1.Auditors test the adequacy of closing procedures by

A. reviewing monthly and quarterly financial statements.

B. discussing with management.

C. reviewing annual financial statements.

D. discussing with the board of directors.

2.Financial statement disclosure of related party transactions is important for

A. the board of directors.

B. the users of the financial statements.

C. the auditor.

D. the client management.

3.The auditor should gather evidence about corporate governance practices to

A. discuss with those charged with governance.

B. discuss with the audit team.

C. make a judgement of corporate governance and issue an audit report.

D. evaluate effectiveness and make a judgement on the fair presentation of the financial statements.

4.Related party transactions that require disclosure include

A. related party purchase and sale transactions, related party rent paid, loans, and loan guarantees.

B. related party purchase and sale transactions, related party rent paid, related party loans, and

shareholder loan guarantees.

C. purchase and sale transactions, related party rent paid, related party loans, and loan guarantees.

D. related party purchase and sale transactions, rent paid to landlord, loans, and loan guarantees.

5. Inadequate closing procedures may result in

transactions recorded in the correct period.

transactions recorded at the incorrect value.

the auditor not testing closing procedures.

material misstatement and errors in recording transactions.

6. The time spent acquiring audit evidence is

A. related to effectiveness.

B. related to the risk assessment.

C. related to efficiency.

D. related to the audit strategy.

7. Audit team members reviewing closing procedures should be aware of the risks of

A. misstated income and expenses.

B. misstated income, expenses, assets, and liabilities.

C. understated income and overstated expenses.

D. overstated income and expenses.

8. Internal controls are designed to

A. eliminate risk and support the going concern of a company.

B. eliminate risk and guarantee the going concern of the operations of a company.

C. reduce risk and guarantee the going concern of the operations of a company.

D. reduce risk and support the going concern of a company.

9. Smoothing income involves

A. increasing expenses and accruals.

B. including income and expenses incurred after year end.

C. excluding income earned before year end and including expenses incurred after year end.

D. material misstatement in the financial statements.

10. An adverse audit opinion is most likely to be issued when

A. assets are unable to be used in the production of goods.

B. liabilities are not completely recorded in the financial statements.

C. accounts receivable are outstanding for longer than 30 days.

D. the client has unpaid accounts payable due over 30 days.

Note Auditing fundamentals