Question 1

Materiality levels determined at the planning stage are used to decide how much work to do on each financial statement account.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is likely to be found in the minutes of the board of directors?

Accepted Answer

A)  Approval of customer credit limits. 
B)  Approval of a new computer for the controller. 
C)  Authorization of employee salaries. 
D)  Authorization of executive salaries. 
A)  Approval of customer credit limits. 
B)  Approval of a new computer for the controller. 
C)  Authorization of employee salaries. 
D)  Authorization of executive salaries.

Question 3

Generally accepted auditing standards require that analytical procedures should be applied ________.

Accepted Answer

A)  in the planning and final review stages of the audit and as a substantive test during the audit 
B)  in the planning and final review stages of the audit, and can be used as a substantive test during the audit 
C)  in the planning stage, and can be applied as a substantive test and in the final review stage 
D)  in the final review stage, and can be applied as a substantive test in the planning stage 
A)  in the planning and final review stages of the audit and as a substantive test during the audit 
B)  in the planning and final review stages of the audit, and can be used as a substantive test during the audit 
C)  in the planning stage, and can be applied as a substantive test and in the final review stage 
D)  in the final review stage, and can be applied as a substantive test in the planning stage

Question 4

Contrast horizontal and vertical analysis. Give an example of each.

Accepted Answer

Horizontal analysis refers to changes in

Question 5

In the planning stage, analytical procedures are used to ________.

Accepted Answer

A)  assess overall reasonableness of the financial statements 
B)  identify potential problem areas 
C)  determine the mathematical correctness of the financial statements 
D)  provide direct evidence about the balances in accounts 
A)  assess overall reasonableness of the financial statements 
B)  identify potential problem areas 
C)  determine the mathematical correctness of the financial statements 
D)  provide direct evidence about the balances in accounts

Question 6

The overall audit strategy typically includes ________.

Accepted Answer

A)  the detailed audit plan 
B)  specific procedures for determining inherent and control risk 
C)  decisions about unusual client accounting principles 
D)  audit evidence gathering procedures 
A)  the detailed audit plan 
B)  specific procedures for determining inherent and control risk 
C)  decisions about unusual client accounting principles 
D)  audit evidence gathering procedures

Question 7

What are auditors referring to when they talk about the nature, timing, and extent of audit procedures?

Accepted Answer

The nature of audit procedures refers to

Question 8

The auditor's objective in obtaining an understanding of the client's business and risks is to design audit procedures that will serve as a basis for their report.

Accepted Answer

A) True 
 B)False

Question 9

Auditors' analytical procedures can include review of prior year adjusting entries, conversations with client personnel, and study of the minutes of board of directors' meetings.

Accepted Answer

A) True 
 B)False

Question 10

This question tests your ability to perceive the place(s) where potential problems may exist and the type of problem (overstatement or understatement) that may exist.
Required:
For each of the items below, identify the account(s) that need(s) to be audited carefully and the reason; for example, "potential overstatement or understatement of _______."
A) Current year accounts receivable is larger than last year but the allowance for doubtful accounts is the same.
B) Current year inventory is larger than last year but the current year gross margin (profit) is larger.
C) Current year long-term liabilities are larger than last year but the interest expense is the same.
D) Current-year fixed assets total is larger than last year but current amortization expense is the same as last year.

Accepted Answer

A) The collectability of accounts receiv

Question 11

How should auditors use the concept of materiality?

Accepted Answer

A)  As a guide to assessing inherent risk 
B)  As a guide in assessing control risk. 
C)  As a guide in deciding to report a deficiency to the audit committee. 
D)  As a guide in planning the audit program. 
A)  As a guide to assessing inherent risk 
B)  As a guide in assessing control risk. 
C)  As a guide in deciding to report a deficiency to the audit committee. 
D)  As a guide in planning the audit program.

Question 12

Relationships on the financial statements that do not make sense may indicate problem areas in the accounts.

Accepted Answer

A) True 
 B)False

Question 13

The enquiries of the client that result from preliminary analytical review provide direct evidence about the amounts in the financial statements.

Accepted Answer

A) True 
 B)False

Question 14

Materiality is primarily a quantitative calculation.

Accepted Answer

A) True 
 B)False

Materiality levels determined at the planning stage are used to decide how much work to do on each financial statement account.

Which of the following is likely to be found in the minutes of the board of directors?

Generally accepted auditing standards require that analytical procedures should be applied ________.

Contrast horizontal and vertical analysis. Give an example of each.

In the planning stage, analytical procedures are used to ________.

The overall audit strategy typically includes ________.

What are auditors referring to when they talk about the nature, timing, and extent of audit procedures?

The auditor's objective in obtaining an understanding of the client's business and risks is to design audit procedures that will serve as a basis for their report.

Auditors' analytical procedures can include review of prior year adjusting entries, conversations with client personnel, and study of the minutes of board of directors' meetings.

How should auditors use the concept of materiality?

Relationships on the financial statements that do not make sense may indicate problem areas in the accounts.

The enquiries of the client that result from preliminary analytical review provide direct evidence about the amounts in the financial statements.

Materiality is primarily a quantitative calculation.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Part I the Audit of Accounting Estimates: Basic Material Relating to Accountingestimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud

Filters

Exam 5: Preliminary Audit Planning: Understanding the Auditees Business

Materiality levels determined at the planning stage are used to decide how much work to do on each financial statement account.

Which of the following is likely to be found in the minutes of the board of directors?

Generally accepted auditing standards require that analytical procedures should be applied ________.

Contrast horizontal and vertical analysis. Give an example of each.

In the planning stage, analytical procedures are used to ________.

The overall audit strategy typically includes ________.

What are auditors referring to when they talk about the nature, timing, and extent of audit procedures?

The auditor's objective in obtaining an understanding of the client's business and risks is to design audit procedures that will serve as a basis for their report.

Auditors' analytical procedures can include review of prior year adjusting entries, conversations with client personnel, and study of the minutes of board of directors' meetings.

How should auditors use the concept of materiality?

Relationships on the financial statements that do not make sense may indicate problem areas in the accounts.

The enquiries of the client that result from preliminary analytical review provide direct evidence about the amounts in the financial statements.

Materiality is primarily a quantitative calculation.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Part I the Audit of Accounting Estimates: Basic Material Relating to Accountingestimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud

Filters