d.1. The major advantage to using statistical techniques is:

a. it limits the risk of incorrect acceptance

b. it relate sample size to audit risk

c. it limits the risk of inefficiency

d. it limits sample size to the smallest appropriate size

2. If the auditor is performing an audit of a nonpublic company and the client refuses to provide a management representation letter, the auditor may:

a. issue a financial statement audit report

b. issue an integrated audit report

c. issue a financial statement audit report with a scope limitation

d. dependening on the circumstances the auditor may choose any of the alternitives

3. Which of the following would be least likely to preclude an audit firm from proposing on a potential client due to independence concerns?

a. A recently-promoted partner in the audit firm holds a financial interest in the potential client company.

b. Someone who resigned from the audit firm three years ago is now the Chief Accounting Officer at the potential client company.

c. The audit firm provides internal audit outsourcing and certain nonaudit services to the client company.

d. The audit firm's pension plan holds securities of the potential client company.

4. If an auditor determines that a client company's internal controls are producing reliable and complete financial information, the auditor will rely upon the internal control system and:

a. reduce the extent of controls testing in the interim phase of the financial statement audit.

b. reduce the planned substantive testing during the financial statement audit.

c. increase the amount of evidence collected during the financial statement audit.

d. increase the planned substantive testing during the financial statement audit.

5. Which of the following internal control activities most likely would deter lapping of collections from customers?

a. Independent internal verification of dates of entry in the cash receipts journal with dates of daily cash summaries.

b. Separation of duties between receiving cash and posting the accounts receivable ledger.

c. Authorization of write-offs of uncollectible accounts by a supervisor independent of credit approval.

d. Supervisory comparison of the daily cash summary with the sum of the cash receipts journal entries.