Question 1

Auditors look for relationships that do not make sense as indicators of problems in the accounts and use such indicators to plan further audit work.

Accepted Answer

A) True 
 B)False

Question 2

Based on audit evidence gathered and evaluated,an auditor decides to increase the assessed level of control risk from that originally planned.To achieve an overall audit risk level that is substantially the same as the planned audit risk level,the auditor would

Accepted Answer

A)  Decrease substantive testing. 
B)  Decrease detection risk. 
C)  Increase inherent risk. 
D)  Increase materiality levels 
A)  Decrease substantive testing. 
B)  Decrease detection risk. 
C)  Increase inherent risk. 
D)  Increase materiality levels

Question 3

Experience has shown that the many large fraudulent transactions can be found in

Accepted Answer

A)  Systematic processing of large volumes of day-to-day ordinary transactions. 
B)  Payroll fraudsters' mistakes in using unissued Social Security numbers. 
C)  Petty cash embezzlements. 
D)  Nonroutine, nonsystematic journal entries. 
A)  Systematic processing of large volumes of day-to-day ordinary transactions. 
B)  Payroll fraudsters' mistakes in using unissued Social Security numbers. 
C)  Petty cash embezzlements. 
D)  Nonroutine, nonsystematic journal entries.

Question 4

The type of financial analysis that expresses balance sheet accounts as percentages of total assets is known as:

Accepted Answer

A)  Horizontal analysis. 
B)  Vertical analysis. 
C)  Net worth analysis. 
D)  Expenditure analysis. 
A)  Horizontal analysis. 
B)  Vertical analysis. 
C)  Net worth analysis. 
D)  Expenditure analysis.

Question 5

Which of the following is an acceptable response to fraud risks related to sales that were identified in an audit?

Accepted Answer

A)  Exercise professional skepticism when performing sales testing. 
B)  Increase the assessment of control risk for sales. 
C)  Increase the assessment of detection risk for sales. 
D)  Perform additional substantive sales procedures on a surprise basis. 
A)  Exercise professional skepticism when performing sales testing. 
B)  Increase the assessment of control risk for sales. 
C)  Increase the assessment of detection risk for sales. 
D)  Perform additional substantive sales procedures on a surprise basis.

Question 6

Audit care and attention should be greater where business and inherent risks are judged to be lower.

Accepted Answer

A) True 
 B)False

Question 7

Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.They range from simple comparisons to the use of complex models involving many relationships and elements of data.They involve comparisons of recorded amounts or ratios developed from recorded amounts to expectations developed by auditors.
Required:
A. Analytical procedures are used for these broad purposes:
1. To assist the auditor in planning the nature, timing, and extent of other audit procedures.
2. As a substantive test to obtain evidential matter about particular assertions related to account balances or classes of transactions.
3. As an overall review of the financial information in the final review stage of the audit.
A. Describe the broad purposes of analytical procedures.
B. An auditor's expectations are developed from the following sources of information:
B. Identify the sources of information from which an auditor develops expectations.

Accepted Answer

A.Analytical procedures are used for the

Question 8

Analytical procedures are considered to be "soft" evidence and therefore considered ineffective.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following pieces of information discovered by an auditor when performing substantive tests of account balances would most likely raise red flags about the possible existence of material fraudulent financial reporting?

Accepted Answer

A)  Paper copies of paid invoices and cancelled checks were microfiched and then destroyed. 
B)  The controller requires that you schedule any audit inquiries daily after lunch, not in the morning. 
C)  The petty cash fund custodian never takes a vacation. 
D)  The client's estimate of the allowance for doubtful accounts is lower than the auditor's independent evaluation of the allowance. 
A)  Paper copies of paid invoices and cancelled checks were microfiched and then destroyed. 
B)  The controller requires that you schedule any audit inquiries daily after lunch, not in the morning. 
C)  The petty cash fund custodian never takes a vacation. 
D)  The client's estimate of the allowance for doubtful accounts is lower than the auditor's independent evaluation of the allowance.

Question 10

In the _____________________________ stage,_______________________________ are used to identify potential problem areas and to reduce risk.

Accepted Answer

planning;

Question 11

_______________________________________ is the probability that material misstatements have occurred in transactions entering the accounting system.

Accepted Answer

The answer of _______________________________________ is the probability that material misstatements...

Question 12

According to auditing standards,external auditors' responsibilities for indirect noncompliance do not include

Accepted Answer

A)  Designing audit procedures to detect noncompliance in the absence of specific information brought to the auditors' attention. 
B)  Performing audit procedures when specific information indicates that possible noncompliance may have an indirect material effect on financial statements. 
C)  Considering the qualitative materiality of known and suspected noncompliance. 
D)  Obtaining written management representations concerning the absence of violations of laws and regulations. 
A)  Designing audit procedures to detect noncompliance in the absence of specific information brought to the auditors' attention. 
B)  Performing audit procedures when specific information indicates that possible noncompliance may have an indirect material effect on financial statements. 
C)  Considering the qualitative materiality of known and suspected noncompliance. 
D)  Obtaining written management representations concerning the absence of violations of laws and regulations.

Question 13

Generally,fraudulent financial statements show financial performance and ratios that are better than current industry experience.

Accepted Answer

A) True 
 B)False

Question 14

For audits of financial statements made in accordance with generally accepted auditing standards,the use of analytical procedures is required to some extent

Accepted Answer

A)  As a substantive test: yes; in the final review stage: yes 
B)  As a substantive test: yes; in the final review stage: no 
C)  As a substantive test: no; in the final review stage: yes 
D)  As a substantive test: no; in the final review stage: no 
A)  As a substantive test: yes; in the final review stage: yes 
B)  As a substantive test: yes; in the final review stage: no 
C)  As a substantive test: no; in the final review stage: yes 
D)  As a substantive test: no; in the final review stage: no

Question 15

Jones,CPA,is auditing the financial statements of XYZ Retailing,Inc.What assurance does Jones provide that direct effect noncompliance that is material to XYZ's financial statements and noncompliance that has a material but indirect effect on the financial statements will be detected?

Accepted Answer

A)  Direct effect noncompliance: Reasonable; indirect effect noncompliance: none. 
B)  Direct effect noncompliance: Reasonable; indirect effect noncompliance: reasonable. 
C)  Direct effect noncompliance: Limited; indirect effect noncompliance: none. 
D)  Direct effect noncompliance: Limited; indirect effect noncompliance: reasonable. 
A)  Direct effect noncompliance: Reasonable; indirect effect noncompliance: none. 
B)  Direct effect noncompliance: Reasonable; indirect effect noncompliance: reasonable. 
C)  Direct effect noncompliance: Limited; indirect effect noncompliance: none. 
D)  Direct effect noncompliance: Limited; indirect effect noncompliance: reasonable.

Question 16

Audits are not designed to detect material errors and fraud in financial statements.

Accepted Answer

A) True 
 B)False

Question 17

The probability that audit procedures will fail to produce evidence of material misstatements is referred to as _____________________________________.

Accepted Answer

detection

Question 18

The probability that an audit team will give an inappropriate opinion on financial statements best describes

Accepted Answer

A)  Audit risk. 
B)  Inherent risk. 
C)  Control risk. 
D)  Detection risk. 
A)  Audit risk. 
B)  Inherent risk. 
C)  Control risk. 
D)  Detection risk.

Question 19

Managing business risk is the responsibility of

Accepted Answer

A)  The auditors. 
B)  Management. 
C)  The SEC. 
D)  The PCAOB. 
A)  The auditors. 
B)  Management. 
C)  The SEC. 
D)  The PCAOB.

Question 20

Auditors use brainstorming

Accepted Answer

A)  To heighten the audit team's awareness of fraud potential. 
B)  To heighten management's awareness of fraud potential. 
C)  To determine detection risk. 
D)  To set materiality. 
A)  To heighten the audit team's awareness of fraud potential. 
B)  To heighten management's awareness of fraud potential. 
C)  To determine detection risk. 
D)  To set materiality.

Auditors look for relationships that do not make sense as indicators of problems in the accounts and use such indicators to plan further audit work.

Based on audit evidence gathered and evaluated,an auditor decides to increase the assessed level of control risk from that originally planned.To achieve an overall audit risk level that is substantially the same as the planned audit risk level,the auditor would

Experience has shown that the many large fraudulent transactions can be found in

The type of financial analysis that expresses balance sheet accounts as percentages of total assets is known as:

Which of the following is an acceptable response to fraud risks related to sales that were identified in an audit?

Audit care and attention should be greater where business and inherent risks are judged to be lower.

Analytical procedures are considered to be "soft" evidence and therefore considered ineffective.

Which of the following pieces of information discovered by an auditor when performing substantive tests of account balances would most likely raise red flags about the possible existence of material fraudulent financial reporting?

In the _ stage,___ are used to identify potential problem areas and to reduce risk.

_______________________________________ is the probability that material misstatements have occurred in transactions entering the accounting system.

According to auditing standards,external auditors' responsibilities for indirect noncompliance do not include

Generally,fraudulent financial statements show financial performance and ratios that are better than current industry experience.

For audits of financial statements made in accordance with generally accepted auditing standards,the use of analytical procedures is required to some extent

Jones,CPA,is auditing the financial statements of XYZ Retailing,Inc.What assurance does Jones provide that direct effect noncompliance that is material to XYZ's financial statements and noncompliance that has a material but indirect effect on the financial statements will be detected?

Audits are not designed to detect material errors and fraud in financial statements.

The probability that audit procedures will fail to produce evidence of material misstatements is referred to as _____________________________________.

The probability that an audit team will give an inappropriate opinion on financial statements best describes

Managing business risk is the responsibility of

Auditors use brainstorming

Auditing and Assurance Services

Professional Standards

Engagement Planning

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

Exam 4: Management Fraud and Audit Risk

Auditors look for relationships that do not make sense as indicators of problems in the accounts and use such indicators to plan further audit work.

Based on audit evidence gathered and evaluated,an auditor decides to increase the assessed level of control risk from that originally planned.To achieve an overall audit risk level that is substantially the same as the planned audit risk level,the auditor would

Experience has shown that the many large fraudulent transactions can be found in

The type of financial analysis that expresses balance sheet accounts as percentages of total assets is known as:

Which of the following is an acceptable response to fraud risks related to sales that were identified in an audit?

Audit care and attention should be greater where business and inherent risks are judged to be lower.

Analytical procedures are considered to be "soft" evidence and therefore considered ineffective.

Which of the following pieces of information discovered by an auditor when performing substantive tests of account balances would most likely raise red flags about the possible existence of material fraudulent financial reporting?

In the _____________________________ stage,_______________________________ are used to identify potential problem areas and to reduce risk.

_______________________________________ is the probability that material misstatements have occurred in transactions entering the accounting system.

According to auditing standards,external auditors' responsibilities for indirect noncompliance do not include

Generally,fraudulent financial statements show financial performance and ratios that are better than current industry experience.

For audits of financial statements made in accordance with generally accepted auditing standards,the use of analytical procedures is required to some extent

Jones,CPA,is auditing the financial statements of XYZ Retailing,Inc.What assurance does Jones provide that direct effect noncompliance that is material to XYZ's financial statements and noncompliance that has a material but indirect effect on the financial statements will be detected?

Audits are not designed to detect material errors and fraud in financial statements.

The probability that audit procedures will fail to produce evidence of material misstatements is referred to as _____________________________________.

The probability that an audit team will give an inappropriate opinion on financial statements best describes

Managing business risk is the responsibility of

Auditors use brainstorming

Auditing and Assurance Services

Professional Standards

Engagement Planning

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

In the _ stage,___ are used to identify potential problem areas and to reduce risk.