1) The auditor must gather sufficient and appropriate evidence during the course of the
audit. Sufficient evidence must:
A) be well documented and cross-referenced in the audit documents
B) be based on sources that are external to company
C) provide evidence that prove or disprove an audit objective/assertion
D) be persuasive enough to enable the auditor to issue an audit report
2) Tests of details of balances focus on testing the year-end balances of balance sheet
accounts.
A) True
B) False
3) When the auditor cannot perform procedures and the amounts are so material that a
disclaimer of opinion is required, the:
A) opinion paragraph will state “does not present fairly”
B) opinion paragraph will state “presents fairly”
C) scope paragraph will be unchanged from the standard unqualified opinion
D) scope paragraph will be deleted
4) When verifying the correct balance in Accounts payable, vendors’ invoices are more
useful than vendors’ statements.
A) True
B) False
5) Prenumbered documents are intended to help:
A)
B)
C)
D)
6) When an auditor believes that analytical procedures indicate a reasonable possibility
of misstatement, the auditor usually would:
A)
B)
C)
D)
7) Transaction-related audit objectives are essentially the same for processing credit
memos as for sales with certain differences. Which of the following are two key
differences?
A) Risk and emphasis on the completeness objective
B) Materiality and emphasis on the accuracy objective
C) Risk and emphasis on the classification objective
D) Materiality and emphasis on the occurrence objective
8) Old and new systems operating simultaneously in all locations is a test approach
known as:
A) pilot testing
B) horizontal testing
C) integrative testing
D) parallel testing
9) An audit to determine whether an entity is following specific procedures or rules set
down by some higher authority is classified as a(n):
A) audit of financial statements
B) compliance audit
C) operational audit
D) production audit
10) Auditing standards require that the audit report must be titled and that the title must:
A) include the word “independent”
B) indicate if the auditor is a CPA
C) indicate if the auditor is a proprietorship, partnership, or incorporated
D) indicate the type of audit opinion issued
11) The accounts receivable balance-related audit objective net realizable value is not
affected by assessed control risk for sales or cash receipts.
A) True
B) False
12) ________ is fraud that involves theft of an entity’s assets.
A) Fraudulent financial reporting
B) A “cookie jar” reserve
C) Misappropriation of assets
D) Income smoothing
13) To maximize audit efficiency, the auditor should allocate less tolerable
misstatement to accounts that can be verified by using low-cost audit procedures, such
as analytical procedures, than to accounts that are more costly to audit.
A) True
B) False
14) When auditing a client whose information is processed by an outside service
provider, it is not acceptable for the auditor to rely on the audit report of another
independent auditor who has previously tested the internal controls of the service
provider, rather than testing the service provider’s controls himself or herself.
A) True
B) False
15) Audit evidence to support an opinion about the fairness of a client’s financial
statements consists entirely of written information.
A) True
B) False
16) A shareholders’ capital stock master file is a record of the issuance and repurchase
of capital stock over the life of the corporation.
A) True
B) False
17) Section 404(b) of the Sarbanes Oxley Act requires that the auditor of an issuer attest
to management’s report on the efficiency of internal controls over financial reporting.
A) True
B) False
18) When sending confirmations during most audits of accounts receivable, the
emphasis is often on confirming larger and older accounts.
A) True
B) False
19) When a successor auditor contacts a company’s previous auditor, the predecessor
auditor is required to respond fully and without limit to the request for information.
A) True
B) False
20) The concept of limited assurance is provided for in which of the following
engagements?
A) audit
B) review
C) compilation
D) agreed-upon procedures
21) If an audit client is a public company, the understanding of internal control must be
sufficient to identify opportunities to increase audit effectiveness.
A) True
B) False
22) If the auditor’s preliminary assessment of control risk is decreased from high to
medium, tests of controls can be reduced.
A) True
B) False
23) Which of the following is one of the conditions for fraud described in SAS No. 99?
A)
B)
C)
D)
24) Review reports are normally dated as of the client’s balance sheet date.
A) True
B) False
25) Which of the following statements is correct regarding the auditor’s responsibility
with respect to the year-end inventory procedures of an audit client?
A)
B)
C)
D)
26) Violations of the existence objective for sales are of greater concern to the auditor
than violations of the completeness objective.
A) True
B) False
27) Internal controls that are likely to prevent the client from including as a business
expense those transactions that primarily benefit management or other employees rather
than the entity being audited satisfy the control objective that:
A) acquisitions are correctly valued
B) existing acquisitions are recorded
C) acquisitions are correctly classified
D) recorded acquisitions are for goods and services received
28) 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.
A) True
B) False