[B] Module 8: Documentation, Financial Assertions, and Audit Evidence

D

1. When receiving audit working papers, the primary responsibility of an audit supervisor is to determine that

A. Each worksheet is properly identified with a decretive heading.

B. Working papers are properly reference and kept in logical groupings.

C. Standard departmental procedures are adhered to with regard to working paper preparation and technique.

D. Working papers adequately support the audit findings, conclusions, and report.

D

2. A difference of opinion concerning accounting and auditing matters relative to a particular phase of the audit arises between an assistant auditor who is an the senior auditor responsible for the engagement. After appropriate consultation, the assistant auditor asks to be disassociated from the resolution of the matter. The working papers would probably be

A. Silent on the matter because it is an internal matter for the auditing firm.

B. Expanded to document that the assistant auditor is completely disassociated from responsibility for the auditor's opinion.

C. Expanded to document the additional work required because all disagreements of this type will require further substantive testing.

D. Expanded to document the assistant auditor's position and the manner in which the difference of opinion was resolved

D

3. During the course of an audit engagement, an auditor prepares and accumulates audit working papers. The primary purpose of audit working papers is to

A. Aid the auditor in adequately planning his work.

B. Serve as a reference for future audit engagements.

C. Support the underlying concepts included in the preparation of the basi financial statements.

D. Support the auditor's opinion

C

4. Which of the following characteristics is most important in assuring the achievement of the primary purpose of worming papers?

A. Working papers must be of standard format and standard content

B. Working papers must be properly indexed and corss-referenced to the draft of audit report.

C. Working papers must provide sufficient, competent, and useful information to support the audit report.

D. Working papers must be arranged in logical order following the audit program sequence.

A

5. The primary purpose of the auditor's working papers is to

A. Provide evidence of planning and execution of audit procedures performed.

B. Serve as a means with which to prepare the financial statements.

C. Document the deficiencies in internal control with recommendations to management for improvement.

D. Comply with the auditing standards of the profession.

D

6. What is (are) the purpose(s) of audit documentation?

A. Provide reasonable assurance that the audit is conducted in accordance with PSAs

B. Provide a basis for determining the appropriate audit report

C. Provide the supervisory personnel an opportunity to assess the sufficiency of evidence obtained during and audit.

D. Audit documentation serves all the given choices.

C

7. Which of the following is not a primary purpose of audit working papers?

A. Coordinate the examination

B. Assist in the preparation of the audit report

C. Support the financial statements

D. Provide evidence of the audit work performed

A

8. Which of the following conditions constitutes inappropriate working paper preparation?

A. All forms and memoranda used/issued by the auditee department are included in the working papers.

B. Flowcharts are included in the working papers.

C. The findings are cross-referenced to the supporting documentation.

D. Tick marks are explained in the working papers.

C

9. Working papers that record the procedures used by the auditor to gather evidence should be

A. Considered the primary support for the financial statements being audited.

B. Viewed as the connecting link between the books of accounts and the financial statements.

C. Designed to meet the circumstances of the particular engagement.

D. Destroyed when the particular audit engagement is terminated.

D

10. Which of the following factors will least affect the auditor's judgement as to the quantity, type, and content of the working papers desirable for a particular engagement?

A. Nature of the auditor's report

B. Nature of the financial statements, schedules, or other information upon which the auditor is reporting

C. Need for supervision and review

D. Number of personnel assigned to the audit

C

11. During the audit engagement, data are compiled and included in the audit working papers. The working papers are

A. Client-owned record of conclusions reached by the auditors who performed the engagement.

B. Evidence supporting financial statements.

C. Support for the auditor's compliance with generally accepted auditing standards.

D. A record to be used as a basis for the following year's engagement.

C

12. Which of the following is not a factor affecting the independent auditor's judgement about the quantity, type, and content of audit working papers?

A. The need for supervision and review of the work performed by assistants.

B. The nature and condition of the client's records and internal controls.

C. The expertise of the client personnel and their participation in preparing the schedules.

D. The type of financial statements, schedules, or other information on which the auditor is reporting.

A

13. Which of the following factors most likely affects the auditor's judgment about the quantity, type and content of the working papers?

