Question 1

Sales revenue is typically significant due to:

Accepted Answer

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

Question 2

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 important to ensure the auditor has gained sufficient and appropriate audit evidence for sales revenue are occurrence,accuracy and cut-off.Testing of the occurrence assertion needs to ensure that the sales recorded in the general ledger are in fact bona fide sales and have 'occurred'.Substantive tests for the accuracy assertion focus on ensuring that the sales have been recorded at the amount (or value)and have not been overstated.The cut-off assertion is important because there is a risk that an entity will record sales that occur after year-end in the year being audited.The pressure to achieve sales targets and budgets can lead to companies recording sales that occur after year-end in the results prior to year-end.As a result,procedures are designed to test material transactions either side of year-end or all sales in the last week before year-end to ensure that all sales are recorded in the period.

Question 3

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

Question 4

The auditor uses their professional judgement,knowledge of the client and risk assessment for each significant account to determine the timing and extent of testing.

Accepted Answer

A) True 
 B)False

Question 5

The accuracy of cost of sales and expenses is verified by:

Accepted Answer

A) tracing supporting documentation to the accounting records. 
B) vouching recorded amounts to supporting documentation. 
C) sending confirmation requests to the client's creditors. 
D) All of the above 
A) tracing supporting documentation to the accounting records. 
B) vouching recorded amounts to supporting documentation. 
C) sending confirmation requests to the client's creditors. 
D) All of the above

Question 6

Which type of substantive procedure do auditors ordinarily use when testing income statement accounts?

Accepted Answer

A) Analytical procedures 
B) Confirmations 
C) recalculations 
D) Observations 
A) Analytical procedures 
B) Confirmations 
C) recalculations 
D) Observations

Question 7

Ensuring that all costs and expenses in the income statement are properly supported as charges against the entity relates to the classification assertion.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) Cut-off 
B) Completeness 
C) Accuracy 
D) Existence 
A) Cut-off 
B) Completeness 
C) Accuracy 
D) Existence

Question 9

Substantive procedures are designed to detect material misstatements at the assertion level.

Accepted Answer

A) True 
 B)False

Question 10

When inherent risk and control risk are assessed to be low,the level of substantive procedures required to address any remaining detection risk is limited.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

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

Question 12

Substantive procedures are also known as:

Accepted Answer

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

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Testing the pricing and mathematical accuracy of sales invoices is an example of a substantive test of transactions in the sales process.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Sales revenue is typically not significant due to its size.

Accepted Answer

A) True 
 B)False

Question 17

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 18

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 19

The key audit assertions when auditing cost of sales and expenses include:

Accepted Answer

A) accuracy. 
B) cut-off. 
C) completeness. 
D) All of the above 
A) accuracy. 
B) cut-off. 
C) completeness. 
D) All of the above

Question 20

Purchases testing is performed most efficiently by the use of controls testing.

Accepted Answer

A) True 
 B)False

Sales revenue is typically significant due to:

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:

The auditor uses their professional judgement,knowledge of the client and risk assessment for each significant account to determine the timing and extent of testing.

The accuracy of cost of sales and expenses is verified by:

Which type of substantive procedure do auditors ordinarily use when testing income statement accounts?

Ensuring that all costs and expenses in the income statement are properly supported as charges against the entity relates to the classification assertion.

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

Substantive procedures are designed to detect material misstatements at the assertion level.

When inherent risk and control risk are assessed to be low,the level of substantive procedures required to address any remaining detection risk is limited.

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

Substantive procedures are also known as:

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

Testing the pricing and mathematical accuracy of sales invoices is an example of a substantive test of transactions in the sales process.

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

Sales revenue is typically not significant due to its size.

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

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

The key audit assertions when auditing cost of sales and expenses include:

Purchases testing is performed most efficiently by the use of controls testing.

Introduction and Overview of Audit and Assurance

Ethics,legal Liability and Client Acceptance

Risk Assessment I

Risk Assessment II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Testing of Controls

Execution of the Audit Performing Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Completing and Reporting on the Audit

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Exam 11: Substantive Testing and Income Statement Accounts

Sales revenue is typically significant due to:

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:

The auditor uses their professional judgement,knowledge of the client and risk assessment for each significant account to determine the timing and extent of testing.

The accuracy of cost of sales and expenses is verified by:

Which type of substantive procedure do auditors ordinarily use when testing income statement accounts?

Ensuring that all costs and expenses in the income statement are properly supported as charges against the entity relates to the classification assertion.

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

Substantive procedures are designed to detect material misstatements at the assertion level.

When inherent risk and control risk are assessed to be low,the level of substantive procedures required to address any remaining detection risk is limited.

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

Substantive procedures are also known as:

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

Testing the pricing and mathematical accuracy of sales invoices is an example of a substantive test of transactions in the sales process.

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

Sales revenue is typically not significant due to its size.

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

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

The key audit assertions when auditing cost of sales and expenses include:

Purchases testing is performed most efficiently by the use of controls testing.

Introduction and Overview of Audit and Assurance

Ethics,legal Liability and Client Acceptance

Risk Assessment I

Risk Assessment II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Testing of Controls

Execution of the Audit Performing Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Completing and Reporting on the Audit

Filters