Question 1

You are concerned about whether all sales have occurred.The procedure that will be most effective in verifying this assertion is:

Accepted Answer

A) selecting a sample of invoices and vouching them to delivery dockets. 
B) selecting a sample of customers' orders and tracing them to delivery dockets. 
C) checking the sequence of delivery dockets. 
D) selecting a sample of delivery dockets and tracing them to invoices. 
A) selecting a sample of invoices and vouching them to delivery dockets. 
B) selecting a sample of customers' orders and tracing them to delivery dockets. 
C) checking the sequence of delivery dockets. 
D) selecting a sample of delivery dockets and tracing them to invoices.

Question 2

When reviewing a loan agreement to ascertain whether the bank's security over any of the client's assets has been included in the financial report, the audit assertion being achieved is:

Accepted Answer

A) valuation and allocation. 
B) completeness. 
C) presentation and disclosure-accuracy and valuation. 
D) presentation and disclosure-completeness. 
A) valuation and allocation. 
B) completeness. 
C) presentation and disclosure-accuracy and valuation. 
D) presentation and disclosure-completeness.

Question 3

Which of the following audit objectives relates primarily to the financial report assertion, rights and obligations?

Accepted Answer

A) Inventories are properly classified in the statement of financial position as current assets. 
B) Inventories exclude items billed to customers or owned by others. 
C) Slow-moving and obsolete items included in inventories are properly identified. 
D) Inventory quantities include all products, materials and supplies owned by the company. 
A) Inventories are properly classified in the statement of financial position as current assets. 
B) Inventories exclude items billed to customers or owned by others. 
C) Slow-moving and obsolete items included in inventories are properly identified. 
D) Inventory quantities include all products, materials and supplies owned by the company.

Question 4

When considering materiality for planning purposes, an auditor believes that misstatements aggregating $10 000 would have a material effect on an entity's income statement, but that misstatements would have to aggregate $20 000 to materially affect the statement of financial position.Ordinarily, it would be appropriate to design auditing procedures that would be expected to detect misstatements that aggregate:

Accepted Answer

A) $10 000. 
B) $15 000. 
C) $20 000. 
D) $30 000. 
A) $10 000. 
B) $15 000. 
C) $20 000. 
D) $30 000.

Question 5

Which of the following audit objectives relates primarily to the financial report assertion of valuation and allocation?

Accepted Answer

A) Inventory listings are accurately compiled and the totals are properly included in the inventory accounts. 
B) Inventory quantities include all products, materials and supplies owned by the company that are in transit. 
C) Slow-moving and obsolete items included in inventories are properly identified. 
D) Inventories exclude items billed to customers or owned by others. 
A) Inventory listings are accurately compiled and the totals are properly included in the inventory accounts. 
B) Inventory quantities include all products, materials and supplies owned by the company that are in transit. 
C) Slow-moving and obsolete items included in inventories are properly identified. 
D) Inventories exclude items billed to customers or owned by others.

Question 6

Which of the following is an essential factor in evaluating the sufficiency of evidence? The evidence must:

Accepted Answer

A) be well documented and cross-referenced in the audit documents. 
B) be based on sources that are considered reliable. 
C) bear a direct relationship to the audit objective. 
D) be of a large enough quantity to enable the auditor to form an opinion. 
A) be well documented and cross-referenced in the audit documents. 
B) be based on sources that are considered reliable. 
C) bear a direct relationship to the audit objective. 
D) be of a large enough quantity to enable the auditor to form an opinion.

Question 7

An auditor's decision either to apply analytical procedures as substantive tests or to perform tests of details usually is determined by the:

Accepted Answer

A) availability of data aggregated at a high level. 
B) relative effectiveness and efficiency of the tests. 
C) timing of tests performed after the balance date. 
D) auditor's familiarity with industry trends. 
A) availability of data aggregated at a high level. 
B) relative effectiveness and efficiency of the tests. 
C) timing of tests performed after the balance date. 
D) auditor's familiarity with industry trends.

Question 8

As the acceptable level of detection risk decreases, the assurance directly provided from:

Accepted Answer

A) substantive tests should increase. 
B) substantive tests should decrease. 
C) tests of controls should increase. 
D) tests of controls should decrease. 
A) substantive tests should increase. 
B) substantive tests should decrease. 
C) tests of controls should increase. 
D) tests of controls should decrease.

Question 9

Which of the following procedures would an auditor most likely rely on to verify management's assertion of completeness?

Accepted Answer

A) Comparing a sample of shipping documents to related sales invoices. 
B) Reviewing a standard bank confirmation. 
C) Confirming a sample of recorded receivables by direct communication with the debtors. 
D) Observing the client's distribution of payroll cheques. 
A) Comparing a sample of shipping documents to related sales invoices. 
B) Reviewing a standard bank confirmation. 
C) Confirming a sample of recorded receivables by direct communication with the debtors. 
D) Observing the client's distribution of payroll cheques.

Question 10

Audit documents that record the procedures used by the auditor to gather evidence should be:

Accepted Answer

A) considered the primary support for the financial report being examined. 
B) viewed as the connecting link between the accounting records and the financial report. 
C) designed to meet the circumstances of the particular engagement. 
D) destroyed when the audited entity ceases to be a client. 
A) considered the primary support for the financial report being examined. 
B) viewed as the connecting link between the accounting records and the financial report. 
C) designed to meet the circumstances of the particular engagement. 
D) destroyed when the audited entity ceases to be a client.

Question 11

As the acceptable level of detection risk increases, an auditor may change the:

Accepted Answer

A) assessed level of control risk from less than high to high. 
B) assurance provided by tests of controls by using a larger sample size than planned. 
C) timing of substantive tests from year-end to an interim date. 
D) nature of substantive tests from less effective to more effective procedures. 
A) assessed level of control risk from less than high to high. 
B) assurance provided by tests of controls by using a larger sample size than planned. 
C) timing of substantive tests from year-end to an interim date. 
D) nature of substantive tests from less effective to more effective procedures.

Question 12

Selecting a sample of quantities of inventory in the warehouse and tracing each item to the final stock sheets helps address which of the following assertions in respect of inventory?

Accepted Answer

A) Completeness. 
B) Valuation and allocation. 
C) Existence. 
D) Rights and obligations. 
A) Completeness. 
B) Valuation and allocation. 
C) Existence. 
D) Rights and obligations.

Question 13

The weakest form of audit evidence among the following is:

Accepted Answer

A) a letter of representation from management. 
B) confirmation of an inter-company receivable from a related company. 
C) a letter of representation from the client's solicitors. 
D) a bank statement. 
A) a letter of representation from management. 
B) confirmation of an inter-company receivable from a related company. 
C) a letter of representation from the client's solicitors. 
D) a bank statement.

Question 14

Auditors are most likely to use focused audit procedures to examine:

Accepted Answer

A) routine transactions. 
B) low-risk assertions. 
C) only the rights and obligations assertion. 
D) high-risk assertions. 
A) routine transactions. 
B) low-risk assertions. 
C) only the rights and obligations assertion. 
D) high-risk assertions.

Question 15

Which of the following audit objectives relates primarily to the financial report assertion of presentation and disclosure-classification and understandability?

Accepted Answer

A) Inventories are included in the statement of financial position as current assets. 
B) Inventories exclude items billed to customers or owned by others. 
C) Inventories are included in the statement of financial position at the lower of cost and net realisable value. 
D) Inventory quantities include all products, materials and supplies owned by the company that are in transit. 
A) Inventories are included in the statement of financial position as current assets. 
B) Inventories exclude items billed to customers or owned by others. 
C) Inventories are included in the statement of financial position at the lower of cost and net realisable value. 
D) Inventory quantities include all products, materials and supplies owned by the company that are in transit.

Question 16

The following statements were made in a discussion of audit evidence between two auditors.Which statement is not valid concerning audit evidence?

Accepted Answer

A) 'I am seldom convinced beyond all doubt with respect to all aspects of the reports being examined.' 
B) 'I would not undertake that procedure because at best the results would only be persuasive and I'm looking for convincing evidence.' 
C) 'I evaluate the degree of risk involved in deciding the kind of evidence I will gather.' 
D) 'I evaluate the usefulness of the evidence I can obtain against the cost of obtaining it.' 
A) 'I am seldom convinced beyond all doubt with respect to all aspects of the reports being examined.' 
B) 'I would not undertake that procedure because at best the results would only be persuasive and I'm looking for convincing evidence.' 
C) 'I evaluate the degree of risk involved in deciding the kind of evidence I will gather.' 
D) 'I evaluate the usefulness of the evidence I can obtain against the cost of obtaining it.'

Question 17

To be appropriate, evidence must be both:

Accepted Answer

A) reliable and well documented. 
B) reliable and relevant. 
C) useful and independent. 
D) extensive and timely. 
A) reliable and well documented. 
B) reliable and relevant. 
C) useful and independent. 
D) extensive and timely.

Question 18

Audit documentation prepared on audits of publicly-held clients is the property of the:

Accepted Answer

A) shareholders. 
B) auditor. 
C) management of the entity being audited. 
D) the Australian and Securities Investments Commission. 
A) shareholders. 
B) auditor. 
C) management of the entity being audited. 
D) the Australian and Securities Investments Commission.

Question 19

The current file of an auditor's working papers is most likely to include a copy of the:

Accepted Answer

A) superannuation fund contract. 
B) constitution. 
C) flowcharts of the internal control activities. 
D) bank reconciliation. 
A) superannuation fund contract. 
B) constitution. 
C) flowcharts of the internal control activities. 
D) bank reconciliation.

Question 20

Which of the following tests would involve the exercising of professional judgment?

Accepted Answer

A) Assessing the appropriateness of the estimate of the provision for doubtful debts. 
B) Obtaining a bank confirmation to support the cash at bank figure. 
C) Checking the calculations on a sales invoice. 
D) All of the answers given are correct. 
A) Assessing the appropriateness of the estimate of the provision for doubtful debts. 
B) Obtaining a bank confirmation to support the cash at bank figure. 
C) Checking the calculations on a sales invoice. 
D) All of the answers given are correct.

You are concerned about whether all sales have occurred.The procedure that will be most effective in verifying this assertion is:

When reviewing a loan agreement to ascertain whether the bank's security over any of the client's assets has been included in the financial report, the audit assertion being achieved is:

Which of the following audit objectives relates primarily to the financial report assertion, rights and obligations?

Which of the following audit objectives relates primarily to the financial report assertion of valuation and allocation?

Which of the following is an essential factor in evaluating the sufficiency of evidence? The evidence must:

An auditor's decision either to apply analytical procedures as substantive tests or to perform tests of details usually is determined by the:

As the acceptable level of detection risk decreases, the assurance directly provided from:

Which of the following procedures would an auditor most likely rely on to verify management's assertion of completeness?

Audit documents that record the procedures used by the auditor to gather evidence should be:

As the acceptable level of detection risk increases, an auditor may change the:

Selecting a sample of quantities of inventory in the warehouse and tracing each item to the final stock sheets helps address which of the following assertions in respect of inventory?

The weakest form of audit evidence among the following is:

Auditors are most likely to use focused audit procedures to examine:

Which of the following audit objectives relates primarily to the financial report assertion of presentation and disclosure-classification and understandability?

The following statements were made in a discussion of audit evidence between two auditors.Which statement is not valid concerning audit evidence?

To be appropriate, evidence must be both:

Audit documentation prepared on audits of publicly-held clients is the property of the:

The current file of an auditor's working papers is most likely to include a copy of the:

Which of the following tests would involve the exercising of professional judgment?

Assurance and Auditing: An Overview

Audit Regulation, Structure of the Profession and Auditors Liability

Ethics, Independence and Corporate Governance

Planning, Understanding the Entity and Assessing Business Risk

Assessing Inherent Risk, and Other Specific Business Risks

Understanding and Assessing Internal Control

Tests of Controls

Substantive Tests of Transactions and Balances

Completion and Review

The Auditors Reporting Obligations

Other Assurance Services and Advanced Topics

Internal Auditing

Audit and Assurance Services in the Public Sector

Filters

Exam 4: Overview of Elements of the Financial Report Audit Process

You are concerned about whether all sales have occurred.The procedure that will be most effective in verifying this assertion is:

When reviewing a loan agreement to ascertain whether the bank's security over any of the client's assets has been included in the financial report, the audit assertion being achieved is:

Which of the following audit objectives relates primarily to the financial report assertion, rights and obligations?

Which of the following audit objectives relates primarily to the financial report assertion of valuation and allocation?

Which of the following is an essential factor in evaluating the sufficiency of evidence? The evidence must:

An auditor's decision either to apply analytical procedures as substantive tests or to perform tests of details usually is determined by the:

As the acceptable level of detection risk decreases, the assurance directly provided from:

Which of the following procedures would an auditor most likely rely on to verify management's assertion of completeness?

Audit documents that record the procedures used by the auditor to gather evidence should be:

As the acceptable level of detection risk increases, an auditor may change the:

Selecting a sample of quantities of inventory in the warehouse and tracing each item to the final stock sheets helps address which of the following assertions in respect of inventory?

The weakest form of audit evidence among the following is:

Auditors are most likely to use focused audit procedures to examine:

Which of the following audit objectives relates primarily to the financial report assertion of presentation and disclosure-classification and understandability?

The following statements were made in a discussion of audit evidence between two auditors.Which statement is not valid concerning audit evidence?

To be appropriate, evidence must be both:

Audit documentation prepared on audits of publicly-held clients is the property of the:

The current file of an auditor's working papers is most likely to include a copy of the:

Which of the following tests would involve the exercising of professional judgment?

Assurance and Auditing: An Overview

Audit Regulation, Structure of the Profession and Auditors Liability

Ethics, Independence and Corporate Governance

Planning, Understanding the Entity and Assessing Business Risk

Assessing Inherent Risk, and Other Specific Business Risks

Understanding and Assessing Internal Control

Tests of Controls

Substantive Tests of Transactions and Balances

Completion and Review

The Auditors Reporting Obligations

Other Assurance Services and Advanced Topics

Internal Auditing

Audit and Assurance Services in the Public Sector

Filters