for detecting material errors than fraud and direct-effect illegal acts. 
D)  equal responsibility for detecting errors, fraud, and direct-effect illegal acts.

Question 15

Which general ledger account affects the most financial statement cycles?

Accepted Answer

A)  cash account 
B)  retained earnings account 
C)  income tax expense and liability accounts 
D)  inventory account 
A)  cash account 
B)  retained earnings account 
C)  income tax expense and liability accounts 
D)  inventory account

Question 16

After the auditor has completed all the procedures, it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented.This is a highly subjective process that relies heavily on:

Accepted Answer

A)  the auditor's professional judgement. 
B)  generally accepted accounting principles. 
C)  the Code of Ethics for Professional Accountants. 
D)  generally accepted auditing standards. 
A)  the auditor's professional judgement. 
B)  generally accepted accounting principles. 
C)  the Code of Ethics for Professional Accountants. 
D)  generally accepted auditing standards.

Question 17

Auditors have found that the most efficient way to conduct audits is to focus primarily on testing classes of transactions and performing minimal or no tests of ending account balances.

Accepted Answer

A) True 
 B)False

Question 18

If the auditor were responsible for making certain that all the assertions of management in the statements are correct, then:

Accepted Answer

A)  audits would be much easier to complete. 
B)  bankruptcies would be reduced to a very small number. 
C)  audits would not be economically feasible. 
D)  bankruptcies could no longer occur. 
A)  audits would be much easier to complete. 
B)  bankruptcies would be reduced to a very small number. 
C)  audits would not be economically feasible. 
D)  bankruptcies could no longer occur.

Question 19

The auditor's opinion is to be written so that which party can understand its language and terminology?

Accepted Answer

A)  the reader 
B)  investors 
C)  management 
D)  a prudent user 
A)  the reader 
B)  investors 
C)  management 
D)  a prudent user

Question 20

Other than inquiring of management about policies they have established to prevent illegal acts and whether management knows of any laws or regulations that the company has violated, the auditor should NOT search for indirect-effect illegal acts unless there is reason to believe they may exist.

Accepted Answer

A) True 
 B)False

The reason auditors accumulate evidence is to:

Discuss the differences between errors, fraud, and illegal acts.Give an example of each.

Which of the following is an example of the classification and understand ability assertion?

If the auditor has obtained a reasonable level of assurance about the fair presentation of the financial statements through understanding internal control, assessing control risk, testing controls, and performing analytical procedures, then the auditor:

ASA 300 requires an auditor to gain a reasonable understanding of the client's:

Audits are conducted by performing tests of transactions and separate tests on closing balances in the balance sheet.

The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to:

Audits are expected to provide a higher degree of assurance for the detection of material irregularities, such as management fraud, than is provided for an equally material error.

An auditor should recognise that the application of auditing procedures may produce evidential matter indicating the possibility of errors or fraud; therefore, an auditor should:

A directors' declaration in accordance with the Corporations Act must state the directors are satisfied the financial statements:

The completeness assertion concerns whether recorded transactions included in the financial statements actually occurred.

Although management has the responsibility for the preparation of the financial statements and the accompanying notes, it is acceptable for an auditor to draft the financial statements for the client or to offer suggestions for clarification.

The cycle approach to segmenting an audit:

Which of the following statements BEST describes the auditor's responsibility regarding the detection of fraud? The auditor has

Which general ledger account affects the most financial statement cycles?

After the auditor has completed all the procedures, it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented.This is a highly subjective process that relies heavily on:

Auditors have found that the most efficient way to conduct audits is to focus primarily on testing classes of transactions and performing minimal or no tests of ending account balances.

If the auditor were responsible for making certain that all the assertions of management in the statements are correct, then:

The auditor's opinion is to be written so that which party can understand its language and terminology?

Other than inquiring of management about policies they have established to prevent illegal acts and whether management knows of any laws or regulations that the company has violated, the auditor should NOT search for indirect-effect illegal acts unless there is reason to believe they may exist.

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit evidence

Audit planning and documentation

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 4: Audit responsibilities and objectives

The reason auditors accumulate evidence is to:

Discuss the differences between errors, fraud, and illegal acts.Give an example of each.

Which of the following is an example of the classification and understand ability assertion?

If the auditor has obtained a reasonable level of assurance about the fair presentation of the financial statements through understanding internal control, assessing control risk, testing controls, and performing analytical procedures, then the auditor:

ASA 300 requires an auditor to gain a reasonable understanding of the client's:

Audits are conducted by performing tests of transactions and separate tests on closing balances in the balance sheet.

The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to:

Audits are expected to provide a higher degree of assurance for the detection of material irregularities, such as management fraud, than is provided for an equally material error.

An auditor should recognise that the application of auditing procedures may produce evidential matter indicating the possibility of errors or fraud; therefore, an auditor should:

A directors' declaration in accordance with the Corporations Act must state the directors are satisfied the financial statements:

The completeness assertion concerns whether recorded transactions included in the financial statements actually occurred.

Although management has the responsibility for the preparation of the financial statements and the accompanying notes, it is acceptable for an auditor to draft the financial statements for the client or to offer suggestions for clarification.

The cycle approach to segmenting an audit:

Which of the following statements BEST describes the auditor's responsibility regarding the detection of fraud? The auditor has

Which general ledger account affects the most financial statement cycles?

After the auditor has completed all the procedures, it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented.This is a highly subjective process that relies heavily on:

Auditors have found that the most efficient way to conduct audits is to focus primarily on testing classes of transactions and performing minimal or no tests of ending account balances.

If the auditor were responsible for making certain that all the assertions of management in the statements are correct, then:

The auditor's opinion is to be written so that which party can understand its language and terminology?

Other than inquiring of management about policies they have established to prevent illegal acts and whether management knows of any laws or regulations that the company has violated, the auditor should NOT search for indirect-effect illegal acts unless there is reason to believe they may exist.

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit evidence

Audit planning and documentation

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