Question 1

Auditors usually test for the existence of property, plant and equipment by:

Accepted Answer

A)  physically sighting the assets on the fixed assets register in the first year the client is audited. 
B)  vouching to supporting documentation. 
C)  re-performing depreciation calculations. 
D)  performing analytical review procedures. 
A)  physically sighting the assets on the fixed assets register in the first year the client is audited. 
B)  vouching to supporting documentation. 
C)  re-performing depreciation calculations. 
D)  performing analytical review procedures. A

Question 2

Testing the mathematical accuracy of the cash payment ledger relates to the existence assertion.

Accepted Answer

A) True 
 B)False  False

Question 3

Discuss why valuation and allocation is a key assertion for property, plant and equipment and explain how auditors verify the reliability of the valuations of such assets.

Accepted Answer

Valuation and allocation is a key assertion for property, plant, and equipment because it ensures that these assets are accurately recorded at their fair market value and that their costs are appropriately allocated over their useful lives. This is important for financial reporting purposes as it impacts the company's balance sheet, income statement, and overall financial health.

Auditors verify the reliability of the valuations of property, plant, and equipment through various methods. One common method is to engage a third-party valuation expert to assess the fair market value of the assets. This expert will consider factors such as the condition of the assets, market trends, and comparable sales to determine their value.

Auditors also review the company's depreciation methods and assumptions to ensure that the allocation of costs over the assets' useful lives is reasonable and in accordance with accounting standards. They may also perform physical inspections of the assets to confirm their existence and condition.

Additionally, auditors may compare the valuations of property, plant, and equipment to industry benchmarks and historical data to assess reasonableness. They may also review any significant changes in the company's operations or market conditions that could impact the valuations of these assets.

Overall, the verification of the reliability of valuations for property, plant, and equipment is a critical part of the audit process to ensure the accuracy and completeness of a company's financial statements.

Question 4

Provisions can be easily audited by controls testing alone.

Accepted Answer

A) True 
 B)False

Question 5

The typical procedures performed to verify that the client has not omitted any amounts from the payables balance include:

Accepted Answer

A)  vouching recorded payables to supporting documentation. 
B)  performing analytical review procedures. 
C)  performing confirmations of payables accounts. 
D)  subsequent payments testing. 
A)  vouching recorded payables to supporting documentation. 
B)  performing analytical review procedures. 
C)  performing confirmations of payables accounts. 
D)  subsequent payments testing.

Question 6

Discuss the specific issues that auditors should consider when designing substantive procedures.

Accepted Answer

When deciding on the nature of test to p

Question 7

The timing of substantive testing is dependent on the risk assessment of the significant account in question.

Accepted Answer

A) True 
 B)False

Question 8

Evaluating the adequacy of the allowance for doubtful debts account is an example of a substantive test of trade receivables that is always performed.

Accepted Answer

A) True 
 B)False

Question 9

A fixed assets register is used to capture additions and disposals of fixed assets, as well as calculating depreciation charges.

Accepted Answer

A) True 
 B)False

Question 10

When the assessment of inherent risk and control risk is low, the amount of substantive testing required to reduce the detection risk to an acceptable level is significant.

Accepted Answer

A) True 
 B)False

Question 11

Which are the two audit assertions considered most important to the auditor concluding there are no material misstatements in trade receivables at year-end?

Accepted Answer

A)  Valuation and allocation, and rights and obligations 
B)  Existence and occurrence 
C)  Occurrence and rights and obligations 
D)  Existence and valuation and allocation 
A)  Valuation and allocation, and rights and obligations 
B)  Existence and occurrence 
C)  Occurrence and rights and obligations 
D)  Existence and valuation and allocation

Question 12

Which of the following is a substantive test of the trade receivables balance that is always performed?

Accepted Answer

A)  Testing the accounting classification of sales transactions 
B)  Testing the mathematical accuracy of the cash receipts ledger 
C)  Evaluating the adequacy of the provision for doubtful debts 
D)  None of the above 
A)  Testing the accounting classification of sales transactions 
B)  Testing the mathematical accuracy of the cash receipts ledger 
C)  Evaluating the adequacy of the provision for doubtful debts 
D)  None of the above

Question 13

Which of the following account balances are typically audited fully substantially with limited or no controls testing?

Accepted Answer

A)  Investments 
B)  Intercompany balances 
C)  Prepayments 
D)  All of the above 
A)  Investments 
B)  Intercompany balances 
C)  Prepayments 
D)  All of the above

Question 14

Explain how auditors evaluate the results of substantive procedures and describe the procedures employed by auditors when the procedures identify errors or exceptions.

Accepted Answer

Auditors evaluate the results of substan

Question 15

A pledge is something delivered as security for the payment of a debt or the fulfilment of a promise.

Accepted Answer

A) True 
 B)False

Question 16

Accounts that are clearly trivial or immaterial are usually ignored or only subjected to:

Accepted Answer

A)  tests of controls. 
B)  analytical procedures. 
C)  confirmations. 
D)  observations. 
A)  tests of controls. 
B)  analytical procedures. 
C)  confirmations. 
D)  observations.

