3. A financial audit is related to which economic factor of production?

a. Allocation of financial capital b. Labor c. Land d. Manufacturing

4. Which of the following terms is associated with the auditing standard stating: In rare circumstances, the auditor may judge it necessary to depart fron a relevant presumptively mandatory requirement. In such circumstances, the auditor should perform alternative procedures to achieve the intent of the requirement. AU-C200.26

a. Can b. May d. Should c. Must

5. Professional skepticism is best described as:

a. an intent to deceive.

b. a trustful manner.

c. a questioning mind.

d. the ability to follow professional standards.

6. Consider the following statements:

I. Conceptually, to INCREASE the level of DETECTION RISK, the

auditor would do MORE substantive testing (i.e. more

detail testing and/or analytical procedures).

II. Conceptually, as the assessed level of Inherent Risk

DECREASES, there is MORE of a need to lower detection risk

to maintain the same overall level of acceptable audit risk.

a. I is true; II is true.

b. I is true; II is false.

c. I is false; II is true.

d. I is false; II is false.

8. The risk that the procedures performed by the auditor to

reduce audit risk to an acceptable low level will not detect

a misstatement that exists and could be material, either

individually or when aggregated with other misstatements

9. Consider the following statements:

I. Materiality has both quantitative and numerical

considerations.

II. The fraud triangle involves incentive, opportunity

and rationalization.

a. I is true; II is true.

b. I is true; II is false.

c. I is false; II is true.

d. I is false; II is false.

10. Consider the following statements:

I. Conceptually, the auditor will do enough audit work in an

account to discover misstatements which individually, or

in total exceed the amount of tolerable misstatement

involving the account.

II. Tolerable Misstatement is the amount of planning

materiality that is allocated to an account or class of

transactions.

a. I is true; II is true.

b. I is true; II is false.

c. I is false; II is true.

d. I is false; II is false.

12. Consider the following statements:

I. Analytical procedures can be used in the preliminary

phase of an audit to suggest areas, or accounts which

should receive more attention during the audit.

II. If one is looking for unusual fluctuations to

investigate further, then one would tend to believe that

the current years results are expected to look similar

to the past years results.

a. I is true; II is true.

b. I is true; II is false.

c. I is false; II is true.

d. I is false; II is false.

14. A difference between error and fraud is:

a. Interest.

b. Intent.

c. Misperception.

11. Which of the following accounts would be part of the

Revenue Process [revenue cycle]?

a. Inventory.

b. Accounts payable.

c. Bad Debts expense.

d. Interest expense to finance inventory purchases.

e. None of the above. None are part of the

revenue process [revenue cycle].

refers to:

a. Audit Risk.

b. Control Risk.

c. Detection Risk.

d. Inherent Risk.