Question 1

Which of the following is NOT a type of audit test?

Accepted Answer

A)  substantive tests of transactions 
B)  authorisation of transactions 
C)  analytical procedures 
D)  tests of controls 
A)  substantive tests of transactions 
B)  authorisation of transactions 
C)  analytical procedures 
D)  tests of controls B

Question 2

The timing of phase II audit procedures are typically:

Accepted Answer

A)  before the balance sheet date. 
B)  on or after the balance sheet date. 
C)  anytime. 
D)  at the end of fieldwork. 
A)  before the balance sheet date. 
B)  on or after the balance sheet date. 
C)  anytime. 
D)  at the end of fieldwork. A

Question 3

Discuss the major activities and procedures performed by the auditor in each of the four phases of an audit.

Accepted Answer

The major activities performed in the planning and design phase (Phase I)are as follows:preplan the engagement, obtain background information about the client, obtain information about the client's legal obligations, perform preliminary analytical procedures, set performance materiality and assess acceptable risk and inherent risk, obtain an understanding of internal control and assess control risk, and develop an overall audit plan and audit program.
Phase II involves tests of controls, substantive tests of transactions, and an assessment of the likelihood of misstatements in the financial statements.
Phase III involves analytical procedures and tests of details of balances.
In Phase IV, the auditor performs the review for contingent liabilities, the review for subsequent events, accumulates final evidence, evaluates results, issues the audit report, and communicates with the client's audit committee and management.

Question 4

There is a trade-off between tests of controls and substantive tests.

Accepted Answer

A) True 
 B)False

Question 5

The tests of controls and substantive tests of transactions section of the audit program normally includes a descriptive section documenting the understanding obtained about internal control.

Accepted Answer

A) True 
 B)False

Question 6

Auditors follow a four-step approach to reduce assessed control risk.What is the order of these four steps?
1) Identify key controls that should reduce control risk for each transaction-related audit objective.
2) Apply the transaction-related objectives to the class of transactions being tested.
3) Develop appropriate tests of controls for all internal controls that are used to reduce the preliminary assessment of control risk below maximum (key controls).
4) For potential types of misstatements related to each transaction-related audit objective, design appropriate substantive tests of transactions.

Accepted Answer

A)  1, 2, 3, 4 
B)  4, 1, 2, 3 
C)  2, 1, 3, 4 
D)  1, 3, 2, 4 
A)  1, 2, 3, 4 
B)  4, 1, 2, 3 
C)  2, 1, 3, 4 
D)  1, 3, 2, 4

Question 7

When analytical procedures are performed during substantive testing, they are typically less focused and less extensive than when performed as part of audit planning.

Accepted Answer

A) True 
 B)False

Question 8

Shown below (1-5)are the five types of tests which auditors use to determine whether financial statements are fairly stated.Which three are substantive tests?
1) procedures to obtain an understanding of internal control
2) tests of controls
3) tests of transactions
4) analytical procedures
5) tests of balances

Accepted Answer

A)  2, 3 and 4 
B)  1, 2 and 3 
C)  3, 4 and 5 
D)  2, 3 and 5 
A)  2, 3 and 4 
B)  1, 2 and 3 
C)  3, 4 and 5 
D)  2, 3 and 5

Question 9

Contingent liabilities must be:

Accepted Answer

A)  recorded on the balance sheet between current and long-term liabilities. 
B)  disclosed in the footnotes. 
C)  recorded in the ledger, or no disclosure is required. 
D)  material and imminent, or they should not even be mentioned. 
A)  recorded on the balance sheet between current and long-term liabilities. 
B)  disclosed in the footnotes. 
C)  recorded in the ledger, or no disclosure is required. 
D)  material and imminent, or they should not even be mentioned.

Question 10

Which of the following objectives is NOT addressed by tests of control?

Accepted Answer

A)  timing 
B)  accuracy 
C)  realisable value 
D)  completeness 
A)  timing 
B)  accuracy 
C)  realisable value 
D)  completeness

Question 11

An exception in a test of control provides only an indication of the likelihood of monetary misstatements in the financial statements, because tests of controls reveal whether monetary misstatements have actually occurred.

Accepted Answer

A) True 
 B)False

Question 12

Tests of details of balances are always substantive tests.

Accepted Answer

A) True 
 B)False

Question 13

An exception in a substantive test of transactions provides only an indication of the likelihood of monetary misstatements in the financial statements, because substantive tests of transactions do not reveal whether monetary misstatements have actually occurred.

Accepted Answer

A) True 
 B)False

Question 14

The timing of phase IV audit procedures are typically:

Accepted Answer

A)  before the balance sheet date. 
B)  on or after the balance sheet date. 
C)  anytime. 
D)  at the end of fieldwork. 
A)  before the balance sheet date. 
B)  on or after the balance sheet date. 
C)  anytime. 
D)  at the end of fieldwork.

Question 15

Which one of the following audit tests is usually the MOST costly to perform?

Accepted Answer

A)  analytical procedures 
B)  tests of balances 
C)  tests of controls 
D)  substantive tests of transactions 
A)  analytical procedures 
B)  tests of balances 
C)  tests of controls 
D)  substantive tests of transactions

Question 16

The purpose of tests of controls is to provide reasonable assurance that the:

Accepted Answer

A)  entity has complied with requirements of quality control. 
B)  accounting treatment of transactions and balances is valid and proper. 
C)  entity has complied with disclosure requirements of generally accepted accounting principles. 
D)  accounting control procedures are operating effectively. 
A)  entity has complied with requirements of quality control. 
B)  accounting treatment of transactions and balances is valid and proper. 
C)  entity has complied with disclosure requirements of generally accepted accounting principles. 
D)  accounting control procedures are operating effectively.

Question 17

A low tolerable error for a given account would result in more testing of details than a higher amount.

Accepted Answer

A) True 
 B)False

Question 18

Why are substantive tests of transaction high-cost?

Accepted Answer

A)  The calculations are more difficult and complicated. 
B)  They involve inquiry, observation, and inspection. 
C)  A greater extent of testing is required. 
D)  They require re-calculations and tracing. 
A)  The calculations are more difficult and complicated. 
B)  They involve inquiry, observation, and inspection. 
C)  A greater extent of testing is required. 
D)  They require re-calculations and tracing.

Question 19

Where is the primary emphasis in most tests of details of balances?

Accepted Answer

A)  income statement accounts 
B)  cash flow statement account 
C)  balance sheet accounts 
D)  all of the above 
A)  income statement accounts 
B)  cash flow statement account 
C)  balance sheet accounts 
D)  all of the above

Question 20

Which of the following is a procedure designed to test for monetary errors or irregularities directly affecting the correctness of financial statement balances?

Accepted Answer

A)  substantive test 
B)  monetary-unit sampling test 
C)  test of control 
D)  test of attributes 
A)  substantive test 
B)  monetary-unit sampling test 
C)  test of control 
D)  test of attributes

Which of the following is NOT a type of audit test?

The timing of phase II audit procedures are typically:

Discuss the major activities and procedures performed by the auditor in each of the four phases of an audit.

There is a trade-off between tests of controls and substantive tests.

The tests of controls and substantive tests of transactions section of the audit program normally includes a descriptive section documenting the understanding obtained about internal control.

When analytical procedures are performed during substantive testing, they are typically less focused and less extensive than when performed as part of audit planning.

Contingent liabilities must be:

Which of the following objectives is NOT addressed by tests of control?

An exception in a test of control provides only an indication of the likelihood of monetary misstatements in the financial statements, because tests of controls reveal whether monetary misstatements have actually occurred.

Tests of details of balances are always substantive tests.

An exception in a substantive test of transactions provides only an indication of the likelihood of monetary misstatements in the financial statements, because substantive tests of transactions do not reveal whether monetary misstatements have actually occurred.

The timing of phase IV audit procedures are typically:

Which one of the following audit tests is usually the MOST costly to perform?

The purpose of tests of controls is to provide reasonable assurance that the:

A low tolerable error for a given account would result in more testing of details than a higher amount.

Why are substantive tests of transaction high-cost?

Where is the primary emphasis in most tests of details of balances?

Which of the following is a procedure designed to test for monetary errors or irregularities directly affecting the correctness of financial statement balances?

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

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

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 11: Overall audit plan and audit program

Which of the following is NOT a type of audit test?

The timing of phase II audit procedures are typically:

Discuss the major activities and procedures performed by the auditor in each of the four phases of an audit.

There is a trade-off between tests of controls and substantive tests.

The tests of controls and substantive tests of transactions section of the audit program normally includes a descriptive section documenting the understanding obtained about internal control.

When analytical procedures are performed during substantive testing, they are typically less focused and less extensive than when performed as part of audit planning.

Contingent liabilities must be:

Which of the following objectives is NOT addressed by tests of control?

An exception in a test of control provides only an indication of the likelihood of monetary misstatements in the financial statements, because tests of controls reveal whether monetary misstatements have actually occurred.

Tests of details of balances are always substantive tests.

An exception in a substantive test of transactions provides only an indication of the likelihood of monetary misstatements in the financial statements, because substantive tests of transactions do not reveal whether monetary misstatements have actually occurred.

The timing of phase IV audit procedures are typically:

Which one of the following audit tests is usually the MOST costly to perform?

The purpose of tests of controls is to provide reasonable assurance that the:

A low tolerable error for a given account would result in more testing of details than a higher amount.

Why are substantive tests of transaction high-cost?

Where is the primary emphasis in most tests of details of balances?

Which of the following is a procedure designed to test for monetary errors or irregularities directly affecting the correctness of financial statement balances?

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

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

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