Question 1

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 2

An auditor tests an entity's control that matches shipping documents to sales invoices before they are recorded in the financial statements as revenue in support of management's financial statement assertion of

Accepted Answer

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

Question 3

In auditing accrued liabilities,an auditor's procedures most likely would focus primarily on management's assertion of

Accepted Answer

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

Question 4

In considering overall materiality for planning purposes,an auditor believes that misstatements aggregating $10,000 would have a material effect on an entity's income statement but that misstatements would have to aggregate $20,000 to materially affect the balance sheet.Ordinarily,it would be appropriate to design audit procedures that would be expected to detect misstatements aggregating

Accepted Answer

A) $10,000. 
B) $15,000. 
C) $20,000. 
D) $30,000. 
A) $10,000. 
B) $15,000. 
C) $20,000. 
D) $30,000.

Question 5

The confirmation of an accounts receivable balance provides primary evidence regarding which management assertion?

Accepted Answer

A) Completeness 
B) Valuation 
C) Allocation 
D) Existence 
A) Completeness 
B) Valuation 
C) Allocation 
D) Existence

Question 6

Which of the following would be a step in an internal control program?

Accepted Answer

A) Obtain an aged trial balance of the accounts receivable. 
B) Prepare and send confirmations on a sample of customers' accounts receivable. 
C) Assess the control risk for sales and collections. 
D) Read sales contracts for evidence of customers' rights of return or price allowance terms. 
A) Obtain an aged trial balance of the accounts receivable. 
B) Prepare and send confirmations on a sample of customers' accounts receivable. 
C) Assess the control risk for sales and collections. 
D) Read sales contracts for evidence of customers' rights of return or price allowance terms.

Question 7

The independent auditors' audit design prepared prior to the start of fieldwork is appropriately considered documentation of

Accepted Answer

A) planning. 
B) supervision. 
C) information evaluation. 
D) quality assurance. 
A) planning. 
B) supervision. 
C) information evaluation. 
D) quality assurance.

Question 8

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 9

An auditor selected items for test counts from a client's inventory listing before observing the client's physical inventory at the warehouse.The auditor then found the items selected at the warehouse and counted them.This procedure most likely obtained evidence concerning management's assertion of

Accepted Answer

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

Question 10

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 11

Which of the following factors should an external auditor obtain updated information about then assessing an internal auditor's competence?

Accepted Answer

A) The reporting status of the internal auditor within the organization. 
B) The educational level and professional experiences of the internal auditor. 
C) Whether policies prohibit the internal auditor from auditing areas where relatives are employed. 
D) Whether the board of directors,audit committee,or owner-manager oversees employment decisions related to the internal auditor. 
A) The reporting status of the internal auditor within the organization. 
B) The educational level and professional experiences of the internal auditor. 
C) Whether policies prohibit the internal auditor from auditing areas where relatives are employed. 
D) Whether the board of directors,audit committee,or owner-manager oversees employment decisions related to the internal auditor.

Question 12

Which of the following is a correct statement regarding the nature and timing of communications between an accounting firm performing an initial audit of an issuer and the issuer's audit committee?

Accepted Answer

A) Prior to accepting the engagement,the firm must orally affirm its independence to the audit committee with all members present. 
B) The firm must address all independence impairment issues on the date of the audit opinion. 
C) Communications related to independence may occur in any form prior to issuance of the financial statements. 
D) Prior to accepting the engagement,the firm should describe in writing all relationships that,as of the date of the communication,may reasonably be thought to bear on independence. 
A) Prior to accepting the engagement,the firm must orally affirm its independence to the audit committee with all members present. 
B) The firm must address all independence impairment issues on the date of the audit opinion. 
C) Communications related to independence may occur in any form prior to issuance of the financial statements. 
D) Prior to accepting the engagement,the firm should describe in writing all relationships that,as of the date of the communication,may reasonably be thought to bear on independence.

Question 13

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 14

During an audit of an entity's stockholders' equity accounts,the auditor determines whether there are restrictions on retained earnings resulting from loans,agreements,or state law.This audit procedure most likely is intended to verify management's assertion

Accepted Answer

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

Question 15

In testing the existence assertion for an asset,an auditor ordinarily works from the

Accepted Answer

A) financial statements to the potentially unrecorded items. 
B) potentially unrecorded items to the financial statement. 
C) accounting records to the supporting evidence. 
D) supporting evidence to the accounting records. 
A) financial statements to the potentially unrecorded items. 
B) potentially unrecorded items to the financial statement. 
C) accounting records to the supporting evidence. 
D) supporting evidence to the accounting records.

Question 16

Which of the following steps should an auditor perform first to determine the existence of related parties?

Accepted Answer

A) Examine invoices,contracts,and purchasing orders. 
B) Request a list of related parties from management. 
C) Review the company's business structure. 
D) Review proxy and other materials filed with the SEC. 
A) Examine invoices,contracts,and purchasing orders. 
B) Request a list of related parties from management. 
C) Review the company's business structure. 
D) Review proxy and other materials filed with the SEC.

Question 17

Which of the following audit procedures probably would provide the most reliable evidence concerning the entity's assertion of rights and obligations related to inventories?

Accepted Answer

A) Trace test counts noted during the physical count of inventory to the summarization of quantities. 
B) Inspect agreements for evidence of inventory held on consignment. 
C) Select the last few shipping advices used before the physical count and determine whether the shipments were recorded as sales. 
D) Inspect the open purchase order file for significant commitments to consider for disclosure. 
A) Trace test counts noted during the physical count of inventory to the summarization of quantities. 
B) Inspect agreements for evidence of inventory held on consignment. 
C) Select the last few shipping advices used before the physical count and determine whether the shipments were recorded as sales. 
D) Inspect the open purchase order file for significant commitments to consider for disclosure.

