3. Analytical procedures used in the final overall review stage of an audit include:

A) Considering unusual account balances in the audited financial statements that were not previously identified.

B) Testing detailed transactions to corroborate managements financial statement assertions.

C) Gathering evidence concerning account balances that have not changed much from the prior year.

D) Retesting internal controls that appeared to be ineffective during the assessment of control risk stage.

4. Which of the following audit procedures is most likely to assist an auditor in identifying conditions and events that may indicate substantial doubt about an entitys ability to continue as a going concern?

A) Confirming accounts receivable from important customers.

B) Reconcile interest expense with outstanding long term debt.

C) Review overhead cost allocation.

D) Review compliance with the terms of debt agreements.

5. An auditor would issue an adverse opinion if:

A) The audit was begun by other auditors who withdrew from the engagement.

B) A qualified (modified) opinion cannot be given because the auditor lacks independence.

C) The restriction on the scope of the audit work was very significant.

D) The financial statements as a whole do not fairly present the financial condition and results of operation of the company.

6. In which of the following circumstances would an auditor usually choose between issuing a qualified opinion and issuing a disclaimer?

A) Departure from generally accepted accounting principles.

B) Important disclosures (e.g. PPE useful life/depreciation rate) of accounting policies are missing.

C) Inability to obtain sufficient competent evidential matter.

D) Capital lease is treated as operating lease by the management.

7. Which of the following is not a procedure that is designed to provide evidence about the existence of contingent loss?

A) Obtaining a lawyers' letter.

B) Confirming accounts payable.

C) Reviewing the minutes of board of directors' meetings.

D) Search for tax assessment or notices from IRS with respect to probable penalty for tax evasion.

8. To ensure that each voucher is paid only once, when a payment is approved, supporting documents and voucher should be canceled by the:

A) Cashier.

B) Accounts payable accountant.

C) Authorized accounting department manager.

D) Authorized finance manager who mails the check.

9. Around the end of annual audit, auditors must communicate internal control "significant deficiencies" to:

A) The shareholders or the annual shareholder meeting.

B) IRS

C) The clients audit committee.

D) PCAOB.

10. Which of the following procedures is not a procedure that is completed near the end of the engagement?

A) Review cash transactions.

B) Review to identify subsequent events.

C) Obtain the lawyer's letter.

D) Obtain the letter of representations from the management.

11. The review of audit working papers by the audit partner is normally completed:

A) Prior to clients fiscal year-end.

B) Immediately as each working paper is completed.

C) Near the completion of the audit.

D) After issuance of the auditors report, but prior to required subsequent event review procedures.

12. Which of the following is an analytical procedure that should be applied to the income statement?

A) Select sales and expense items and trace amounts to related supporting documents.

B) Ascertain that the net income amount in the statement of cash flows agrees with the net income amount in the income statement.

C) Compare the operating expenses (as a percentage of total revenue) with the corresponding figure of the previous year and investigate significant differences.

D) Obtain from the proper client representatives, the beginning and ending inventory amounts that were used to determine costs of sales.

13. Which of the following auditing procedures is ordinarily performed last?

A) Interview the management to understand clients business and its risks.

B) Confirming accounts payable.

C) Obtaining a management representation letter.

D) Confirming clients cash balance at the bank.

14. A very significant and material departure from generally accepted accounting principles will result in auditor consideration of:

A) Whether to issue an adverse opinion rather than a disclaimer of opinion.

B) Whether to issue a disclaimer of opinion rather than a modified opinion.

C) Whether to issue an adverse opinion rather than a modified opinion.

D) Nothing, because none of these opinions is applicable to this type of situation.

15. The unmodified standard audit report of a nonpublic company does not explicitly state that:

A) The financial statements are the responsibility of the company's management.

B) The audit was conducted in accordance with audit standards generally accepted in the United States of America.

C) The auditors will also express an opinion on clients internal controls.

D) An audit includes assessing the accounting principles used.

16. When confirming accounts payable, the approach is most likely to be one of:

A) Selecting the accounts with the largest ending balances at year-end, plus a sample of other accounts.

B) Selecting the accounts of some key suppliers with whom the client has previously done the most business, plus a sample of other accounts.

C) Selecting a random sample of accounts payable at year-end.

4. Confirming all accounts.

17. Which of the following accounts should be reviewed by the auditors to gain reasonable assurance that additions to property, plant, and equipment are not understated:

A) Depreciation.

B) Repair and maintenance expense.

C) Accounts receivable.

D) Cash.