Archives: Quiz

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. […]

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 […]

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 […]

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 […]

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 […]

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 […]

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 […]

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 […]

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 […]

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 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 […]

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 […]

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 […]

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 […]

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 […]

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 […]

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 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 […]

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 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 […]

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 […]

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 […]

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 […]

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 […]

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%. […]

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. […]

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 […]

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 […]

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 […]

A review engagement requires what amount of evidence to be accumulated? A) Minimal B) Moderate C) Extensive D) Maximum Brandon is working on the audit of Michum Inc. In accordance with CAS 550 (related parties), Brandon had obtained a management […]

The existence of advanced automated systems affects the audit process. Which of the following characteristics is an indicator of the presence of an advanced automated information system? A) use of data communications (such as the Internet) to transfer transaction data […]

If the auditor were responsible for making certain that all the assertions of management in the statements were correct, A) bankruptcies could no longer occur. B) bankruptcies would be reduced to a very small number. C) audits would be much […]

The operational responsibility and the recording of transactions are normally kept separate A) to centralize activities in order to be more cost efficient. B) to ensure unbiased information is recorded. C) because operational personnel rarely has the necessary accounting skills […]

The No-Name Advertising Rating Agency conducts independent surveys to determine the sources of purchases by consumers (e.g. newspaper ad, magazine ad, television ad). This information is then used by those media (i.e. newspapers, magazines, and television broadcasters) to indicate to […]

Even though the tests of controls are the most important part of testing payroll, many auditors spend little time in this area. In many audits, there is a minimal risk of material misstatements, even though payroll is frequently a significant […]

PA firm has been auditing Big Manufacturing Company (BMC) for several years. Last year, BMC converted its inventory and purchasing systems to a new system effective December 31, the date of the year end. To their horror, the PA firm […]

The appropriate date for the audit report for a public company is the one on which the A) client’s fiscal year ended. B) auditor and client entered into a contract. C) board of directors approved the financial statements. D) auditor […]

As a result of management’s refusal to permit the auditor to physically examine inventory, the auditor has not accumulated sufficient evidence to conclude whether financial statements are stated in accordance with ASPE (Accounting Standards for Private Enterprises). The auditor must […]

Comparison of the total balance in notes payable, interest expense and accrued interest with these accounts in the prior year could detect what type of possible misstatement? A) Misstatement of interest expense or accrued interest, or omission of a note […]

The use of the negative (as opposed to the positive) form of receivables confirmation is indicated when A) internal control surrounding accounts receivable is considered to be ineffective. B) there is reason to believe that a substantial number of accounts […]

Which of the following is an example of a key internal control for an online system that would help ensure that recorded sales are for the amount of goods shipped and are accurately billed and recorded? A) Shipping documents are […]

In testing for cutoff, the objective is to determine A) whether all of the current period’s transactions are recorded. B) that no transactions from the prior period are included in the current period’s balances. C) that no transactions of the […]

You are conducting an audit and have obtained the following figures with respect to sales and accounts receivable: 2012 2011 Accounts receivable $ 3,343,000 $ 2,694,000 Allowance for doubtful accounts 212,150 207,660 Sales 25,640,000 24,630,000 Required: A) What are the […]

The need to implement philosophies and practices commonly referred to as “improved business practices” comes from A) increased competition resulting in public accounting firms being concerned about keeping clients and maintaining a reasonable profit. B) a CAS pronouncement. C) a […]

A common inventory observation procedure is to be alert for items that are damaged, rust- or dust-covered, or located in inappropriate places. The balance-related audit objective being achieved by this procedure is A) classification. B) cutoff. C) valuation. D) rights. […]

Management assesses risks as a part of designing and operating internal controls to minimize fraud and errors. Auditors assess risks to A) decide the evidence needed in the audit. B) fully implement the audit risk model. C) enable them to […]

The document that is used to prepare and reconcile the deposit of cash and improve the control over the custody of assets (cash) is the A) sales invoice. B) credit memo. C) remittance advice. D) cash receipts journal. A risk […]

“Use of comparisons and relationships to determine whether account balances or other data appear reasonable” is a definition of A) auditing. B) tests of balances. C) tests of controls. D) analytical procedures. When the criteria to be used in the […]

The use of the term “reasonable assurance” is intended to indicate that an audit cannot be expected to A) completely eliminate the possibility that a material error or fraud exists. B) consider or search for minor errors. C) be compliant […]

The transfer agent confirmed to the auditor that the company had 2,500,000 shares outstanding at December 31, 2010. To have assurance over the accuracy of the dividend payable, the auditor would multiply 2,500,000 by the A) dividend per share declared. […]