A. The assessed level of control risk

B. The content of the client's representation letter

C. The timing of substantive tests completed prior to the balance sheet date

D. The usefulness of the working papers as a reference source for the client

D

14. Audit working papers are used to record the results of the auditor's evidence gathering procedures. When preparing working papers, the auditors should remember that working papers should be

A. Kept on the client's premises so that the client can have access to them for reference purposes.

B. The primary support for the financial statements being examined,

C. Considered as part of the client's accounting records that are retained by the auditor.

D. Designed to meet the circumstances and the auditor's needs on each engagement.

A

15. Audit working papers are indexed by means of reference numbers. The primary purpose of indexing is to

A. Permit cross-referencing and simplify supervisory review.

B. Support the audit report.

C. Eliminate the need for follow-up reviews

D. Determine that working papers adequately support the findings, conclusions and reports.

D

16. The principal purpose for cross-indexing the audit working papers is to

A. Give the working papers a professional appearance.

B. Explain the use of tick marks.

C. Provide an explanation on the audit steps performed.

D. Provide a trail for the auditor and the reviewer.

C

17. Documentation may not be deleted form the working papers after the

A. Audit report delivery date.

B. Date of the audit report.

C. Completion of the assembly of final audit file.

D. Final day of field work

D

18. The reason why the auditors accumulate evidence is to

A. Defend themselves in the event of lawsuit.

B. Justify the conclusions they have otherwise reached.

C. Satisfy the requirements of the Bureau of Internal Revenue.

D. Enable them to reach conclusions about the fairness of the financial statements and issue an appropriate audit report.

A

19. To be competent, evidence must be all of the following except:

A. Sufficient

B. Reliable

C. Relevant

D. Unbiased

B

20. Which of the following is not one of the determinants of the persuasiveness of evidence?

A. Competence

B. Physical examination

C. Relevance

D. Sufficiency

B

21. In determining the sufficiency of evidential matter, which of the following would not normally be a factor?

A. Cost/benefit considerations

B. The sampling technique used

C. Audit risk

D. Materiality of the account

A

22. Which of the following statements is not true regarding the competence of audit evidence?

A. Relevance is enhanced by an effective information system.

B. To be competent, evidence must be both valid and relevant.

C. Validity is related to the quality of the client's information system.

D. Relevance must always relate to audit objectives.

D

23. Which of the following statements concerning evidence is correct?

A. Competent evidential matter supporting management's assertions should be convincing rather than merely persuasive

B. Effective internal control unlikely contributes to the reliability of the evidence created within the entity.

C. The cost of obtaining evidence is not an important consideration to anauditor in deciding what evidence should be obtained.

D. A client's accounting data cannot be considered a sufficient audit evidence to support the financial statements.

B

24. Which of the following statements is incorrect about audit evidence?

A. Evidence obtained from an independent source outside the client organization is more reliable than that obtained from within.

B. Documentary evidence is more reliable when it is received by the auditor directly from an independent third party.

C. Documents that originate outside the company are considered more reliable than those that originate within the client's organization.

D. External evidence, such as communications from banks, is generally regarded as more reliable than the information obtained from the client.

A

25. Which of the following factors is most important in determining the competence of audit evidence?

A. The reliability of the evidence in meeting the audit objective

B. The objectivity of the auditor in gathering the evidence

C. The quantity of the evidence obtained

D. The independence of the source of evidence

A

26. Which of the following pertains to the reliability of audit evidence?

A. The independence of the source of evidence

B. The experience level of the auditor who obtains the evidence

C. Whether the audit client uses a manual or computerized accounting system

D. The quantity of the evidence obtained

C

27. Which of the following is not one of the characteristics of competent evidence?

A. Independence of the source of the evidence

B. Effectiveness of internal control structure under which the internal evidence has been developed

C. Size of the sample

D. Degree of objectivity of the auditor

B

28. Which of the following presumptions does not relate to the competence of audit evidence?

A. The more effective the internal control is, the more assurance it provides about the accounting data and financial statements

B. An auditor's opinion, to be economically useful, is formed within a reasonable time and based on evidence obtained at a reasonable cost.

