Question 1

Assessing the overall reasonableness of transactions and balances is the goal of:

Accepted Answer

A)  management assertions. 
B)  auditing. 
C)  analytical procedures. 
D)  fraud detection. 
A)  management assertions. 
B)  auditing. 
C)  analytical procedures. 
D)  fraud detection.

Question 2

When the auditor believes an illegal act may have occurred, it is necessary to:

Accepted Answer

A)  consult with the client's legal counsel. 
B)  inquire of management, at a level above those likely to be involved with illegality. 
C)  consider accumulating additional evidence to determine if there is actually an illegal act. 
D)  all of the above 
A)  consult with the client's legal counsel. 
B)  inquire of management, at a level above those likely to be involved with illegality. 
C)  consider accumulating additional evidence to determine if there is actually an illegal act. 
D)  all of the above

Question 3

Auditors have a higher degree of responsibility for detecting direct-effect illegal acts than indirect-effect illegal acts.

Accepted Answer

A) True 
 B)False

Question 4

Distinguish between 'balance-related' and 'transaction-related' audit objectives.Which are more numerous?

Accepted Answer

Balance-related objectives refer to fina

Question 5

Balance-related audit objectives are also applied to all income statement accounts.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following statements is true?

Accepted Answer

A)  Usually, errors and fraud are equally difficult for the auditor to uncover. 
B)  It is usually easier for the auditor to uncover fraud than errors. 
C)  It is usually easier for the auditor to uncover errors than fraud. 
D)  none of the above 
A)  Usually, errors and fraud are equally difficult for the auditor to uncover. 
B)  It is usually easier for the auditor to uncover fraud than errors. 
C)  It is usually easier for the auditor to uncover errors than fraud. 
D)  none of the above

Question 7

Which one of the following statements is true?

Accepted Answer

A)  The circumstances may vary from audit to audit, but the evidence accumulated remains the same. 
B)  The general audit objectives may vary from audit to audit, but the circumstances remain the same. 
C)  The evidence that the auditor accumulates remains the same from audit to audit, but the general audit objectives vary, depending on the circumstances. 
D)  The general audit objectives remain the same from audit to audit, but the evidence varies, depending on the circumstances. 
A)  The circumstances may vary from audit to audit, but the evidence accumulated remains the same. 
B)  The general audit objectives may vary from audit to audit, but the circumstances remain the same. 
C)  The evidence that the auditor accumulates remains the same from audit to audit, but the general audit objectives vary, depending on the circumstances. 
D)  The general audit objectives remain the same from audit to audit, but the evidence varies, depending on the circumstances.

Question 8

Discuss the actions an auditor should take when the auditor discovers an illegal act.

Accepted Answer

The auditor should first consider the ef

Question 9

The broad categories of management assertions listed in ASA 315 may be grouped together under five headings.One heading is 'existence or occurrence.' Assertions about existence deal with whether assets, liabilities, and equities included in the balance sheet actually existed on the balance sheet date.Assertions about occurrence deal with whether recorded transactions reflected in the income statement actually occurred during the accounting period.Identify and discuss each of the remaining four categories or headings of management assertions.

Accepted Answer

.Completeness.All transactions and accou

Question 10

What are the two major classifications of fraud?

Accepted Answer

A)  intent and rationalization 
B)  misappropriation of assets and materiality 
C)  misappropriation of assets and fraudulent financial reporting 
D)  fraudulent financial reporting and intent 
A)  intent and rationalization 
B)  misappropriation of assets and materiality 
C)  misappropriation of assets and fraudulent financial reporting 
D)  fraudulent financial reporting and intent

Question 11

What reasoning would an auditor use when no material misstatements are discovered?

Accepted Answer

A)  The audit was conducted in accordance with auditor judgement. 
B)  The audit was conducted in accordance with Australian auditing standards. 
C)  Misstatements are the responsibility of management. 
D)  The audit was conducted in accordance with Australian accounting standards. 
A)  The audit was conducted in accordance with auditor judgement. 
B)  The audit was conducted in accordance with Australian auditing standards. 
C)  Misstatements are the responsibility of management. 
D)  The audit was conducted in accordance with Australian accounting standards.

Question 12

The accuracy of information included in footnotes that accompany the audited financial statements of a publicly traded company is the primary responsibility of the:

Accepted Answer

A)  Australian Securities and Investment Commission. 
B)  independent auditor. 
C)  company's management. 
D)  stock exchange officials. 
A)  Australian Securities and Investment Commission. 
B)  independent auditor. 
C)  company's management. 
D)  stock exchange officials.

Question 13

Which one of the following statements is NOT true?

Accepted Answer

A)  An example of a completeness assertion would be that the notes payable account in the balance sheet includes all such obligations of the entity. 
B)  An example of a rights/obligations assertion would be that amounts capitalised for leases in the balance sheet represent the cost of the entity's rights to leased property. 
C)  An example of a valuation/allocation assertion would be that property, plant, and equipment are listed in the noncurrent section of the balance sheet. 
D)  An example of an existence/occurrence assertion would be that sales in the income statement represent exchanges of goods or services that actually took place. 
A)  An example of a completeness assertion would be that the notes payable account in the balance sheet includes all such obligations of the entity. 
B)  An example of a rights/obligations assertion would be that amounts capitalised for leases in the balance sheet represent the cost of the entity's rights to leased property. 
C)  An example of a valuation/allocation assertion would be that property, plant, and equipment are listed in the noncurrent section of the balance sheet. 
D)  An example of an existence/occurrence assertion would be that sales in the income statement represent exchanges of goods or services that actually took place.

Question 14

When preparing the financial statements, it is acceptable for the auditor to prepare:

Accepted Answer

A)  the footnotes for a client. 
B)  the statements for a client. 
C)  a draft of the statements and footnotes for a client. 
D)  a draft of the statements for a client. 
A)  the footnotes for a client. 
B)  the statements for a client. 
C)  a draft of the statements and footnotes for a client. 
D)  a draft of the statements for a client.

Question 15

Misstatements are usually considered material if the:

Accepted Answer

A)  combined uncorrected errors in the financial statements are likely to have changed or influenced the decisions of a reasonable person using the financial statements. 
B)  auditor has quantified a measure of materiality. 
C)  combined uncorrected errors and fraud in the financial statements are likely to have changed or influenced the decisions of a reasonable person using the financial statements. 
D)  none of the above 
A)  combined uncorrected errors in the financial statements are likely to have changed or influenced the decisions of a reasonable person using the financial statements. 
B)  auditor has quantified a measure of materiality. 
C)  combined uncorrected errors and fraud in the financial statements are likely to have changed or influenced the decisions of a reasonable person using the financial statements. 
D)  none of the above

Question 16

Most illegal acts affect the financial statements:

Accepted Answer

A)  both directly and indirectly. 
B)  only indirectly. 
C)  directly. 
D)  materially if direct, immaterially if indirect. 
A)  both directly and indirectly. 
B)  only indirectly. 
C)  directly. 
D)  materially if direct, immaterially if indirect.

Question 17

A financial statement audit typically consists of four phases.Identify each of these four phases of an audit and discuss the major activities performed by the auditor in each phase.

Accepted Answer

Phase I.Plan and design an audit approac

Question 18

When using the cycle approach to segmenting an audit, the reason for treating capital acquisition and repayment separately from the acquisition of goods and services is that:

Accepted Answer

A)  the transactions are related to financing a company rather than to its operations. 
B)  most capital acquisition and repayment cycle accounts involve few transactions, but each is often highly material, and therefore should be audited extensively. 
C)  both A and B 
D)  neither A nor B 
A)  the transactions are related to financing a company rather than to its operations. 
B)  most capital acquisition and repayment cycle accounts involve few transactions, but each is often highly material, and therefore should be audited extensively. 
C)  both A and B 
D)  neither A nor B

Question 19

Which of the following statements is NOT true about the cycle approach to segmenting an audit?

Accepted Answer

A)  All general ledger accounts and journals are included at least once. 
B)  The 'inventory and warehousing' cycle may be audited at any time during the engagement since it is unrelated to the other cycles. 
C)  The 'capital acquisition and repayment' cycle is closely related to the 'acquisition of goods and services and payment' cycle. 
D)  Some journals and general ledger accounts are included in more than one cycle. 
A)  All general ledger accounts and journals are included at least once. 
B)  The 'inventory and warehousing' cycle may be audited at any time during the engagement since it is unrelated to the other cycles. 
C)  The 'capital acquisition and repayment' cycle is closely related to the 'acquisition of goods and services and payment' cycle. 
D)  Some journals and general ledger accounts are included in more than one cycle.

Question 20

Auditors cannot provide assurance that indirect-effect illegal acts will be detected because:

Accepted Answer

A)  they do not accept responsibility for discovering illegal acts. 
B)  they lack legal expertise. 
C)  both A and B 
D)  none of the above 
A)  they do not accept responsibility for discovering illegal acts. 
B)  they lack legal expertise. 
C)  both A and B 
D)  none of the above

Assessing the overall reasonableness of transactions and balances is the goal of:

When the auditor believes an illegal act may have occurred, it is necessary to:

Auditors have a higher degree of responsibility for detecting direct-effect illegal acts than indirect-effect illegal acts.

Distinguish between 'balance-related' and 'transaction-related' audit objectives.Which are more numerous?

Balance-related audit objectives are also applied to all income statement accounts.

Which one of the following statements is true?

Which one of the following statements is true?

Discuss the actions an auditor should take when the auditor discovers an illegal act.

What are the two major classifications of fraud?

What reasoning would an auditor use when no material misstatements are discovered?

The accuracy of information included in footnotes that accompany the audited financial statements of a publicly traded company is the primary responsibility of the:

Which one of the following statements is NOT true?

When preparing the financial statements, it is acceptable for the auditor to prepare:

Misstatements are usually considered material if the:

Most illegal acts affect the financial statements:

A financial statement audit typically consists of four phases.Identify each of these four phases of an audit and discuss the major activities performed by the auditor in each phase.

When using the cycle approach to segmenting an audit, the reason for treating capital acquisition and repayment separately from the acquisition of goods and services is that:

Which of the following statements is NOT true about the cycle approach to segmenting an audit?

Auditors cannot provide assurance that indirect-effect illegal acts will be detected because:

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

Assessing the overall reasonableness of transactions and balances is the goal of:

When the auditor believes an illegal act may have occurred, it is necessary to:

Auditors have a higher degree of responsibility for detecting direct-effect illegal acts than indirect-effect illegal acts.

Distinguish between 'balance-related' and 'transaction-related' audit objectives.Which are more numerous?

Balance-related audit objectives are also applied to all income statement accounts.

Which one of the following statements is true?

Which one of the following statements is true?

Discuss the actions an auditor should take when the auditor discovers an illegal act.

What are the two major classifications of fraud?

What reasoning would an auditor use when no material misstatements are discovered?

The accuracy of information included in footnotes that accompany the audited financial statements of a publicly traded company is the primary responsibility of the:

Which one of the following statements is NOT true?

When preparing the financial statements, it is acceptable for the auditor to prepare:

Misstatements are usually considered material if the:

Most illegal acts affect the financial statements:

A financial statement audit typically consists of four phases.Identify each of these four phases of an audit and discuss the major activities performed by the auditor in each phase.

When using the cycle approach to segmenting an audit, the reason for treating capital acquisition and repayment separately from the acquisition of goods and services is that:

Which of the following statements is NOT true about the cycle approach to segmenting an audit?

Auditors cannot provide assurance that indirect-effect illegal acts will be detected because:

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