1/40
Looks like no tags are added yet.
Name | Mastery | Learn | Test | Matching | Spaced |
---|
No study sessions yet.
Which of the following procedures would an auditor most likely rely on to verify management’s assertion of completeness?
Multiple Choice
observing the entity’s distribution of payroll checks
comparing a sample of shipping documents to related sales invoices
confirming a sample of recorded receivables by direct communication with the debtors
reviewing standard bank confirmations for indications of cash manipulations
comparing a sample of shipping documents to related sales invoices
In testing the existence assertion for an asset, an auditor ordinarily works from the:
Multiple Choice
potentially unrecorded items to the financial statements.
supporting documents to the accounting records.
accounting records to the supporting documents.
financial statements to the potentially unrecorded items.
accounting records to the supporting documents.
Which of the following statements concerning audit evidence is correct?
Multiple Choice
An entity’s general ledger may be sufficient audit evidence to support the financial statements.
The difficulty and expense of obtaining audit evidence concerning an account balance are a valid basis for omitting the test.
To be appropriate, audit evidence should be either persuasive or relevant but need not be both.
The measure of the reliability of audit evidence lies in the auditor’s judgment.
The measure of the reliability of audit evidence lies in the auditor’s judgment.
Which of the following presumptions is least likely to relate to the reliability of audit evidence?
Multiple Choice
The independent auditor’s direct personal knowledge obtained through observation and inspection is more persuasive than information obtained indirectly.
The more effective internal control, the more assurance it provides about the accounting data and financial statements.
Evidence obtained from independent sources outside the entity is more reliable than evidence secured solely within the entity.
An auditor’s opinion is formed within a reasonable time to achieve a balance between benefit and cost.
An auditor’s opinion is formed within a reasonable time to achieve a balance between benefit and cost.
Which of the following types of audit evidence is the least reliable?
Multiple Choice
correspondence from the entity’s attorney about litigation
prenumbered purchase order forms prepared by the entity
test counts of inventory performed by the auditor
bank statements obtained from the entity
prenumbered purchase order forms prepared by the entity
Audit evidence can come in different forms with different degrees of reliability. Which of the following is the most persuasive type of evidence?
Multiple Choice
prenumbered entity sales invoices
vendors’ invoices included in the entity’s files
bank statements obtained from the entity
computations made by the auditor
computations made by the auditor
An auditor would be least likely to use confirmations in connection with the examination of:
Multiple Choice
long-term debt.
inventory held in a third-party warehouse.
stockholders’ equity.
refundable income taxes.
refundable income taxes.
The assurance bucket is filled with all of the following types of evidence except:
Multiple Choice
the audit report.
substantive analytical procedures.
tests of details.
test of controls.
the audit report.
The current file of the auditor’s working papers should generally include:
Multiple Choice
a flowchart of the accounting system.
organization charts.
copies of bond and note indentures.
a copy of the financial statements.
a copy of the financial statements.
The permanent file section of the working papers that is kept for each audit client most likely contains:
Multiple Choice
narrative descriptions of the entity’s accounting system and control procedures.
review notes pertaining to questions and comments regarding the audit work performed.
correspondence with the entity’s legal counsel concerning pending litigation.
a schedule of time spent on the engagement by each individual auditor.
narrative descriptions of the entity’s accounting system and control procedures.
An audit document that reflects the major components of an amount reported in the financial statements is referred to as a(n):
Multiple Choice
supporting schedule.
working trial balance.
audit control account.
lead schedule.
lead schedule.
The primary objective of final analytical procedures is to:
Multiple Choice
satisfy doubts when questions arise about an entity’s ability to continue in existence.
obtain evidence from details tested to corroborate particular assertions.
identify areas that represent specific risks relevant to the audit.
assist the auditor in assessing the validity of the conclusions reached on the audit.
assist the auditor in assessing the validity of the conclusions reached on the audit.
The substantive analytical procedure known as trend analysis is best described by:
Multiple Choice
the calculation of days sales outstanding and comparing the value to the industry average.
development of a model to form an expectation using financial data, nonfinancial data, or both to test account balances or changes in account balances between accounting periods.
the examination of changes in an account over time.
the comparison, across time or to a benchmark, of relationships between financial statement accounts or between an account and nonfinancial data.
the examination of changes in an account over time
According to the text, each of the following is a main purpose for performing audit procedures except:
Multiple Choice
To develop recommendations for the control system.
