Question 1

Tracing is primarily directed towards verifying which of the following assertions?

Accepted Answer

A)  completeness 
B)  existence 
C)  occurrence 
D)  valuation 
A)  completeness 
B)  existence 
C)  occurrence 
D)  valuation A

Question 2

Raisa Alexseev was getting ready to perform analytical procedures at Vulcan Spice Mills. She had made the following notes in her audit file:
1. Review allowance for doubtful accounts.
2. Don't forget to bring calculator to work.
3. Figure out the probability of $5,000,000 sales commissions threshold of last year.
4. Perform variance analysis.
Instructions
Can you summarize the steps Raisa will have to go through using analytical procedures before she can draw any conclusions about the subject matter?

Accepted Answer

When performing analytical procedures, the steps Raisa will perform can be summarized as follows:
1. Identify the computation, comparison or relationship to be made or to be investigated. Raisa would compare the allowance or commissions amounts in the current year's accounts and compare them to the methods and outcomes of previous years.
2. Assess the reliability of any data to be used. Raisa will ensure that the accounts receivable controls over transactions have been tested and that substantive procedures such as accounts receivable confirmations have been carried out.
3. Estimate the probable balance in the account or the probable outcome of the computation. If the client uses percentage of receivables or aging percentages, Raisa will estimate this year's anticipated balance using the data available.
4. Make whatever computations are needed using data in the client's records or data from reliable outside sources. Raisa will use her calculator or software to perform computations on the allowance for doubtful account amount or the reasonableness of the commissions expense.
5. Compare the estimated amount with the computed or recorded amount and evaluate whether the difference, if any, is significant.
6. Determine appropriate procedures for investigating the reasons for the difference if it is significant. Raisa will have discussions with the client's personnel such as the credit manager and sales vice president.
7. Perform the procedures.
8. Draw conclusions. Based on the procedures applied and her conclusions, Raisa may have to perform more substantive work in order to be satisfied with the reliability of underlying data.

Question 3

Larry French is trying to determine the extent of testing his team will have to perform in order to determine whether controls are working. How will he decide how much testing to perform?

Accepted Answer

A)  He will utilize statistical sampling. 
B)  He will use his professional judgment. 
C)  He will use last year's results as a basis for this year's tests. 
D)  none of the above 
A)  He will utilize statistical sampling. 
B)  He will use his professional judgment. 
C)  He will use last year's results as a basis for this year's tests. 
D)  none of the above B

Question 4

Which of the following factors would most likely influence an auditor's consideration of the reliability of data when performing analytical procedures?

Accepted Answer

A)  if the data were developed in a computerized accounting system 
B)  if the data were prepared in conformity with GAAP 
C)  if the data were developed under a system with adequate controls 
D)  if the data were processed in an online system 
A)  if the data were developed in a computerized accounting system 
B)  if the data were prepared in conformity with GAAP 
C)  if the data were developed under a system with adequate controls 
D)  if the data were processed in an online system

Question 5

Explain the four different levels of evidence obtained when performing substantive procedures.

Accepted Answer

Several different levels of evidence are

Question 6

Roll-forward procedures are performed during the period between the end of the financial year and the date of the audit report.

Accepted Answer

A) True 
 B)False

Question 7

Typically, substantive testing tends to be performed

Accepted Answer

A)  at the start of the financial year. 
B)  at or near year end. 
C)  half way through the financial year. 
D)  only when the client's management allows the auditor to conduct the tests. 
A)  at the start of the financial year. 
B)  at or near year end. 
C)  half way through the financial year. 
D)  only when the client's management allows the auditor to conduct the tests.

Question 8

Which of the following statements is correct?

Accepted Answer

A)  If detection risk is high, significant substantive procedures are necessary to reduce detection risk. 
B)  There is an inverse relation between the auditor's assessed risk of material misstatement and detection risk. 
C)  There is no relation between the auditor's assessed risk of material misstatement and detection risk. 
D)  If detection risk is low, only a small number of substantive procedures are necessary to reduce the detection risk. 
A)  If detection risk is high, significant substantive procedures are necessary to reduce detection risk. 
B)  There is an inverse relation between the auditor's assessed risk of material misstatement and detection risk. 
C)  There is no relation between the auditor's assessed risk of material misstatement and detection risk. 
D)  If detection risk is low, only a small number of substantive procedures are necessary to reduce the detection risk.

