Question 1

Tests of controls are generally more costly to perform than analytical procedures.

Accepted Answer

A) True 
 B)False

Question 2

Discuss the purposes of (1) substantive tests of transactions, (2) tests of controls, and (3) tests of details of balances. Give an example of each.

Accepted Answer

The purpose of substantive tests of tran

Question 3

Which of the following is true?

Accepted Answer

A)  tests of details of balances focus on the ending balances for accounts in the client's ending trial balance 
B)  tests of details of balances focus on the transactions during the period 
C)  tests of details of balances focus on the auditor's understanding of internal controls 
D)  tests of details of balances focus on comparisons of recorded amounts to expectations developed by the auditor 
A)  tests of details of balances focus on the ending balances for accounts in the client's ending trial balance 
B)  tests of details of balances focus on the transactions during the period 
C)  tests of details of balances focus on the auditor's understanding of internal controls 
D)  tests of details of balances focus on comparisons of recorded amounts to expectations developed by the auditor

Question 4

A procedure designed to test for monetary misstatements directly affecting the correctness of financial statement balances is a:

Accepted Answer

A)  test of controls. 
B)  substantive test. 
C)  test of attributes. 
D)  monetary-unit sampling test. 
A)  test of controls. 
B)  substantive test. 
C)  test of attributes. 
D)  monetary-unit sampling test.

Question 5

Which of the following audit tests is usually the most costly to perform?

Accepted Answer

A)  Analytical procedures 
B)  Tests of controls 
C)  Tests of balances 
D)  Substantive tests of transactions 
A)  Analytical procedures 
B)  Tests of controls 
C)  Tests of balances 
D)  Substantive tests of transactions

Question 6

Which audit tests involve physical examination and confirmation?

Accepted Answer

A)  tests of controls 
B)  tests of transactions 
C)  tests of balances 
D)  analytical procedures 
A)  tests of controls 
B)  tests of transactions 
C)  tests of balances 
D)  analytical procedures

Question 7

An exception in a substantive test of transactions provides an indication of the likelihood of monetary misstatements in the financial statements because substantive tests of transactions do reveal whether monetary misstatements have actually occurred.

Accepted Answer

A) True 
 B)False

Question 8

The most important consideration in developing the audit plan and audit program is the:

Accepted Answer

A)  client's size. 
B)  client's industry. 
C)  audit firm's available personnel. 
D)  audit risk model used in its planning form. 
A)  client's size. 
B)  client's industry. 
C)  audit firm's available personnel. 
D)  audit risk model used in its planning form.

Question 9

When designing an audit program for tests of details of balances, the auditor should make assumptions about inherent risk and control risk, and predictions concerning the outcome of tests of controls, substantive tests of transactions, and analytical procedures.

Accepted Answer

A) True 
 B)False

Question 10

Transaction related audit objectives would most likely be performed in which phase of the audit process?

Accepted Answer

A)  plan and design audit approach 
B)  perform audit tests for controls and transactions 
C)  perform analytical procedures and tests of balances 
D)  complete the audit and issue the audit report 
A)  plan and design audit approach 
B)  perform audit tests for controls and transactions 
C)  perform analytical procedures and tests of balances 
D)  complete the audit and issue the audit report

Question 11

In the audit of a public company, computer controls must be tested if they are considered to be key controls for reducing the likelihood of material misstatements in the financial statements.

Accepted Answer

A) True 
 B)False

Question 12

Auditors follow a four step approach to reduce assessed control risk. Which of the following is not one of the four?

Accepted Answer

A)  Apply transaction related audit objectives to a class of transactions. 
B)  Indentify accounts that have high inherent risk. 
C)  Identify key controls that reduce control risk. 
D)  For potential misstatements, design appropriate substantive tests of transactions. 
A)  Apply transaction related audit objectives to a class of transactions. 
B)  Indentify accounts that have high inherent risk. 
C)  Identify key controls that reduce control risk. 
D)  For potential misstatements, design appropriate substantive tests of transactions.

Question 13

Procedures to obtain an understanding of internal control may suffice for tests of controls when the auditor is assessing automated controls.

