13. Analytical procedures are best used as a substantive audit procedure in which of the following scenarios?

A. The auditors primary objective is to reduce audit costs to a minimum.

B. Internal control risk is high, and therefore it does not make sense to test controls.

C. Preliminary analytical review indicates that there are likely to be misstatements in significant account balances.

D. None of the above.

14. The auditor wishes to test the assertion related to the existence of accounts receivable. Which of the following would be the best approach to gathering the audit evidence?

A. Take an attribute sample of shipping documents and trace to invoices.

B. Take an attribute sample of invoices and review to see that credit was properly reviewed.

C. Take a MUS sample and send confirmations to customers.

D. Use analytical procedures and develop an aging of receivables and compare to the aging analysis from last year to determine whether the differences are material.

15. An auditor discovers a material misappropriation of assets involving the theft of $500,000 of inventory. Restitution will not be made. Which of the following statements is not correct regarding the auditors responsibility for reporting the misappropriation of assets?

A. Because theft was involved, the auditor must report it to the clients lawyer with a follow-up to see that it had been reported to the proper legal enforcement group.

B. The theft, because it is material, should be separately reported as a line item in the financial statements because it is unusual and non-recurring and there will be no restitution.

C. The theft must be reported to the audit committee.

D. The theft must be reported to top management

16. The largest form of misappropriation of assets (both in dollars and frequency) is:

A. Theft of cash directly from the company.

B. Theft of cash through disbursement schemes.

C. Theft of inventory and small tools.

D. Theft of cash by taking customer receipts and writing off accounts receivable.