Question 1

Making fair representations in the financial statements is the responsibility of:

Accepted Answer

A)  management. 
B)  the auditor. 
C)  the internal auditor. 
D)  all of the above 
A)  management. 
B)  the auditor. 
C)  the internal auditor. 
D)  all of the above

Question 2

The cut-off objective, 'transactions near the balance sheet date are recorded in the proper period,' is a transaction-related, not a balance-related, audit objective.

Accepted Answer

A) True 
 B)False

Question 3

The auditor's BEST defence when existing material misstatements in the financial statements are NOT uncovered in the audit is that the:

Accepted Answer

A)  financial statements are the client's responsibility. 
B)  audit was conducted in accordance with generally accepted accounting principles. 
C)  audit was conducted in accordance with Australian auditing standards. 
D)  client is guilty of contributory negligence. 
A)  financial statements are the client's responsibility. 
B)  audit was conducted in accordance with generally accepted accounting principles. 
C)  audit was conducted in accordance with Australian auditing standards. 
D)  client is guilty of contributory negligence.

Question 4

An intentional overstatement of sales is an example of:

Accepted Answer

A)  fraudulent financial reporting. 
B)  misappropriation of assets. 
C)  an accounting error. 
D)  all of the above 
A)  fraudulent financial reporting. 
B)  misappropriation of assets. 
C)  an accounting error. 
D)  all of the above

Question 5

There are several reasons why the auditor is responsible for reasonable but not absolute assurance.One of them is that:

Accepted Answer

A)  fraudulently prepared financial statements are often extremely difficult, but not impossible, for the auditor to detect. 
B)  accounting presentations contain complex estimates that can be convincing. 
C)  most audit evidence results from testing a sample of a population, and sampling involves minimal risk. 
D)  audit testing and the evaluation of test results require significant auditor judgement, and auditors can make errors in judgement. 
A)  fraudulently prepared financial statements are often extremely difficult, but not impossible, for the auditor to detect. 
B)  accounting presentations contain complex estimates that can be convincing. 
C)  most audit evidence results from testing a sample of a population, and sampling involves minimal risk. 
D)  audit testing and the evaluation of test results require significant auditor judgement, and auditors can make errors in judgement.

Question 6

Management assertions are:

Accepted Answer

A)  provided to the auditor in the assertions letter, but are not disclosed on the financial statements. 
B)  explicitly expressed representations about the financial statements. 
C)  stated in the footnotes to the financial statements. 
D)  implied or expressed representations about classes of transactions and the related accounts in the financial statements. 
A)  provided to the auditor in the assertions letter, but are not disclosed on the financial statements. 
B)  explicitly expressed representations about the financial statements. 
C)  stated in the footnotes to the financial statements. 
D)  implied or expressed representations about classes of transactions and the related accounts in the financial statements.

Question 7

ASA 200 states that the objective of an audit of a financial report is to enhance the degree of confidence in the financial statements by the intended users.

Accepted Answer

A) True 
 B)False

Question 8

Although not an insurer or guarantor of the fairness of the presentations in the statements, the auditor has considerable responsibility for notifying users whether the statements are properly stated.

Accepted Answer

A) True 
 B)False

Question 9

An audit process is a well-defined methodology for organising an audit to ensure that:

Accepted Answer

A)  the evidence gathered is both sufficient and appropriate. 
B)  all appropriate audit objectives are met. 
C)  all appropriate audit objectives are specified. 
D)  all of the above 
A)  the evidence gathered is both sufficient and appropriate. 
B)  all appropriate audit objectives are met. 
C)  all appropriate audit objectives are specified. 
D)  all of the above

Question 10

Determining whether the client's financial statements are fairly stated is the goal of which function?

Accepted Answer

A)  consulting 
B)  auditing 
C)  compilation 
D)  attest 
A)  consulting 
B)  auditing 
C)  compilation 
D)  attest

Question 11

Which one of the following is NOT an example of misclassification for sales?

Accepted Answer

A)  including retail sales as wholesale sales 
B)  recording the sale of a subsidiary as a reduction in investments 
C)  recording a sale of operating fixed assets as revenue 
D)  including cash sales as credit sales 
A)  including retail sales as wholesale sales 
B)  recording the sale of a subsidiary as a reduction in investments 
C)  recording a sale of operating fixed assets as revenue 
D)  including cash sales as credit sales

Question 12

The completeness assertion addresses:

Accepted Answer

A)  the possibility of omitting transactions that should have been recorded. 
B)  whether all transactions that should be included in the financial statements are in fact included. 
C)  matters that are the opposite of those addressed by the occurrence assertion. 
D)  all of the above 
A)  the possibility of omitting transactions that should have been recorded. 
B)  whether all transactions that should be included in the financial statements are in fact included. 
C)  matters that are the opposite of those addressed by the occurrence assertion. 
D)  all of the above

Question 13

Professional scepticism means that the auditor should:

Accepted Answer

A)  not accept the representations of management. 
B)  approach the audit with a questioning mind. 
C)  consider that management is mostly honest. 
D)  only consider written representations from the audit client. 
A)  not accept the representations of management. 
B)  approach the audit with a questioning mind. 
C)  consider that management is mostly honest. 
D)  only consider written representations from the audit client.

