Question 1

Explain the various components of risk in the audit risk model and the interrelationship between the various components.

Accepted Answer

Audit risk is a function of inherent ris

Question 2

Testing the postings of the sales ledger to the general ledger and the trade receivables sub- ledger relates to which assertion?

Accepted Answer

A)  occurrence 
B)  completeness 
C)  accuracy 
D)  none of the above 
A)  occurrence 
B)  completeness 
C)  accuracy 
D)  none of the above

Question 3

Comparing supplier/creditor invoices to the initial record of entry relates to which assertion?

Accepted Answer

A)  completeness 
B)  accuracy 
C)  cut-off 
D)  existence 
A)  completeness 
B)  accuracy 
C)  cut-off 
D)  existence

Question 4

Sales revenue is typically significant due to:

Accepted Answer

A)  the overall inherent risk associated with revenue. 
B)  the volume of transactions that flow through the account. 
C)  its size. 
D)  all of the above. 
A)  the overall inherent risk associated with revenue. 
B)  the volume of transactions that flow through the account. 
C)  its size. 
D)  all of the above.

Question 5

Which of the following substantive tests of payroll transactions does not relate to the accuracy assertion?

Accepted Answer

A)  reconciling the accrued payroll balance to the amount in the payroll ledger for the corresponding balance 
B)  testing the postings of totals in the payroll ledger to the general ledger 
C)  testing the extensions of wage rates times the hours worked 
D)  comparing the hours paid with the record of hours worked 
A)  reconciling the accrued payroll balance to the amount in the payroll ledger for the corresponding balance 
B)  testing the postings of totals in the payroll ledger to the general ledger 
C)  testing the extensions of wage rates times the hours worked 
D)  comparing the hours paid with the record of hours worked

Question 6

Sales revenue is typically not significant due to its size.

Accepted Answer

A) True 
 B)False

Question 7

Substantive procedures are also known as:

Accepted Answer

A)  tests of details. 
B)  compliance tests. 
C)  tests of subsequent events. 
D)  tests of controls. 
A)  tests of details. 
B)  compliance tests. 
C)  tests of subsequent events. 
D)  tests of controls.

Question 8

Occurrence is not typically a significant assertion as the primary objective in testing for
occurrence is to ensure that costs and expenses are not overstated.

Accepted Answer

A) True 
 B)False

Question 9

What are the three audit assertions that are important to ensuring that the auditor has gained sufficient and appropriate audit evidence for sales revenue?

Accepted Answer

The three audit assertions that are impo

Question 10

The three audit assertions that are important to ensure the auditor has gained sufficient and appropriate audit evidence for sales revenue are:

Accepted Answer

A)  completeness, accuracy and occurrence. 
B)  occurrence, accuracy and cut-off. 
C)  cut-off, accuracy and completeness. 
D)  classification, accuracy and completeness. 
A)  completeness, accuracy and occurrence. 
B)  occurrence, accuracy and cut-off. 
C)  cut-off, accuracy and completeness. 
D)  classification, accuracy and completeness.

Question 11

Control risk is the risk that an auditor expresses an inappropriate audit opinion when a
financial statement is materially misstated.

Accepted Answer

A) True 
 B)False

Question 12

The completeness assertion relates to the audit objective that sales and other revenues are
stated in the profit and loss at the appropriate amounts.

Accepted Answer

A) True 
 B)False

Question 13

When substantive tests performed identify errors or exceptions, the auditor's first response is to:

Accepted Answer

A)  qualify the audit report. 
B)  report the client to CPA Canada. 
C)  understand why the exception or error has arisen. 
D)  none of the above. 
A)  qualify the audit report. 
B)  report the client to CPA Canada. 
C)  understand why the exception or error has arisen. 
D)  none of the above.

Question 14

The risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated is known as:

Accepted Answer

A)  engagement risk. 
B)  audit risk. 
C)  client business risk. 
D)  detection risk. 
A)  engagement risk. 
B)  audit risk. 
C)  client business risk. 
D)  detection risk.

Question 15

The key audit assertions for cost of sales and expenses are rights and obligations and
occurrence

Accepted Answer

A) True 
 B)False

Question 16

The key objective when performing substantive testing is determining whether the client's
internal controls are effective at preventing and detecting material misstatements.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following are examples of substantive procedures in auditing revenue that are always performed?

Accepted Answer

A)  testing the cut-off of revenues 
B)  comparing the monthly income statements to budget and investigating any unexpected fluctuations 
C)  both a and b 
D)  none of the above 
A)  testing the cut-off of revenues 
B)  comparing the monthly income statements to budget and investigating any unexpected fluctuations 
C)  both a and b 
D)  none of the above

Question 18

Testing the account classification of credit memos tests the accuracy assertion for the sales
returns process.

Accepted Answer

A) True 
 B)False

Question 19

The level of substantive procedures will be limited when:

Accepted Answer

A)  the inherent and control risk assessment is low. 
B)  there are no controls tested or relied upon. 
C)  the inherent and control risk assessment is high. 
D)  the client requests the auditor to perform limited procedures. 
A)  the inherent and control risk assessment is low. 
B)  there are no controls tested or relied upon. 
C)  the inherent and control risk assessment is high. 
D)  the client requests the auditor to perform limited procedures.

Question 20

Explain the key objective of substantive testing and the responses from auditors when errors or exceptions are identified during testing.

Accepted Answer

When performing substantive testing, the

Explain the various components of risk in the audit risk model and the interrelationship between the various components.

Testing the postings of the sales ledger to the general ledger and the trade receivables sub- ledger relates to which assertion?

Comparing supplier/creditor invoices to the initial record of entry relates to which assertion?

Sales revenue is typically significant due to:

Which of the following substantive tests of payroll transactions does not relate to the accuracy assertion?

Sales revenue is typically not significant due to its size.

Substantive procedures are also known as:

Occurrence is not typically a significant assertion as the primary objective in testing for occurrence is to ensure that costs and expenses are not overstated.

What are the three audit assertions that are important to ensuring that the auditor has gained sufficient and appropriate audit evidence for sales revenue?

The three audit assertions that are important to ensure the auditor has gained sufficient and appropriate audit evidence for sales revenue are:

Control risk is the risk that an auditor expresses an inappropriate audit opinion when a financial statement is materially misstated.

The completeness assertion relates to the audit objective that sales and other revenues are stated in the profit and loss at the appropriate amounts.

When substantive tests performed identify errors or exceptions, the auditor's first response is to:

The risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated is known as:

The key audit assertions for cost of sales and expenses are rights and obligations and occurrence

The key objective when performing substantive testing is determining whether the client's internal controls are effective at preventing and detecting material misstatements.

Which of the following are examples of substantive procedures in auditing revenue that are always performed?

Testing the account classification of credit memos tests the accuracy assertion for the sales returns process.

The level of substantive procedures will be limited when:

Explain the key objective of substantive testing and the responses from auditors when errors or exceptions are identified during testing.

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Audit Planning I

Audit Planning II

Audit Evidence

Sampling and Overview of the Risk Response Phase of the Audit

Gaining an Understanding of the Clients System of Internal Controls

Execution of the Audittesting of Controls

Execution of the Auditperforming Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Completing and Reporting on the Audit

Filters

Exam 11: Substantive Testing and Income Statement Accounts

Explain the various components of risk in the audit risk model and the interrelationship between the various components.

Testing the postings of the sales ledger to the general ledger and the trade receivables sub- ledger relates to which assertion?

Comparing supplier/creditor invoices to the initial record of entry relates to which assertion?

Sales revenue is typically significant due to:

Which of the following substantive tests of payroll transactions does not relate to the accuracy assertion?

Sales revenue is typically not significant due to its size.

Substantive procedures are also known as:

Occurrence is not typically a significant assertion as the primary objective in testing for occurrence is to ensure that costs and expenses are not overstated.

What are the three audit assertions that are important to ensuring that the auditor has gained sufficient and appropriate audit evidence for sales revenue?

The three audit assertions that are important to ensure the auditor has gained sufficient and appropriate audit evidence for sales revenue are:

Control risk is the risk that an auditor expresses an inappropriate audit opinion when a financial statement is materially misstated.

The completeness assertion relates to the audit objective that sales and other revenues are stated in the profit and loss at the appropriate amounts.

When substantive tests performed identify errors or exceptions, the auditor's first response is to:

The risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated is known as:

The key audit assertions for cost of sales and expenses are rights and obligations and occurrence

The key objective when performing substantive testing is determining whether the client's internal controls are effective at preventing and detecting material misstatements.

Which of the following are examples of substantive procedures in auditing revenue that are always performed?

Testing the account classification of credit memos tests the accuracy assertion for the sales returns process.

The level of substantive procedures will be limited when:

Explain the key objective of substantive testing and the responses from auditors when errors or exceptions are identified during testing.

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Audit Planning I

Audit Planning II

Audit Evidence

Sampling and Overview of the Risk Response Phase of the Audit

Gaining an Understanding of the Clients System of Internal Controls

Execution of the Audittesting of Controls

Execution of the Auditperforming Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Completing and Reporting on the Audit

Filters