To test the operating effectiveness of controls.
To detect material misstatements in the financial statements.
To obtain an understanding of the entity and its environment.
To develop recommendations for the control system.
Which of the following is true relating to audit work paper documentation?
Multiple Choice
It serves as the basis of review for audit supervisors to determine if sufficient, appropriate evidence has been gathered.
It should not include copies of any client-generated documents.
It is generally examined and utilized by the client after the audit is completed.
It must be destroyed once the audit is complete and the opinion is rendered.
It serves as the basis of review for audit supervisors to determine if sufficient, appropriate evidence has been gathered.
Audit evidence can come in different forms with different degrees of reliability. Of the following, which is the least reliable type of evidence?
Multiple Choice
The opinion of an outside specialist regarding inventory valuation.
Pre-numbered sales invoices.
Copies of bank statements obtained from the entity under audit.
Vendor confirmations of accounts payable balances.
Pre-numbered sales invoice
According to the reliability hierarchy by evidence type as presented in the text, an example of audit evidence with a low level of reliability is:
Multiple Choice
Reperformance.
Observation.
Inspection.
Analytical procedures.
Observation.
According to the reliability hierarchy by evidence type as presented in the text, an example of audit evidence with a high level of reliability is:
Multiple Choice
Confirmation.
Recalculation.
Observation.
Analytical procedures.
Recalculation.
Which of the following primary assertions is satisfied when an auditor observes the entity’s physical count of inventory?
Multiple Choice
Rights and obligations.
Accuracy, Valuation and Allocation.
Existence.
Completeness.
Existence.
Which of the following is true regarding audit evidence?
Multiple Choice
Auditors typically gather audit evidence about one whole financial statement at a time rather than one account at a time.
When audit evidence supports management’s assertions, a qualified audit report can be issued.
Audit evidence is gathered to determine whether each relevant financial statement assertion is supported.
Auditors rarely gather audit evidence about one business process at a time.
Audit evidence is gathered to determine whether each relevant financial statement assertion is supported.
One of the main objectives of performing analytical procedures during the planning phase of the audit is to identify:
Multiple Choice
Unusual changes that may signal possible account misstatements.
Inefficient operations.
Illegal acts undetected as a result of poor internal controls.
Transactions that have not been properly authorized.
Unusual changes that may signal possible account misstatements.
Which of the following items is generally not included as part of audit documentation?
Multiple Choice
Tickmarks.
Indexing.
Heading.
Client review notation.
Client review notation.
Which of the following statements is correct with regard to the quality or appropriateness of evidential matter?
Multiple Choice
Evidential matter must be either valid or relevant but need not be both.
Internal accounting data alone may be considered sufficient appropriate evidential matter to issue an unqualified opinion on financial statements.
The auditor’s direct personal knowledge, obtained through reperformance and recalculation, is more persuasive than information obtained indirectly from independent outside sources.
Appropriateness of evidential matter refers to the amount of corroborative evidence to be obtained.
The auditor’s direct personal knowledge, obtained through reperformance and recalculation, is more persuasive than information obtained indirectly from independent outside sources.
Which of the following audit procedures would most likely be used to test the mathematical accuracy of a five-hundred page inventory listing?
Multiple Choice
Examine a random sample of inventory documents.
Manually foot, or sum, several randomly-selected pages.
Use computer assisted audit techniques to foot, or sum, the entire listing.
Send confirmations to selected vendors to verify amounts.
Use computer assisted audit techniques to foot, or sum, the entire listing.
Confirmations would normally be most likely used as a type of audit evidence in connection with which of the following?
Multiple Choice
Goodwill.
Machinery and Equipment.
Deferred Taxes.
Accounts Receivable.
Accounts Receivable
Discussions with the owner-manager of an entity under audit reveal to the auditor that the company is more concerned with minimizing its income tax payments than maximizing income. Based on this information, which management assertion will the auditor be most concerned about verifying with regard to sales revenue?
Multiple Choice
Completeness.
Accuracy, Valuation and Allocation.
Existence and occurrence.
Rights and obligations.
Completeness.
Which of the following presumptions is correct regarding the reliability of audit evidence?
Multiple Choice
To be reliable, evidence should be convincing rather than simply persuasive.
An effective internal control system provides increased assurance with regard to the reliability of audit evidence.
Information obtained directly from the company is considered to be the most reliable type of evidence.
Reliability generally refers to the amount and relevance of corroborative audit evidence obtained.
An effective internal control system provides increased assurance with regard to the reliability of audit evidence
Audit documentation provides the principal support for which of the following?
Multiple Choice
Demonstrate that the underlying accounting records agreed or reconciled with the financial statements.
All of the above.
Support the basis for the auditor’s conclusions concerning material financial statement assertions.
Demonstrate how the audit complied with auditing and related professional practice standards.
All of the above.
An auditor’s primary consideration regarding an entity’s internal controls is whether they:
Multiple Choice
prevent management override.
affect the financial statement assertions.
relate to the control environment.
reflect management’s philosophy and operating style.
affect the financial statement assertions.
Which of the following statements about internal control is correct?
Multiple Choice
The establishment and maintenance of internal control is an important responsibility of the internal auditor.
The cost-benefit relationship is a primary criterion that should be considered in designing an internal control system.
A properly maintained internal control system reasonably ensures that collusion among employees cannot occur.
An exceptionally strong internal control system is enough for the auditor to eliminate substantive procedures on a significant account balance.
The cost-benefit relationship is a primary criterion that should be considered in designing an internal control system.
Internal control is a process designed to provide reasonable assurance regarding the achievement of which objective?
Multiple Choice
reliability of financial reporting
compliance with applicable laws and regulations
effectiveness and efficiency of operations
all of these are correct.
all of these are correct.
Monitoring is a major component of the COSO Internal Control—Integrated Framework. Which of the following is not correct in how the company can implement the monitoring component?
Multiple Choice
Monitoring can be an ongoing process.
The independent auditor can serve as part of the entity’s control environment and continuous monitoring.
Monitoring can be conducted as a separate evaluation.
Monitoring and other audit work conducted by internal audit staff can reduce external audit costs.
The independent auditor can serve as part of the entity’s control environment and continuous monitoring.
After obtaining an understanding of an entity’s internal control system, an auditor may set control risk at high for some assertions (i.e., plan to follow a substantive strategy) because the auditor:
Multiple Choice
determines that the pertinent internal control components are well documented.
performs tests of controls to restrict detection risk to an acceptable level.
believes the internal controls are unlikely to be effective.
identifies internal controls that are likely to prevent material misstatements.
believes the internal controls are unlikely to be effective.
Regardless of the assessed level of control risk, an auditor would perform some:
Multiple Choice
dual-purpose tests to evaluate both the risk of monetary misstatement and preliminary control risk.
analytical procedures to verify the design of internal controls.
substantive procedures to restrict detection risk for significant transaction classes.
tests of controls to determine the effectiveness of internal controls.
substantive procedures to restrict detection risk for significant transaction classes
Assessing control risk below high involves all of the following except:
Multiple Choice
concluding that controls are ineffective.
analyzing the achieved level of control risk after performing tests of controls.
performing tests of controls.
identifying specific controls to rely on.
concluding that controls are ineffective.
Which of the following audit techniques would most likely provide an auditor with the least assurance about the effectiveness of the operation of a control?
Multiple Choice
observation of entity personnel
inquiry of entity personnel
reperformance of the control by the auditor
walkthrough
inquiry of entity personnel
The highest-quality and most reliable audit evidence that segregation of duties is properly implemented is obtained by:
Multiple Choice
inquiries of employees who apply control activities.
observation by the auditor of the employees performing control activities.
inspection of documents prepared by a third party but which contain the initials of those applying entity controls.
inspection of a flowchart of duties performed and available personnel.
observation by the auditor of the employees performing control activities.
SOC 1, Type 2 reports issued by the service organization’s auditor typically:
Multiple Choice
ensure that the entity is billed correctly.
ensure that the entity will not have any misstatements in areas related to the service organization’s activities.
provide reasonable assurance that their financial statements are free of material misstatements.
assess whether the service organization’s controls are suitably designed and operating effectively.
assess whether the service organization’s controls are suitably designed and operating effectively.
Significant deficiencies are matters that come to an auditor’s attention that should be communicated to an entity’s audit committee because they represent:
Multiple Choice
disclosures of information that significantly contradict the auditor’s going concern assumption.
material fraud or illegal acts perpetrated by high-level management.
manipulation or falsification of accounting records or documents from which financial statements are prepared.
significant deficiencies in the design or operation of the internal control.