C. Evidence obtained from independent sources outside the entity is more reliable than evidence secured solely within the entity.

D. The independent auditor's direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly.

D

29. Which of the following statement relating to the competence of evidential matter is always true?

A. Evidential matter gathered by an auditor from outside an enterprise is reliable.

B. Accounting data developed under satisfactory conditions of internal control are more relevant than data developed under unsatisfactory conditions.

C. Oral representations made by managements are not valid

D. Evidence gathered by auditors must be both valid and relevant to be considered competent.

C

30. Although the validity of evidential matter is dependent on the circumstances under which it is obtained, there are three general presumptions that have some usefulness. The situations given below indicate the relative reliability that a CPA has placed on two types of evidence obtained in different situations. Which of these is an exception to one of the general presumptions?

A. The CPA places more reliance on the balance in the scrap sales account at Plant A, where the CPA has made limited tests of transactions because of effective controls, than at Plant B where the CPA has made extensive tests of transactions because of ineffective controls.

B. The CPA places more reliance on the CPAs computation of interest payable on outstanding bonds than on the amount confirmed by the trustee.

C. The CPA places more reliance on the report of an expert on an inventory of precious gems than on the CPAs physical observation of the gems.

D. The CPA places more reliance on a schedule of insurance coverage obtained from the company's insurance agent than on one prepared by the internal audit staff.

C

31. Which of the following would not be a factor in determining the competence of evidential matter?

A. The source of the evidence

B. The relevance of the evidence

C. The cost of gathering the evidence

D. Timeliness of the evidence

D

32. Which of the following statements is incorrect?

A. There are many ways ab auditor can accumulate evidence to meet the overall audit objectives.

B. Sufficient competent evidence must be accumulated to meet the auditor's professional responsibility.

C. The cost of accumulating the evidence should be minimized.

D. Gathering evidence and minimizing costs are equally important.

A

33. Each of the following might, by itself, form a valid basis for an auditor of deciding to omit a test except for the:

A. Difficulty and expense involved in testing a particular item

B. Assessment of control risk at a low level

C. Inherent risk involved

D. Relationship between the cost obtaining evidence and its usefulness

B

34. The following statements were made in a discussion of audit evidence by two independent auditors. Which of these statements is not valid?

A. I am seldom convinced beyond all doubt about all aspects of the financial statements being audited.

B. I would not undertake that procedure because at best the results would only be persuasive and I'm looking for convincing evidence.

C. I evaluate the degree of risk involved in deciding the kind of evidence I will gather.

D. I evaluate the usefulness of the evidence I can obtain against the cost to obtain it.

B

35. Management assertions that are embodied in the financial statements are

A. Directly related to standards on auditing

B. Directly related to financial reporting framework

C. Indirectly related to standards on auditing

D. Indirectly related to financial reporting framework

B

36. Management assertions are

A. Stated in the footnotes to the financial statements.

B. Implied or expressed representations about the financial statements.

C. Explicit representations about the financial statements.

D. Provided to the auditor in the assertions letter, but are not disclosed in the financial statements.

C

37. As used in auditing, which of the following statements best describes assertions?

A. Assertions are the representations of managements as to the reliability of the information system.

B. Assertions are the auditor's findings to be communicated in his audit report.

C. Assertions are the representations of managements as to the fairness of presentation of the financial statements.

D. Assertions are found only in the notes to the financial statements.

C

38. Financial statement assertions include all of the following except:

A. Occurrence

B. Presentation and disclosure

C. Consistency and comparability

D. Completeness

C

39. The audit objective that all transactions and accounts that should be presented in the financial statements are included is related to which assertion?

A. Occurrence

B. Rights and obligations

C. Completeness

D. Presentation and disclosure

D

40. The audit objective ―that all footnotes have been included in the financial statements is related most closely to which assertion?

