Question 1

The characteristics that distinguish computer processing from manual processing would not include

Accepted Answer

A)  a decrease of management supervision of operations. 
B)  automatic initiation and execution of transactions. 
C)  the possible concentration of control activities. 
D)  a high potential for unauthorized access to data. 
A)  a decrease of management supervision of operations. 
B)  automatic initiation and execution of transactions. 
C)  the possible concentration of control activities. 
D)  a high potential for unauthorized access to data.

Question 2

The auditor looked at a bank statement received and held by the client.What kind of audit procedure would this be considered?

Accepted Answer

A)  Recalculation 
B)  Physical observation 
C)  Confirmation 
D)  Examination of documents 
A)  Recalculation 
B)  Physical observation 
C)  Confirmation 
D)  Examination of documents

Question 3

Which of the following procedures would an auditor most likely perform in planning a financial statement audit?

Accepted Answer

A)  Inquiring of the client's legal counsel concerning pending litigation 
B)  Comparing the financial statements to anticipated results 
C)  Examining computer-generated exception reports to verify the effectiveness of internal controls 
D)  Searching for unauthorized transactions that may aid in detecting unrecorded liabilities 
A)  Inquiring of the client's legal counsel concerning pending litigation 
B)  Comparing the financial statements to anticipated results 
C)  Examining computer-generated exception reports to verify the effectiveness of internal controls 
D)  Searching for unauthorized transactions that may aid in detecting unrecorded liabilities

Question 4

Which of the following auditor concerns most likely could be so serious that the auditor would conclude that a financial statement audit cannot be conducted?

Accepted Answer

A)  The entity has no formal written code of conduct. 
B)  The integrity of entity's management is suspect. 
C)  Procedures requiring separation of duties are subject to management override. 
D)  Management fails to modify prescribed controls for changes in conditions. 
A)  The entity has no formal written code of conduct. 
B)  The integrity of entity's management is suspect. 
C)  Procedures requiring separation of duties are subject to management override. 
D)  Management fails to modify prescribed controls for changes in conditions.

Question 5

For which of the following judgments may an independent auditor share responsibility with an entity's internal auditor who is assessed to be both competent and objective?

Accepted Answer

A)  Assessment of inherent risk, yes; assessment of control risk, yes 
B)  Assessment of inherent risk, yes; assessment of control risk, no 
C)  Assessment of inherent risk, no; assessment of control risk, yes 
D)  Assessment of inherent risk, no; assessment of control risk, no 
A)  Assessment of inherent risk, yes; assessment of control risk, yes 
B)  Assessment of inherent risk, yes; assessment of control risk, no 
C)  Assessment of inherent risk, no; assessment of control risk, yes 
D)  Assessment of inherent risk, no; assessment of control risk, no

Question 6

Before accepting an engagement to audit a new client,an auditor is required to

Accepted Answer

A)  make inquiries of the predecessor auditor after obtaining the consent of the prospective client. 
B)  obtain the prospective client's signature to the engagement letter. 
C)  prepare a memorandum setting forth the staffing requirements and documenting the preliminary audit plan. 
D)  discuss the management representation letter with the prospective client's audit committee. 
A)  make inquiries of the predecessor auditor after obtaining the consent of the prospective client. 
B)  obtain the prospective client's signature to the engagement letter. 
C)  prepare a memorandum setting forth the staffing requirements and documenting the preliminary audit plan. 
D)  discuss the management representation letter with the prospective client's audit committee.

Question 7

Do the following regarding auditors' concepts of overall "materiality" considered at the planning stage (i.e.,"planning materiality").
a.Define or describe independent auditors' concept of "planning materiality."
b.Name (but do not describe or explain)three common relationships or considerations used by auditors when assessing the dollar amount considered to be material.

Accepted Answer

a.Planning materiality is the largest am

Question 8

An auditor's purpose in auditing the information contained in the pension footnote most likely is to obtain evidence concerning management's assertion about

Accepted Answer

A)  rights and obligations. 
B)  existence. 
C)  presentation and disclosure. 
D)  valuation. 
A)  rights and obligations. 
B)  existence. 
C)  presentation and disclosure. 
D)  valuation.

Question 9

Which of the following is not one of the four major cycles?

Accepted Answer

A)  Revenue and cash collection 
B)  Acquisition and expenditure 
C)  Cash receipts and disbursements 
D)  Financing and investing 
A)  Revenue and cash collection 
B)  Acquisition and expenditure 
C)  Cash receipts and disbursements 
D)  Financing and investing

Question 10

The basic auditing application of the personal computer as an audit tool would not include

Accepted Answer

A)  spreadsheet analysis. 
B)  sample planning, selection, and evaluation. 
C)  continuous monitoring of a client's internal control system. 
D)  analytical review. 
A)  spreadsheet analysis. 
B)  sample planning, selection, and evaluation. 
C)  continuous monitoring of a client's internal control system. 
D)  analytical review.

Question 11

Which of the following factors most likely would cause an auditor not to accept a new audit engagement?

Accepted Answer

A)  An inadequate understanding of the entity's internal controls 
B)  The close proximity to the end of the entity's fiscal year 
C)  Concluding that the entity's management probably lacks integrity 
D)  The inability to perform preliminary analytical procedures before assessing control risk 
A)  An inadequate understanding of the entity's internal controls 
B)  The close proximity to the end of the entity's fiscal year 
C)  Concluding that the entity's management probably lacks integrity 
D)  The inability to perform preliminary analytical procedures before assessing control risk

Question 12

C.Hill,CPA,has been retained to audit the financial statements of Monday Co.Monday's predecessor auditor was K.Post,CPA,whom Monday has notified by that its services have been terminated.Under these circumstances,which party should initiate the communications between Hill and Post?

Accepted Answer

A)  Hill, the auditor 
B)  Post, the predecessor auditor 
C)  Monday's controller or CFO 
D)  The chair of Monday's board of directors 
A)  Hill, the auditor 
B)  Post, the predecessor auditor 
C)  Monday's controller or CFO 
D)  The chair of Monday's board of directors

Question 13

D.Jackson,CPA,audited Washington Company's financial statements for the year ended December 31,2007.On November 1,2008,Washington notified Jackson that it was changing auditors and that Jackson's services were being terminated.On November 5,2008,Washington invited Lincoln,CPA,to make a proposal for an engagement to audit its financial statements for the year ended December 31,2008.
Required:
What procedures concerning Jackson should Lincoln perform before accepting the engagement?

Accepted Answer

a.Lincoln should explain to Washington t

Question 14

An auditor who uses 7 percent of income before taxes as a basis for overall materiality would be basing judgment on

Accepted Answer

A)  absolute size. 
B)  relative size. 
C)  nature of the item. 
D)  cumulative effects. 
A)  absolute size. 
B)  relative size. 
C)  nature of the item. 
D)  cumulative effects.

Question 15

Comparing data on separate files can be accomplished by using computer-assisted audit techniques (CAATs)to determine whether comparable information is in agreement.Examples of such comparisons would not include

Accepted Answer

A)  payroll details with personnel records. 
B)  current and prior inventory to details of purchases and sales. 
C)  paid vouchers to disbursements. 
D)  observation of inventory accounts. 
A)  payroll details with personnel records. 
B)  current and prior inventory to details of purchases and sales. 
C)  paid vouchers to disbursements. 
D)  observation of inventory accounts.

Question 16

Which of the following explanations best describes why an auditor may decide to reduce tests of details for a particular audit objective?

Accepted Answer

A)  The audit is being performed soon after the balance sheet date. 
B)  Audit staff are experienced in performing the planned procedures. 
C)  Analytical procedures have revealed no unusual or unexpected results. 
D)  There were many transactions posted to the account during the period. 
A)  The audit is being performed soon after the balance sheet date. 
B)  Audit staff are experienced in performing the planned procedures. 
C)  Analytical procedures have revealed no unusual or unexpected results. 
D)  There were many transactions posted to the account during the period.

Question 17

An auditor most likely would inspect additions to the audit client's Property,Plant,and Equipment account to obtain evidence concerning management's assertions about

Accepted Answer

A)  existence or occurrence. 
B)  rights and obligations. 
C)  presentation and disclosure. 
D)  valuation or allocation. 
A)  existence or occurrence. 
B)  rights and obligations. 
C)  presentation and disclosure. 
D)  valuation or allocation.

Question 18

Which of the following most likely would give the most assurance concerning the valuation assertion of accounts receivable?

Accepted Answer

A)  Tracing amounts in the subsidiary ledger to details on shipping documents 
B)  Comparing receivable turnover rates to industry statistics for reasonableness 
C)  Inquiring about receivables pledged under loan agreements 
D)  Assessing the allowance for uncollectible accounts for reasonableness 
A)  Tracing amounts in the subsidiary ledger to details on shipping documents 
B)  Comparing receivable turnover rates to industry statistics for reasonableness 
C)  Inquiring about receivables pledged under loan agreements 
D)  Assessing the allowance for uncollectible accounts for reasonableness

Question 19

During a financial statement audit an internal auditor may provide direct assistance to the independent CPA in performing.

