Question 1

During a change to an entire IT system, if conversion controls are poor or are not documented, the auditor will need to

Accepted Answer

A)  conduct an implementation audit. 
B)  conduct a legacy system audit. 
C)  conduct an audit of the new system. 
D)  conduct a conversion audit. 
A)  conduct an implementation audit. 
B)  conduct a legacy system audit. 
C)  conduct an audit of the new system. 
D)  conduct a conversion audit.

Question 2

The auditor of ABC Ltd. has concluded that there are significant risks of misstatement of revenue at the company with potential overstatement of revenue. Which of the following audit tests should the auditor conduct to address this significant risk?

Accepted Answer

A)  control tests of authorization to ensure that credit limits for sales are all approved by the sales manager 
B)  analytical review of sales comparing sales trends over the last five years by division and to the industry 
C)  examination of sales after the year end to quantify potential cutoff errors (income from the subsequent period included in the current year) 
D)  risk assessment procedures looking carefully at inherent risks associated with the handling of cash in the sales cycle 
A)  control tests of authorization to ensure that credit limits for sales are all approved by the sales manager 
B)  analytical review of sales comparing sales trends over the last five years by division and to the industry 
C)  examination of sales after the year end to quantify potential cutoff errors (income from the subsequent period included in the current year) 
D)  risk assessment procedures looking carefully at inherent risks associated with the handling of cash in the sales cycle

Question 3

Jane is a sole practitioner operating out of a local office. She is part of a regional group of firms and occasionally does small audits with the assistance of one staff person. Using automated working paper software, she runs a standard set of analytical review calculations for each audit, then puts them in the working paper file. She does not look at the analytical review process again.
Since most of her audit clients have no internal controls, she then calculates materiality and conducts a substantive audit. She prefers to do more substantive testing rather than having to do all kinds of work with internal controls.
Required:
What is wrong with Jane's audit approach?

Accepted Answer

First of all, Jane is violating generall

Question 4

If no material fluctuations are found using analytical procedures and the auditor concludes that differences should not have occurred,

Accepted Answer

A)  it will be necessary to increase the tests of details of balances. 
B)  other tests may be reduced. 
C)  it will be necessary to increase the tests of controls. 
D)  it will not be necessary to perform tests of details of balances. 
A)  it will be necessary to increase the tests of details of balances. 
B)  other tests may be reduced. 
C)  it will be necessary to increase the tests of controls. 
D)  it will not be necessary to perform tests of details of balances.

Question 5

A PA is conducting the audit of Middi Furniture Company, a medium-sized company with few effective controls and significant inherent risks. Management has decided that it is not cost-effective to implement better internal controls. What audit strategy will the PA likely select for this client?

Accepted Answer

A)  combined audit approach for all transaction cycles and accounts 
B)  substantive audit approach for all transaction cycles and accounts 
C)  combined audit approach for all cycles except cash and inventory 
D)  substantive audit approach for all cycles except sales and payroll 
A)  combined audit approach for all transaction cycles and accounts 
B)  substantive audit approach for all transaction cycles and accounts 
C)  combined audit approach for all cycles except cash and inventory 
D)  substantive audit approach for all cycles except sales and payroll

Question 6

A substantive procedure is used to

Accepted Answer

A)  assess the likelihood of material misstatement in the financial statements. 
B)  obtain an understanding of internal controls. 
C)  analyze the account balance to see if there are potential errors. 
D)  quantify the amount of potential error in an account or transaction stream. 
A)  assess the likelihood of material misstatement in the financial statements. 
B)  obtain an understanding of internal controls. 
C)  analyze the account balance to see if there are potential errors. 
D)  quantify the amount of potential error in an account or transaction stream.

Question 7

If the auditor is not using tests of control, then

Accepted Answer

A)  tests of detail must be used. 
B)  analytical procedures must be used. 
C)  tests of design of internal controls must at least be used. 
D)  the auditor will have to qualify the audit opinion. 
A)  tests of detail must be used. 
B)  analytical procedures must be used. 
C)  tests of design of internal controls must at least be used. 
D)  the auditor will have to qualify the audit opinion.

During a change to an entire IT system, if conversion controls are poor or are not documented, the auditor will need to

The auditor of ABC Ltd. has concluded that there are significant risks of misstatement of revenue at the company with potential overstatement of revenue. Which of the following audit tests should the auditor conduct to address this significant risk?

If no material fluctuations are found using analytical procedures and the auditor concludes that differences should not have occurred,

A PA is conducting the audit of Middi Furniture Company, a medium-sized company with few effective controls and significant inherent risks. Management has decided that it is not cost-effective to implement better internal controls. What audit strategy will the PA likely select for this client?

A substantive procedure is used to

If the auditor is not using tests of control, then

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 Sampling Concepts

Audit of the Revenue Cycle

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 10: Audit Strategy and Audit Program

During a change to an entire IT system, if conversion controls are poor or are not documented, the auditor will need to

The auditor of ABC Ltd. has concluded that there are significant risks of misstatement of revenue at the company with potential overstatement of revenue. Which of the following audit tests should the auditor conduct to address this significant risk?

If no material fluctuations are found using analytical procedures and the auditor concludes that differences should not have occurred,

A PA is conducting the audit of Middi Furniture Company, a medium-sized company with few effective controls and significant inherent risks. Management has decided that it is not cost-effective to implement better internal controls. What audit strategy will the PA likely select for this client?

A substantive procedure is used to

If the auditor is not using tests of control, then

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 Sampling Concepts

Audit of the Revenue Cycle

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