Question 14

Responsibility for the fair presentation of financial statements rests with the client's management, not with the auditor.

Accepted Answer

A) True 
 B)False

Question 15

The transaction-related audit objective that deals with whether recorded transactions have actually occurred is the completeness objective.

Accepted Answer

A) True 
 B)False

Question 16

To adequately plan the appropriate audit evidence, generally accepted auditing standards require the auditor to gain an understanding of the internal control structure.This understanding is obtained by:

Accepted Answer

A)  discussions with client personnel. 
B)  observing client activities. 
C)  reviewing organisational charts and procedural manuals. 
D)  all of the above 
A)  discussions with client personnel. 
B)  observing client activities. 
C)  reviewing organisational charts and procedural manuals. 
D)  all of the above

Question 17

The objective of the audit of financial statements by an independent auditor is to verify that the financial statements are free of misstatements and accurately present the company's financial position and results of operations.

Accepted Answer

A) True 
 B)False

Question 18

There is no distinction made by auditing standards between an auditor's responsibility for searching for errors and his responsibility for searching for fraud.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is NOT an assertion relating to 'general presentation and disclosure-related audit objectives'?

Accepted Answer

A)  Occurrence 
B)  Cut off 
C)  Accuracy 
D)  Completeness 
A)  Occurrence 
B)  Cut off 
C)  Accuracy 
D)  Completeness

Question 20

To which audit objective does the assertion 'recorded sales are for the amount of goods shipped and are correctly billed and recorded' relate?

Accepted Answer

A)  occurrence 
B)  completeness 
C)  accuracy 
D)  valuation 
A)  occurrence 
B)  completeness 
C)  accuracy 
D)  valuation

Making fair representations in the financial statements is the responsibility of:

The cut-off objective, 'transactions near the balance sheet date are recorded in the proper period,' is a transaction-related, not a balance-related, audit objective.

The auditor's BEST defence when existing material misstatements in the financial statements are NOT uncovered in the audit is that the:

An intentional overstatement of sales is an example of:

There are several reasons why the auditor is responsible for reasonable but not absolute assurance.One of them is that:

Management assertions are:

ASA 200 states that the objective of an audit of a financial report is to enhance the degree of confidence in the financial statements by the intended users.

Although not an insurer or guarantor of the fairness of the presentations in the statements, the auditor has considerable responsibility for notifying users whether the statements are properly stated.

An audit process is a well-defined methodology for organising an audit to ensure that:

Determining whether the client's financial statements are fairly stated is the goal of which function?

Which one of the following is NOT an example of misclassification for sales?

The completeness assertion addresses:

Professional scepticism means that the auditor should:

Responsibility for the fair presentation of financial statements rests with the client's management, not with the auditor.

The transaction-related audit objective that deals with whether recorded transactions have actually occurred is the completeness objective.

To adequately plan the appropriate audit evidence, generally accepted auditing standards require the auditor to gain an understanding of the internal control structure.This understanding is obtained by:

The objective of the audit of financial statements by an independent auditor is to verify that the financial statements are free of misstatements and accurately present the company's financial position and results of operations.

There is no distinction made by auditing standards between an auditor's responsibility for searching for errors and his responsibility for searching for fraud.

Which of the following is NOT an assertion relating to 'general presentation and disclosure-related audit objectives'?

To which audit objective does the assertion 'recorded sales are for the amount of goods shipped and are correctly billed and recorded' relate?

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

Making fair representations in the financial statements is the responsibility of:

The cut-off objective, 'transactions near the balance sheet date are recorded in the proper period,' is a transaction-related, not a balance-related, audit objective.

The auditor's BEST defence when existing material misstatements in the financial statements are NOT uncovered in the audit is that the:

An intentional overstatement of sales is an example of:

There are several reasons why the auditor is responsible for reasonable but not absolute assurance.One of them is that:

Management assertions are:

ASA 200 states that the objective of an audit of a financial report is to enhance the degree of confidence in the financial statements by the intended users.

Although not an insurer or guarantor of the fairness of the presentations in the statements, the auditor has considerable responsibility for notifying users whether the statements are properly stated.

An audit process is a well-defined methodology for organising an audit to ensure that:

Determining whether the client's financial statements are fairly stated is the goal of which function?

Which one of the following is NOT an example of misclassification for sales?

The completeness assertion addresses:

Professional scepticism means that the auditor should:

Responsibility for the fair presentation of financial statements rests with the client's management, not with the auditor.

The transaction-related audit objective that deals with whether recorded transactions have actually occurred is the completeness objective.

To adequately plan the appropriate audit evidence, generally accepted auditing standards require the auditor to gain an understanding of the internal control structure.This understanding is obtained by:

The objective of the audit of financial statements by an independent auditor is to verify that the financial statements are free of misstatements and accurately present the company's financial position and results of operations.

There is no distinction made by auditing standards between an auditor's responsibility for searching for errors and his responsibility for searching for fraud.

Which of the following is NOT an assertion relating to 'general presentation and disclosure-related audit objectives'?

To which audit objective does the assertion 'recorded sales are for the amount of goods shipped and are correctly billed and recorded' relate?

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