1).Assuming the other factors remain unchanged, which of the following change will INCREASE the amount of planned evidence?

An increase in acceptable audit risk.

An increase in inherent risk.

A decrease in control risk.

An increase in planned detection risk.

2). Which of the following is an example of a Type II subsequent event?

The client settles a lawsuit for a different amount than was accrued at the balance sheet date.

A sale of inventory below carrying value provides evidence that the net realizable value was less than cost at year-end.

Information becomes available that provides evidence about the valuation of an estimate or reserve that had been accrued at year-end.

None of the above.

4). Which of the following statements areincorrectwith respect to the inventory observation?

When a client has many inventory locations, auditors ordinarily need not be present at each location.

Inventory items present as "consigned in" should not be included in the client's inventory value.

At the completion of the count, an auditor will ordinarily provide the client with copies of his or her inventory test counts to help assure inventory accuracy.

Ordinarily, an auditor need not count all items in the inventory.

5). The fieldwork for the December 31, 2007 audit of Treble Corporation ended on March 17, 2008. The financial statements and auditor's report were issued and mailed to stockholders on March 29, 2008. On April 7, 2008, the auditor discovered that a debtor of Treble went bankrupt on January 22, 2008, due to a major uninsured fire that occurred on January 2, 2008. Please indicate the appropriate action (a, b, c, or d) for the auditor of Treble.

Adjust the December 31, 2007 financial statements.

Disclose the information in a footnote in the December 31, 2007 financial statements.

Request the client revise and reissue the December 31, 2007 financial statements. The revision should involve an adjustment to the December 31, 2007 financial statements.

Request the client revise and reissue the December 31, 2007 financial statements. The revision should involve the addition of a footnote, but no adjustment, to the December 31, 2007 financial statements.

6). Which of the following statements areincorrectwith respect to confirmation of accounts receivables?

The confirmation requests should be mailed to respondents by the CPAs.

Second requests are ordinarily sent for positive form confirmations requests when the first request is not returned.

A combination of positive and negative request forms must be used if receivables are significant.

Confirmations address existence more than they address completeness.

7). Which of the following is appropriate relates to segregation of duties?

A billing clerk prepares invoices and records the resulting increase in accounts receivable.

An accounting clerk receives customer payments and records the resulting reduction in accounts receivable.

The cashier performs the monthly bank reconciliation.

The purchasing manager approves vendor invoices for payment.

8). Red Cross Company is a privately owned business that sells medical product and devices to hospitals, clinics and the public. Certain changes have occurred in Red Cross during the year undergoing the audit. Which of the following changes will decrease planned detection risk?

An expert was hired to help determine the value of the ore content in ending materials inventory

A new inventory control system has been installed that reduces the access of unauthorized parties

Excess cash was used to purchase complex derivatives

An internal audit department has been established

9). In the audit risk model, which of the risk components can be assessed but cannot be controlled by the auditor?

Inherent risk.

Control risk.

Detection risk.

Both A and B.