A. Existence or occurrence

B. Rights and obligations

C. Completeness

D. Presentation and disclosure

B

41. Which of the following is a management assertion that relates to the valuation or allocation of fixed assets?

A. Fixed assets are properly classified as noncurrent assets

B. Fixed asset depreciation has been correctly calculated

C. The client has title to the machinery and equipment

D. Lien or encumbrance on fixed assets is appropriately disclosed in the notes to the financial statements

C

42. Which of the following statements about the existence and completeness objectives is incorrect?

A. The existence and completeness objectives emphasize opposite audit concerns

B. Existence deals with overstatements and completeness deals with understatements.

C. Existence deals with understatements and completeness deals with overstatements.

D. The completeness objective deals with unrecorded transactions.

A

43. If reported sales for 2009 erroneously included sales that occurred in 2010, the assertion violated on the 2009 statements would be

A. Occurrence

B. Completeness

C. Presentation and disclosure

D. Rights and obligation

B

44. The completeness assertion would be violated if:

A. Fictitious sale transactions were included in accounts receivable.

B. Unbilled shipments had occurred during the period.

C. The balance of accounts payable was overstated.

D. Disclosure in the statements of pledged receivable was inadequate.

B

45. The rights and obligations assertion applies to

A. Current liability items only

B. Balance sheet items only

C. Both income statement and balance sheet items

D. Assets that are not owned by the company

A

46. Which of the following is incorrect?

A. It would be a violation of the completeness assertion if managements would record a sale that did not take place.

B. The completeness assertion deals with matters opposite from those of the existence/occurrence assertion.

C. The completeness assertion is concerned with the possibility of omitting items from the financial statements that should have been included.

D. The existence/occurrence assertion is concerned with inclusion of amounts that should not have been included.

C

47. Which of the following best describes the primary purpose of audit procedures?

A. To detect errors or irregularities

B. To comply with financial reporting standards

C. To gather corroborative evidence

D. To verify the accuracy of account balances

D

48. Physical examination of assets is not sufficient form of evidence when the auditor wants to determine the

A. Existence of the asset

B. Quantity and description of the asset

C. Condition or quality of the asset

D. Ownership of the asset

D

49. Physical examination is not an objective means of ascertaining an asset's

A. Quantity

B. Description

C. Condition or quality

D. Ownership

C

50. Which of the following statements is not true? The evidence-gathering technique of observation

A. Is useful in most parts of the audit.

B. Is rarely sufficient by itself.

C. Is limited to what the auditor sees.

D. Requires the gathering of corroborative evidence.

B

51. A letter to the auditor in response to an inquiry is an example of

A. Physical evidence

B. Confirmation evidence

C. Documentary evidence

D. Analytical evidence

B

52. A CPA, who is performing an independent audit, would most likely use recalculation as a substantive test for which of the following expense-related accounts?

A. Purchases of supplies

B. Interest expense

C. Advertising expense

D. Repairs and maintenance expense

D

53. Evaluations of financial information made by a study of plausible relationships among financial and nonfinancial date involving comparisons of recorded amounts to expectations developed by the auditor. Refers to:

A. Auditing

B. Tests of balances

C. Tests of transactions

D. Analytical procedures

D

54. External auditors often confirm assertions contained in the organization's financial statements and accounting records with third parties. Which of the following best explains why confirmation produces an evidence of high quality?

A. Written assertions from knowledgeable third parties provide sufficient evidence to achieve most audit objectives.

B. Confirmation by knowledgeable third parties is usually the most relevant evidence available.

C. Confirmation by knowledgeable third parties is usually the least costly evidence to obtain.

D. Confirmation by knowledgeable third parties is highly competent because of its independent source.

A

55. When comparing the reliability of external versus internal documents, the external documents are generally considered

