Archives

Auditors General are responsible for auditing which types of organizations? A) Public companies with shares issued to investors B) Private companies that have loans outstanding to banks or other creditors C) Ministries, departments, agencies, and crown corporations D) Any organization […]

Attribute sampling would be an appropriate method to use on which one of the following procedures in an audit program? A) Review sales transactions for large and unreasonable amounts. B) Observe whether the duties of the accounts receivable clerk are […]

Two accounts receivable balance-related audit objectives are not affected by assessed control risk for the sales and cash receipts classes of transactions. These are A) valuation allocation. B) allocation, rights and obligations. C) valuation, rights and obligations. D) accuracy, existence. […]

When the employees are paid automatically by bank deposits to the employees’ accounts, in an effort to identify potential fraud, the auditor can look for A) duplicated bank account numbers. B) duplicated name in the master payroll files. C) unusual […]

Confirmation is most likely to be a relevant form of evidence with regard to assertions about accounts receivable when the auditor has concerns about the accounts receivable’s A) valuation. B) classification. C) existence. D) completeness. For listed clients, the audit […]

Fractal Software Limited has acquired a 100% subsidiary in Malaysia that produces keyboards and other types of computer hardware. Fractal is refusing to consolidate its financial statements, as this would increase the debt to equity ratio to the point that […]

The audit working papers serve as a record of the evidence accumulated and the results of the audit tests. This helps to demonstrate that the audit was A) properly kept confidential; information was held secure. B) completed using Canadian generally […]

ABC Company is considering three different alternatives with respect to expansion. To assist with the decision process, the company has requested PA to perform simulations and prepare prospective financial information using several sets of assumptions. Some of these assumptions are […]

Which of the following presentation and disclosure related audit objectives has a matching transaction related audit objective, but not a matching balance-related audit objective? A) accuracy B) classification C) occurrence D) completeness Kendra is inquiring about subsequent events with regards […]

The principal issue to be resolved in cases involving alleged negligence is usually A) the amount of the damages suffered by the plaintiff. B) whether to impose punitive damages on the defendant. C) the level of care required to be […]

Which of the following would you expect to find in a corporation’s bylaws? The A) kinds and amounts of capital stock authorized. B) date of incorporation. C) rules and procedures adopted by the shareholders of the corporation. D) types of […]

The auditor and the entities should agree on the criteria to be used in the audit A) before the audit starts. B) after the audit planning has been done. C) as they progress with the audit as they can determine […]

The audit plan includes the nature, timing and extent of audit procedures for the purposes of risk assessment, including those that are linked to the individual audit assertions, as well as any other audit procedures that are considered necessary. At […]

One of the reasons that an auditor must be competent is to be able to A) select the type and amount of evidence to accumulate. B) explain how the bookkeeping should be done to his staff. C) record the transactions […]

The auditor obtains corroborating audit evidence for accounts receivable by using positive or negative confirmation requests. Under which of the following circumstances might the negative form of the accounts receivable confirmation be useful? A) A substantial number of accounts are […]

A large PA firm has assessed evidence collected during an engagement. Criteria used to assess the financial statements were International Financial Reporting Standards (IFRS). A high level of assurance was obtained. The type of engagement conducted was a(n) A) audit. […]

The scope paragraph of the standard unqualified audit report in the auditor responsibility section states that the audit is designed to A) discover all errors and/or irregularities. B) discover material errors and/or irregularities. C) obtain reasonable assurance whether the statements […]

When a different extent of evidence is needed for the various cycles, the difference is caused by A) errors in the client’s accounting system. B) the client’s need to achieve an unqualified opinion. C) the auditor’s need to follow GAAS. […]

Financial information prepared using one or more assumptions (hypotheses) that do not necessarily reflect the most likely course of action in management’s judgment is called a(n) A) forecast. B) projection. C) prospective financial statement. D) prospectus. When a misstatement in […]

Which of the following situations best describes a familiarity threat? A) Design and implementation of a new payroll system B) Preparation and entry of bookkeeping transactions C) Completion of corporate transactions for subsidiary companies D) PA has been working with […]

To improve the appropriateness of audit evidence, the auditor should A) make sure to select a larger sample size for the items being tested. B) add additional population items into the sample, improving sample variety. C) select audit procedures that […]

You are a public accountant retained by the manager of a cooperative retirement village to do “write-up work.” You are expected to prepare unaudited financial statements with each page marked “unaudited” and accompanied by a disclaimer of opinion stating no […]

Audit risk is ordinarily set by the auditor during planning and A) held constant for each major cycle and account. B) held constant for each major cycle but varies by account. C) varies by each major cycle and by each […]

Which of the following misstatements in the payroll cycle could be detected during the audit of payroll transactions (but would not be discovered as part of the audit of the bank reconciliation)? A) failure to include outstanding payroll cheques on […]

A) Describe the three broad objectives of management when designing an effective system of internal control. B) Describe the aspect of internal control with which auditors are primarily concerned with for a financial statement audit. Which of the following control […]

CAS 250 requires the auditor to communicate illegal acts to the audit committee A) if the illegal acts are slightly material. B) if the illegal acts are material. C) if the illegal acts are other than trivial. D) regardless of […]

As part of the audit of sales, the auditor has used attribute sampling to select a sample of sales invoices. The auditor has examined the duplicate sales invoice to determine whether it was approved for credit. Which of the following […]

The auditor set audit risk at 5%, inherent risk at 100%, and control risk at 50%, and determined a detection risk of 10%. If control risk had been 80%, detection risk would be about A) 16%. B) 10%. C) 6%. […]

A sample in which the characteristics of the sample are the same as those of the population is a(n) A) random sample. B) variables sample. C) attribute sample. D) representative sample. To help with corporate governance and a positive “tone […]

Materiality is used to help decide the scope of testing, help determine the sample size and to help A) develop the audit report. B) decide which analytical review calculations to use. C) evaluate the results of testing. D) conduct understanding […]

Which of the following lawsuits resulted in a decision that shareholders could not sue the auditors for the loss in the value of their shares? A) Haig V. Bamford et al (1976) B) Hercules Management Ltd. V. Ernst & Young […]

The overall objective in the audit of the inventory and distribution cycle is to determine that A) costs of goods sold and gross profit are correctly stated on the income statement. B) inventory items on the balance sheet are neither […]

Control risk has been assessed at 100% for your client. What audit approach will you follow? A) combined approach. B) substantive approach. C) reliance on analytical review and tests of controls. D) reliance on tests of controls and tests of […]

If a potential loss on a contingent liability is likely and the amount of the loss can be reasonably estimated, the liability should be A) accrued and indicated in the body of the financial statements. B) disclosed in footnotes, but […]

Audit evidence is generally considered sufficient when A) it is appropriate. B) there is enough of it to afford a reasonable basis for an opinion on financial statements. C) it has the qualities of being relevant, objective, and free from […]

On a bank transfer schedule, if a cash disbursement was recorded in the current fiscal year, and the receipt in the subsequent fiscal year, this might be A) the best way to record this type of transaction. B) an indication […]

With the use of electronic working papers, each team member should have a unique access identification code and a password to access the working papers. Once a working paper is completed, what type of access should the staff auditor who […]

Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor? A) postponing recording of cash receipt entries B) overstating the accounts receivable […]