Question 1

Tests of details of balances relate to which part of the Audit Risk Model?

Accepted Answer

A)  control risk 
B)  inherent risk 
C)  substantive risk 
D)  planned detection risk 
A)  control risk 
B)  inherent risk 
C)  substantive risk 
D)  planned detection risk

Question 2

Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

Accepted Answer

A)  postponing recording of cash receipt entries 
B)  overstating the accounts receivable control account 
C)  overstating the accounts receivable subsidiary ledger 
D)  recording cash receipt entries early 
A)  postponing recording of cash receipt entries 
B)  overstating the accounts receivable control account 
C)  overstating the accounts receivable subsidiary ledger 
D)  recording cash receipt entries early

Question 3

An audit procedure that compares the name, amount, and dates shown on remittance advices with cash receipts journal entries and with related duplicate deposit slips would be effective in detecting

Accepted Answer

A)  kiting. 
B)  lapping. 
C)  illicit write-offs of customers as uncollectible accounts. 
D)  sales without proper credit authorization. 
A)  kiting. 
B)  lapping. 
C)  illicit write-offs of customers as uncollectible accounts. 
D)  sales without proper credit authorization.

Question 4

Analytical procedures are substantive tests and if the results of the analytical procedures are favourable they will reduce

Accepted Answer

A)  the extent of tests of details of balances. 
B)  the extent of tests of controls. 
C)  the analytical procedures. 
D)  all of the other tests. 
A)  the extent of tests of details of balances. 
B)  the extent of tests of controls. 
C)  the analytical procedures. 
D)  all of the other tests.

Question 5

As the quality of the enterprise risk management process declines, and the overall quality of internal controls declines,

Accepted Answer

A)  risk of fraud decreases. 
B)  risk of fraud increases. 
C)  the extent of control testing increases. 
D)  the extent of substantive testing decreases. 
A)  risk of fraud decreases. 
B)  risk of fraud increases. 
C)  the extent of control testing increases. 
D)  the extent of substantive testing decreases.

Question 6

Whenever a statistical method is used, a decision rule determines whether the population is acceptable. The decision rule for dollar-unit sampling is "Accept the conclusion that the book value is not misstated by a material amount if

Accepted Answer

A)  the upper error bound falls between the understatement and overstatement tolerable misstatement amounts." 
B)  both the lower and upper error bound fall between the understatement and overstatement tolerable misstatement amounts." 
C)  both the understatement and overstatement tolerable misstatement amounts fall between the upper and lower error bound." 
D)  the overstatement tolerable misstatement amount falls between the lower and upper error bound." 
A)  the upper error bound falls between the understatement and overstatement tolerable misstatement amounts." 
B)  both the lower and upper error bound fall between the understatement and overstatement tolerable misstatement amounts." 
C)  both the understatement and overstatement tolerable misstatement amounts fall between the upper and lower error bound." 
D)  the overstatement tolerable misstatement amount falls between the lower and upper error bound."

Question 7

There are two important assumptions that underly the auditor's use of external confirmations. The first is that the person returning the confirmation is independent of the company and so will provide an unbiased response. The second is that

Accepted Answer

A)  only authorized employees of the company have prepared the response. 
B)  the person completing the response has carefully checked the data being confirmed. 
C)  the respondent has not been coerced or bribed to respond to the confirmation. 
D)  adequate controls exist at the client company to prevent unauthorized responses. 
A)  only authorized employees of the company have prepared the response. 
B)  the person completing the response has carefully checked the data being confirmed. 
C)  the respondent has not been coerced or bribed to respond to the confirmation. 
D)  adequate controls exist at the client company to prevent unauthorized responses.

Question 8

For cash receipts, the occurrence transaction-related audit objective affects the completeness balance-related audit objective of accounts receivable. Which accounts receivable balance-related audit objective does the cash receipts transaction-related audit objective of completeness affect?

Accepted Answer

A)  allocation 
B)  completeness 
C)  rights and obligations 
D)  existence 
A)  allocation 
B)  completeness 
C)  rights and obligations 
D)  existence

Question 9

One of the most important test of details of balances for accounts receivable is

Accepted Answer

A)  recalculation of the aged receivables and uncollectible accounts. 
B)  confirmations. 
C)  tracing from shipping documents to journals to the accounts receivable ledger. 
D)  tracing credit memos for returned merchandise to receiving room reports. 
A)  recalculation of the aged receivables and uncollectible accounts. 
B)  confirmations. 
C)  tracing from shipping documents to journals to the accounts receivable ledger. 
D)  tracing credit memos for returned merchandise to receiving room reports.

Question 10

What information would be considered semi-permanent as well as transaction information?

Accepted Answer

A)  customer number or code 
B)  customer credit limit 
C)  transaction amount 
D)  current balance outstanding 
A)  customer number or code 
B)  customer credit limit 
C)  transaction amount 
D)  current balance outstanding

Question 11

It is important that sales be billed and recorded in the journal as soon as possible after

Accepted Answer

A)  the order is received. 
B)  the order is received and credit is approved. 
C)  credit is approved and it is verified that there is enough inventory to fill the order. 
D)  shipment takes place. 
A)  the order is received. 
B)  the order is received and credit is approved. 
C)  credit is approved and it is verified that there is enough inventory to fill the order. 
D)  shipment takes place.

Question 12

A positive confirmation is more reliable evidence than a negative confirmation because

Accepted Answer

A)  the auditor has a document that can be used in court. 
B)  follow-up procedures can be performed if a response is not received from the debtor. 
C)  the debtor's lack of response indicates agreement with the stated balance. 
D)  fewer confirmations can be sent out. 
A)  the auditor has a document that can be used in court. 
B)  follow-up procedures can be performed if a response is not received from the debtor. 
C)  the debtor's lack of response indicates agreement with the stated balance. 
D)  fewer confirmations can be sent out.

Question 13

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to satisfy the audit objective of

Accepted Answer

A)  accuracy. 
B)  completeness. 
C)  control. 
D)  existence. 
A)  accuracy. 
B)  completeness. 
C)  control. 
D)  existence.

Question 14

As part of audit planning, you have calculated gross margin for the last five years and compared gross margin to industry averages. Your client's gross margin has increased by about 5% in the current year, while the industry gross average has declined. One possible cause of this increased gross margin is

Accepted Answer

A)  higher cost of goods sold. 
B)  increased bad debt expenses. 
C)  premature revenue recognition. 
D)  fictitious expenses. 
A)  higher cost of goods sold. 
B)  increased bad debt expenses. 
C)  premature revenue recognition. 
D)  fictitious expenses.

Question 15

One of the key internal controls to prevent transactions in the sales and collection cycle to fictitious customers is to

Accepted Answer

A)  have the bank reconciliation done by someone who is independent of the treasury function. 
B)  account for the integrity of the numerical sequence of sales orders. 
C)  compare customer numbers entered to the customer master file. 
D)  include the sales price list of all products in the computer files. 
A)  have the bank reconciliation done by someone who is independent of the treasury function. 
B)  account for the integrity of the numerical sequence of sales orders. 
C)  compare customer numbers entered to the customer master file. 
D)  include the sales price list of all products in the computer files.

Question 16

What is one of the advantages of converting procedures from a design to a performance format?

Accepted Answer

A)  obtain audit evidence of better quality 
B)  help the auditor select the procedures to be performed 
C)  eliminate duplicate procedures 
D)  ensure compliance with Canadian Auditing Standards 
A)  obtain audit evidence of better quality 
B)  help the auditor select the procedures to be performed 
C)  eliminate duplicate procedures 
D)  ensure compliance with Canadian Auditing Standards

Question 17

Confirmation of individual accounts receivable balances directly with debtors will, of itself, normally provide evidence concerning the

Accepted Answer

A)  collectability of the balances confirmed. 
B)  ownership of the balances confirmed. 
C)  existence of the balances confirmed. 
D)  internal control over balances confirmed. 
A)  collectability of the balances confirmed. 
B)  ownership of the balances confirmed. 
C)  existence of the balances confirmed. 
D)  internal control over balances confirmed.

Question 18

There are three main types of revenue manipulations. Which of the following revenue manipulations affects the occurrence objective?