A. More reliable

B. Less reliable

C. Equally reliable

D. Unreliable

C

56. Traditionally, confirmations are used to verify

A. Individual transactions between organizations, such as sales transactions.

B. Fixed asset addition

C. Bank balances and accounts receivable

D. Any of the given responses

A

57. Analytical procedures are so important that they are required during

A. Planning and completion phases

B. Planning and testing phases

C. Testing and completion phases

D. Planning, testing, and completion phases

C

58. Analytical procedures used in planning an audit should focus

A. Evaluating the adequacy of evidence gathered concerning unusual balances

B. Testing individual account balances that depend on accounting estimates.

C. Enhancing the auditor's understanding of the client's business.

D. Identifying material weaknesses in internal control.

C

59. Analytical procedures are

A. Substantive tests designed to evaluate system of internal control

B. Tests of controls designed to evaluate the validity of management's representation letter.

C. Substantive tests designed to evaluate the reasonableness of financial information.

D. Tests of controls designed to evaluate the reasonableness of financial information.

B

1. In determining the quantity and quality of evidence to gather, the auditor will be satisfied when the evidence is

A. Irrefutable.

B. Highly persuasive.

C. Conclusive.

D. Completely convincing.

B

2. The current file of the auditor's working papers generally should include

A. A flowchart of the internal controls.

B. A copy of the financial statements.

C. Organizational charts.

D. Copies of bond and note indentures.

B

3. It refers to the detailed instructions for the collection of a particular type of audit evidence that is to be obtained at some time during the audit

A. Sampling plan.

B. Audit procedure

C. Audit program

D. Audit plan

A

4. The auditor's working papers will least likely include documentation showing how the

A. Schedules are prepared by the client personnel.

B. Engagement is planned

C. Understanding of the client's internal control is obtained and control rise was assessed.

D. Unusual matters are resolved

D

5. Although the quantity and content of audit working papers vary with each particular engagement, an auditor's permanent files most likely include

A. Schedules that support the current year's adjusting entries.

B. Prior years' accounts receivable confirmations that are classified as exceptions.

C. Documentation indicating that the audit work is adequately planned and supervised.

D. Analysis of capital stock and other owners' equity accounts.

D

6. The audit working paper that reflects the major components of an amount reported in the financial statements is the

A. Interbank transfer schedule

B. Supporting schedule

C. Carry forward schedule

D. Lead schedule

C

7. An auditor ordinarily uses a working trial balance resembling the financial statements without footnotes, but containing columns for

A. Cash flow increases and decreases

B. Audit objectives and assertions

C. Reclassifications and adjustments

D. Reconciliation and tick marks

C

8. In the course of an audit of financial statements for the purpose of expressing an opinion thereon, the auditor will normally prepare a schedule of unadjusted differences for which he did not propose adjustments when they were uncovered. The primary purpose of this schedule is to

A. Point out to the responsible client officials the errors made by various company personnel

B. Summarize the adjustments that must be made before the company can prepare and submit its income tax returns

C. Identify the potential effects on the financial statement of errors or disputed items that were considered immaterial when discovered.

D. Summarize the errors made by the company so that corrections can be made after the audited financial statements are released.

D

9. Which of the following analyses appearing in a predecessor's working papers would the successor auditor least likely review?

A. Analysis of noncurrent balance sheet accounts

B. Analysis of current balance sheet accounts

C. Analysis of contingencies

D. Analysis of income statement accounts

D

10. Using personal computers in auditing may affect the methods used to review the work of staff assistants because

A. The audit fieldwork standards for supervision may differ

B. Documenting the supervisory review may require assistance of consulting services personnel

C. Supervisory personnel may not have an understanding of the capabilities and limitations of personal computers

D. Working paper documentation may not contain readily observable details of calculations

A

11. In an internal audit, the audit supervisor determines that the working papers are complete

A. When satisfied that the audit objectives have been met and the working papers support the conclusions

B. When working papers refer to the steps outlined in the audit program

C. Only after the auditor who prepared the working papers has signed and dated them

D. When proper cross-references to other working papers are noted.

A

12. Standardized working papers are often used, chiefly because they allow working papers to be prepared more

A. Efficiently

B. Comprehensively

C. Neatly

D. Accurately

A

13. After the fieldwork audit procedures are completed, a partner of the CPA firm who has not been involved in the audit performs a second or wrap-up working paper review. This second review usually focuses on