Accepted Answer

A) True 
 B)False

Question 14

If no material differences are found using analytical procedures and the auditor concludes that misstatements are not likely to have occurred:

Accepted Answer

A)  other substantive tests may be reduced. 
B)  it will be necessary to increase the tests of balances. 
C)  it will not be necessary to perform tests of balances. 
D)  it will be necessary to increase the tests of transactions. 
A)  other substantive tests may be reduced. 
B)  it will be necessary to increase the tests of balances. 
C)  it will not be necessary to perform tests of balances. 
D)  it will be necessary to increase the tests of transactions.

Question 15

Which of the following statements is not true?

Accepted Answer

A)  Analytical procedures emphasize the overall reasonableness of transactions and balances. 
B)  Tests of controls are concerned with evaluating whether controls are sufficiently effective to justify reducing control risk and thereby reducing analytical review procedures. 
C)  Substantive tests of transactions emphasize the verification of transactions recorded in the journals and then posted in the general ledger. 
D)  Tests of details of balances emphasize the ending balances in the general ledger. 
A)  Analytical procedures emphasize the overall reasonableness of transactions and balances. 
B)  Tests of controls are concerned with evaluating whether controls are sufficiently effective to justify reducing control risk and thereby reducing analytical review procedures. 
C)  Substantive tests of transactions emphasize the verification of transactions recorded in the journals and then posted in the general ledger. 
D)  Tests of details of balances emphasize the ending balances in the general ledger.

Question 16

A document that details what the auditor will do to gather sufficient, appropriate evidence is the:

Accepted Answer

A)  audit strategy. 
B)  audit program. 
C)  audit procedure. 
D)  audit risk model. 
A)  audit strategy. 
B)  audit program. 
C)  audit procedure. 
D)  audit risk model.

Question 17

The extent of tests of details of balances cannot be reduced when transaction-related audit objectives have been satisfied by tests of controls or substantive tests of transactions.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following procedures would most likely be performed in response to the auditor's assessment of the risk of monetary misstatements in the financial statements?

Accepted Answer

A)  Ratio analysis 
B)  Tests of controls 
C)  Tests of details of balances 
D)  Risk assessment procedures 
A)  Ratio analysis 
B)  Tests of controls 
C)  Tests of details of balances 
D)  Risk assessment procedures

Question 19

Tests of controls and substantive tests of transactions are normally conducted simultaneously on the same transactions.

Accepted Answer

A) True 
 B)False

Question 20

Analytical procedures provide fewer types of evidence than any other type of audit test.

Accepted Answer

A) True 
 B)False

Exam 13: Overall Audit Plan and Audit Program

Tests of controls are generally more costly to perform than analytical procedures.

Discuss the purposes of (1) substantive tests of transactions, (2) tests of controls, and (3) tests of details of balances. Give an example of each.

Which of the following is true?

A procedure designed to test for monetary misstatements directly affecting the correctness of financial statement balances is a:

Which of the following audit tests is usually the most costly to perform?

Which audit tests involve physical examination and confirmation?

An exception in a substantive test of transactions provides an indication of the likelihood of monetary misstatements in the financial statements because substantive tests of transactions do reveal whether monetary misstatements have actually occurred.

The most important consideration in developing the audit plan and audit program is the:

When designing an audit program for tests of details of balances, the auditor should make assumptions about inherent risk and control risk, and predictions concerning the outcome of tests of controls, substantive tests of transactions, and analytical procedures.

Transaction related audit objectives would most likely be performed in which phase of the audit process?

In the audit of a public company, computer controls must be tested if they are considered to be key controls for reducing the likelihood of material misstatements in the financial statements.

Auditors follow a four step approach to reduce assessed control risk. Which of the following is not one of the four?

Procedures to obtain an understanding of internal control may suffice for tests of controls when the auditor is assessing automated controls.

If no material differences are found using analytical procedures and the auditor concludes that misstatements are not likely to have occurred:

Which of the following statements is not true?

A document that details what the auditor will do to gather sufficient, appropriate evidence is the:

The extent of tests of details of balances cannot be reduced when transaction-related audit objectives have been satisfied by tests of controls or substantive tests of transactions.

Which of the following procedures would most likely be performed in response to the auditor's assessment of the risk of monetary misstatements in the financial statements?

Tests of controls and substantive tests of transactions are normally conducted simultaneously on the same transactions.

Analytical procedures provide fewer types of evidence than any other type of audit test.

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

The CPA Profession

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Section 404 Audits of Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details and Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls and Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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