Question 1

Which of the following procedures would most likely be performed in response to the auditor's assessment of the risk of monetary misstatements in the financial statements?

Accepted Answer

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

Question 2

The ________ is the combination of the types of tests to obtain sufficient appropriate evidence for a cycle. There are likely to be variations in the mix from cycle to cycle depending on the circumstances of the audit.

Accepted Answer

A)  testing mix 
B)  evidence mix 
C)  audit process mix 
D)  procedures mix

Question 3

If internal controls are tested and are considered effective, the auditor generally will increase both substantive tests of transactions and tests of details of balances.

Accepted Answer

A) True 
 B)False

Question 4

Analytical procedures performed during substantive testing, such as those for the audit of inventories, are typically more focused and more extensive than those done as part of the audit planning.

Accepted Answer

A) True 
 B)False

Question 5

For automated controls, the auditor's procedures to determine whether the automated control has been implemented may also serve as the test of that control.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is an accurate statement regarding the four phases of the audit process?

Accepted Answer

A)  After the planning stage, the auditor should have a well-defined audit strategy and plan and a specific audit program for the entire audit. 
B)  The objective of phase III is to perform tests of controls. 
C)  During phase II, the auditor must evaluate the going-concern assumption. 
D)  All of the above are correct statements.

Question 7

The evidence mix includes risk assessment procedures.

Accepted Answer

A) True 
 B)False

Question 8

Substantive tests of balances performed before year-end provide significant assurance and are normally only done when internal controls are ineffective.

Accepted Answer

A) True 
 B)False

Question 9

The auditor performs tests of controls and substantive procedures to obtain assurance that all audit objectives are achieved for information and amounts included in those disclosures.

Accepted Answer

A) True 
 B)False

Question 10

If the auditor's test of controls supports the control risk assessment, planned detection risk in the audit risk model is decreased, and planned substantive tests should therefore be reduced.

Accepted Answer

A) True 
 B)False

Question 11

There is a direct relationship between the ________ transaction-related audit objective and the ________ balance-related audit objective.

Accepted Answer

A)  occurrence; existence 
B)  timing; cutoff 
C)  posting and summarization; detail tie-in 
D)  all of the above

Question 12

Management implements internal controls to ensure that all required footnote disclosures are accurate. Auditors tests those controls to provide evidence supporting the ________ presentation.

Accepted Answer

A)  completeness and valuation 
B)  completeness and accuracy 
C)  rights and obligations and existence 
D)  occurrence and accuracy

Question 13

Collectively, procedures performed to obtain an understanding of the entity and its environment, including internal controls, represent the auditor's

Accepted Answer

A)  audit strategy. 
B)  tests of controls. 
C)  risk assessment procedures. 
D)  tests of transactions.

Question 14

Which of the following is ordinarily designed to detect material dollar errors on the financial statements?

Accepted Answer

A)  tests of controls 
B)  analytical review procedures 
C)  computer controls 
D)  tests of details of balances

Question 15

Which of the following statements is not true?

Accepted Answer

A)  Analytical procedures emphasize the overall reasonableness of transactions and balances. 
B)  Tests of controls are concerned with evaluating whether controls are sufficiently effective to justify reducing control risk and thereby reducing analytical review procedures. 
C)  Substantive tests of transactions emphasize the verification of transactions recorded in the journals and then posted in the general ledger. 
D)  Tests of details of balances emphasize the ending balances in the general ledger.

Question 16

One factor that determines the amount of additional evidence required for tests of controls is the planned reduction in control risk.

Accepted Answer

A) True 
 B)False

Question 17

The amount of additional evidence required for tests of controls depends on two things: the extent of evidence obtained in gaining an understanding of internal controls, and the planned reduction in detection risk.

Accepted Answer

A) True 
 B)False

Question 18

For clients with highly sophisticated computerized accounting systems, auditors perform tests throughout the year to identify significant or unusual transactions. This approach is called ________ and is frequently used in integrated audits of financial statements and internal control for public companies.

Accepted Answer

A)  continuous audit program 
B)  continuous auditing 
C)  continuous analytical testing 
D)  continuous audit mix

Question 19

Auditors must perform tests of controls separately from substantive tests of transactions.

Accepted Answer

A) True 
 B)False

Question 20

An increased extent of tests of controls is most likely to occur when

Accepted Answer

A)  it is a first-year audit. 
B)  the auditor is doing a "fraud audit." 
C)  controls are effective and the preliminary control risk assessment is low. 
D)  controls are ineffective and the preliminary control risk assessment is high.

Exam 13: Overall Audit Strategy and Audit Program

Which of the following procedures would most likely be performed in response to the auditor's assessment of the risk of monetary misstatements in the financial statements?

The ________ is the combination of the types of tests to obtain sufficient appropriate evidence for a cycle. There are likely to be variations in the mix from cycle to cycle depending on the circumstances of the audit.

If internal controls are tested and are considered effective, the auditor generally will increase both substantive tests of transactions and tests of details of balances.

Analytical procedures performed during substantive testing, such as those for the audit of inventories, are typically more focused and more extensive than those done as part of the audit planning.

For automated controls, the auditor's procedures to determine whether the automated control has been implemented may also serve as the test of that control.

Which of the following is an accurate statement regarding the four phases of the audit process?

The evidence mix includes risk assessment procedures.

Substantive tests of balances performed before year-end provide significant assurance and are normally only done when internal controls are ineffective.

The auditor performs tests of controls and substantive procedures to obtain assurance that all audit objectives are achieved for information and amounts included in those disclosures.

If the auditor's test of controls supports the control risk assessment, planned detection risk in the audit risk model is decreased, and planned substantive tests should therefore be reduced.

There is a direct relationship between the transaction-related audit objective and the balance-related audit objective.

Management implements internal controls to ensure that all required footnote disclosures are accurate. Auditors tests those controls to provide evidence supporting the ________ presentation.

Collectively, procedures performed to obtain an understanding of the entity and its environment, including internal controls, represent the auditor's

Which of the following is ordinarily designed to detect material dollar errors on the financial statements?

Which of the following statements is not true?

One factor that determines the amount of additional evidence required for tests of controls is the planned reduction in control risk.

The amount of additional evidence required for tests of controls depends on two things: the extent of evidence obtained in gaining an understanding of internal controls, and the planned reduction in detection risk.

Auditors must perform tests of controls separately from substantive tests of transactions.

An increased extent of tests of controls is most likely to occur when