Question 1

The current audit file usually includes

Accepted Answer

A)  Working trial balance. 
B)  Organizational chart. 
C)  Accounting manual. 
D)  Copies of important contracts. 
A)  Working trial balance. 
B)  Organizational chart. 
C)  Accounting manual. 
D)  Copies of important contracts. A

Question 2

Discuss the reliability of the types of audit evidence and identify the level of reliability for each type of evidence.

Accepted Answer

Inspection of the tangible assets,reperformance,and recalculation are generally considered of high reliability because the auditor has direct knowledge about them.
Inspection of records and documents,scanning,confirmation,and analytical procedures are generally considered to be of medium reliability.The reliability of inspection of records and documents depends primarily on whether a document is internal or external,and the reliability of confirmation is affected by (1)the form of the confirmation,(2)prior experience with the entity,(3)the nature of the information being confirmed and (4)the intended respondent.The reliability of analytical procedures may be affected by the availability and reliability of the data.
Observation and inquiry (other than confirmation)are generally low-reliability types of evidence because both require further corroboration by the auditor.
The reliabilities of the types of evidence are summarized below:
High Reliability
1.Inspection of tangible assets
2.Reperformance
3.Recalculation
Medium Reliability
1.Inspection of records and documents
2.Scanning
3.Confirmation
4.Analytical procedures
Low Reliability
1.Observation
2.Inquiry

Question 3

An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use of

Accepted Answer

A)  Tests of transactions and balances. 
B)  A preliminary review of internal controls. 
C)  Specialized audit programs. 
D)  Analytical procedures. 
A)  Tests of transactions and balances. 
B)  A preliminary review of internal controls. 
C)  Specialized audit programs. 
D)  Analytical procedures. D

Question 4

Which of the following nonfinancial information would an auditor most likely consider in performing analytical procedures during the planning phase of an audit?

Accepted Answer

A)  Turnover of personnel in the accounting department. 
B)  Objectivity of audit committee members. 
C)  Square footage of selling space. 
D)  Management's plans to repurchase stock. 
A)  Turnover of personnel in the accounting department. 
B)  Objectivity of audit committee members. 
C)  Square footage of selling space. 
D)  Management's plans to repurchase stock.

Question 5

Which set of assertions is tested when,during completion of the audit,the audit partner conducts a final review of the format of the entity's balance sheet?

Accepted Answer

A)  Assertions about classes of transactions and events. 
B)  Assertions about account balances at the period end. 
C)  Assertions about presentation and disclosure. 
D)  None of the above. 
A)  Assertions about classes of transactions and events. 
B)  Assertions about account balances at the period end. 
C)  Assertions about presentation and disclosure. 
D)  None of the above.

Question 6

A company sells a particular product only in the last month of its fiscal year.The company uses commission agents for such sales and pays them 6% of their net sales 30 days after the sales are made.The agents' sales were $10 million.Experience indicates that 10% of the sales are usually not collected and 2% are returned in the first month of the new year.The auditor would expect the year-end balance in the accrued commissions payable account to be

Accepted Answer

A)  $528,000. 
B)  $540,000. 
C)  $588,000. 
D)  $600,000. 
A)  $528,000. 
B)  $540,000. 
C)  $588,000. 
D)  $600,000.

Question 7

Analytical procedures performed in the overall review stage of an audit suggest that several accounts have unexpected relationships.The results of these procedures most likely would indicate that

Accepted Answer

A)  Fraud exists within the relevant accounts. 
B)  Internal control activities are not operating effectively. 
C)  Additional tests of details are required. 
D)  The communication with the audit committee should be revised. 
A)  Fraud exists within the relevant accounts. 
B)  Internal control activities are not operating effectively. 
C)  Additional tests of details are required. 
D)  The communication with the audit committee should be revised.

Question 8

Which of the following elements ultimately determines the amount of audit work that is necessary in the circumstances to afford a reasonable basis for an opinion?

Accepted Answer

A)  Auditor judgment. 
B)  Materiality. 
C)  Relative risk. 
D)  Reasonable assurance. 
A)  Auditor judgment. 
B)  Materiality. 
C)  Relative risk. 
D)  Reasonable assurance.

Question 9

The cutoff assertion relates to whether transactions and events have been recorded in the correct accounting period.

Accepted Answer

A) True 
 B)False

Question 10

For each of the following categories of analytical procedures,indicate (a)whether an auditor is required to use the procedure and (b)the purpose(s)of the procedure.
Preliminary analytical procedures
Substantive analytical procedures
Final analytical procedures

Accepted Answer

The auditor is required to use prelimina

Question 11

Based on conversations with the owner-manager of an audit client,the auditor ascertained that the company's primary motivation is to avoid paying income taxes.Based on this motivation,which account balance assertion for ending inventory will the auditor be most concerned about verifying?

Accepted Answer

A)  Existence or occurrence. 
B)  Completeness. 
C)  Rights and obligations. 
D)  Observation. 
A)  Existence or occurrence. 
B)  Completeness. 
C)  Rights and obligations. 
D)  Observation.

Question 12

Which of the following statements is generally correct about the appropriateness of audit evidence?

Accepted Answer

A)  The more effective the internal control, the more assurance it provides about the reliability of the accounting data and financial statements. 
B)  Appropriateness of audit evidence refers to the amount of corroborative evidence obtained. 
C)  Information obtained indirectly from independent outside sources is more persuasive than the auditor's direct personal knowledge obtained through observation and inspection. 
D)  Appropriateness of audit evidence refers only to audit evidence obtained from outside the entity. 
A)  The more effective the internal control, the more assurance it provides about the reliability of the accounting data and financial statements. 
B)  Appropriateness of audit evidence refers to the amount of corroborative evidence obtained. 
C)  Information obtained indirectly from independent outside sources is more persuasive than the auditor's direct personal knowledge obtained through observation and inspection. 
D)  Appropriateness of audit evidence refers only to audit evidence obtained from outside the entity.

Question 13

A not-for-profit organization published a monthly magazine that had 15,000 subscribers on January 1,2011.The number of subscribers increased steadily throughout the year and at December 31,2011,there were 16,200 subscribers.The annual magazine subscription cost was $10 on January 1,2011 and was increased to $12 for new members on April 1,2011.Subscriptions are paid in full at the beginning of the member term.An auditor should expect that the revenue from subscriptions for the year ended December 31,2011,would be approximately

Accepted Answer

A)  $179,400. 
B)  $171,600. 
C)  $164,400. 
D)  $163,800. 
A)  $179,400. 
B)  $171,600. 
C)  $164,400. 
D)  $163,800.

Question 14

An example of audit evidence with a medium level of reliability is

Accepted Answer

A)  Scanning. 
B)  Recalculation. 
C)  Observation. 
D)  All of the above. 
A)  Scanning. 
B)  Recalculation. 
C)  Observation. 
D)  All of the above.

Question 15

All of the following are typically in the current file except:

Accepted Answer

A)  Adjusting journal entries. 
B)  Copies of the audit report. 
C)  Chart of accounts. 
D)  Lead schedules. 
A)  Adjusting journal entries. 
B)  Copies of the audit report. 
C)  Chart of accounts. 
D)  Lead schedules.

Question 16

Which of the following ratios would an engagement partner most likely calculate when reviewing the balance sheet in the overall review stage of an audit?

Accepted Answer

A)  Quick assets divided by accounts payable. 
B)  Accounts receivable divided by inventory. 
C)  Interest payable divided by interest receivable. 
D)  Total debt divided by total assets. 
A)  Quick assets divided by accounts payable. 
B)  Accounts receivable divided by inventory. 
C)  Interest payable divided by interest receivable. 
D)  Total debt divided by total assets.

Question 17

Which of the following best describes the primary purpose of audit procedures?

Accepted Answer

A)  To detect all errors or fraudulent activities. 
B)  To comply with generally accepted accounting principles. 
C)  To gather corroborative evidence about management's assertions. 
D)  To verify the accuracy of the balance sheet account balances. 
A)  To detect all errors or fraudulent activities. 
B)  To comply with generally accepted accounting principles. 
C)  To gather corroborative evidence about management's assertions. 
D)  To verify the accuracy of the balance sheet account balances.

Question 18

Which of the following would be least likely to be comparable between similar corporations in the same industry or line of business?

Accepted Answer

A)  Earnings per share. 
B)  Return on total assets before interest and taxes. 
C)  Accounts receivable turnover. 
D)  Operating cycle. 
A)  Earnings per share. 
B)  Return on total assets before interest and taxes. 
C)  Accounts receivable turnover. 
D)  Operating cycle.

Question 19

Sarah is auditing the sales of a new client.In one procedure Sarah performs,she begins with the original sales documents and then searches the accounting records to find the corresponding entry.What test is Sarah performing and what management assertion is she testing?

Accepted Answer

Sarah is tracing,which refers to first s

Question 20

Which assertions may be tested for the "account balances" category of management assertions?

Accepted Answer

A)  Existence, accuracy, rights and obligations, completeness. 
B)  Existence, rights and obligations, completeness, valuation and allocation. 
C)  Occurrence, rights and obligations, completeness, valuation and allocation. 
D)  Occurrence, accuracy, rights and obligations, completeness. 
A)  Existence, accuracy, rights and obligations, completeness. 
B)  Existence, rights and obligations, completeness, valuation and allocation. 
C)  Occurrence, rights and obligations, completeness, valuation and allocation. 
D)  Occurrence, accuracy, rights and obligations, completeness.

The current audit file usually includes

Discuss the reliability of the types of audit evidence and identify the level of reliability for each type of evidence.

An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use of

Which of the following nonfinancial information would an auditor most likely consider in performing analytical procedures during the planning phase of an audit?

Which set of assertions is tested when,during completion of the audit,the audit partner conducts a final review of the format of the entity's balance sheet?

Analytical procedures performed in the overall review stage of an audit suggest that several accounts have unexpected relationships.The results of these procedures most likely would indicate that

Which of the following elements ultimately determines the amount of audit work that is necessary in the circumstances to afford a reasonable basis for an opinion?

The cutoff assertion relates to whether transactions and events have been recorded in the correct accounting period.

For each of the following categories of analytical procedures,indicate (a)whether an auditor is required to use the procedure and (b)the purpose(s)of the procedure. Preliminary analytical procedures Substantive analytical procedures Final analytical procedures

Based on conversations with the owner-manager of an audit client,the auditor ascertained that the company's primary motivation is to avoid paying income taxes.Based on this motivation,which account balance assertion for ending inventory will the auditor be most concerned about verifying?

Which of the following statements is generally correct about the appropriateness of audit evidence?

An example of audit evidence with a medium level of reliability is

All of the following are typically in the current file except:

Which of the following ratios would an engagement partner most likely calculate when reviewing the balance sheet in the overall review stage of an audit?

Which of the following best describes the primary purpose of audit procedures?

Which of the following would be least likely to be comparable between similar corporations in the same industry or line of business?

Sarah is auditing the sales of a new client.In one procedure Sarah performs,she begins with the original sales documents and then searches the accounting records to find the corresponding entry.What test is Sarah performing and what management assertion is she testing?

Which assertions may be tested for the "account balances" category of management assertions?

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning,Types of Audit Tests,and Materiality

Risk Assessment

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,and Internal Auditing Services

Filters

Exam 5: Evidence and Documentation

The current audit file usually includes

Discuss the reliability of the types of audit evidence and identify the level of reliability for each type of evidence.

An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use of

Which of the following nonfinancial information would an auditor most likely consider in performing analytical procedures during the planning phase of an audit?

Which set of assertions is tested when,during completion of the audit,the audit partner conducts a final review of the format of the entity's balance sheet?

Analytical procedures performed in the overall review stage of an audit suggest that several accounts have unexpected relationships.The results of these procedures most likely would indicate that

Which of the following elements ultimately determines the amount of audit work that is necessary in the circumstances to afford a reasonable basis for an opinion?

The cutoff assertion relates to whether transactions and events have been recorded in the correct accounting period.

For each of the following categories of analytical procedures,indicate (a)whether an auditor is required to use the procedure and (b)the purpose(s)of the procedure. Preliminary analytical procedures Substantive analytical procedures Final analytical procedures

Based on conversations with the owner-manager of an audit client,the auditor ascertained that the company's primary motivation is to avoid paying income taxes.Based on this motivation,which account balance assertion for ending inventory will the auditor be most concerned about verifying?

Which of the following statements is generally correct about the appropriateness of audit evidence?

An example of audit evidence with a medium level of reliability is

All of the following are typically in the current file except:

Which of the following ratios would an engagement partner most likely calculate when reviewing the balance sheet in the overall review stage of an audit?

Which of the following best describes the primary purpose of audit procedures?

Which of the following would be least likely to be comparable between similar corporations in the same industry or line of business?

Sarah is auditing the sales of a new client.In one procedure Sarah performs,she begins with the original sales documents and then searches the accounting records to find the corresponding entry.What test is Sarah performing and what management assertion is she testing?

Which assertions may be tested for the "account balances" category of management assertions?

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning,Types of Audit Tests,and Materiality

Risk Assessment

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,and Internal Auditing Services

Filters