Question 1

The largest portion of the auditor's working papers is the:

Accepted Answer

A)  adjusting and reclassification entries. 
B)  working trial balance. 
C)  lead schedules. 
D)  supporting schedules. 
A)  adjusting and reclassification entries. 
B)  working trial balance. 
C)  lead schedules. 
D)  supporting schedules.

Question 2

The most likely uses of the financial statements can be determined from:

Accepted Answer

A)  inquiries with ASIC and the ASX. 
B)  reviewing the terms of the engagement as set out in the engagement letter. 
C)  reviewing the minutes of meetings. 
D)  previous experience with the auditee and discussions with management. 
A)  inquiries with ASIC and the ASX. 
B)  reviewing the terms of the engagement as set out in the engagement letter. 
C)  reviewing the minutes of meetings. 
D)  previous experience with the auditee and discussions with management.

Question 3

Which one of the following eliminates voluminous details from the auditor's working trial balance by classifying and summarising similar or related items?

Accepted Answer

A)  account analyses 
B)  lead schedules 
C)  control accounts 
D)  supporting schedules 
A)  account analyses 
B)  lead schedules 
C)  control accounts 
D)  supporting schedules

Question 4

Because company policies are reflected in the financial statements, it is important that auditors:

Accepted Answer

A)  include the primary accounting policies in the permanent file. 
B)  carefully evaluate basic policy decisions. 
C)  periodically review information on accounting policies to determine if there has been a change. 
D)  all of the above 
A)  include the primary accounting policies in the permanent file. 
B)  carefully evaluate basic policy decisions. 
C)  periodically review information on accounting policies to determine if there has been a change. 
D)  all of the above

Question 5

The auditor should understand the client's business factors-such as information about related parties-because they may indicate

Accepted Answer

A)  reasons not to accept the engagement. 
B)  areas of increased audit risk. 
C)  areas of increased control risk. 
D)  areas of increased client business risk. 
A)  reasons not to accept the engagement. 
B)  areas of increased audit risk. 
C)  areas of increased control risk. 
D)  areas of increased client business risk.

Question 6

An extensive understanding of the client's business and industry as well as knowledge of the company's operations are essential because:

Accepted Answer

A)  there is a risk the business may impact the environment. 
B)  the increased importance of human resources has increased accounting complexity. 
C)  the increased importance of intangible assets has increased accounting complexity. 
D)  all of the above 
A)  there is a risk the business may impact the environment. 
B)  the increased importance of human resources has increased accounting complexity. 
C)  the increased importance of intangible assets has increased accounting complexity. 
D)  all of the above

Question 7

The primary purpose of an engagement letter is to establish a clear understanding of the terms of the engagement between the client and the auditor.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is NOT indicative of a related-party transaction?

Accepted Answer

A)  an unusually large sale of merchandise to the company's best and largest customer 
B)  loans to corporate officers at market rates of interest with a regular repayment schedule 
C)  exchange of equipment between two companies owned by the same person 
D)  sales of merchandise between a parent company and its subsidiary 
A)  an unusually large sale of merchandise to the company's best and largest customer 
B)  loans to corporate officers at market rates of interest with a regular repayment schedule 
C)  exchange of equipment between two companies owned by the same person 
D)  sales of merchandise between a parent company and its subsidiary

Question 9

Why might an audit firm reject a potential client?

Accepted Answer

A)  the client's management lacks integrity 
B)  the risk of litigation 
C)  the client operates in a high-risk industry 
D)  all of the above 
A)  the client's management lacks integrity 
B)  the risk of litigation 
C)  the client operates in a high-risk industry 
D)  all of the above

Question 10

Policy and procedures governing the acceptance and continuance of client relationships are contained primarily in:

Accepted Answer

A)  ASA 620. 
B)  ASA 315. 
C)  ASA 220. 
D)  ASA 210. 
A)  ASA 620. 
B)  ASA 315. 
C)  ASA 220. 
D)  ASA 210.

Question 11

What procedures should the auditor use to identify a related-party transaction?

Accepted Answer

ASA 550 provides specific audit procedur

Question 12

Reclassification entries are recorded in the:

Accepted Answer

A)  general journal. 
B)  cash receipts journal. 
C)  sales journal. 
D)  financial statements but not in the general ledger. 
A)  general journal. 
B)  cash receipts journal. 
C)  sales journal. 
D)  financial statements but not in the general ledger.

Question 13

List the steps in planning an audit.

Accepted Answer

1.Accept clients and perform initial aud

Question 14

The auditor's primary concern is the risk of material misstatements in the financial statements due to business risk.

Accepted Answer

A) True 
 B)False

Question 15

Working papers prepared by the client for the auditor are the property of the auditor.

Accepted Answer

A) True 
 B)False

Question 16

Discuss the factors an auditor should consider before accepting a company as an audit client.

Accepted Answer

The auditor should investigate and consi

Question 17

Which one of the following is an inherent risk that is common to all clients in certain industries?

Accepted Answer

A)  brand loyalty in the cosmetics industry 
B)  sales between a parent company and subsidiary company 
C)  dependence on a small number of customers 
D)  accounts receivable collection in the consumer loan industry 
A)  brand loyalty in the cosmetics industry 
B)  sales between a parent company and subsidiary company 
C)  dependence on a small number of customers 
D)  accounts receivable collection in the consumer loan industry

Question 18

A measure of the auditor's assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client's internal control is called:

Accepted Answer

A)  control risk. 
B)  acceptable audit risk. 
C)  inherent risk. 
D)  statistical risk. 
A)  control risk. 
B)  acceptable audit risk. 
C)  inherent risk. 
D)  statistical risk.

Question 19

The objective of audit documentation is to provide reasonable assurance that an adequate audit was conducted.

Accepted Answer

A) True 
 B)False

Question 20

Which one of the following items would NOT normally be included, in whole or in part, in the auditor's permanent file on a client?

Accepted Answer

A)  analyses of accounts such as long-term debt and shareholders' equity 
B)  organisation charts and internal control questionnaires 
C)  the audit program 
D)  the company's constitution 
A)  analyses of accounts such as long-term debt and shareholders' equity 
B)  organisation charts and internal control questionnaires 
C)  the audit program 
D)  the company's constitution

The largest portion of the auditor's working papers is the:

The most likely uses of the financial statements can be determined from:

Which one of the following eliminates voluminous details from the auditor's working trial balance by classifying and summarising similar or related items?

Because company policies are reflected in the financial statements, it is important that auditors:

The auditor should understand the client's business factors-such as information about related parties-because they may indicate

An extensive understanding of the client's business and industry as well as knowledge of the company's operations are essential because:

The primary purpose of an engagement letter is to establish a clear understanding of the terms of the engagement between the client and the auditor.

Which of the following is NOT indicative of a related-party transaction?

Why might an audit firm reject a potential client?

Policy and procedures governing the acceptance and continuance of client relationships are contained primarily in:

What procedures should the auditor use to identify a related-party transaction?

Reclassification entries are recorded in the:

List the steps in planning an audit.

The auditor's primary concern is the risk of material misstatements in the financial statements due to business risk.

Working papers prepared by the client for the auditor are the property of the auditor.

Discuss the factors an auditor should consider before accepting a company as an audit client.

Which one of the following is an inherent risk that is common to all clients in certain industries?

A measure of the auditor's assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client's internal control is called:

The objective of audit documentation is to provide reasonable assurance that an adequate audit was conducted.

Which one of the following items would NOT normally be included, in whole or in part, in the auditor's permanent file on a client?

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

Audit evidence

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 6: Audit planning and documentation

The largest portion of the auditor's working papers is the:

The most likely uses of the financial statements can be determined from:

Which one of the following eliminates voluminous details from the auditor's working trial balance by classifying and summarising similar or related items?

Because company policies are reflected in the financial statements, it is important that auditors:

The auditor should understand the client's business factors-such as information about related parties-because they may indicate

An extensive understanding of the client's business and industry as well as knowledge of the company's operations are essential because:

The primary purpose of an engagement letter is to establish a clear understanding of the terms of the engagement between the client and the auditor.

Which of the following is NOT indicative of a related-party transaction?

Why might an audit firm reject a potential client?

Policy and procedures governing the acceptance and continuance of client relationships are contained primarily in:

What procedures should the auditor use to identify a related-party transaction?

Reclassification entries are recorded in the:

List the steps in planning an audit.

The auditor's primary concern is the risk of material misstatements in the financial statements due to business risk.

Working papers prepared by the client for the auditor are the property of the auditor.

Discuss the factors an auditor should consider before accepting a company as an audit client.

Which one of the following is an inherent risk that is common to all clients in certain industries?

A measure of the auditor's assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client's internal control is called:

The objective of audit documentation is to provide reasonable assurance that an adequate audit was conducted.

Which one of the following items would NOT normally be included, in whole or in part, in the auditor's permanent file on a client?

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

Audit evidence

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