A. The fair presentation of the financial statements in conformity with GAAP

B. Fraud involving the client's management and its employees

C. The materiality of the adjusting entries proposed by the audit staff

D. The communication of internal control weaknesses to the client's audit committee

C

14. An auditor's working papers should

A. Not be permitted to serve as a reference source for the client

B. Not contain comments critical of management

C. Show that the accounting records agree or reconcile with the financial statements

D. Be considered the primary support for the financial statements being audited

C

15. The detailed description of the results of the various evidence decisions for a specific audit is called an

A. Audit procedure.

B. Audit plan

C. Audit program

D. Audit guide

D

16. In using the work of a specialist, an understanding should exist among the auditor, the client, and the specialist as to the nature of the work to be performed by the specialist. Preferably, the understanding should be documented and would include all of the following except

A. The objectives and scope of the specialist's work

B. The specialist's representations as to his relationship, if any, to the client

C. The specialist's understanding of the auditor's corroborative use of the specialist's findings in relation to the representations in the financial statements

D. A statement that the methods or assumptions to be used are not inconsistent with those used by the client

D

17. Which of the following is an invalid description of why working papers are developed?

A. Facilitates third-party reviews

B. Aids in the planning, performance, and review of audits

C. Provides the principal evidential support for the auditor's report

D. Aids in the professional development of the operating staff

D

18. During the working paper review, an audit supervisor finds that the auditor's reported findings are not adequately cross-referenced to the supporting documentation. The supervisor will most likely instruct the auditor to

A. Prepare a working paper to indicate that the full scope of the audit was carried out

B. Familiarize himself with the sequence of working papers so that he will be able to answer questions about the conclusions stated in the report

C. Eliminate any cross-references to other working papers since the system is unclear

D. Provide a working paper indexing system that shows the relationship between findings, conclusions, and the related facts.

B

19. The main advantage of properly indexed working papers is to

A. Reduce the size of the file

B. Better organize the working papers

C. Allow division of labor within the audit team

D. Facilitate the efficient use of audit staff

B

20. Which of the following statements about working papers is correct?

A. Working papers are not permitted to be used as a reference source by the client

B. The auditor should document his understanding of the client's internal control which is to be used to plan the audit

C. Working papers may be regarded as a substitute for the client's accounting records

D. When reporting on comparative financial statements, the independent auditor may discard working papers after two years

D

21. Which of the following is a basic tool used by the auditor to control the audit work and review the progress of the audit?

A. Time and expense summary

B. Engagement letter

C. Progress flowchart

D. Audit program

A

22. Which of the following working papers would one normally expect to find in the permanent file?

A. A copy of a long-term bond indenture

B. The working trial balance

C. An analysis of additions and disposals relating to marketable securities

D. A workpaper analyzing customer replies to confirmation requests

D

23. The permanent file section of the working papers that is kept for each audit client most likely contains

A. Review notes pertaining to questions and comments regarding the audit work performed

B. A schedule of time spent on the engagement by each individual auditor

C. Correspondence with the client's legal counsel concerning pending litigation

D. Narrative descriptions of the client's internal control policies and procedures

A

24. Which of the following statements is correct with respect to ownership of audit documentation?

A. The audit firm owns the audit documentation

B. The audit client owns the audit documentation

C. The audit client and audit firm jointly own the audit documentation

D. The law is not explicit with respect to the ownership of audit documentation

A

25. Which of the following statements is true?

A. The auditor's objectives follow and are closely related to management assertions

B. Management's assertions follow and are closely related to the auditor's objectives

C. The auditor's primary responsibility is to find and disclose fraudulent management assertions

D. Assertions about presentation and disclosure deal with whether the accounts have been included in the financial statements at appropriate amounts

A

26. Which of the following is an incorrect statement about audit objectives?

A. There should be a one-to-one relationship between audit objectives and procedures

B. Audit objectives should be developed on the basis of management assertions about the financial statement components

C. Selection of tests to meet audit objectives should depend upon the understanding of internal control

D. The auditor should resolve any substantial doubt about any of the management's material financial statement assertions

D

27. Which of the following assertions is least likely to be tested exclusively at an interim date?

A. Existence for inventory

B. Completeness for accounts receivable

C. Existence for equipment

D. Valuation for marketable securities

B

28. Assuming a low assessed level of control risk, which of the following audit procedures is least likely to be performed?