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 20

Errors in data processed in a batch computer system may not be detected immediately because

Accepted Answer

A)  transaction trails in a batch system are available for only a limited period of time. 
B)  there are time delays in processing transactions in a batch system. 
C)  errors in some transactions cause rejection of other transactions in the batch. 
D)  random errors are more likely in a batch system than in an online system. 
A)  transaction trails in a batch system are available for only a limited period of time. 
B)  there are time delays in processing transactions in a batch system. 
C)  errors in some transactions cause rejection of other transactions in the batch. 
D)  random errors are more likely in a batch system than in an online system.

The characteristics that distinguish computer processing from manual processing would not include

The auditor looked at a bank statement received and held by the client.What kind of audit procedure would this be considered?

Which of the following procedures would an auditor most likely perform in planning a financial statement audit?

Which of the following auditor concerns most likely could be so serious that the auditor would conclude that a financial statement audit cannot be conducted?

For which of the following judgments may an independent auditor share responsibility with an entity's internal auditor who is assessed to be both competent and objective?

Before accepting an engagement to audit a new client,an auditor is required to

An auditor's purpose in auditing the information contained in the pension footnote most likely is to obtain evidence concerning management's assertion about

Which of the following is not one of the four major cycles?

The basic auditing application of the personal computer as an audit tool would not include

Which of the following factors most likely would cause an auditor not to accept a new audit engagement?

C.Hill,CPA,has been retained to audit the financial statements of Monday Co.Monday's predecessor auditor was K.Post,CPA,whom Monday has notified by that its services have been terminated.Under these circumstances,which party should initiate the communications between Hill and Post?

An auditor who uses 7 percent of income before taxes as a basis for overall materiality would be basing judgment on

Comparing data on separate files can be accomplished by using computer-assisted audit techniques (CAATs)to determine whether comparable information is in agreement.Examples of such comparisons would not include

Which of the following explanations best describes why an auditor may decide to reduce tests of details for a particular audit objective?

An auditor most likely would inspect additions to the audit client's Property,Plant,and Equipment account to obtain evidence concerning management's assertions about

Which of the following most likely would give the most assurance concerning the valuation assertion of accounts receivable?

During a financial statement audit an internal auditor may provide direct assistance to the independent CPA in performing.

Errors in data processed in a batch computer system may not be detected immediately because

Auditing and Assurance Services

Professional Standards

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

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Exam 3: Engagement Planning

The characteristics that distinguish computer processing from manual processing would not include

The auditor looked at a bank statement received and held by the client.What kind of audit procedure would this be considered?

Which of the following procedures would an auditor most likely perform in planning a financial statement audit?

Which of the following auditor concerns most likely could be so serious that the auditor would conclude that a financial statement audit cannot be conducted?

For which of the following judgments may an independent auditor share responsibility with an entity's internal auditor who is assessed to be both competent and objective?

Before accepting an engagement to audit a new client,an auditor is required to

An auditor's purpose in auditing the information contained in the pension footnote most likely is to obtain evidence concerning management's assertion about

Which of the following is not one of the four major cycles?

The basic auditing application of the personal computer as an audit tool would not include

Which of the following factors most likely would cause an auditor not to accept a new audit engagement?

C.Hill,CPA,has been retained to audit the financial statements of Monday Co.Monday's predecessor auditor was K.Post,CPA,whom Monday has notified by that its services have been terminated.Under these circumstances,which party should initiate the communications between Hill and Post?

An auditor who uses 7 percent of income before taxes as a basis for overall materiality would be basing judgment on

Comparing data on separate files can be accomplished by using computer-assisted audit techniques (CAATs)to determine whether comparable information is in agreement.Examples of such comparisons would not include

Which of the following explanations best describes why an auditor may decide to reduce tests of details for a particular audit objective?

An auditor most likely would inspect additions to the audit client's Property,Plant,and Equipment account to obtain evidence concerning management's assertions about

Which of the following most likely would give the most assurance concerning the valuation assertion of accounts receivable?

During a financial statement audit an internal auditor may provide direct assistance to the independent CPA in performing.

Errors in data processed in a batch computer system may not be detected immediately because

Auditing and Assurance Services

Professional Standards

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters