MULTIPLE-CHOICE QUESTIONS
1. Assume that an auditor is physically examining a client's equipment. What type of audit procedure is the auditor performing?
a. Inspection of documentation.
b. Inspection of assets.
c. External confirmation.
d. Observation.

2. Which of the following is a true statement regarding audit evidence and audit procedures?
a. The auditor has a responsibility to design and perform audit procedures to obtain sufficient appropriate audit evidence.
b. Inquiry is a type of audit procedure that typically does not require corroborating evidence.
c. The audit procedures that are performed during an audit are summarized in a document referred to as an audit engagement letter.
d. Reperformance involves checking the mathematical accuracy of a document or record, such as an inventory count sheet.

3. Which of the following items should be included in audit documentation?
a. Procedures performed.
b. Audit evidence examined.
c. Conclusions reached with respect to relevant financial statement assertions.
d. All of the above should be included.

4. Which of the following statements is a false statement regarding audit documentation?
a. An audit program is an example of audit documentation.
b. The only purpose of audit documentation is to provide evidence that the audit was planned and performed in accordance with auditing standards.
c. Audit documentation helps facilitate internal and external inspections of completed audits.
d. All of the above statements are true.

5. Which of the following statements is a true statement regarding client acceptance?
a. Auditors in the U.S. are required to communicate with the predecessor auditor before accepting a new client.
b. Audit firms are required to provide audits for any organization that requests one.
c. Communication with a predecessor audit must be written.
d. International auditing standards require auditors to communicate with the predecessor auditor before accepting a new client.

6. Which of the following documents contains the agreed-upon terms of the audit engagement?
a. Audit program.
b. Audit plan.
c. Audit engagement letter.
d. Audit documentation.

7. Which of the following statements is correct regarding the design of controls related to credit limits?
a. The effectiveness of the control design is contingent on the credit manager's process for establishing and reviewing credit limits.
b. Because the process of establishing credit limits is fairly time-consuming, the control should be designed so that the marketing manager has the ability to approve sales on an ad hoc basis while waiting for the credit approval.
c. The control should be designed so that the sales manager has final approval regarding credit limits.
d. All are correct statements regarding the design of controls related to credit limits.

8. Which of the following tests of controls would not typically be used in assessing control design effectiveness?
a. Inquiry.
b. Observation.
c. Inspection of documentation.
d. Reperformance.