Question 9

Performing substantive procedures prior to year end, in the absence of specific effective controls, may be acceptable when

Accepted Answer

A)  the auditor is able to conclude overall that the client's control environment is effective. 
B)  the likelihood of errors or fraud is high. 
C)  the likelihood of errors or fraud is low. 
D)  both a and c 
A)  the auditor is able to conclude overall that the client's control environment is effective. 
B)  the likelihood of errors or fraud is high. 
C)  the likelihood of errors or fraud is low. 
D)  both a and c

Question 10

Jocelyne Yu is performing procedures and has decided to vouch the balance in the fixed assets ledger of a furniture manufacturing company back to supporting documentation. She is performing a

Accepted Answer

A)  test of details. 
B)  test of controls. 
C)  risk assessment. 
D)  none of the above 
A)  test of details. 
B)  test of controls. 
C)  risk assessment. 
D)  none of the above

Question 11

Which of the following examples of substantive procedures would often be performed prior to year end?

Accepted Answer

A)  confirming the client's bank balance 
B)  attending the client's annual inventory count 
C)  testing additions and disposals to the fixed asset register 
D)  performing confirmations of accounts receivable 
A)  confirming the client's bank balance 
B)  attending the client's annual inventory count 
C)  testing additions and disposals to the fixed asset register 
D)  performing confirmations of accounts receivable

Question 12

Analytical procedures may not be used

Accepted Answer

A)  as primary tests of an account balance. 
B)  in testing internal controls. 
C)  to provide at least some minimal level of support for the conclusion. 
D)  as corroborative tests in combination with other procedures. 
A)  as primary tests of an account balance. 
B)  in testing internal controls. 
C)  to provide at least some minimal level of support for the conclusion. 
D)  as corroborative tests in combination with other procedures.

Question 13

Roll-forward procedures are conducted to

Accepted Answer

A)  update findings from the previous year's audit to the current year. 
B)  update findings from an interim date to year end. 
C)  adjust accounts at year end for prepayments. 
D)  none of the above 
A)  update findings from the previous year's audit to the current year. 
B)  update findings from an interim date to year end. 
C)  adjust accounts at year end for prepayments. 
D)  none of the above

Question 14

Vouching involves

Accepted Answer

A)  tracking a source document through to the underlying accounting records. 
B)  agreeing the details of a transaction to supporting evidence outside of the company's accounting records. 
C)  the application of audit procedures to less than 100 per cent of items within a population. 
D)  none of the above 
A)  tracking a source document through to the underlying accounting records. 
B)  agreeing the details of a transaction to supporting evidence outside of the company's accounting records. 
C)  the application of audit procedures to less than 100 per cent of items within a population. 
D)  none of the above

Question 15

A substantive test that an auditor would conduct at year end is

Accepted Answer

A)  physical inspection of assets on hand. 
B)  review of the audit client's credit procedures. 
C)  testing the mathematical accuracy of invoices. 
D)  confirmation of accounts receivable. 
A)  physical inspection of assets on hand. 
B)  review of the audit client's credit procedures. 
C)  testing the mathematical accuracy of invoices. 
D)  confirmation of accounts receivable.

Question 16

Stella Zhang has been performing analytical procedures techniques as a substantive test. The techniques that can be used to perform analytical procedures are

Accepted Answer

A)  preparation of common sized financial statements. 
B)  break-even analysis. 
C)  ratio analysis. 
D)  all of the above 
A)  preparation of common sized financial statements. 
B)  break-even analysis. 
C)  ratio analysis. 
D)  all of the above

Question 17

Manny Regimbald is concerned about the audit of a high-risk client, the Lewiston Stampeders. He believes that there is a high likelihood that because his audit team is inexperienced, the testing procedures will not detect a material misstatement. This is a(n)

Accepted Answer

A)  audit risk. 
B)  control risk. 
C)  detection risk. 
D)  none of the above 
A)  audit risk. 
B)  control risk. 
C)  detection risk. 
D)  none of the above

Question 18

Judgmental misstatements can arise from

Accepted Answer

A)  the auditor conducting substantive tests inappropriate to the account being tested. 
B)  differences in the interpretation or application of accounting policies. 
C)  selecting a sample that is not representative of the population. 
D)  none of the above 
A)  the auditor conducting substantive tests inappropriate to the account being tested. 
B)  differences in the interpretation or application of accounting policies. 
C)  selecting a sample that is not representative of the population. 
D)  none of the above

Question 19

Analytical procedures may not be useful when they are used on a company with significantly diverse operations and geographical segments.

