Question 1

Which of the following ratios would an engagement partner most likely calculate when reviewing the balance sheet in the overall review stage of an audit?

Accepted Answer

A)  Quick assets divided by accounts payable. 
B)  Accounts receivable divided by inventory. 
C)  Interest payable divided by interest receivable. 
D)  Total debt divided by total assets. 
A)  Quick assets divided by accounts payable. 
B)  Accounts receivable divided by inventory. 
C)  Interest payable divided by interest receivable. 
D)  Total debt divided by total assets. D

Question 2

Which of the following would be least likely to be comparable between similar corporations in the same industry or line of business?

Accepted Answer

A)  Earnings per share. 
B)  Return on total assets before interest and taxes. 
C)  Accounts receivable turnover. 
D)  Operating cycle. 
A)  Earnings per share. 
B)  Return on total assets before interest and taxes. 
C)  Accounts receivable turnover. 
D)  Operating cycle. A

Question 3

Who is responsible for the financial statements? What does the term "assertions" mean? Identify the assertion categories and the specific assertions for each category.

Accepted Answer

Management is responsible for the fair presentation of its financial statements.
Assertions are expressed or implied representations by management that are reflected in the financial statement components.
Management assertions fall into the following categories:
1.Assertions about classes of transactions and events for the period under audit.Specific assertions for this category include: (1)occurrence,(2)completeness,(3)authorization,(4)accuracy,(5)cutoff,and (6)classification.
2.Assertions about account balances at the period end.Specific assertions for this category include: (1)existence,(2)rights and obligations,(3)completeness,and (4)valuation and allocation.
3.Assertions about presentation and disclosure.Specific assertions for this category include: (1)occurrence and rights and obligations,(2)completeness,(3)classification and understandability,and (4)accuracy and valuation.

Question 4

In deciding to implement analytical procedures,what are some factors the auditor will consider in determining a tolerable difference between the expectation and the recorded amount?

Accepted Answer

The size of the tolerable difference dep

Question 5

The permanent audit file usually includes

Accepted Answer

A)  Working trial balance. 
B)  Organizational chart. 
C)  Audit plan. 
D)  Audit programs. 
A)  Working trial balance. 
B)  Organizational chart. 
C)  Audit plan. 
D)  Audit programs.

Question 6

The classification assertion refers to transactions and events being recorded in the correct accounting period.

Accepted Answer

A) True 
 B)False

Question 7

According to the text,what are the two functions of working papers?

Accepted Answer

Working papers provide support for the a

Question 8

Analytical procedures enable the auditor to predict the balance or quantity of an item under audit.Information to develop this estimate can be obtained from all of the following except:

Accepted Answer

A)  Tracing transactions through the system to determine whether procedures are being applied as prescribed. 
B)  Comparison of financial data with data for comparable prior periods, anticipated results (e.g., budgets and forecasts) and similar data for the industry in which the entity operates. 
C)  Study of the relationships of elements of financial data that would be expected to conform to a predictable pattern based upon the entity's experience. 
D)  Study of the relationships of financial data with relevant nonfinancial data. 
A)  Tracing transactions through the system to determine whether procedures are being applied as prescribed. 
B)  Comparison of financial data with data for comparable prior periods, anticipated results (e.g., budgets and forecasts) and similar data for the industry in which the entity operates. 
C)  Study of the relationships of elements of financial data that would be expected to conform to a predictable pattern based upon the entity's experience. 
D)  Study of the relationships of financial data with relevant nonfinancial data.

Question 9

The text discusses three main purposes for performing audit procedures.List and describe these three main categories of audit procedures and describe their purpose.

Accepted Answer

Risk assessment procedures: Risk assessm

Question 10

Of the following,which is the least persuasive type of audit evidence?

Accepted Answer

A)  Documents mailed by outsiders to the auditor. 
B)  Correspondence between the auditor and third party vendors. 
C)  Copies of company sales invoices inspected by the auditor. 
D)  Computations made by the auditor. 
A)  Documents mailed by outsiders to the auditor. 
B)  Correspondence between the auditor and third party vendors. 
C)  Copies of company sales invoices inspected by the auditor. 
D)  Computations made by the auditor.

Question 11

In testing plant and equipment balances,an auditor may physically inspect new additions listed on the summary of plant and equipment transactions for the year.This procedure is designed to obtain evidence concerning management's assertions about classes of transactions and events,and specifically,which assertion?

Accepted Answer

A)  Occurrence. 
B)  Cutoff. 
C)  Authorization. 
D)  Classification. 
A)  Occurrence. 
B)  Cutoff. 
C)  Authorization. 
D)  Classification.

Question 12

An example of audit evidence with a medium level of reliability is

Accepted Answer

A)  Scanning. 
B)  Recalculation. 
C)  Observation. 
D)  All of these. 
A)  Scanning. 
B)  Recalculation. 
C)  Observation. 
D)  All of these.

Question 13

For an auditor,how are management assertions useful?

Accepted Answer

The assertions provide a framework withi

Question 14

A confirmation is used to

Accepted Answer

A)  Verify the inventory count is correct. 
B)  Verify that a control is being observed. 
C)  Verify a representation from a third party. 
D)  Verify that a specific trend is correct. 
A)  Verify the inventory count is correct. 
B)  Verify that a control is being observed. 
C)  Verify a representation from a third party. 
D)  Verify that a specific trend is correct.

Question 15

Audit documentation prepared on audits of public entities is the property of the

Accepted Answer

A)  Shareholders. 
B)  Auditor. 
C)  Management of the entity being audited. 
D)  SEC. 
A)  Shareholders. 
B)  Auditor. 
C)  Management of the entity being audited. 
D)  SEC.

Question 16

Several factors may influence the reliability of evidence.Identify and describe two of these factors.

Accepted Answer

Answer should include two of the followi

Question 17

Based on conversations with the owner-manager of an audit client,the auditor ascertained that the company's primary motivation is to avoid paying income taxes.Based on this motivation,which account balance assertion for ending inventory will the auditor be most concerned about verifying?

Accepted Answer

A)  Existence or occurrence. 
B)  Completeness. 
C)  Rights and obligations. 
D)  Observation. 
A)  Existence or occurrence. 
B)  Completeness. 
C)  Rights and obligations. 
D)  Observation.

Question 18

Which of the following is not a typical analytical procedure?

Accepted Answer

A)  Study of relationships of the financial information with relevant nonfinancial information. 
B)  Comparison of the financial information with similar information regarding the industry in which the entity operates. 
C)  Comparison of recorded amounts of major disbursements with appropriate invoices. 
D)  Comparison of the financial information with budgeted amounts. 
A)  Study of relationships of the financial information with relevant nonfinancial information. 
B)  Comparison of the financial information with similar information regarding the industry in which the entity operates. 
C)  Comparison of recorded amounts of major disbursements with appropriate invoices. 
D)  Comparison of the financial information with budgeted amounts.

Question 19

Which statement concerning audit evidence is not valid?

Accepted Answer

A)  The auditor is seldom convinced beyond all doubt with respect to all aspects of the financial statements being audited. 
B)  The auditor performs tests to collect convincing evidence that the financial statements are not misstated. 
C)  The auditor weighs the cost of obtaining evidence with its usefulness. 
D)  The auditor considers the amount of risk present in deciding the nature and extent of evidence to be collected. 
A)  The auditor is seldom convinced beyond all doubt with respect to all aspects of the financial statements being audited. 
B)  The auditor performs tests to collect convincing evidence that the financial statements are not misstated. 
C)  The auditor weighs the cost of obtaining evidence with its usefulness. 
D)  The auditor considers the amount of risk present in deciding the nature and extent of evidence to be collected.

Question 20

A company sells a particular product only in the last month of its fiscal year.The company uses commission agents for such sales and pays them 6% of their net sales 30 days after the sales are made.The agents' sales were $10 million.Experience indicates that 10% of the sales are usually not collected and 2% are returned in the first month of the new year.The auditor would expect the year-end balance in the accrued commissions payable account to be

Accepted Answer

A)  $528,000. 
B)  $540,000. 
C)  $588,000. 
D)  $600,000.
$10,000,000 × 98% = $9,800,000 Net Sales × 6% commission percentage = $588,000 estimated accrued commissions payable. 
A)  $528,000. 
B)  $540,000. 
C)  $588,000. 
D)  $600,000.
$10,000,000 × 98% = $9,800,000 Net Sales × 6% commission percentage = $588,000 estimated accrued commissions payable.

Which of the following ratios would an engagement partner most likely calculate when reviewing the balance sheet in the overall review stage of an audit?

Which of the following would be least likely to be comparable between similar corporations in the same industry or line of business?

Who is responsible for the financial statements? What does the term "assertions" mean? Identify the assertion categories and the specific assertions for each category.

In deciding to implement analytical procedures,what are some factors the auditor will consider in determining a tolerable difference between the expectation and the recorded amount?

The permanent audit file usually includes

The classification assertion refers to transactions and events being recorded in the correct accounting period.

According to the text,what are the two functions of working papers?

Analytical procedures enable the auditor to predict the balance or quantity of an item under audit.Information to develop this estimate can be obtained from all of the following except:

The text discusses three main purposes for performing audit procedures.List and describe these three main categories of audit procedures and describe their purpose.

Of the following,which is the least persuasive type of audit evidence?

An example of audit evidence with a medium level of reliability is

For an auditor,how are management assertions useful?

A confirmation is used to

Audit documentation prepared on audits of public entities is the property of the

Several factors may influence the reliability of evidence.Identify and describe two of these factors.

Based on conversations with the owner-manager of an audit client,the auditor ascertained that the company's primary motivation is to avoid paying income taxes.Based on this motivation,which account balance assertion for ending inventory will the auditor be most concerned about verifying?

Which of the following is not a typical analytical procedure?

Which statement concerning audit evidence is not valid?

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters

Exam 5: Evidence and Documentation

Which of the following ratios would an engagement partner most likely calculate when reviewing the balance sheet in the overall review stage of an audit?

Which of the following would be least likely to be comparable between similar corporations in the same industry or line of business?

Who is responsible for the financial statements? What does the term "assertions" mean? Identify the assertion categories and the specific assertions for each category.

In deciding to implement analytical procedures,what are some factors the auditor will consider in determining a tolerable difference between the expectation and the recorded amount?

The permanent audit file usually includes

The classification assertion refers to transactions and events being recorded in the correct accounting period.

According to the text,what are the two functions of working papers?

Analytical procedures enable the auditor to predict the balance or quantity of an item under audit.Information to develop this estimate can be obtained from all of the following except:

The text discusses three main purposes for performing audit procedures.List and describe these three main categories of audit procedures and describe their purpose.

Of the following,which is the least persuasive type of audit evidence?

An example of audit evidence with a medium level of reliability is

For an auditor,how are management assertions useful?

A confirmation is used to

Audit documentation prepared on audits of public entities is the property of the

Several factors may influence the reliability of evidence.Identify and describe two of these factors.

Based on conversations with the owner-manager of an audit client,the auditor ascertained that the company's primary motivation is to avoid paying income taxes.Based on this motivation,which account balance assertion for ending inventory will the auditor be most concerned about verifying?

Which of the following is not a typical analytical procedure?

Which statement concerning audit evidence is not valid?

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters