Question 1

Tracing is used primarily to test which of the following assertions about classes of transactions?

Accepted Answer

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

Question 2

All of the following are typically in the current file except:

Accepted Answer

A)  Adjusting journal entries. 
B)  Copies of the audit report. 
C)  Chart of accounts. 
D)  Lead schedules. 
A)  Adjusting journal entries. 
B)  Copies of the audit report. 
C)  Chart of accounts. 
D)  Lead schedules.

Question 3

You are concerned with unrecorded transactions in the purchasing cycle.Which audit procedure are you most likely to use when auditing purchases?

Accepted Answer

A)  Vouching transactions in accounting records to vendor invoices. 
B)  Tracing vendor invoices to accounting records. 
C)  Recalculation of vendor invoice amounts. 
D)  Confirmation of customer accounts. 
A)  Vouching transactions in accounting records to vendor invoices. 
B)  Tracing vendor invoices to accounting records. 
C)  Recalculation of vendor invoice amounts. 
D)  Confirmation of customer accounts.

Question 4

An auditor's analytical procedures performed during the overall review stage indicated that the entity's accounts receivable balance had doubled since the end of the prior year.However,the allowance for doubtful accounts as a percentage of accounts receivable remained about the same.Which of the following explanations most likely would satisfy the auditor?

Accepted Answer

A)  The entity liberalized its credit standards in the current year and sold much more merchandise to customers with poor credit ratings. 
B)  Twice as many accounts receivable were written off in the prior year than in the current year. 
C)  A greater percentage of accounts receivable were currently listed in the "more than 90 days overdue" category than in the prior year. 
D)  The entity opened a second retail outlet in the current year and its credit sales approximately equaled the older, established outlet. 
A)  The entity liberalized its credit standards in the current year and sold much more merchandise to customers with poor credit ratings. 
B)  Twice as many accounts receivable were written off in the prior year than in the current year. 
C)  A greater percentage of accounts receivable were currently listed in the "more than 90 days overdue" category than in the prior year. 
D)  The entity opened a second retail outlet in the current year and its credit sales approximately equaled the older, established outlet.

Question 5

Which of the following types of documentary evidence should the auditor consider to be the most reliable?

Accepted Answer

A)  A sales invoice issued by the entity and supported by a delivery receipt from an outside trucker. 
B)  Confirmation of an account payable balance mailed by and returned directly to the auditor. 
C)  A check issued by the company and bearing the payee's endorsement that is included with the bank statement mailed directly to the auditor. 
D)  A working paper prepared by the entity's controller and reviewed by the entity's treasurer. 
A)  A sales invoice issued by the entity and supported by a delivery receipt from an outside trucker. 
B)  Confirmation of an account payable balance mailed by and returned directly to the auditor. 
C)  A check issued by the company and bearing the payee's endorsement that is included with the bank statement mailed directly to the auditor. 
D)  A working paper prepared by the entity's controller and reviewed by the entity's treasurer.

Question 6

The completeness assertion refers to ensuring that transactions and events that should have been recorded actually have been recorded.

Accepted Answer

A) True 
 B)False

Question 7

An auditor's decision either to apply analytical procedures as substantive procedures or to perform tests of transactions and account balances usually is determined by

Accepted Answer

A)  Availability of data aggregated at a high level. 
B)  Relative effectiveness and efficiency of the tests. 
C)  Timing of tests performed after the balance sheet date. 
D)  Auditor's familiarity with industry trends. 
A)  Availability of data aggregated at a high level. 
B)  Relative effectiveness and efficiency of the tests. 
C)  Timing of tests performed after the balance sheet date. 
D)  Auditor's familiarity with industry trends.

Question 8

Which assertions may be tested for the "transactions and events" category of management assertions?

Accepted Answer

A)  Existence, completeness, rights and obligations, accuracy, cutoff and classification. 
B)  Occurrence, completeness, rights and obligations, accuracy, cutoff and classification. 
C)  Occurrence, completeness, authorization, accuracy, cutoff and classification. 
D)  Existence, rights and obligations, accuracy, authorization, and completeness. 
A)  Existence, completeness, rights and obligations, accuracy, cutoff and classification. 
B)  Occurrence, completeness, rights and obligations, accuracy, cutoff and classification. 
C)  Occurrence, completeness, authorization, accuracy, cutoff and classification. 
D)  Existence, rights and obligations, accuracy, authorization, and completeness.

Question 9

Following are several statements regarding accounting records or audit documentation.Which of the statements is correct?

Accepted Answer

A)  Accounting records belong to the auditee. 
B)  Documentation of an auditor's understanding of the entity's internal control system is not necessary. 
C)  Audit documents may be regarded as a substitute for the company's accounting records. 
D)  The independent auditor may discard audit documents after two years. 
A)  Accounting records belong to the auditee. 
B)  Documentation of an auditor's understanding of the entity's internal control system is not necessary. 
C)  Audit documents may be regarded as a substitute for the company's accounting records. 
D)  The independent auditor may discard audit documents after two years.

Question 10

The auditor generally gives most emphasis to ratio and trend analysis in the examination of the

Accepted Answer

A)  Statement of Changes in Stockholders' Equity and Retained Earnings. 
B)  Income Statement. 
C)  Balance Sheet. 
D)  Statement of Cash Flows. 
A)  Statement of Changes in Stockholders' Equity and Retained Earnings. 
B)  Income Statement. 
C)  Balance Sheet. 
D)  Statement of Cash Flows.

Question 11

As a result of analytical procedures conducted during the planning phase,the independent auditor determines that the gross profit percentage has declined from 30% in the preceding year to 20% in the current year.The auditor should

Accepted Answer

A)  Express an opinion that is qualified due to the inability of the company to continue as a going concern. 
B)  Evaluate management's performance in causing this decline. 
C)  Require footnote disclosure. 
D)  Consider the possibility of an error in the financial statements. 
A)  Express an opinion that is qualified due to the inability of the company to continue as a going concern. 
B)  Evaluate management's performance in causing this decline. 
C)  Require footnote disclosure. 
D)  Consider the possibility of an error in the financial statements.

Question 12

Each of the following might,by itself,form a valid basis for an auditor to reduce substantive testing except for the:

Accepted Answer

A)  Difficulty and expense involved in testing a particular item. 
B)  Assessment of control risk at a low level. 
C)  Low inherent risk involved. 
D)  Relationship between the cost of obtaining evidence and its usefulness. 
A)  Difficulty and expense involved in testing a particular item. 
B)  Assessment of control risk at a low level. 
C)  Low inherent risk involved. 
D)  Relationship between the cost of obtaining evidence and its usefulness.

Question 13

Which of the following are ordinarily designed to detect possible material monetary errors in the financial statements?

Accepted Answer

A)  Tests of controls. 
B)  Analytical procedures. 
C)  Computer controls. 
D)  Post-audit review of audit documents. 
A)  Tests of controls. 
B)  Analytical procedures. 
C)  Computer controls. 
D)  Post-audit review of audit documents.

Question 14

Stan is auditing First Financial Services and would like to use financial ratios to test the ability of First Financial Services to meet its current obligations.Identify two ratios that would help Stan in this task.Indicate how each ratio is calculated and what a high ratio would signify to Stan.

Accepted Answer

Answer should include two of the followi

Question 15

Of the following,the most reliable type of evidence typically is:

Accepted Answer

A)  Confirmation. 
B)  Inspection of records and documents. 
C)  Reperformance. 
D)  Observation. 
A)  Confirmation. 
B)  Inspection of records and documents. 
C)  Reperformance. 
D)  Observation.

Question 16

Which of the following procedures would an auditor most likely perform to verify management's assertion of completeness?

Accepted Answer

A)  Compare a sample of shipping documents to related sales invoices. 
B)  Observe the entity's distribution of payroll checks. 
C)  Confirm a sample of recorded receivables by direct communication with the debtors. 
D)  Review standard bank confirmations for indications of kiting. 
A)  Compare a sample of shipping documents to related sales invoices. 
B)  Observe the entity's distribution of payroll checks. 
C)  Confirm a sample of recorded receivables by direct communication with the debtors. 
D)  Review standard bank confirmations for indications of kiting.

Question 17

The audit testing hierarchy is considered to be more effective and more efficient.Why?

Accepted Answer

Effectiveness: The auditor's understandi

Question 18

Vouching is used primarily to test which of the following assertions about classes of transaction?

Accepted Answer

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

Question 19

Analytical procedures used in planning an audit should focus on identifying

Accepted Answer

A)  Material weaknesses in internal control. 
B)  The predictability of financial data from individual transactions. 
C)  The various assertions that are embodied in the financial statements. 
D)  Areas that may represent specific risks relevant to the audit. 
A)  Material weaknesses in internal control. 
B)  The predictability of financial data from individual transactions. 
C)  The various assertions that are embodied in the financial statements. 
D)  Areas that may represent specific risks relevant to the audit.

Question 20

You are auditing a manufacturing company that has a large production facility.Some of the production equipment is held through lease agreements.Which of the following is the account balance assertion you would be most concerned about?

Accepted Answer

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

Tracing is used primarily to test which of the following assertions about classes of transactions?

All of the following are typically in the current file except:

You are concerned with unrecorded transactions in the purchasing cycle.Which audit procedure are you most likely to use when auditing purchases?

Which of the following types of documentary evidence should the auditor consider to be the most reliable?

The completeness assertion refers to ensuring that transactions and events that should have been recorded actually have been recorded.

An auditor's decision either to apply analytical procedures as substantive procedures or to perform tests of transactions and account balances usually is determined by

Which assertions may be tested for the "transactions and events" category of management assertions?

Following are several statements regarding accounting records or audit documentation.Which of the statements is correct?

The auditor generally gives most emphasis to ratio and trend analysis in the examination of the

As a result of analytical procedures conducted during the planning phase,the independent auditor determines that the gross profit percentage has declined from 30% in the preceding year to 20% in the current year.The auditor should

Each of the following might,by itself,form a valid basis for an auditor to reduce substantive testing except for the:

Which of the following are ordinarily designed to detect possible material monetary errors in the financial statements?

Stan is auditing First Financial Services and would like to use financial ratios to test the ability of First Financial Services to meet its current obligations.Identify two ratios that would help Stan in this task.Indicate how each ratio is calculated and what a high ratio would signify to Stan.

Of the following,the most reliable type of evidence typically is:

Which of the following procedures would an auditor most likely perform to verify management's assertion of completeness?

The audit testing hierarchy is considered to be more effective and more efficient.Why?

Vouching is used primarily to test which of the following assertions about classes of transaction?

Analytical procedures used in planning an audit should focus on identifying

You are auditing a manufacturing company that has a large production facility.Some of the production equipment is held through lease agreements.Which of the following is the account balance assertion you would be most concerned about?

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

Tracing is used primarily to test which of the following assertions about classes of transactions?

All of the following are typically in the current file except:

You are concerned with unrecorded transactions in the purchasing cycle.Which audit procedure are you most likely to use when auditing purchases?

Which of the following types of documentary evidence should the auditor consider to be the most reliable?

The completeness assertion refers to ensuring that transactions and events that should have been recorded actually have been recorded.

An auditor's decision either to apply analytical procedures as substantive procedures or to perform tests of transactions and account balances usually is determined by

Which assertions may be tested for the "transactions and events" category of management assertions?

Following are several statements regarding accounting records or audit documentation.Which of the statements is correct?

The auditor generally gives most emphasis to ratio and trend analysis in the examination of the

As a result of analytical procedures conducted during the planning phase,the independent auditor determines that the gross profit percentage has declined from 30% in the preceding year to 20% in the current year.The auditor should

Each of the following might,by itself,form a valid basis for an auditor to reduce substantive testing except for the:

Which of the following are ordinarily designed to detect possible material monetary errors in the financial statements?

Stan is auditing First Financial Services and would like to use financial ratios to test the ability of First Financial Services to meet its current obligations.Identify two ratios that would help Stan in this task.Indicate how each ratio is calculated and what a high ratio would signify to Stan.

Of the following,the most reliable type of evidence typically is:

Which of the following procedures would an auditor most likely perform to verify management's assertion of completeness?

The audit testing hierarchy is considered to be more effective and more efficient.Why?

Vouching is used primarily to test which of the following assertions about classes of transaction?

Analytical procedures used in planning an audit should focus on identifying

You are auditing a manufacturing company that has a large production facility.Some of the production equipment is held through lease agreements.Which of the following is the account balance assertion you would be most concerned about?

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