Question 1

For internal control testing related to a financial statement audit,the population is usually

Accepted Answer

A) all items in the class of transactions or account balance for the year 
B) all items in the class of transactions or account balance for the end of the year 
C) all items in the class of transactions or account balance during the year 
D) all items in the class of transactions or account balance for the beginning of the year 
A) all items in the class of transactions or account balance for the year 
B) all items in the class of transactions or account balance for the end of the year 
C) all items in the class of transactions or account balance during the year 
D) all items in the class of transactions or account balance for the beginning of the year

Question 2

Audit samples for tests of controls may be designed using a fixed sampling plan or a sequential sampling plan.The auditor decides between the two plans based on

Accepted Answer

A) which plan he believes to be more effective 
B) which plan he believes to be more efficient 
C) which plan he believes to be more reliable 
D) which plan he believes to be more relevant 
A) which plan he believes to be more effective 
B) which plan he believes to be more efficient 
C) which plan he believes to be more reliable 
D) which plan he believes to be more relevant

Question 3

You are responsible for planning the audit of inventory for the BCS Corporation.You have documented the internal control system related to the movement of goods from raw materials to finished goods for the manufacturing process.Your documentation includes the following potential controls:
• When materials are transferred from raw materials to work-in-process,the inventory storeroom clerk signs off on the "materials requisition sheet".These are filed in the production area by date.• When materials are transferred from work-in-process to finished goods,the production manager signs off on the "production report worksheet" indicating that he approved the transfer.The "production reports" are filed in the production department.• The storeroom manager compares the totals on the "production report worksheet" with the quantity the storeroom clerk counts and if the quantities agree the journal entry to record the transfer is made.• At the end of each week,the cost accountant prepares a reconciliation between the entries on the "materials requisition sheets" and the general ledger to determine that all transfers were recorded.The reconciliation sheet is initialed indicating agreement.The reconciliation sheets are filed in the production department.Prepare a sampling plan.For this sample,the auditor determines that the acceptable risk of overreliance is 5%,the tolerable deviation rate is 15%,and the expected population deviation rate is 3.5%.These decisions are based on professional judgment.The sample size is 40 with 2 deviations allowed.The auditor will perform a nonstatistical sample.All of the documents needed for this sample are filed in 6 file drawers organized by month.

Accepted Answer

Sampling plan:
Step 1.Describe the inter

Question 4

For a dual-purpose test,the auditor obtains the following evidence

Accepted Answer

A) is the class of transaction working correctly? 
B) is the class of transaction initiated correctly? 
C) is the control working? 
D) is the control documented? 
E) is the class of transaction recorded misstated?
F)both A and B
G)both B and C
H)Both C and E 
A) is the class of transaction working correctly? 
B) is the class of transaction initiated correctly? 
C) is the control working? 
D) is the control documented? 
E) is the class of transaction recorded misstated?
F)both A and B
G)both B and C
H)Both C and E

Question 5

Internal control tests are designed to provide information about

Accepted Answer

A) whether or not the control has been placed in operation 
B) the effectiveness of the control 
C) the efficiency of the control 
D) the number of deviations for the control 
A) whether or not the control has been placed in operation 
B) the effectiveness of the control 
C) the efficiency of the control 
D) the number of deviations for the control

Question 6

The auditor uses professional judgment to estimate

Accepted Answer

A) the risk of overreliance 
B) the sample interval 
C) the desired control risk 
D) the actual deviation rate 
E) the tolerable deviation rate
F)both A and C
G)both A and E
H)both B and D 
A) the risk of overreliance 
B) the sample interval 
C) the desired control risk 
D) the actual deviation rate 
E) the tolerable deviation rate
F)both A and C
G)both A and E
H)both B and D

Question 7

What is the basic question to be answered in an internal control test? What is the purpose of this question?

Accepted Answer

The basic question to be answered is whe

Question 8

The most important points to understand about gathering evidence based on sampling procedures are:

Accepted Answer

A) when to use a sample to gather evidence 
B) how to generate a random sample for the test 
C) how to validate the audit test 
D) how to observe the deviations found in the sample 
E) how to use the sample results to arrive at an assumption about the population
F)both A and B
G)both C and D
H)both D and E 
A) when to use a sample to gather evidence 
B) how to generate a random sample for the test 
C) how to validate the audit test 
D) how to observe the deviations found in the sample 
E) how to use the sample results to arrive at an assumption about the population
F)both A and B
G)both C and D
H)both D and E

Question 9

Which of the following is an internal control procedure?

Accepted Answer

A) segregation of controls 
B) authorization procedures 
C) documented transaction trails 
D) independent recalculations 
E) relevant controls that limit access to assets
F)both A and B
G)both B and C
H)both D and E 
A) segregation of controls 
B) authorization procedures 
C) documented transaction trails 
D) independent recalculations 
E) relevant controls that limit access to assets
F)both A and B
G)both B and C
H)both D and E

Question 10

If the deviations in the sample include more deviations than would be acceptable,the auditor would

Accepted Answer

A) increase inherent risk 
B) increase audit risk 
C) increase control risk 
D) perform more test of controls 
E) perform more substantive procedures
F)both A and B
G)both C and E
H)both D and E 
A) increase inherent risk 
B) increase audit risk 
C) increase control risk 
D) perform more test of controls 
E) perform more substantive procedures
F)both A and B
G)both C and E
H)both D and E

Question 11

Nonsampling risk is the fact that the sample is not representative of the population.

Accepted Answer

A) True 
 B)False

Question 12

If the sample deviation rate is higher than the tolerable deviation rate,the auditor will

Accepted Answer

A) increase the amount of control testing 
B) assume controls are not working 
C) assume the controls are working 
D) reduce the amount of substantive testing 
E) increase the amount of substantive testing
F)both A and B
G)both A and C
H)Both B and E 
A) increase the amount of control testing 
B) assume controls are not working 
C) assume the controls are working 
D) reduce the amount of substantive testing 
E) increase the amount of substantive testing
F)both A and B
G)both A and C
H)Both B and E

Question 13

When an auditor performs a test of controls,the evidence he obtains is

Accepted Answer

A) an observation of segregation of duties. 
B) a verification of the transaction. 
C) a confirmation of the account balance. 
D) only about the control. 
E) evidence about whether the class of transactions is materially misstated. 
A) an observation of segregation of duties. 
B) a verification of the transaction. 
C) a confirmation of the account balance. 
D) only about the control. 
E) evidence about whether the class of transactions is materially misstated.

Question 14

The auditor may test internal controls when evaluating internal controls over the financial reporting process for public companies.

Accepted Answer

A) True 
 B)False

Question 15

To determine the sample size for tests of controls,the auditor needs to estimate the following information based on his professional judgment

Accepted Answer

A) the tolerable rate of deviation for the population to be tested 
B) the realizable rate of deviation for the population to be tested 
C) the desired level of assurance that the actual rate of deviation is not exceeded by the tolerable rate of deviation 
D) the number of sampling units in the population if the population is very large 
A) the tolerable rate of deviation for the population to be tested 
B) the realizable rate of deviation for the population to be tested 
C) the desired level of assurance that the actual rate of deviation is not exceeded by the tolerable rate of deviation 
D) the number of sampling units in the population if the population is very large

Question 16

The sample size can be determined once the auditor specifies

Accepted Answer

A) the tolerable rate of exceptions 
B) the expected rate of exceptions 
C) the desired level of assurance 
D) the expected rate of deviation 
E) the actual rate of deviation
F)both A and C
G)both A and E
H)Both C and D 
A) the tolerable rate of exceptions 
B) the expected rate of exceptions 
C) the desired level of assurance 
D) the expected rate of deviation 
E) the actual rate of deviation
F)both A and C
G)both A and E
H)Both C and D

Question 17

If the internal control test is done as a dual-purpose test,the auditor will

Accepted Answer

A) examine whether there is a deviation from the documented control 
B) recalculate the control 
C) examine whether the deviation is within the tolerable limit 
D) examine whether there is a deviation relevant to the documented control 
E) reperform the control
F)both A and B
G)both A and E
H)both C and D 
A) examine whether there is a deviation from the documented control 
B) recalculate the control 
C) examine whether the deviation is within the tolerable limit 
D) examine whether there is a deviation relevant to the documented control 
E) reperform the control
F)both A and B
G)both A and E
H)both C and D

Question 18

Nonstatistical sampling

Accepted Answer

A) is never a more effective way to gather evidence 
B) is a less efficient way to gather evidence 
C) may be a less efficient way to gather evidence 
D) should be viewed as a less effective way to gather evidence 
E) should not be viewed as a less effective way to gather evidence
F)both A and C
G)both B and D
H)Both C and E 
A) is never a more effective way to gather evidence 
B) is a less efficient way to gather evidence 
C) may be a less efficient way to gather evidence 
D) should be viewed as a less effective way to gather evidence 
E) should not be viewed as a less effective way to gather evidence
F)both A and C
G)both B and D
H)Both C and E

Question 19

Internal control tests are designed to provide information about the effectiveness of a control.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is an internal control procedure?

Accepted Answer

A) segregation of duties 
B) policies and procedures 
C) reliable transaction trails 
D) independent reconciliations 
E) relevant controls that limit access to assets
F)both A and D
G)both A and E
H)both B and D 
A) segregation of duties 
B) policies and procedures 
C) reliable transaction trails 
D) independent reconciliations 
E) relevant controls that limit access to assets
F)both A and D
G)both A and E
H)both B and D

For internal control testing related to a financial statement audit,the population is usually

Audit samples for tests of controls may be designed using a fixed sampling plan or a sequential sampling plan.The auditor decides between the two plans based on

For a dual-purpose test,the auditor obtains the following evidence

Internal control tests are designed to provide information about

The auditor uses professional judgment to estimate

What is the basic question to be answered in an internal control test? What is the purpose of this question?

The most important points to understand about gathering evidence based on sampling procedures are:

Which of the following is an internal control procedure?

If the deviations in the sample include more deviations than would be acceptable,the auditor would

Nonsampling risk is the fact that the sample is not representative of the population.

If the sample deviation rate is higher than the tolerable deviation rate,the auditor will

When an auditor performs a test of controls,the evidence he obtains is

The auditor may test internal controls when evaluating internal controls over the financial reporting process for public companies.

To determine the sample size for tests of controls,the auditor needs to estimate the following information based on his professional judgment

The sample size can be determined once the auditor specifies

If the internal control test is done as a dual-purpose test,the auditor will

Nonstatistical sampling

Internal control tests are designed to provide information about the effectiveness of a control.

Which of the following is an internal control procedure?

What Is Auditing

The Audit Planning Process: Understanding the Risk of Material Misstatement

Internal Controls

Auditing the Revenue Business Process

Audit Evidence and the Auditors Responsibility for Fraud Detection

Auditing the Acquisition and Expenditure Business Process

Auditing the Inventory Business Process

Audit Sampling: Substantive Tests of Details

Cash and Investment Business Processes

Long-Term Debt and Owners Equity Business Process

Completing the Audit

Audit Reports

The Auditing Profession Glossary

Filters

Exam 8: Audit Sampling: Tests of Internal Controls

For internal control testing related to a financial statement audit,the population is usually

Audit samples for tests of controls may be designed using a fixed sampling plan or a sequential sampling plan.The auditor decides between the two plans based on

For a dual-purpose test,the auditor obtains the following evidence

Internal control tests are designed to provide information about

The auditor uses professional judgment to estimate

What is the basic question to be answered in an internal control test? What is the purpose of this question?

The most important points to understand about gathering evidence based on sampling procedures are:

Which of the following is an internal control procedure?

If the deviations in the sample include more deviations than would be acceptable,the auditor would

Nonsampling risk is the fact that the sample is not representative of the population.

If the sample deviation rate is higher than the tolerable deviation rate,the auditor will

When an auditor performs a test of controls,the evidence he obtains is

The auditor may test internal controls when evaluating internal controls over the financial reporting process for public companies.

To determine the sample size for tests of controls,the auditor needs to estimate the following information based on his professional judgment

The sample size can be determined once the auditor specifies

If the internal control test is done as a dual-purpose test,the auditor will

Nonstatistical sampling

Internal control tests are designed to provide information about the effectiveness of a control.

Which of the following is an internal control procedure?

What Is Auditing

The Audit Planning Process: Understanding the Risk of Material Misstatement

Internal Controls

Auditing the Revenue Business Process

Audit Evidence and the Auditors Responsibility for Fraud Detection

Auditing the Acquisition and Expenditure Business Process

Auditing the Inventory Business Process

Audit Sampling: Substantive Tests of Details

Cash and Investment Business Processes

Long-Term Debt and Owners Equity Business Process

Completing the Audit

Audit Reports

The Auditing Profession Glossary

Filters