Question 1

Which of the following accounts tends to be most predictable for purposes of analytical procedures?

Accepted Answer

A) Accounts receivable 
B) Travel and entertainment expense 
C) Interest expense 
D) Income taxes payable 
A) Accounts receivable 
B) Travel and entertainment expense 
C) Interest expense 
D) Income taxes payable

Question 2

Certain conditions and circumstances are often present when management fraud occurs.Which of the following is not such a condition or circumstance?

Accepted Answer

A) Unfavorable industry conditions 
B) Lack of working capital 
C) High liquidity 
D) Slow customer collections 
A) Unfavorable industry conditions 
B) Lack of working capital 
C) High liquidity 
D) Slow customer collections

Question 3

What assurance does the auditor provide that errors,frauds,and direct effect noncompliance that are material to the financial statements will be detected?

Accepted Answer

A) Errors: Limited; Frauds: Negative; Direct effect noncompliance: Limited 
B) Errors: Limited; Frauds: Limited; Direct effect noncompliance: Reasonable 
C) Errors: Reasonable; Frauds: Limited; Direct effect noncompliance: Limited 
D) Errors: Reasonable; Frauds: Reasonable; Direct effect noncompliance: Reasonable 
A) Errors: Limited; Frauds: Negative; Direct effect noncompliance: Limited 
B) Errors: Limited; Frauds: Limited; Direct effect noncompliance: Reasonable 
C) Errors: Reasonable; Frauds: Limited; Direct effect noncompliance: Limited 
D) Errors: Reasonable; Frauds: Reasonable; Direct effect noncompliance: Reasonable

Question 4

Which of the following is not required by AU 240,"Consideration of Fraud in a Financial Statement Audit"?

Accepted Answer

A) Conduct a continuing assessment of the risks of material misstatement due to fraud throughout the audit. 
B) Conduct a discussion by the audit team of the risks of material misstatement due to fraud. 
C) Conduct the audit with professional skepticism,which includes an attitude that assumes balances are incorrect until verified by the auditor. 
D) Conduct inquiries of shareholders as to their views about the risks of fraud and their knowledge of any fraud or suspected fraud. 
A) Conduct a continuing assessment of the risks of material misstatement due to fraud throughout the audit. 
B) Conduct a discussion by the audit team of the risks of material misstatement due to fraud. 
C) Conduct the audit with professional skepticism,which includes an attitude that assumes balances are incorrect until verified by the auditor. 
D) Conduct inquiries of shareholders as to their views about the risks of fraud and their knowledge of any fraud or suspected fraud.

Question 5

Inherent risk and control risk differ from detection risk in that inherent risk and control risk are

Accepted Answer

A) elements of audit risk whereas detection risk is not. 
B) changed at the auditor's discretion whereas detection risk is not. 
C) considered at the individual account-balance level whereas detection risk is not. 
D) functions of the client and its environment whereas detection risk is not. 
A) elements of audit risk whereas detection risk is not. 
B) changed at the auditor's discretion whereas detection risk is not. 
C) considered at the individual account-balance level whereas detection risk is not. 
D) functions of the client and its environment whereas detection risk is not.

Question 6

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.Describe the broad purposes of analytical procedures.
b.Identify the sources of information from which an auditor develops expectations.

Accepted Answer

a.Analytical procedures are used for the

Question 7

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

Accepted Answer

A) Move detailed analytical procedures from year end to interim. 
B) Increase the dollar threshold of vouching customer invoices. 
C) Send negative accounts receivable confirmations instead of positive accounts receivable confirmations. 
D) Use more experienced audit team members to perform year-end testing. 
A) Move detailed analytical procedures from year end to interim. 
B) Increase the dollar threshold of vouching customer invoices. 
C) Send negative accounts receivable confirmations instead of positive accounts receivable confirmations. 
D) Use more experienced audit team members to perform year-end testing.

Question 8

If not already performed during the overall review stage of the audit,the auditor should perform analytical procedures relating to which of the following transaction cycles?

Accepted Answer

A) Payroll 
B) Revenue 
C) Purchasing 
D) Inventory 
A) Payroll 
B) Revenue 
C) Purchasing 
D) Inventory

Question 9

Horizontal analysis refers to

Accepted Answer

A) the trend of income from year to year of persons suspected of fraud. 
B) changes of financial statement numbers and ratios across several years. 
C) financial statement amounts expressed each year as a proportion of a base amount. 
D) the change in a suspect's net worth from the beginning to the end of a period. 
A) the trend of income from year to year of persons suspected of fraud. 
B) changes of financial statement numbers and ratios across several years. 
C) financial statement amounts expressed each year as a proportion of a base amount. 
D) the change in a suspect's net worth from the beginning to the end of a period.

Which of the following accounts tends to be most predictable for purposes of analytical procedures?

Certain conditions and circumstances are often present when management fraud occurs.Which of the following is not such a condition or circumstance?

What assurance does the auditor provide that errors,frauds,and direct effect noncompliance that are material to the financial statements will be detected?

Which of the following is not required by AU 240,"Consideration of Fraud in a Financial Statement Audit"?

Inherent risk and control risk differ from detection risk in that inherent risk and control risk are

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

If not already performed during the overall review stage of the audit,the auditor should perform analytical procedures relating to which of the following transaction cycles?

Horizontal analysis refers to

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 Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Exam 4: Management Fraud and Audit Risk

Which of the following accounts tends to be most predictable for purposes of analytical procedures?

Certain conditions and circumstances are often present when management fraud occurs.Which of the following is not such a condition or circumstance?

What assurance does the auditor provide that errors,frauds,and direct effect noncompliance that are material to the financial statements will be detected?

Which of the following is not required by AU 240,"Consideration of Fraud in a Financial Statement Audit"?

Inherent risk and control risk differ from detection risk in that inherent risk and control risk are

While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?

If not already performed during the overall review stage of the audit,the auditor should perform analytical procedures relating to which of the following transaction cycles?

Horizontal analysis refers to

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 Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters