1.

In auditing accounts payable, an auditor's procedures most likely would focus primarily on management'sassertionof:

a.

Existence

b.

Presentation and disclosure

c.

Valuation and allocation

d.

Completeness

2.

An auditor may analyse inventory turnover to detect:

a.

Errors in inventory pricing

b.

The existence of obsolete inventory

c.

Optimal reorder points

d.

Methods of avoiding cyclical holding costs

3.

The acceptance of incoming inventory should be authorised on the basis of:

a.

A vendor invoice

b.

An approved purchase order

c.

A bill of lading

d.

The purchase requisition

4.

If management refuses to provide a written representation on a material matter the auditor considers essential, this constitutes:

a.

A violation of the Corporations Act 2001

b.

An uncertainty, preventing the issue of an unmodified opinion

c.

A limitation of scope, preventing the issue of an unmodified opinion

d.

Evidence that the financial report is materially misstated

5.

For reporting purposes,subsequent eventsare those occurring subsequent to the:

a.

Reporting period balance date

b.

Reporting period balance date but before the date of the audit report

c.

Date of the audit report but before the date of issue of the financial report

d.

Date of issue of the financial report

6.

Thedateof an audit report should be the date of:

a.

Completion of all important audit procedures

b.

Closing of the client's books

c.

Receipt of the management representation letter

d.

Issue of the audit report to members

7.

When an auditor issues an audit report referring to amaterial uncertainty, this indicates that:

a.

The auditor was unable to apply audit procedures sufficient to resolve the uncertainty

b.

The client is likely to experience going concern problems

c.

The uncertainty arose during the subsequent events period

d.

The auditor wasn't able to form an opinion on the financial report as a whole

8.

Aqualified opinionwill be issued by the auditor if:

a.

The financial report does not include a statement of cash flows

b.

A significant uncertainty has been disclosed adequately in the notes

c.

The client has restricted the auditor from attending the physical stocktake, and alternative procedures to satisfy the auditor as to the existence of highly material inventory are not available

d.

Management refuses to allow for doubtful debts which are material

9.

Compared with non-statistical sampling,statistical samplinghas the advantage that it:

a.

Measures the sufficiency of evidence by quantifying sampling risk

b.

Minimises the failure to detect fraud and error

c.

Eliminates non-sampling risk

d.

Assists in the design of more effective auditing procedures

10.

Which of the following best demonstrates the concept ofsampling risk?

a.

The auditor may not recognise errors in the items selected in the sample

b.

The items selected in the sample may not be available to the auditor for inspection

c.

The audit procedures chosen by the auditor to test this objective were not appropriate

d.

A randomly chosen sample of items may not be representative of the population as a whole for the attribute of interest

11.

The failure by the auditor to recognise a control deviation or a misstatement in a sample of items is a:

a.

Statistical error

b.

Non-sampling error

c.

Sampling error

d.

Standard error

12.

When the auditor does not receive replies to accounts receivable confirmation letters after a second request, he or she is likely to:

a.

Extend tests of controls over revenue

b.

Examine cash receipts in the final month of the financial year

c.

Examine shipping documents for recorded sales to those debtors

d.

Increase the planned level of detection risk for existence for accounts receivable

13.

To discoverunder-statementof accounts receivable, the auditor will:

a.

Test a sample of sales transactions selected from the sales journal

b.

Confirm accounts receivable

c.

Test a sample of sales transactions selected from shipping documents

d.

Test the aged accounts receivable trial balance

14.

The accounting system will not post a sales transaction without a valid shipping document number. This internal control is most relevant to the transaction-related audit objective:

a.

Occurrence

b.

Completeness

c.

Accuracy

d.

Posting and summarisation

15.

The accounting system automatically applies the stored price to products sold based on the scan of their bar codes. This internal control is most relevant to the transaction-related audit objective:

a.

Occurrence

b.

Completeness

c.

Posting and summarisation

d.

Accuracy

16.

To support the auditor's initial assessment of control risk below maximum, the auditor performs procedures to determine that internal controls are operating effectively. Which of the following audit procedures is the auditor performing?

a.

Test of controls

b.

Substantive tests of transactions

c.

Analytical procedures

d.

Tests of details of balances

17.

The auditor faces a risk that the audit won't detect material misstatements that occur in the accounting process. To minimise this risk, the auditor relies primarily on:

a.

Test of controls

b.

Substantive tests

c.

Statistical tests

d.

Internal control

18.

As the strength of general IT controlsweakens, the auditor is most likely to:

a.

Reduce testing of IT application controls

b.

Increase testing of general IT controls to determine whether they are operating effectively

c.

Expand testing of IT application controls to justify reduced assessment of control risk

d.

Cease the examination of the client's general IT controls

19.

Which of the following factors are relevant to theOpportunitycomponent of the Fraud Triangle?

a.

Management has a strong interest in employing inappropriate means to minimise reported earnings for tax-motivated reasons.

b.

There are recurring attempts by management to justify marginal or inappropriate accounting on the basis of materiality.

c.

The company's financial performance is threatened by a high degree of competition and market saturation.

d.

There is inadequate segregation of duties in the accounts payable department

20.

Management refuses to record the auditor's proposed adjustments that collectively are not material and wants the auditor to issue the report based on the unadjusted numbers. Which of the following statements is correct regarding the financial report presentation?

a.

The financial report contains unadjusted errors requiring the auditor is issue a qualified opinion

b.

The financial report is not presented in accordance with Australian Accounting Standards

c.

The financial report is free from material misstatement, and no disclosure is required in the notes to the financial statements

d.

The financial report is free from material misstatement, but the failure to record the proposed adjustments should be disclosed in the notes