Question 17

When trade receivables is a significant account in an entity's balance sheet, the two audit assertions that are considered most important are existence and valuation and allocation.

Accepted Answer

A) True 
 B)False

Question 18

The additional opportunities for influencing the timing of the work include:

Accepted Answer

A)  reviewing provisions prior to year-end. 
B)  leveraging off the activities of the internal audit function. 
C)  reviewing activity in the period to date. 
D)  All of the above 
A)  reviewing provisions prior to year-end. 
B)  leveraging off the activities of the internal audit function. 
C)  reviewing activity in the period to date. 
D)  All of the above

Question 19

Which of the following are substantive tests of payables balances that are always performed?

Accepted Answer

A)  Perform a search for unrecorded liabilities 
B)  Examine the client's bank reconciliations 
C)  Test the cut-off by inspecting the payments ledger and supporting documents to determine that transactions are recorded in the period 
D)  All of the above 
A)  Perform a search for unrecorded liabilities 
B)  Examine the client's bank reconciliations 
C)  Test the cut-off by inspecting the payments ledger and supporting documents to determine that transactions are recorded in the period 
D)  All of the above

Question 20

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

Accepted Answer

A)  qualify the audit report. 
B)  understand why the exception or error has arisen. 
C)  report the client to ASIC. 
D)  perform additional substantive testing. 
A)  qualify the audit report. 
B)  understand why the exception or error has arisen. 
C)  report the client to ASIC. 
D)  perform additional substantive testing.

Auditors usually test for the existence of property, plant and equipment by:

Testing the mathematical accuracy of the cash payment ledger relates to the existence assertion.

Discuss why valuation and allocation is a key assertion for property, plant and equipment and explain how auditors verify the reliability of the valuations of such assets.

Provisions can be easily audited by controls testing alone.

The typical procedures performed to verify that the client has not omitted any amounts from the payables balance include:

Discuss the specific issues that auditors should consider when designing substantive procedures.

The timing of substantive testing is dependent on the risk assessment of the significant account in question.

Evaluating the adequacy of the allowance for doubtful debts account is an example of a substantive test of trade receivables that is always performed.

A fixed assets register is used to capture additions and disposals of fixed assets, as well as calculating depreciation charges.

When the assessment of inherent risk and control risk is low, the amount of substantive testing required to reduce the detection risk to an acceptable level is significant.

Which are the two audit assertions considered most important to the auditor concluding there are no material misstatements in trade receivables at year-end?

Which of the following is a substantive test of the trade receivables balance that is always performed?

Which of the following account balances are typically audited fully substantially with limited or no controls testing?

Explain how auditors evaluate the results of substantive procedures and describe the procedures employed by auditors when the procedures identify errors or exceptions.

A pledge is something delivered as security for the payment of a debt or the fulfilment of a promise.

Accounts that are clearly trivial or immaterial are usually ignored or only subjected to:

When trade receivables is a significant account in an entity's balance sheet, the two audit assertions that are considered most important are existence and valuation and allocation.

The additional opportunities for influencing the timing of the work include:

Which of the following are substantive tests of payables balances that are always performed?

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

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Risk Assessment 1

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 Income Statement Accounts

Completing and Reporting on the Audit

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Exam 10: Substantive Testing and Balance Sheet Accounts

Auditors usually test for the existence of property, plant and equipment by:

Testing the mathematical accuracy of the cash payment ledger relates to the existence assertion.

Discuss why valuation and allocation is a key assertion for property, plant and equipment and explain how auditors verify the reliability of the valuations of such assets.

Provisions can be easily audited by controls testing alone.

The typical procedures performed to verify that the client has not omitted any amounts from the payables balance include:

Discuss the specific issues that auditors should consider when designing substantive procedures.

The timing of substantive testing is dependent on the risk assessment of the significant account in question.

Evaluating the adequacy of the allowance for doubtful debts account is an example of a substantive test of trade receivables that is always performed.

A fixed assets register is used to capture additions and disposals of fixed assets, as well as calculating depreciation charges.

When the assessment of inherent risk and control risk is low, the amount of substantive testing required to reduce the detection risk to an acceptable level is significant.

Which are the two audit assertions considered most important to the auditor concluding there are no material misstatements in trade receivables at year-end?

Which of the following is a substantive test of the trade receivables balance that is always performed?

Which of the following account balances are typically audited fully substantially with limited or no controls testing?

Explain how auditors evaluate the results of substantive procedures and describe the procedures employed by auditors when the procedures identify errors or exceptions.

A pledge is something delivered as security for the payment of a debt or the fulfilment of a promise.

Accounts that are clearly trivial or immaterial are usually ignored or only subjected to:

When trade receivables is a significant account in an entity's balance sheet, the two audit assertions that are considered most important are existence and valuation and allocation.

The additional opportunities for influencing the timing of the work include:

Which of the following are substantive tests of payables balances that are always performed?

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

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Risk Assessment 1

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 Income Statement Accounts

Completing and Reporting on the Audit

Filters