Accepted Answer

A)  recording subsequent period sales as current period sales 
B)  the use of "bill and holds" (goods are invoiced but not shipped) 
C)  understatement of bad debts 
D)  creation of fictitious sales that are misclassified as revenue 
A)  recording subsequent period sales as current period sales 
B)  the use of "bill and holds" (goods are invoiced but not shipped) 
C)  understatement of bad debts 
D)  creation of fictitious sales that are misclassified as revenue

Question 19

Discuss the alternative procedures an auditor can perform to test the existence objective for accounts receivable when customers do not respond to confirmation requests.

Accepted Answer

For any positive confirmation not return

Question 20

In monetary-unit sampling, the values of the estimated likely maximum misstatements are referred to as the

Accepted Answer

A)  point estimates. 
B)  precision intervals. 
C)  confidence intervals. 
D)  misstatement bounds. 
A)  point estimates. 
B)  precision intervals. 
C)  confidence intervals. 
D)  misstatement bounds.

Tests of details of balances relate to which part of the Audit Risk Model?

Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

An audit procedure that compares the name, amount, and dates shown on remittance advices with cash receipts journal entries and with related duplicate deposit slips would be effective in detecting

Analytical procedures are substantive tests and if the results of the analytical procedures are favourable they will reduce

As the quality of the enterprise risk management process declines, and the overall quality of internal controls declines,

Whenever a statistical method is used, a decision rule determines whether the population is acceptable. The decision rule for dollar-unit sampling is "Accept the conclusion that the book value is not misstated by a material amount if

There are two important assumptions that underly the auditor's use of external confirmations. The first is that the person returning the confirmation is independent of the company and so will provide an unbiased response. The second is that

For cash receipts, the occurrence transaction-related audit objective affects the completeness balance-related audit objective of accounts receivable. Which accounts receivable balance-related audit objective does the cash receipts transaction-related audit objective of completeness affect?

One of the most important test of details of balances for accounts receivable is

What information would be considered semi-permanent as well as transaction information?

It is important that sales be billed and recorded in the journal as soon as possible after

A positive confirmation is more reliable evidence than a negative confirmation because

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to satisfy the audit objective of

One of the key internal controls to prevent transactions in the sales and collection cycle to fictitious customers is to

What is one of the advantages of converting procedures from a design to a performance format?

Confirmation of individual accounts receivable balances directly with debtors will, of itself, normally provide evidence concerning the

There are three main types of revenue manipulations. Which of the following revenue manipulations affects the occurrence objective?

Discuss the alternative procedures an auditor can perform to test the existence objective for accounts receivable when customers do not respond to confirmation requests.

In monetary-unit sampling, the values of the estimated likely maximum misstatements are referred to as the

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters

Exam 12: Audit of the Revenue Cycle

Tests of details of balances relate to which part of the Audit Risk Model?

Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

An audit procedure that compares the name, amount, and dates shown on remittance advices with cash receipts journal entries and with related duplicate deposit slips would be effective in detecting

Analytical procedures are substantive tests and if the results of the analytical procedures are favourable they will reduce

As the quality of the enterprise risk management process declines, and the overall quality of internal controls declines,

Whenever a statistical method is used, a decision rule determines whether the population is acceptable. The decision rule for dollar-unit sampling is "Accept the conclusion that the book value is not misstated by a material amount if

There are two important assumptions that underly the auditor's use of external confirmations. The first is that the person returning the confirmation is independent of the company and so will provide an unbiased response. The second is that

For cash receipts, the occurrence transaction-related audit objective affects the completeness balance-related audit objective of accounts receivable. Which accounts receivable balance-related audit objective does the cash receipts transaction-related audit objective of completeness affect?

One of the most important test of details of balances for accounts receivable is

What information would be considered semi-permanent as well as transaction information?

It is important that sales be billed and recorded in the journal as soon as possible after

A positive confirmation is more reliable evidence than a negative confirmation because

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to satisfy the audit objective of

One of the key internal controls to prevent transactions in the sales and collection cycle to fictitious customers is to

What is one of the advantages of converting procedures from a design to a performance format?

Confirmation of individual accounts receivable balances directly with debtors will, of itself, normally provide evidence concerning the

There are three main types of revenue manipulations. Which of the following revenue manipulations affects the occurrence objective?

Discuss the alternative procedures an auditor can perform to test the existence objective for accounts receivable when customers do not respond to confirmation requests.

In monetary-unit sampling, the values of the estimated likely maximum misstatements are referred to as the

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters