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 client’s 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 client’s 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