1.

During the audit of Mega Co., the auditor obtains several shipping documents from (1) a few days before the close of the current year under audit and (2) a few days into the next accounting period. The auditor then compares these selected documents to the clients sales journal. What assertion is the auditor testing?

A. The existence assertion of sales.

B. The valuation assertion of accounts receivable.

C. The completeness assertion of receivables.

D. The cut-off assertion of sales transactions.

E. The presentation and disclosure assertion of accounts receivable.

2.

Evaluate the statements below about performance materiality. Which statement is correct?

A. Performance materiality is required for public companies, but not for private companies.

B. The level of performance materiality does not affect the amount of evidence needed.

C. Performance materiality cannot vary for different classes of transactions.

D, Determining performance materiality is necessary because auditors accumulate evidence by segments.

E. There is a direct relationship between performance materiality and the amount of evidence needed.

3.

Segregation of duties is an important control activity. Which of the following functions should be separated?

A. custody, execution, and reporting.

B. authorization, reconciliation, and custody.

C. authorization, execution, and payment.

D. authorization, payment, and recording.

E. authorization, recording, and custody.

4.

RST is the audit firm for the General Product Co. audit. Which of the scenario below would cause RST to believe that General Product Co.s financial statements may contain material misstatements due to fraud?

A. General Product Co. places little emphasis on meeting earnings targets.

B. General Product Co. has a stable workforce.

C. General Product Co. was not able to provide the RST audit team with proper supporting documentation on many transactions that RST has tested during the audit.

D. General Product Co. regularly sold their fixed assets at a loss before they were fully depreciated.

E. General Product Co. did not immediately correct the control deficiencies that RST has identified and communicated to them in prior audits.

5.

BCD is the audit firm for the Anderson audit. If Anderson failed to accrue (make an adjusting journal entry for) an unpaid invoice for goods received prior to the end of their fiscal year, it would represent a

A. projected misstatement.

B. known misstatement.

C. possible misstatement.

D. tolerable misstatement.

E. likely misstatement.