1.A succinct, but comprehensive definition of independence is that an auditor

a)Must be independent in fact and in appearance.

b)Must not have a direct financial interest in a client.

c)Must have a license to practice as a public accountant.

d)Must not take on as an audit client a company owned by a member of his/her immediate family.

2.Phillip Montain wrote up an advertisement for his firm.In his draft to the local newspaper he

indicated that the firm was able to provide services that he knew it could not deliver.Which part

of the profession's standards or codes of conduct was Phillip breaking?

a) objectivity

b) confidentiality

c) professional behaviour

d) communication

3.The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the

a)Factors that raise doubts about the auditability of the financial statements.

b)Operating effectiveness of maintaining strong internal control policies and procedures.

c)Risk that material misstatements exist in the financial statements.

d)Possibility that the nature and extent of substantive tests may be reduced.

4.The audit risk model tells us:

a)Auditors cannot rely on an estimate of zero inherent risk.

b)Auditors can rely only on internal controls for forming an opinion.

c)Auditors can rely on an estimate of zero inherent risk.

d)Materiality is not important.

5.According to GAAS, the overall objective of a financial statement audit is:

a)To enable the auditor to express an opinion as to whether the financial statements are prepared in accordance with generally accepted accounting principles.

b)To reduce audit risk to an acceptably low level.

c)To determine whether the financial principles adopted by management in preparing the financial statements are acceptable.

d)To obtain reasonable assurance that the financial statements taken as a whole are free from misstatement, whether due to fraud or error.

6.On the basis of audit evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would

a)Decrease substantive testing.

b)Increase inherent risk.

c)Decrease detection risk.

d)Increase materiality levels.

7. Richard Nucci used analytical procedures at his client, Ultimate Vacations.Which one of

these is not an analytical procedure?

a) Send confirmations to major customers.

b) Estimate revenue for Ultimate Vacations by multiplying trips sold by average price of vacation packages.

c) Discuss unusual fluctuations with client personnel.

d) Compare wages month by month for this year and last year.

8. The internal control objective of 'classified' means there are controls in place to ensure that:

a) fictitious or duplicate transactions are not included in the books of an organization.

b) correct amounts are assigned to transactions.

c) transactions are recorded in the correct accounting period.

d) transactions are charged and allocated to the correct general ledger account.

9. If controls are in place to ensure that transactions are recorded in the correct accounting

period, this satisfies which internal control objective?

a) timely

b) real

c) valued

d) posted