Question 1

The auditors must consider materiality in planning an audit engagement. Materiality for planning purposes is:

Accepted Answer

A)  The auditors' preliminary estimate of the largest amount of misstatement that would be material to any one of the client's financial statements. 
B)  The auditors' preliminary estimate of the smallest amount of misstatement that would be material to any one of the client's financial statements. 
C)  The auditors' preliminary estimate of the amount of misstatement that would be material to the client's balance sheet. 
D)  An amount that cannot be quantitatively stated since it depends on the nature of the item. 
A)  The auditors' preliminary estimate of the largest amount of misstatement that would be material to any one of the client's financial statements. 
B)  The auditors' preliminary estimate of the smallest amount of misstatement that would be material to any one of the client's financial statements. 
C)  The auditors' preliminary estimate of the amount of misstatement that would be material to the client's balance sheet. 
D)  An amount that cannot be quantitatively stated since it depends on the nature of the item. B

Question 2

Which of the following is not an assertion that is made in the financial statements by management concerning each major account balance?

Accepted Answer

A)  Completeness. 
B)  Rights and obligations. 
C)  Legality. 
D)  Valuation. 
A)  Completeness. 
B)  Rights and obligations. 
C)  Legality. 
D)  Valuation. C

Question 3

Which of the following procedures is not performed as a part of planning an audit engagement?

Accepted Answer

A)  Reviewing the working papers of the prior year. 
B)  Developing an overall audit strategy. 
C)  Confirmation of all major accounts. 
D)  Designing an audit plan. 
A)  Reviewing the working papers of the prior year. 
B)  Developing an overall audit strategy. 
C)  Confirmation of all major accounts. 
D)  Designing an audit plan. C

Question 4

At least a portion of the auditors' consideration of internal control usually is performed at an interim date rather than at the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 5

To best test existence, an auditor would sample from the:

Accepted Answer

A)  General ledger to source documents. 
B)  General ledger to the financial statements. 
C)  Source documents to the general ledger. 
D)  Source documents to journals. 
A)  General ledger to source documents. 
B)  General ledger to the financial statements. 
C)  Source documents to the general ledger. 
D)  Source documents to journals.

Question 6

Which of the following statements is accurate about "fraud risk factors" considered when conducting an audit?

Accepted Answer

A)  Factors whose presence indicates that fraud exists. 
B)  Factors whose presence often have been observed in circumstances where frauds have occurred. 
C)  Factors whose presence will require modification to planned audit procedures. 
D)  Factors obtained during the audit which lead to required communications with the audit committee. 
A)  Factors whose presence indicates that fraud exists. 
B)  Factors whose presence often have been observed in circumstances where frauds have occurred. 
C)  Factors whose presence will require modification to planned audit procedures. 
D)  Factors obtained during the audit which lead to required communications with the audit committee.

Question 7

The auditors' tests of controls are designed to substantiate the fairness of specific financial statement accounts.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following situations would most likely require special audit planning by the auditors?

Accepted Answer

A)  Some items of factory and office equipment do not bear identification numbers. 
B)  Depreciation methods used on the client's tax return differ from those used on the books. 
C)  Assets costing less than $500 are expensed even though the expected life exceeds one year. 
D)  Inventory is comprised of precious stones. 
A)  Some items of factory and office equipment do not bear identification numbers. 
B)  Depreciation methods used on the client's tax return differ from those used on the books. 
C)  Assets costing less than $500 are expensed even though the expected life exceeds one year. 
D)  Inventory is comprised of precious stones.

Question 9

Many auditors take an approach to assessing the risk of material misstatement by beginning with an assessment of business risks.
a. Define business risks.
b. Why have auditors found it effective to take the approach of assessing business risks?
c. Identify a business risk and explain how it might affect the auditor's audit procedures.

Accepted Answer

a. Business risks are those that threate

Question 10

Which of the following is least likely to render a quantitatively small misstatement material?

Accepted Answer

A)  Affects the registrant's compliance with regulatory requirements. 
B)  Masks a change in earnings or other trends. 
C)  Arises from an item not capable of precise measurement. 
D)  The transaction involves a related party. 
A)  Affects the registrant's compliance with regulatory requirements. 
B)  Masks a change in earnings or other trends. 
C)  Arises from an item not capable of precise measurement. 
D)  The transaction involves a related party.

Question 11

The auditor faces a risk that the audit will not detect material misstatements in the financial statements. In regard to minimizing this risk, the auditor primarily relies on:

Accepted Answer

A)  Substantive procedures. 
B)  Tests of controls. 
C)  Internal control. 
D)  Statistical analysis. 
A)  Substantive procedures. 
B)  Tests of controls. 
C)  Internal control. 
D)  Statistical analysis.

Question 12

An audit plan includes a detailed listing of the audit procedures to be performed in the verification of items in the financial statements.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is (are) considered a further audit procedure(s) that may be designed after assessing the risks of material misstatement? $\begin{array}{|c|c|c|} 
\hline
& \text { Substantive Tests of Details } & \text { Substantive Analytical Procedures } \
\hline \text { A. } & \text { Yes } & \text { Yes } \
\hline \text { B. } & \text { Yes } & \text { No } \
\hline \text { C. } & \text { No } & \text { Yes } \
\hline \text { D. } & \text { No } & \text { No } \
\hline
\end{array}$

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 14

Which of the following is least likely to be included in an auditor's inquiry of management while obtaining information to identify the risks of material misstatement due to fraud?

Accepted Answer

A)  Are all financial reporting operations at one location? 
B)  Does it have knowledge of fraud or suspect fraud? 
C)  Does it have programs to mitigate fraud risks? 
D)  Has it reported to the audit committee the nature of the company's internal control? 
A)  Are all financial reporting operations at one location? 
B)  Does it have knowledge of fraud or suspect fraud? 
C)  Does it have programs to mitigate fraud risks? 
D)  Has it reported to the audit committee the nature of the company's internal control?

Question 15

Which statement is correct relating to a potential successor auditor's responsibility for communicating with the predecessor auditors in connection with a prospective new audit client?

Accepted Answer

A)  The successor auditors have no responsibility to contact the predecessor auditors. 
B)  The successor auditors should obtain permission from the prospective client to contact the predecessor auditors. 
C)  The successor auditors should contact the predecessors regardless of whether the prospective client authorizes contact. 
D)  The successor auditors need not contact the predecessors if the successors are aware of all available relevant facts. 
A)  The successor auditors have no responsibility to contact the predecessor auditors. 
B)  The successor auditors should obtain permission from the prospective client to contact the predecessor auditors. 
C)  The successor auditors should contact the predecessors regardless of whether the prospective client authorizes contact. 
D)  The successor auditors need not contact the predecessors if the successors are aware of all available relevant facts.

Question 16

A successor auditor is required to attempt communication with the predecessor auditor prior to:

Accepted Answer

A)  Performing test of controls. 
B)  Testing beginning balances for the current year. 
C)  Making a proposal for the audit engagement. 
D)  Accepting the engagement. 
A)  Performing test of controls. 
B)  Testing beginning balances for the current year. 
C)  Making a proposal for the audit engagement. 
D)  Accepting the engagement.

Question 17

Which of the following is not an example of a likely adjustment in the auditors' overall audit approach when significant risk is found to exist?

Accepted Answer

A)  Apply increased professional skepticism about material transactions. 
B)  Increase the assessed level of detection risk. 
C)  Assign personnel with particular skill to areas of high risk. 
D)  Obtain increased evidence about the appropriateness of management's selection of accounting principles. 
A)  Apply increased professional skepticism about material transactions. 
B)  Increase the assessed level of detection risk. 
C)  Assign personnel with particular skill to areas of high risk. 
D)  Obtain increased evidence about the appropriateness of management's selection of accounting principles.

Question 18

Audit committees should be made up of the most qualified directors regardless of whether they are part of management of the company.

Accepted Answer

A) True 
 B)False

Question 19

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to satisfy the audit objective of:

Accepted Answer

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

Question 20

Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor's:

Accepted Answer

A)  Awareness of the consistency in the application of generally accepted accounting principles between accounting periods. 
B)  Evaluation of all matters of continuing accounting significance. 
C)  Opinion of any subsequent events occurring since the predecessor's audit report was issued. 
D)  Understanding as to the reasons for the change of auditors. 
A)  Awareness of the consistency in the application of generally accepted accounting principles between accounting periods. 
B)  Evaluation of all matters of continuing accounting significance. 
C)  Opinion of any subsequent events occurring since the predecessor's audit report was issued. 
D)  Understanding as to the reasons for the change of auditors.

The auditors must consider materiality in planning an audit engagement. Materiality for planning purposes is:

Which of the following is not an assertion that is made in the financial statements by management concerning each major account balance?

Which of the following procedures is not performed as a part of planning an audit engagement?

At least a portion of the auditors' consideration of internal control usually is performed at an interim date rather than at the balance sheet date.

To best test existence, an auditor would sample from the:

Which of the following statements is accurate about "fraud risk factors" considered when conducting an audit?

The auditors' tests of controls are designed to substantiate the fairness of specific financial statement accounts.

Which of the following situations would most likely require special audit planning by the auditors?

Which of the following is least likely to render a quantitatively small misstatement material?

The auditor faces a risk that the audit will not detect material misstatements in the financial statements. In regard to minimizing this risk, the auditor primarily relies on:

An audit plan includes a detailed listing of the audit procedures to be performed in the verification of items in the financial statements.

Which of the following is (are) considered a further audit procedure(s) that may be designed after assessing the risks of material misstatement? Substantive Tests of Details Substantive Analytical Procedures A. Yes Yes B. Yes No C. No Yes D. No No

Which of the following is least likely to be included in an auditor's inquiry of management while obtaining information to identify the risks of material misstatement due to fraud?

Which statement is correct relating to a potential successor auditor's responsibility for communicating with the predecessor auditors in connection with a prospective new audit client?

A successor auditor is required to attempt communication with the predecessor auditor prior to:

Which of the following is not an example of a likely adjustment in the auditors' overall audit approach when significant risk is found to exist?

Audit committees should be made up of the most qualified directors regardless of whether they are part of management of the company.

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to satisfy the audit objective of:

Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor's:

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property, Plant, and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Filters

Exam 6: Planning the Audit; Linking Audit Procedures to Risk

The auditors must consider materiality in planning an audit engagement. Materiality for planning purposes is:

Which of the following is not an assertion that is made in the financial statements by management concerning each major account balance?

Which of the following procedures is not performed as a part of planning an audit engagement?

At least a portion of the auditors' consideration of internal control usually is performed at an interim date rather than at the balance sheet date.

To best test existence, an auditor would sample from the:

Which of the following statements is accurate about "fraud risk factors" considered when conducting an audit?

The auditors' tests of controls are designed to substantiate the fairness of specific financial statement accounts.

Which of the following situations would most likely require special audit planning by the auditors?

Which of the following is least likely to render a quantitatively small misstatement material?

The auditor faces a risk that the audit will not detect material misstatements in the financial statements. In regard to minimizing this risk, the auditor primarily relies on:

An audit plan includes a detailed listing of the audit procedures to be performed in the verification of items in the financial statements.

Which of the following is (are) considered a further audit procedure(s) that may be designed after assessing the risks of material misstatement? Substantive Tests of Details Substantive Analytical Procedures A. Yes Yes B. Yes No C. No Yes D. No No

Which of the following is least likely to be included in an auditor's inquiry of management while obtaining information to identify the risks of material misstatement due to fraud?

Which statement is correct relating to a potential successor auditor's responsibility for communicating with the predecessor auditors in connection with a prospective new audit client?

A successor auditor is required to attempt communication with the predecessor auditor prior to:

Which of the following is not an example of a likely adjustment in the auditors' overall audit approach when significant risk is found to exist?

Audit committees should be made up of the most qualified directors regardless of whether they are part of management of the company.

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is performed to satisfy the audit objective of:

Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor's:

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property, Plant, and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Filters