1) If, when obtaining an understanding of control activities of a relatively small client,
the auditor identified no control activities, the auditor would probably set a high
assessment of control risk.
A) True
B) False
2) The primary accounting record for manufacturing equipment and other fixed assets is
the:
A) depreciation ledger
B) fixed asset master file
C) asset inventory
D) equipment roster
3) Programmers should design the formatting for transactions data.
A) True
B) False
4) It is acceptable under generally accepted accounting principles for a company to use
different valuation methods for different parts of its inventory.
A) True
B) False
5) When using monetary-unit sampling, the recorded dollar population is a definition of
all the items in the:
A) population
B) population which the auditor has included in the sample
C) population which contain errors
D) sample which contain errors
6) The dollar amount of some misstatements cannot be accurately measured. For
example, if the client were unwilling to disclose an existing lawsuit, the auditor must
estimate the likely effect on:
A) net income
B) users of the financial statements
C) the auditor’s exposure to lawsuits
D) management’s future decisions
7) The transaction-related audit objective that deals with whether recorded transactions
have actually occurred is the completeness objective.
A) True
B) False
8) The Sarbanes-Oxley Act of 2002 makes destruction of audit documentation
punishable by up to 10 years in prison.
A) True
B) False
9) What type of audit test will auditors use when testing to see if the amounts of capital
stock transactions are accurately recorded?
A)
B)
C)
D)
10) When auditing interest-bearing debt, the auditor should ________ verify the related
interest expense and interest payable.
A) not
B) attempt to
C) simultaneously
D) never
11) In a WebTrust attestation engagement the client engages a CPA to provide what
level of assurance that the company’s Website complies with Trust Services principles?
A) absolute
B) reasonable
C) limited
D) moderate
12) The accounts payable accounting clerk erroneously recorded the same purchase
twice. Which of the following internal control tests would most likely act as a detective
control?
A) recalculating the purchases journal
B) tracing from the purchases journal to the general ledger
C) vouching from the general ledger to the purchases journal
D) reconciling the vendor’s statements to the accounts payable subsidiary ledger
13) The primary concern in determining whether retained earnings is correctly
disclosed on the balance sheet is:
A) correct calculation of the net income or loss for the year
B) correct calculation of dividend payments for the year
C) whether prior-period adjustments have been made correctly
D) whether there are any restrictions on the payment of dividends
14) Which of the following is not one of the subcomponents of the control
environment?
A) management’s philosophy and operating style
B) organizational structure
C) adequate separation of duties
D) commitment to competence
15) Which department provides quantitative information in order for management and
others to make decisions?
A) management information systems
B) auditing
C) finance
D) accounting
16) An auditor selects a sample of shipping documents in order to determine if the
related sales invoices were prepared. This test would gather evidence concerning which
audit objective?
A) Completeness
B) Detail tie-in
C) Occurrence
D) Realizable value
17) Many of the auditor’s audit procedures in the audit of cash center around the client’s
bank confirmations.
A) True
B) False
18) When a scope limitation exists in an audit which type of report modification can
result?
A)
B)
C)
D)
19) Controls that relate to a specific use of the IT system, such as the processing of
sales or cash receipts, are called application controls.
A) True
B) False
20) SSAEs are issued by the
A) True
B) False
21) If the auditor concludes that physical controls over inventory are so inadequate that
the inventory will be difficult to count, the auditor should ordinarily:
A) withdraw from the engagement
B) issue a qualified audit report
C) conduct expanded observation tests of physical inventory
D) hire a specialist to assist the auditor
22) Subsequent events which require adjustment to the financial statements provide
additional information about significant conditions/events which did not exist at the
balance sheet date.
A) True
B) False
23) Tests of controls are generally more costly to perform than analytical procedures.
A) True
B) False
24) A proof of cash disbursements is not effective for discovering checks written for an
improper amount, fraudulent checks, or misstatements in which the dollar amount
appearing in the cash disbursements records is incorrect.
A) True
B) False
25) Accrued payroll taxes are normally considered to be associated with the acquisition
and payment cycle.
A) True
B) False
26) Which items affect the sufficiency of evidence when choosing a sample?
A)
B)
C)
D)
27) Which of the following is false concerning the principal CPA firm’s alternatives
when issuing a report when another CPA firm performs part of the audit?
A) Issue a joint report signed by both CPA firms
B) Make no reference to the other CPA firm in the audit report, and issue the standard
unqualified opinion
C) Make reference to the other auditor in the report by using modified wording (a
shared opinion or report)
D) A qualified opinion or disclaimer, depending on materiality, is required if the
principal auditor is not willing to assume any responsibility for the work of the other
auditor
28) Professional skepticism requires auditors to “either assume that management is
dishonest or they have questionable honesty.”
A) True
B) False
29) Acceptable audit risk (AAR) and acceptable risk of incorrect acceptance (ARIA)
are inversely related; that is, as AAR increases, ARIA decreases.
A) True
B) False
30) There are 14 steps to attributes sampling, divided into three sections: plan the
sample, select the sample and perform the audit procedures, and evaluate the results.
Discuss the three steps that comprise the “evaluate the results” section.
31) There are four steps to generalize from the sample to the population using
difference estimation sampling. Identify each of these four steps.
32) Discuss three reasons why auditors are responsible for “reasonable” but not
“absolute” assurance.
33) When designing tests of controls and substantive tests an auditor is gathering
evidence to satisfy the transaction related audit objectives. What are the four steps the
auditor would normally follow to reduce assessed control risk?
34) You are determining the appropriate sample size to test accounts receivable. What
three factors are the most important to consider?
35) Discuss each of the three broad categories (types) of operational audits.