Question 1

Decisions involving the proper application of GAAP primarily involve which management assertion? Give some examples.

Accepted Answer

The valuation and allocation assertion often involves decisions about the proper application of GAAP.Examples would be the selection of amortization method,or valuing inventory at the lower of cost or market.

Question 2

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  False

Question 3

A completeness error occurs when an account balance is overstated.

Accepted Answer

A) True 
 B)False  False

Question 4

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 5

A bank with a large loan would most likely be interested in materiality based on ________.

Accepted Answer

A) operating cash flows 
B) normalized net income 
C) sales revenue 
D) net assets 
A) operating cash flows 
B) normalized net income 
C) sales revenue 
D) net assets

Question 6

This question is about the auditor's concept of materiality considered in the planning stage of the audit.
Required:
A)Define or describe the independent auditor's concept of "planning materiality."
B)Name (but do not describe or explain)three common relationships or considerations used by the auditor quantifying materiality.

Accepted Answer

A)Planning materiality is the largest am

Question 7

The concept of materiality refers to ________.

Accepted Answer

A) any misstatement in the financial statements 
B) the overall degree of risk in an organization 
C) an amount of misstatement that could lead someone to make a poor decision and suffer a loss 
D) an amount of risk in an organization sufficient to offset the expected returns of any investment in the company 
A) any misstatement in the financial statements 
B) the overall degree of risk in an organization 
C) an amount of misstatement that could lead someone to make a poor decision and suffer a loss 
D) an amount of risk in an organization sufficient to offset the expected returns of any investment in the company

Question 8

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 9

If fictitious sales were recorded and the fictitious accounts receivable were written off as bad debt expense,________.

Accepted Answer

A) income would be overstated 
B) income would be understated 
C) income would not be misstated 
D) accounts receivable would be understated 
A) income would be overstated 
B) income would be understated 
C) income would not be misstated 
D) accounts receivable would be understated

Question 10

The compliance assertion is not normally listed as a separate assertion.It requires an auditor to assess ________.

Accepted Answer

A) how well company procedures control risk 
B) how well company employees comply with codes of conduct 
C) how well company personnel follow internal controls 
D) how well a company's strategy is being implemented 
A) how well company procedures control risk 
B) how well company employees comply with codes of conduct 
C) how well company personnel follow internal controls 
D) how well a company's strategy is being implemented

Question 11

The audit objective related to existence is to obtain evidence that the asset,liability or equity exists physically or legally.

Accepted Answer

A) True 
 B)False

Question 12

An auditor should assess a client's business risks ________.

Accepted Answer

A) early in the engagement,based on discussion with management 
B) at the end of the engagement after all evidence has been assembled 
C) as part of the year-end evidence gathering 
D) only if the client requests the auditor to do so in the engagement letter 
A) early in the engagement,based on discussion with management 
B) at the end of the engagement after all evidence has been assembled 
C) as part of the year-end evidence gathering 
D) only if the client requests the auditor to do so in the engagement letter

Question 13

The valuation assertion includes ________.

Accepted Answer

A) the measurement assumption used 
B) ensuring all inventory is counted 
C) making sure that all receivables relate to sales during the year 
D) the method of presenting short-term and long-term liabilities 
A) the measurement assumption used 
B) ensuring all inventory is counted 
C) making sure that all receivables relate to sales during the year 
D) the method of presenting short-term and long-term liabilities

Question 14

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 15

The detailed audit plan guides development of the overall audit strategy.

Accepted Answer

A) True 
 B)False

Question 16

For audits of financial statements made in accordance with generally accepted auditing standards,the use of analytical procedures is required to some extent ________.

Accepted Answer

A) as a substantive test and in the final review stage 
B) as a substantive test but not in the final review stage 
C) in the final review stage but not as a substantive test 
D) neither in the final review stage nor as a substantive test 
A) as a substantive test and in the final review stage 
B) as a substantive test but not in the final review stage 
C) in the final review stage but not as a substantive test 
D) neither in the final review stage nor as a substantive test

Question 17

An auditor examines an organization's strategy to determine its objectives.After assessing whether the strategy is guiding the whole operation,what steps will the auditor take next? What key management assertion can be affected by any weakness in the strategy?

Accepted Answer

An auditor must consider whether the str

Question 18

When there is a change in auditors,the Rules of Professional Conduct do not permit the predecessor auditor to give information to the successor auditor without explicit approval by the client.

Accepted Answer

A) True 
 B)False

Question 19

Three key management assertions about items on the balance sheet are ________.

Accepted Answer

A) occurrence,completeness,and accuracy 
B) classification,existence,and cut-off 
C) confirmation,presentation,and disclosure 
D) existence,completeness,and presentation 
A) occurrence,completeness,and accuracy 
B) classification,existence,and cut-off 
C) confirmation,presentation,and disclosure 
D) existence,completeness,and presentation

Question 20

Since auditing is a public profession,auditors are obligated to continue auditing a client once they start.

Accepted Answer

A) True 
 B)False

Decisions involving the proper application of GAAP primarily involve which management assertion? Give some examples.

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

A completeness error occurs when an account balance is overstated.

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.

A bank with a large loan would most likely be interested in materiality based on ________.

The concept of materiality refers to ________.

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

If fictitious sales were recorded and the fictitious accounts receivable were written off as bad debt expense,________.

The compliance assertion is not normally listed as a separate assertion.It requires an auditor to assess ________.

The audit objective related to existence is to obtain evidence that the asset,liability or equity exists physically or legally.

An auditor should assess a client's business risks ________.

The valuation assertion includes ________.

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.

The detailed audit plan guides development of the overall audit strategy.

For audits of financial statements made in accordance with generally accepted auditing standards,the use of analytical procedures is required to some extent ________.

An auditor examines an organization's strategy to determine its objectives.After assessing whether the strategy is guiding the whole operation,what steps will the auditor take next? What key management assertion can be affected by any weakness in the strategy?

When there is a change in auditors,the Rules of Professional Conduct do not permit the predecessor auditor to give information to the successor auditor without explicit approval by the client.

Three key management assertions about items on the balance sheet are ________.

Since auditing is a public profession,auditors are obligated to continue auditing a client once they start.

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

hapter 15 Completing the Audit Work

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

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters

Exam 5: Preliminary Audit Planning: Understanding the Auditees Business

Decisions involving the proper application of GAAP primarily involve which management assertion? Give some examples.

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

A completeness error occurs when an account balance is overstated.

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.

A bank with a large loan would most likely be interested in materiality based on ________.

The concept of materiality refers to ________.

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

If fictitious sales were recorded and the fictitious accounts receivable were written off as bad debt expense,________.

The compliance assertion is not normally listed as a separate assertion.It requires an auditor to assess ________.

The audit objective related to existence is to obtain evidence that the asset,liability or equity exists physically or legally.

An auditor should assess a client's business risks ________.

The valuation assertion includes ________.

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.

The detailed audit plan guides development of the overall audit strategy.

For audits of financial statements made in accordance with generally accepted auditing standards,the use of analytical procedures is required to some extent ________.

An auditor examines an organization's strategy to determine its objectives.After assessing whether the strategy is guiding the whole operation,what steps will the auditor take next? What key management assertion can be affected by any weakness in the strategy?

When there is a change in auditors,the Rules of Professional Conduct do not permit the predecessor auditor to give information to the successor auditor without explicit approval by the client.

Three key management assertions about items on the balance sheet are ________.

Since auditing is a public profession,auditors are obligated to continue auditing a client once they start.

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

hapter 15 Completing the Audit Work

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

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters