Question 1

Which of the following would not be considered further audit procedures?

Accepted Answer

A)   tests of controls
B)   analytical procedures
C)   tests of details of balances
D)   risk assessment procedures D

Question 2

In phase IV of the audit, complete the audit and issue an audit report, there are five activities required. List below the activities.

Accepted Answer

1. perform additional tests for presentation and disclosure
2. accumulate final evidence
3. evaluate results
4. issue audit report
5. communicate with audit committee and management

Question 3

You are auditing Rodgers and Company. After performing substantive analytical procedures, you conclude that, for the accounts tested, the client's balance appears reasonable. This may indicate that

Accepted Answer

A)   details test of balances can be eliminated for those accounts.
B)   certain tests of details of balances may be eliminated for those accounts.
C)   control tests may be eliminated for those accounts.
D)   control tests may be reduced for those accounts. B

Question 4

The auditor has determined that a key control in the audit of the sales and collection cycle is that recorded sales are supported by authorized shipping documents and approved customer orders. What typical test of controls should be used in this situation?

Accepted Answer

A)   Examine a sample of duplicate sales invoices to determine that each one is supported by an authorized shipping document and approved customer order.
B)   Observe whether shipping documents are forwarded daily to billing and observe when they are billed.
C)   Examine a sample of sales invoices and agree prices to the authorized computer price list.
D)   Use audit software to trace postings from the batch of sales transactions to the subsidiary and general ledgers.

Question 5

Analytical procedures are the least costly type of audit test.

Accepted Answer

A) True 
 B)False

Question 6

Tests of controls are directed toward the control's

Accepted Answer

A)   efficiency.
B)   effectiveness.
C)   cost and effectiveness.
D)   cost benefit ratio.

Question 7

Tests of controls are performed to support a reduced assessment of detection risk.

Accepted Answer

A) True 
 B)False

Question 8

Many auditors perform extensive analytical procedures because

Accepted Answer

A)   they are required by GAAS.
B)   they pinpoint errors in accounts.
C)   they indicate areas of potential risk and misstatement.
D)   they are required for tests of controls.

Question 9

The results of tests of controls and substantive tests of transactions affect the design of tests of details of balances.

Accepted Answer

A) True 
 B)False

Question 10

The auditor must communicate significant deficiencies in internal control only after the entire audit is complete to ensure the auditor has a sufficient understanding of the circumstances surrounding the deficiency.

Accepted Answer

A) True 
 B)False

Question 11

Analytical procedures performed during phase III of the audit

Accepted Answer

A)   must be performed before the balance sheet date.
B)   can be used as a means of planning and directing other audit tests to specific areas.
C)   should be done after tests of details of balances.
D)   are expensive and are therefore not frequently used by the auditor.

Question 12

Auditors can perform tests of controls separately from all other tests; therefore, it is inefficient to perform tests of controls, separately, from substantive tests of transactions.

Accepted Answer

A) True 
 B)False

Question 13

When designing an audit program for tests of details of balances, the auditor should make assumptions about inherent risk and control risk, and predictions concerning the outcome of tests of controls, substantive tests of transactions, and analytical procedures.

Accepted Answer

A) True 
 B)False

Question 14

When designing the audit program and the particular audit tests, the auditor should keep in mind that

Accepted Answer

A)   the audit program is broken down into two parts-the risk assessment procedures and the tests of details of balances.
B)   the tests of controls will not vary depending on assessed control risk.
C)   analytical procedures performed during substantive testing are generally more focused and more extensive than those done as part of planning.
D)   auditing standards require that the tests contained in the audit program must be approved by the PCAOB.

Question 15

Describe the five types of audit tests. Identify which of the five types are substantive tests, and which are used to reduce assessed control risk.

Accepted Answer

The answer of Describe the five types of audit tests....

Question 16

Tests of details of balances emphasize the overall reasonableness of transactions and the general ledger balances.

Accepted Answer

A) True 
 B)False

Question 17

When auditors must decide which type of test to select for obtaining sufficient appropriate evidence, the cost of obtaining the evidence is an important consideration. Rank the following types of tests in order of increasing cost: 1. Tests of controls
2) Substantive tests of transactions
3) Test of details of balances
4) Risk assessment procedures
5) Substantive analytical procedures

Accepted Answer

A)   1, 2, 3, 4, and 5
B)   2, 4, 3, 5, and 1
C)   5, 4, 1, 2, and 3
D)   5, 4, 3, 2, and 1

Question 18

When designing tests of controls and substantive tests an auditor is gathering evidence to satisfy the transaction-related audit objectives. What are the four steps the auditor would normally follow to reduce assessed control risk?

Accepted Answer

The answer of When designing tests of controls and substantive...

Question 19

In accumulating final evidence upon which to base an audit opinion, the auditor should perform four activities. List the activities below.

Accepted Answer

The answer of In accumulating final evidence upon which to...

Question 20

Which of the following is not completed during phase IV of the audit?

Accepted Answer

A)   Obtain a client representation letter.
B)   Read information in the annual report to make sure that it is consistent with the financial statements.
C)   Perform substantive tests of transactions.
D)   Perform final analytical procedures.

Exam 13: Overall Audit Strategy and Audit Program

Which of the following would not be considered further audit procedures?

In phase IV of the audit, complete the audit and issue an audit report, there are five activities required. List below the activities.

You are auditing Rodgers and Company. After performing substantive analytical procedures, you conclude that, for the accounts tested, the client's balance appears reasonable. This may indicate that

The auditor has determined that a key control in the audit of the sales and collection cycle is that recorded sales are supported by authorized shipping documents and approved customer orders. What typical test of controls should be used in this situation?

Analytical procedures are the least costly type of audit test.

Tests of controls are directed toward the control's

Tests of controls are performed to support a reduced assessment of detection risk.

Many auditors perform extensive analytical procedures because

The results of tests of controls and substantive tests of transactions affect the design of tests of details of balances.

The auditor must communicate significant deficiencies in internal control only after the entire audit is complete to ensure the auditor has a sufficient understanding of the circumstances surrounding the deficiency.

Analytical procedures performed during phase III of the audit

Auditors can perform tests of controls separately from all other tests; therefore, it is inefficient to perform tests of controls, separately, from substantive tests of transactions.

When designing an audit program for tests of details of balances, the auditor should make assumptions about inherent risk and control risk, and predictions concerning the outcome of tests of controls, substantive tests of transactions, and analytical procedures.

When designing the audit program and the particular audit tests, the auditor should keep in mind that

Describe the five types of audit tests. Identify which of the five types are substantive tests, and which are used to reduce assessed control risk.

Tests of details of balances emphasize the overall reasonableness of transactions and the general ledger balances.

When designing tests of controls and substantive tests an auditor is gathering evidence to satisfy the transaction-related audit objectives. What are the four steps the auditor would normally follow to reduce assessed control risk?

In accumulating final evidence upon which to base an audit opinion, the auditor should perform four activities. List the activities below.

Which of the following is not completed during phase IV of the audit?