A. Physical inspection of a sample of inventory

B. Search for unrecorded cash receipts

C. Obtaining a client representation letter

D. Confirmation of accounts receivable

C

29. Which of the following auditing procedures is ordinarily performed last?

A. Reading the minutes of the directors' meetings held during the audit year

B. Confirming accounts payable balances

C. Obtaining a management representation letter

D. Testing of control procedures on purchasing function

A

30. Which of the following is not one of the broad categories of assertions?

A. General or specific transaction objectives

B. Existence or occurrence

C. Valuation or allocation

D. Presentation and disclosure

D

31. Determining whether amounts are in conformity with GAAP addresses the proper measurement of assets, liabilities, revenues, and expenses which includes all of the following except:

A. The reasonableness of management's accounting estimates

B. Proper application of valuation principles

C. Proper application of matching principle

D. The reasonableness of management's accounting policies

A

32. For a particular assertion, control risk is the risk that

A. Control will now detect a material misstatement that occurs

B. Audit procedures will fail to detect a weak control system

C. The prescribed control procedures will not be applied uniformly

D. A material misstatement will occur in the accounting process

D

33. Which of the following is an incorrect statement?

A. An example of a completeness assertion would be that notes payable in the balance sheet includes all such obligations of the entity

B. An example of an occurrence assertion would be that sales in the income statement represent exchanges of goods or services that actually take place

C. An example of a rights/obligations assertion would be that amounts capitalized for leases in the balance sheet represent the cost of the entity's rights to leased property

D. An example of a valuation/allocation assertion would be that property, plant, and equipment are recorded at market value

A

34. A distinction must be made between general audit objectives and specific audit objectives for each account balance. Which of the following is an incorrect statement?

A. The general audit objectives are applicable to every account balance on the financial statements

B. The specific audit objectives are applicable to every account balance on the financial statements

C. The general audit objectives are tailored to the engagement

D. The specific audit objectives are tailored to the engagement

A

35. Which of the following general transaction-related audit objectives is not part of the valuation or allocation assertion?

A. Completeness

B. Accuracy

C. Classification

D. Timing

D

36. Only three of the following management assertions are associated with transaction-related audit objectives. Which one of the following is not?

A. Existence or occurrence

B. Completeness

C. Valuation or allocation

D. Presentation and disclosure

D

37. Which of the following statements is incorrectly stated?

A. Balance-related audit objectives are applied to account balance

B. Transaction-related audit objectives are applied to classes of transactions

C. Balance-related audit objectives are applied to the ending balance in balance sheet accounts

D. Balance-related audit objectives are applied to both beginning and ending balances in the balance sheet accounts

B

38. The detail tie-in objective is not concerned that the details in the account balance

A. Agree with related subsidiary ledger accounts

B. Are properly disclosed, in accordance with PFRS

C. Foot to the total in the account balance

D. Agree with the total in the general ledger

B

39. The disclosure objective is concerned that

A. The account balance is properly presented in the financial statements

B. Disclosure requirements are properly presented in the financial statements and in the footnotes

C. Both responses are correct

D. Both responses are incorrect

C

40. If a long-term note receivable is included in the account receivable listing, there is a violation of the

A. Existence objective

B. Completeness objective

C. Classification objective

D. Timing objective

A

41. After the general objectives are understood, specific objectives for each account balance on the financial statements can be developed. Which of the following statements is true?

A. There should be at least one specific objective for each relevant general objective

B. There will be only one specific objective for each relevant general objective

C. There will be many specific objectives developed for each relevant objective

D. There must be one specific objective for each general objective