Question
1- If an analytical procedure supports management representations, it provides Select answer from the options below persuasive evidence. minimal evidence. corroborative evidence. key item evidence.
1- If an analytical procedure supports management representations, it provides
Select answer from the options below
persuasive evidence.
minimal evidence.
corroborative evidence.
key item evidence.
2- Which of the following statements is NOT accurate as it relates to testing and the audit risk?
Select answer from the options below
the nature, timing, and extent of tests are determined by the risk assessment
professional judgement is required in determining the nature, timing, and extent of tests
the nature, timing, and extent of tests are determined by the clients management
the nature, timing, and extent of tests are performed to decrease audit risk to an acceptable level
3- Which of the following analytical procedures will most likely provide minimal evidence?
Select answer from the options below
agreeing investment income by calculating the average amount invested to an average interest rate
examining commissions expense by referring to the terms of the agreements and the payment dates
calculating the school fee per grade by the number of students in the respective grade
understanding the reason for any large accounts receivable credit transactions on the ledger
4- Which of the following is true about the timing of substantive procedures?
Select answer from the options below
professional judgement is not required in determining if substantive testing can be done prior to year end
more likely to take place at an interim date if the account balance accumulates transactions that will remain in the account balance at year end
more substantive testing takes place at an interim audit date if control risk is high
substantive testing cannot take place at an interim audit date
5- Which type of evidence is considered more reliable and relevant by the auditor?
Select answer from the options below
accounts receivable confirmation
copy of cash receipt
internally generated evidence
minutes from management meetings
6- During the planning stage of the audit, the auditor is alerted to fluctuations in the financial data by
Select answer from the options below
testing the controls.
gaining an understanding of the clients business and industry.
forming an opinion on the fairness of the financial statements.
performing combined substantive procedures.
7- Which of the following does NOT describe items that are included in the audit program?
Select answer from the options below
extent of audit procedures
nature of audit procedures
timing of substantive procedures
adjusting entries to be entered by management
8- An auditor simply compares a current year balance with the prior year balance in order to help identify trends. This procedure provides
Select answer from the options below
corroborative evidence.
key item evidence.
minimal evidence.
persuasive evidence.
9- What is the first step an auditor will take if they identify an error while performing a test of transactions?
Select answer from the options below
automatically determine the statements are materially misstated
ask management to investigate the error
inform the professional body of auditors
resign from the audit
10- As it relates to the testing of the reliability of the underlying data for analytical procedures, which of the following is accurate?
Select answer from the options below
when using analytical procedures to perform an overall financial statement analysis, it is necessary to test the underlying data
professional judgement is not required when determining if the underlying data is to be tested
when analytical procedures are to provide persuasive evidence, it is necessary to test the underlying data
it is always necessary to test the underlying data when the analytical procedure provides minimal assurance
11- The auditor spends significant time auditing cash discounts and sales returns because
Select answer from the options below
these transactions reduce income.
management needs to authorize these transactions.
the materiality is higher.
the risk of transactions being recorded to conceal stolen cash is higher.
12- If a fictitious sale has been recorded, this affects the
Select answer from the options below
valuation of accounts receivable.
occurrence of sales and existence of accounts receivable.
occurrence of accounts receivable.
existence of sales.
13- When a client operates in an industry subject to changing trends
Select answer from the options below
the risk of material misstatement is increased.
the risk of product obsolescence is reduced.
the risk of fraud is increased.
the reputational risk of the client is decreased.
14- The auditor obtains evidence of pledging, assigning, or factoring of accounts receivable through
Select answer from the options below
customer confirmations.
review of the accounts receivable subsidiary ledger.
board minutes and discussion with management.
substantive testing of details of balances.
15- The auditor needs to understand the systems and controls for sales and receivables transactions to
Select answer from the options below
identify the risks of assertions.
assess the strengths and weaknesses to plan the audit.
discuss with the audit committee.
retain the information in the audit files for future audits.
16- Understanding client gross margins and expected receivable levels assists the auditor to
Select answer from the options below
design controls over sales and accounts receivable.
calculate the net income of the client.
develop an expectation of revenue.
understand the cash flow impact of accounts receivable.
17- In order to satisfy the classification assertion, the auditor
Select answer from the options below
reviews the client chart of accounts.
tests all journal entries.
identifies differences between the current and prior year chart of accounts.
tests a sample of journal entries for sales, cash receipts, and sales adjustment transactions.
18- The assessed level of detection risk for the accuracy assertion for accounts receivable is low when
Select answer from the options below
control risk and inherent risk are assessed as high.
audit risk and industry risk are assessed as low.
control risk and inherent risk are assessed as low.
business risk and inherent risk are assessed as high.
19- If an auditor sends an accounts receivable confirmation, and does not receive a response,
Select answer from the options below
The auditor will attempt to perform alternative procedures.
The auditor will replace the confirmation by sending another one to a different supplier.
The auditor will determine the account balance is misstated.
The auditor will resign from the audit.
20- If the management of a company receive bonuses based on the level of net income, how does this affect the inherent risk for revenue?
Select answer from the options below
Lower inherent risk that revenue is overstated
Higher inherent risk that revenue is understated
Higher inherent risk that revenue is overstated
There is no impact on the inherent risk for revenue
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