$1/$ Cash receipts from sales on account have been misappropriated. Which of the following acts will conceal this embezzlement and be least likely to be detected by the auditor?

a$.$ Understating the sales journal

b$.$ Understating the cash receipts journal

c$.$ Overstating the accounts receivable subsidiary records

d$.$ Overstating the accounts receivable control account

$2/$ Which of the following would not be considered an inherent limitation of the potential effectiveness of an entity's internal control structure?

a$.$ Incompatible duties

b$.$ Management override

c$.$ Mistakes in judgment

d$.$ Collusion among employees

$3/$ Which of the following circumstances is most likely to cause an auditor to increase the assessment of the risk of material misstatement of the financial statements due to fraud?

a$.$ Clerical errors are listed on a computer$-$generated exception report.

b$.$ unusual discrepancies exist between the entity's records and confirmation replies.

c$.$ Monthly bank reconciliations usually include several in$-$transit items

d$.$ Property and equipment are usually sold at a loss before being fully depreciated

$4/$ If an independent audit leading to an opinion on financial statements causes the auditor to believe that a material misstatement due to fraud exists, the auditor should first:

a$.$ request that management investigate to determine whether fraud has actually occurred.

b$.$ consider the implications for other aspects of the audit and discuss the matter with the appropriate levels of management.

c$.$ consider whether fraud was the result of a failure by employees to comply with existing controls.

d$.$ make the investigation necessary to determine whether fraud has actually occurred.

$5/$ The auditor uses knowledge gained from the understanding of the client's business and industry to assess:

a$.$ inherent risk.

b$.$ control risk.

c$.$ client business risk.

d$.$ audit risk.

$6/$ In an attestation engagement, a CPA practitioner is engaged to:

a$.$ Prepare a tax return using information the CPA has not audited or reviewed.

b$.$ Give expert testimony in court on particular facts in a corporate income tax controversy.

c$.$ Compile a company's financial forecast based on management's assumptions without expressing any form of assurance.

d$.$ Prepare a written report containing a conclusion about the reliability of a management assertion.

$7/$ An auditor discovers that a client's accounts receivable turnover is substantially lower for the current year than for the prior year. This trend may indicate that

a employees have stolen inventory just before year$-$end.

b$.$ fictitious credit sales have been recorded during the year.

c$.$the client recently tightened its credit$-$granting policies.

d$.$an employee has been lapping receivables in both years.

$8/$ The auditor's responsibility regarding material misstatements caused by fraud is

a$.$ less than the auditor's responsibility regarding material misstatements caused by error.

b$.$ the same as the auditor's responsibility regarding material misstatements caused by error.

c$.$ greater than the auditor's responsibility regarding material misstatements caused by error.

d$.$ either less than or greater than the auditor's responsibility regarding material misstatements caused by error, depending on the circumstances.

$9/$ Which of the following audit tests would be regarded as a substantive test only?

a$.$ Tests of the signatures on purchase orders to a list of approved signatori

b$.$ Interview the sales accountant to verify that whether they perform proper authorisations for sale orders.

c$.$ Comparing inventory good receipt notes, pricing list to vendors' invoices.

d$.$ Tests of the additions to property, plant and equipment by physical inspections

$10/$ Inherent risk and control risk differ from planned detection risk in that they:

a$.$ exists independently of the financial statement audit.

b$.$ can be changed at the auditor's discretion.

c$.$ may be assessed in either quantitative or non$-$quantitative terms.

d$.$ arises from the misapplication of auditing procedures.