Question 18

This year,Blakeney Enterprises engaged a new auditor who must

Accepted Answer

A) attempt to communicate with the predecessor auditor before accepting the engagement. 
B) review the predecessor's audit documentation if the audit is to be in accordance with GAAS. 
C) seek the SEC's permission to accept the engagement if Blakeney is publicly owned. 
D) reject the engagement if the change in auditors resulted from a dispute with the predecessor. 
A) attempt to communicate with the predecessor auditor before accepting the engagement. 
B) review the predecessor's audit documentation if the audit is to be in accordance with GAAS. 
C) seek the SEC's permission to accept the engagement if Blakeney is publicly owned. 
D) reject the engagement if the change in auditors resulted from a dispute with the predecessor.

Question 19

Which of the following provides the best method of obtaining an understanding of a continuing client's business for planning an audit?

Accepted Answer

A) Performing tests of details of transactions and balances 
B) Reviewing prior year audit documentation and the permanent file for the client 
C) Reading specialized industry journals 
D) Reevaluating the client's internal control environment 
A) Performing tests of details of transactions and balances 
B) Reviewing prior year audit documentation and the permanent file for the client 
C) Reading specialized industry journals 
D) Reevaluating the client's internal control environment

Question 20

The firm of Banta,Brown,and Burgess,CPAs,requires that audit documentation contain the initials of the preparer and the reviewer in the top right-hand corner.This procedure provides evidence of professional concern regarding which generally accepted auditing standard?

Accepted Answer

A) Independence 
B) Adequate technical competence and capabilities 
C) Adequate planning and supervision 
D) Gathering sufficient competent evidence 
A) Independence 
B) Adequate technical competence and capabilities 
C) Adequate planning and supervision 
D) Gathering sufficient competent evidence

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

An auditor tests an entity's control that matches shipping documents to sales invoices before they are recorded in the financial statements as revenue in support of management's financial statement assertion of

In auditing accrued liabilities,an auditor's procedures most likely would focus primarily on management's assertion of

The confirmation of an accounts receivable balance provides primary evidence regarding which management assertion?

Which of the following would be a step in an internal control program?

The independent auditors' audit design prepared prior to the start of fieldwork is appropriately considered documentation of

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

An auditor selected items for test counts from a client's inventory listing before observing the client's physical inventory at the warehouse.The auditor then found the items selected at the warehouse and counted them.This procedure most likely obtained evidence concerning management's assertion of

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 factors should an external auditor obtain updated information about then assessing an internal auditor's competence?

Which of the following is a correct statement regarding the nature and timing of communications between an accounting firm performing an initial audit of an issuer and the issuer's audit committee?

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?

During an audit of an entity's stockholders' equity accounts,the auditor determines whether there are restrictions on retained earnings resulting from loans,agreements,or state law.This audit procedure most likely is intended to verify management's assertion

In testing the existence assertion for an asset,an auditor ordinarily works from the

Which of the following steps should an auditor perform first to determine the existence of related parties?

Which of the following audit procedures probably would provide the most reliable evidence concerning the entity's assertion of rights and obligations related to inventories?

This year,Blakeney Enterprises engaged a new auditor who must

Which of the following provides the best method of obtaining an understanding of a continuing client's business for planning an audit?

The firm of Banta,Brown,and Burgess,CPAs,requires that audit documentation contain the initials of the preparer and the reviewer in the top right-hand corner.This procedure provides evidence of professional concern regarding which generally accepted auditing standard?

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

Exam 3: Engagement Planning

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

An auditor tests an entity's control that matches shipping documents to sales invoices before they are recorded in the financial statements as revenue in support of management's financial statement assertion of

In auditing accrued liabilities,an auditor's procedures most likely would focus primarily on management's assertion of

The confirmation of an accounts receivable balance provides primary evidence regarding which management assertion?

Which of the following would be a step in an internal control program?

The independent auditors' audit design prepared prior to the start of fieldwork is appropriately considered documentation of

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

An auditor selected items for test counts from a client's inventory listing before observing the client's physical inventory at the warehouse.The auditor then found the items selected at the warehouse and counted them.This procedure most likely obtained evidence concerning management's assertion of

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 factors should an external auditor obtain updated information about then assessing an internal auditor's competence?

Which of the following is a correct statement regarding the nature and timing of communications between an accounting firm performing an initial audit of an issuer and the issuer's audit committee?

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?

During an audit of an entity's stockholders' equity accounts,the auditor determines whether there are restrictions on retained earnings resulting from loans,agreements,or state law.This audit procedure most likely is intended to verify management's assertion

In testing the existence assertion for an asset,an auditor ordinarily works from the

Which of the following steps should an auditor perform first to determine the existence of related parties?

Which of the following audit procedures probably would provide the most reliable evidence concerning the entity's assertion of rights and obligations related to inventories?

This year,Blakeney Enterprises engaged a new auditor who must

Which of the following provides the best method of obtaining an understanding of a continuing client's business for planning an audit?

The firm of Banta,Brown,and Burgess,CPAs,requires that audit documentation contain the initials of the preparer and the reviewer in the top right-hand corner.This procedure provides evidence of professional concern regarding which generally accepted auditing standard?

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