1.ABC Inc.'s audit committee prohibited the audit team from visiting 2 of the 10 company warehouses which contained significant inventory.The committee explained that these warehouses contained dangerous chemicals.In order to reduce liability insurance premiums, the company had agreed, with the insurance company, to only allow authorized HAZMAT trained company personnel access to these warehouses.Which of the following statements best describes the effect the actions of ABC Inc. will have on the type of audit report that can be issued?

a.Scope restriction of a material amount

c.GAAP restriction of an immaterial amount

d.GAAP restriction of a materialamount

b.Scope restriction ofan immaterial amount

2 The auditor must understand the design and implementation of internal controls relevant to the audit:

a.In all audits and this procedure doesn't depend on the auditor's assessment of control risk

c.Only when control risk is assessed as high by the auditor.

b.Only when control risk is assessed as low by the auditor

d.Only when the audit believes that the company has strong internal controls

3 Which of the following statement(s) iscorrectabout audit risk?

a.It is impossible to completely eliminate audit risk.

b.Audit risk is the risk that an auditor expresses an inappropriate opinion when the financial statements are materially stated.

c.Audit risk can be reduced at the risk assessment phase when the auditor identifies the key risks and develops and an audit strategy and plan to address the risks

d.All of the above

4 Attitudes and rationalization to justify a fraud include

a.an excessive focus on profit maximization.

b. a significant decline in demand for the client's products or services

c. significant related party transactions

d. a high volume of transactions close to year-end

5 An engagement letter is required to be signed for an audit engagement:

a.The first year that the firm obtains the engagement

b. None of the above.

c.Every year

d.The first year that the firm obtains the engagement and then any time the auditor uses their professional judgment to determine there has been a significant change in the term of the engagement.

6 Benita Jeff was concerned when she reviewed the operations of her client and noticed that many of the employees had incompatible duties over the recording of transactions and custody of assets. This best refers to which desired control?

a.physical controls

b.authorization controls

c.information processing controls

d.segregation of incompatible duties

7 Alex Butner is a rookie auditor who has asked you about financial reporting frauds and how they differ from misappropriation of assets frauds. Identify for Alex Butner which one of the following frauds consists of misappropriation of assets

a.improper asset valuation

b.unrecorded liabilities

c.both a and b

d.none of the above

10 Radio Supplies Limited sells parts and components to organizations that repair radios and other forms of audio equipment.It has many parts on its inventory listing at cost that were purchased up to fifteen years ago.Some of these parts have not seen any movement (sales) in the last ten years.The assertion related to this is:

a.Valuation

b.Accuracy

c.Completeness

d.Classification