1.

To determine whether the December sales of your audit client have been understated, an auditor would most likely perform which of the following procedures?

Select one:

a. Vouch from the sales journal to the sales invoices, shipping documents, and purchase orders.

b. Vouch from the sales journal to the cash receipts journal.

c. Trace from the cash receipts journal to the sales journal.

d. Trace from the shipping documents to the sales journal.

e. Trace from the purchase orders to the shipping documents.

2.

To gain assurance that all inventory items in a client's inventory listing schedule are valid, an auditor most likely would trace

Select one:

a. Inventory tags noted during the auditor's observation to items in the inventory listing schedule.

b. Inventory tags noted during the auditor's observation to items listed in receiving reports and vendors' invoices.

c. Items in the inventory listing schedule to inventory tags and the auditor's recorded count sheets.

d. Items in receiving reports and vendors' invoices to the inventory listing schedule.

3.

Charlie Company's comparative financial statements include the financial statements of the prior year that were audited by predecessor auditors whose report on those financial statements is not presented. If the predecessor's report was qualified, the successor auditors should

Select one:

a. indicate in their report the substantive reasons for the qualification issued by the predecessor auditors.

b. request the entity to reissue the predecessor's report on the prior-years' statements.

c. issue an updated comparative report on the entity's financial statements, indicating the involvement of component auditors.

d. express an opinion only on the current-year's financial statements and make no reference to the prior-years' financial statements or opinion.

4.

Event: One of the key suppliers for your audit client goes bankrupt. How does this impact Audit Risk in the Audit Risk Model?

Select one:

a. It increases.

b. It decreases.

c. No effect.

d. Not applicable.

5.

Why is it the client's decision to record adjustments to the financial statements?

Select one:

a. Having auditors adjust the financial statements would impair independence with respect to the client.

b. The financial statements are the responsibility of the client's management.

c. Auditors often do not have sufficient client-specific expertise to record adjustments to the financial statements.

d. The client will ultimately suffer any losses related to misstated financial statements.