1) Which of the following is considered audit evidence?
A)
B)
C)
D)
2) Which of the following audit procedures would normally be best expected to test the
completeness objective (assertion) for sales?
A) Compare shipping documents with sales records
B) Apply gross profit rates to inventory disposed of during the period
C) Trace payments received subsequent to the balance sheet date
D) Send accounts receivable confirmation requests
3) The audit procedures for the subsequent events review can be divided into two
categories: (1) procedures integrated as a part of the verification of year-end account
balances, and (2) those performed specifically for the purpose of discovering
subsequent events. Which of the following procedures is in category 1?
A) Inquiries of client regarding contingent liabilities
B) Obtain a letter of representation written by client
C) Subsequent period sales and purchases transactions are examined to determine
whether the cutoff is accurate
D) Review journals and ledgers of year 2 to determine the existence of any transaction
related to year 1
4) If the financial statements include an income statement and a balance sheet but
exclude the statement of cash flows, the auditors:
A) can issue an unqualified report
B) should issue a qualified opinion due to the departure from GAAP
C) should issue a qualified opinion because the missing statement of cash flows
constitutes a scope limitation
D) should include the statement of cash flows, modify the report and issue an
unqualified opinion
5) Under common law, a foreseen user would be treated the same as:
A)
B)
C)
D)
6) Of the three approaches to applying the concept of foreseen users (Credit Alliance
approach, restatement of torts approach, and foreseeable user approach), the approach
followed by the most states is the Credit Alliance approach.
A) True
B) False
7) Once auditors determine that entity level controls are designed and placed in the
operation they:
A) make a preliminary assessment for each transaction-related audit objective for each
major type of transaction
B) make a preliminary assessment of control risk
C) obtain an understanding of the design and implementation of internal control
D) prepare audit documentation in order to opine on the company’s internal control
system
8) Which of the following items would not normally appear on bank reconciliations?
A) Balance per bank
B) List of deposits in transit
C) Outstanding deposits
D) Outstanding checks
9) Auditing standards prohibit reliance on the work of internal auditors due to the lack
of independence of the internal auditors.
A) True
B) False
10) Under Rule 505, Form of Organization and Name, a CPA firm may use any name as
long as it is not misleading.
A) True
B) False
11) Effective internal accounting control over unclaimed payroll checks that are kept by
the company would include accounting department procedures that require:
A) effective cancellation and stop payment orders for checks representing unclaimed
wages
B) preparation of a list of unclaimed wages on a periodic basis
C) accounting for all unclaimed wages in a current liability account
D) periodic accounting for the actual checks representing unclaimed wages
12) A deficiency uncovered in the audit of internal control is explained by which of the
following in relation to a financial statement misstatement?
A) the amount of the misstatement
B) the likelihood of the misstatement
C) the amount, likelihood, and classification of the misstatement
D) the amount and the classification of the misstatement
13) In the performance of an audit, a CPA:
A) is legally liable for not detecting client fraud
B) must strictly follow GAAS for privately held clients
C) must strictly follow PCAOB auditing standards for publicly held clients
D) must exercise due professional care in the performance of their audit responsibilities
14) A qualified opinion can be issued for which of the following?
I.When a limitation on the scope of the audit has occurred.
II.When the auditor lacks independence.
III.When generally accepted accounting principles have not been used.
A) I and II
B) I and III
C) II and III
D) I, II and III
15) An audit partner is developing an office-training program to familiarize his
professional staff with statistical decision models applicable to the audit of dollar-value
balances. He wishes to demonstrate the relationship of sample sizes to population size
and variability and the auditor’s specifications as to precision and confidence level. The
partner prepared the following table to show comparative population characteristics and
audit specifications of two populations.
Based on the information presented above, you are to indicate for the specified case
from the table the required sample size to be selected from population 1 relative to the
sample from population 2 . In case 1, the required sample from population 1 is:
A) larger than the required sample size from population 2
B) equal to the required sample size from population 2
C) smaller than the required sample size from population 2
D) indeterminate relative to the required sample size from population 2
16) Effectiveness refers to the degree to which costs are reduced without reducing
efficiency.
A) True
B) False
17) An example of an “indirect ownership interest in a client” would be ownership of a
client’s stock by a member’s:
A) dependent child
B) spouse
C) non-dependent grandfather
D) All of the above are examples of indirect ownership
18) When performing tests of controls or substantive tests of transactions for
acquisitions, vendors’ invoices are more useful than vendors’ statements.
A) True
B) False
19) Audit evidence concerning proper segregation of duties normally is best obtained
by:
A) direct personal observation of the employee who applies control procedures
B) making inquiries of co-workers about the employee who applies control procedures
C) preparation of a flowchart of duties performed and available personnel
D) inspection of third-party documents containing the initials of who applied control
procedures
20) The statement that “Nothing came to our attention which would indicate that these
statements are not fairly presented” expresses which of the following?
A) disclaimer of an opinion
B) negative assurance
C) negative confirmation
D) shared opinion
21) Which of the following describes the process of implementing a new system in one
part of the organization, while other locations continue to use the current system.
A) parallel testing
B) online testing
C) pilot testing
D) control testing
22) The use of haphazard sample selection is encouraged under professional auditing
standards.
A) True
B) False
23) Which of the following is not one of the types of engagements and related forms of
conclusions that are defined by the attestation standards?
A) reviews
B) compilations
C) examinations
D) agreed-upon procedures
24) A client representation letter is:
A) prepared on the CPA’s letterhead
B) addressed to the client
C) signed by high-level officials (e.g., the president and chief financial officer)
D) dated as of the client’s year-end
25) The most important general ledger account included in and affecting several cycles
is the:
A) cash account
B) inventory account
C) income tax expense and liability accounts
D) retained earnings account
26) A document that details what the auditor will do to gather sufficient, appropriate
evidence is the:
A) audit strategy
B) audit program
C) audit procedure
D) audit risk model
27) An important statistic to consider when using a statistical sampling audit plan is the
population variability. The population variability is measured by the:
A) sample mean
B) standard deviation
C) standard error of the sample mean
D) estimated population total minus the actual population
28) Sampling risk may be controlled by:
A)
B)
C)
D)
29) In searching for unrecorded liabilities the purpose of the audit procedure to
“examine underlying documentation for subsequent cash disbursements” is to:
A) uncover liabilities on the balance sheet which should not have been recorded until a
subsequent period
B) find the documentation relating to a cash disbursement
C) uncover payments made in a subsequent accounting period for liabilities that existed
at the balance sheet date
D) uncover cash disbursements recorded in a subsequent accounting period which
should be recorded in this period
30) General controls may include firewalls which are used to protect:
A) erroneous internal handling of data
B) against insufficient documentation of transactions
C) illogical programming commands
D) unauthorized use of system resources
31) Which of the following are required to have a written report regarding the assertion
of another party?
A)
B)
C)
D)
32) The audit procedures for the subsequent events review can be divided into two
categories: (1) procedures normally integrated as a part of the verification of year-end
account balances, and (2) those performed specifically for the purpose of discovering
subsequent events. Which of the following procedures is in category 2?
A) Correspond with attorneys
B) Test the collectability of accounts receivable by reviewing subsequent period cash
receipts
C) Subsequent period sales and purchases transactions are examined to determine
whether the cutoff is accurate
D) Compare the subsequent-period purchase price of inventory with the recorded cost
as a test of lower-of-cost-or-market valuation
33) WebTrust services are performed under the direction of the SSARS.
A) True
B) False
34) 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.
A) True
B) False
35) In the audit of a private company, the auditor will test internal controls when control
risk is initially assessed at:
A)
B)
C)
D)