Question 1

Which audit assertion relates to ensuring that all recorded sales are valid?

Accepted Answer

A) Existence. 
B) Completeness. 
C) Occurrence. 
D) Accuracy. 
A) Existence. 
B) Completeness. 
C) Occurrence. 
D) Accuracy.

Question 2

Which of the following is not a factor affecting the independent auditor's judgment as to the quantity, type and content of audit working papers?

Accepted Answer

A) The need, in the particular circumstances, for supervision and review of the work performed by any assistants. 
B) The nature and conditions of the client's records and internal control. 
C) The expertise of client personnel and their expected audit participation. 
D) The type of financial report, schedules or other information upon which the auditor is reporting. 
A) The need, in the particular circumstances, for supervision and review of the work performed by any assistants. 
B) The nature and conditions of the client's records and internal control. 
C) The expertise of client personnel and their expected audit participation. 
D) The type of financial report, schedules or other information upon which the auditor is reporting.

Question 3

Which of the following statements relating to the appropriateness of audit evidence is always true?

Accepted Answer

A) Evidence gathered by an auditor from outside an entity is reliable. 
B) Accounting data developed under a satisfactory internal control system are more relevant than data developed under unsatisfactory internal control conditions. 
C) Oral representations made by management are not valid evidence. 
D) Evidence gathered by auditors must be both reliable and relevant to be considered appropriate. 
A) Evidence gathered by an auditor from outside an entity is reliable. 
B) Accounting data developed under a satisfactory internal control system are more relevant than data developed under unsatisfactory internal control conditions. 
C) Oral representations made by management are not valid evidence. 
D) Evidence gathered by auditors must be both reliable and relevant to be considered appropriate.

Question 4

All of the following auditing procedures are substantive tests except:

Accepted Answer

A) analytical procedures. 
B) tests of approvals on invoices. 
C) vouching of sales transactions to delivery dockets. 
D) confirmation of bank balances at year-end. 
A) analytical procedures. 
B) tests of approvals on invoices. 
C) vouching of sales transactions to delivery dockets. 
D) confirmation of bank balances at year-end.

Question 5

Which of the following statements concerning evidence is correct?

Accepted Answer

A) Appropriate evidence supporting management's assertions must be convincing rather than merely persuasive. 
B) A client's accounting data cannot be considered sufficient audit evidence to support the financial report. 
C) The cost of obtaining evidence is not an important consideration to an auditor in deciding what evidence should be obtained. 
D) Effective internal control contributes little to the reliability of the evidence created within the entity. 
A) Appropriate evidence supporting management's assertions must be convincing rather than merely persuasive. 
B) A client's accounting data cannot be considered sufficient audit evidence to support the financial report. 
C) The cost of obtaining evidence is not an important consideration to an auditor in deciding what evidence should be obtained. 
D) Effective internal control contributes little to the reliability of the evidence created within the entity.

Question 6

Most of the independent auditor's work in formulating an opinion on a financial report consists of:

Accepted Answer

A) obtaining an understanding of the internal control. 
B) obtaining and examining audit evidence. 
C) examining cash transactions. 
D) comparing recorded accounts with assets. 
A) obtaining an understanding of the internal control. 
B) obtaining and examining audit evidence. 
C) examining cash transactions. 
D) comparing recorded accounts with assets.

Question 7

Which of the following items is an example of professional scepticism?

Accepted Answer

A) Determining a low level of materiality. 
B) Determining a high level of risk. 
C) Being alert to conditions that may indicate risks of fraud. 
D) All of the answers given are correct. 
A) Determining a low level of materiality. 
B) Determining a high level of risk. 
C) Being alert to conditions that may indicate risks of fraud. 
D) All of the answers given are correct.

Question 8

Your audit client is under intense pressure to meet an earnings target.Which audit procedure are you most likely to use when auditing purchases?

Accepted Answer

A) Vouching. 
B) Tracing. 
C) Recalculation. 
D) Confirmation. 
A) Vouching. 
B) Tracing. 
C) Recalculation. 
D) Confirmation.

Question 9

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

Accepted Answer

A) substantive tests of details to substantive analytical procedures. 
B) nature of substantive tests from less effective to more effective procedures. 
C) number of tests of controls. 
D) assessed level of inherent risk to a higher amount. 
A) substantive tests of details to substantive analytical procedures. 
B) nature of substantive tests from less effective to more effective procedures. 
C) number of tests of controls. 
D) assessed level of inherent risk to a higher amount.

Question 10

The situation and circumstances can dictate the level of certain risks no matter what the auditor does.However, the auditor is always able to decide to reduce one of the following risks:

Accepted Answer

A) Control risk. 
B) Risk of management fraud. 
C) Detection risk. 
D) Inherent risk. 
A) Control risk. 
B) Risk of management fraud. 
C) Detection risk. 
D) Inherent risk.

Question 11

The auditor faces a risk that the audit will not detect material misstatements that occur in the accounting process.In regard to minimising this risk, the auditor primarily relies on:

Accepted Answer

A) substantive tests. 
B) tests of controls. 
C) internal control. 
D) statistical analysis. 
A) substantive tests. 
B) tests of controls. 
C) internal control. 
D) statistical analysis.

Question 12

Which of the following best describes the concept of audit risk?

Accepted Answer

A) The risk of the auditor being sued because of association with an audit client. 
B) The risk that the auditor will provide an unmodified opinion on a materially misstated financial report. 
C) The overall risk that a material misstatement exists in the financial report. 
D) The risk that auditors use audit procedures that are inappropriate. 
A) The risk of the auditor being sued because of association with an audit client. 
B) The risk that the auditor will provide an unmodified opinion on a materially misstated financial report. 
C) The overall risk that a material misstatement exists in the financial report. 
D) The risk that auditors use audit procedures that are inappropriate.

Question 13

Which of the following presumptions is correct about the reliability of audit evidence?

Accepted Answer

A) Information obtained indirectly from outside sources is the most reliable audit evidence. 
B) To be reliable, audit evidence should be convincing rather than persuasive. 
C) Reliability of audit evidence refers to the amount of corroborative evidence obtained. 
D) An effective internal control system provides more reliable audit evidence than does an ineffective internal control system. 
A) Information obtained indirectly from outside sources is the most reliable audit evidence. 
B) To be reliable, audit evidence should be convincing rather than persuasive. 
C) Reliability of audit evidence refers to the amount of corroborative evidence obtained. 
D) An effective internal control system provides more reliable audit evidence than does an ineffective internal control system.

Question 14

Your audit client is a retailer that sells some of its own merchandise and a large proportion of merchandise held on consignment from suppliers.Which account balance assertion for inventory would this cause to be most at risk?

Accepted Answer

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

Question 15

Vouching is used primarily to test which of the following assertions about classes of transaction?

Accepted Answer

A) Occurrence. 
B) Completeness. 
C) Authorisation. 
D) Classification. 
A) Occurrence. 
B) Completeness. 
C) Authorisation. 
D) Classification.

Question 16

'Dual-purpose tests' is a term used for:

Accepted Answer

A) tests of controls that address both the design of the control procedures and their operating effectiveness. 
B) tests of transactions that include substantive procedures as well as tests of controls. 
C) tests that address both balances and transaction classes. 
D) tests performed because of client expectations as well as for gathering audit evidence. 
A) tests of controls that address both the design of the control procedures and their operating effectiveness. 
B) tests of transactions that include substantive procedures as well as tests of controls. 
C) tests that address both balances and transaction classes. 
D) tests performed because of client expectations as well as for gathering audit evidence.

Question 17

Auditors can eliminate engagement risk:

Accepted Answer

A) under no circumstances. 
B) by establishing policies for client acceptance and continuance. 
C) by lowering audit risk. 
D) by lowering materiality. 
A) under no circumstances. 
B) by establishing policies for client acceptance and continuance. 
C) by lowering audit risk. 
D) by lowering materiality.

Question 18

Which of the following factors is most important in determining the appropriateness of audit evidence?

Accepted Answer

A) The reliability of the evidence in meeting the audit objective. 
B) The sampling method used by the auditor. 
C) The quantity of the evidence obtained. 
D) The objectivity of the auditor gathering the evidence. 
A) The reliability of the evidence in meeting the audit objective. 
B) The sampling method used by the auditor. 
C) The quantity of the evidence obtained. 
D) The objectivity of the auditor gathering the evidence.

Question 19

Which of the following is not a financial report assertion?

Accepted Answer

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

Question 20

An auditor's working papers will generally be least likely to include documentation showing how the:

Accepted Answer

A) client's schedules were prepared. 
B) engagement had been planned. 
C) client's internal control had been understood and the level of control risk assessed. 
D) unusual matters were resolved. 
A) client's schedules were prepared. 
B) engagement had been planned. 
C) client's internal control had been understood and the level of control risk assessed. 
D) unusual matters were resolved.

Which audit assertion relates to ensuring that all recorded sales are valid?

Which of the following is not a factor affecting the independent auditor's judgment as to the quantity, type and content of audit working papers?

Which of the following statements relating to the appropriateness of audit evidence is always true?

All of the following auditing procedures are substantive tests except:

Which of the following statements concerning evidence is correct?

Most of the independent auditor's work in formulating an opinion on a financial report consists of:

Which of the following items is an example of professional scepticism?

Your audit client is under intense pressure to meet an earnings target.Which audit procedure are you most likely to use when auditing purchases?

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

The situation and circumstances can dictate the level of certain risks no matter what the auditor does.However, the auditor is always able to decide to reduce one of the following risks:

The auditor faces a risk that the audit will not detect material misstatements that occur in the accounting process.In regard to minimising this risk, the auditor primarily relies on:

Which of the following best describes the concept of audit risk?

Which of the following presumptions is correct about the reliability of audit evidence?

Your audit client is a retailer that sells some of its own merchandise and a large proportion of merchandise held on consignment from suppliers.Which account balance assertion for inventory would this cause to be most at risk?

Vouching is used primarily to test which of the following assertions about classes of transaction?

'Dual-purpose tests' is a term used for:

Auditors can eliminate engagement risk:

Which of the following factors is most important in determining the appropriateness of audit evidence?

Which of the following is not a financial report assertion?

An auditor's working papers will generally be least likely to include documentation showing how the:

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

Which audit assertion relates to ensuring that all recorded sales are valid?

Which of the following is not a factor affecting the independent auditor's judgment as to the quantity, type and content of audit working papers?

Which of the following statements relating to the appropriateness of audit evidence is always true?

All of the following auditing procedures are substantive tests except:

Which of the following statements concerning evidence is correct?

Most of the independent auditor's work in formulating an opinion on a financial report consists of:

Which of the following items is an example of professional scepticism?

Your audit client is under intense pressure to meet an earnings target.Which audit procedure are you most likely to use when auditing purchases?

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

The situation and circumstances can dictate the level of certain risks no matter what the auditor does.However, the auditor is always able to decide to reduce one of the following risks:

The auditor faces a risk that the audit will not detect material misstatements that occur in the accounting process.In regard to minimising this risk, the auditor primarily relies on:

Which of the following best describes the concept of audit risk?

Which of the following presumptions is correct about the reliability of audit evidence?

Your audit client is a retailer that sells some of its own merchandise and a large proportion of merchandise held on consignment from suppliers.Which account balance assertion for inventory would this cause to be most at risk?

Vouching is used primarily to test which of the following assertions about classes of transaction?

'Dual-purpose tests' is a term used for:

Auditors can eliminate engagement risk:

Which of the following factors is most important in determining the appropriateness of audit evidence?

Which of the following is not a financial report assertion?

An auditor's working papers will generally be least likely to include documentation showing how the:

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