Accepted Answer

A) True 
 B)False

Question 20

Misstatements can only arise from fraud.

Accepted Answer

A) True 
 B)False

Tracing is primarily directed towards verifying which of the following assertions?

Larry French is trying to determine the extent of testing his team will have to perform in order to determine whether controls are working. How will he decide how much testing to perform?

Which of the following factors would most likely influence an auditor's consideration of the reliability of data when performing analytical procedures?

Explain the four different levels of evidence obtained when performing substantive procedures.

Roll-forward procedures are performed during the period between the end of the financial year and the date of the audit report.

Typically, substantive testing tends to be performed

Which of the following statements is correct?

Performing substantive procedures prior to year end, in the absence of specific effective controls, may be acceptable when

Jocelyne Yu is performing procedures and has decided to vouch the balance in the fixed assets ledger of a furniture manufacturing company back to supporting documentation. She is performing a

Which of the following examples of substantive procedures would often be performed prior to year end?

Analytical procedures may not be used

Roll-forward procedures are conducted to

Vouching involves

A substantive test that an auditor would conduct at year end is

Stella Zhang has been performing analytical procedures techniques as a substantive test. The techniques that can be used to perform analytical procedures are

Manny Regimbald is concerned about the audit of a high-risk client, the Lewiston Stampeders. He believes that there is a high likelihood that because his audit team is inexperienced, the testing procedures will not detect a material misstatement. This is a(n)

Judgmental misstatements can arise from

Analytical procedures may not be useful when they are used on a company with significantly diverse operations and geographical segments.

Misstatements can only arise from fraud.

Introduction and Review 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

Understanding and Testing the Clients System of Internal Controls

Auditing Sales and Receivables

Auditing Purchases, Payables and Payroll

Auditing Inventories and PPE

Auditing Cash and Investments

Completing and Reporting on the Audit

Filters

Exam 8: Execution of the Audit Performing Substantive Procedures

Tracing is primarily directed towards verifying which of the following assertions?

Larry French is trying to determine the extent of testing his team will have to perform in order to determine whether controls are working. How will he decide how much testing to perform?

Which of the following factors would most likely influence an auditor's consideration of the reliability of data when performing analytical procedures?

Explain the four different levels of evidence obtained when performing substantive procedures.

Roll-forward procedures are performed during the period between the end of the financial year and the date of the audit report.

Typically, substantive testing tends to be performed

Which of the following statements is correct?

Performing substantive procedures prior to year end, in the absence of specific effective controls, may be acceptable when

Jocelyne Yu is performing procedures and has decided to vouch the balance in the fixed assets ledger of a furniture manufacturing company back to supporting documentation. She is performing a

Which of the following examples of substantive procedures would often be performed prior to year end?

Analytical procedures may not be used

Roll-forward procedures are conducted to

Vouching involves

A substantive test that an auditor would conduct at year end is

Stella Zhang has been performing analytical procedures techniques as a substantive test. The techniques that can be used to perform analytical procedures are

Manny Regimbald is concerned about the audit of a high-risk client, the Lewiston Stampeders. He believes that there is a high likelihood that because his audit team is inexperienced, the testing procedures will not detect a material misstatement. This is a(n)

Judgmental misstatements can arise from

Analytical procedures may not be useful when they are used on a company with significantly diverse operations and geographical segments.

Misstatements can only arise from fraud.

Introduction and Review 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

Understanding and Testing the Clients System of Internal Controls

Auditing Sales and Receivables

Auditing Purchases, Payables and Payroll

Auditing Inventories and PPE

Auditing Cash and Investments

Completing and Reporting on the Audit

Filters