Each multiple choice Question has four suggested answers, letter (A), (B), (C), and (D). Read the following questions and then decide which choice is the best:

1. Which of the following is not a test of details of balances? (A) Physical examination of inventory (B) Test of authorization of transactions (C) Confirmation of accounts receivable (D) Examination of vendors' statements for accounts payable

2. Pre-numbered purchase order is an example of: (A) Segregation of duties (B) Control Activities (C) Monitoring (D) Adequate Information and Communication

3. The proper authorization of transactions and activities divided to general and specific authorization. Which of the following is an example of general authorization: (A) Approval of daily transaction by Financial Manager (B) Approval of credit ceiling of the Companys customer (C) Approval of bank reconciliation by General Manager (D) Issuance of the purchase order when the inventory reached the reorder point

4. Methods used to assess acceptable audit risk related to likelihood of financial difficulties include the following except: (A) Analyze financial statements using ratios. (B) Analyze factors related to fraudulent financial reporting and misappropriation of assets (C) Examine inflows and outflows of cash flow statements (D) Read minutes of the Board of Directors

5. The auditor examine the sales invoices to obtained an indications on whether the invoices have been verified. This is an example of: (A) Tests of controls (B) Analytical procedures (C) Substantive tests of transactions (D) Tests of details of balances

6. -------------------- the risk that is arising from misapplication of auditing procedures: (A) Planned detection risk (B) Inherent risk (C) Control risk (D) Acceptable audit risk

7. When the auditor decide to fully reliance of the internal control, the auditor reliance for the other types of tests will be: (A) Partially reliance on substantive tests of transactions , and fully relia nce on the test of details of balances. (B) Fully reliance on substantive tests of transactions, and fully reliance on the test of details of balances. (C) Partially reliance on substantive tests of transactions, and partially reliance on the test of details of balances. (D) Fully reliance on substantive tests of transactions, and partially reliance on the test of details of balances.

8. Which of the following is not factors should consider when assessing inherent risk: (A) The likelihood that a client will have financial difficulties after the audit report is issued (B) Makeup of the population (C) Judgment required to correctly record account balances and transactions (D) Factors related to fraudulent financial reporting and misappropriation of assets

9. Substantive tests aid the auditor in all, but which of the following ways? (A) Identify monetary misstatements in accounts (B) Obtain an understanding of internal controls (C) Satisfy planned detection risk (D) Substantive tests aid the auditor in all of above ways

10. The auditors communication with the audit committee or BOD includes several types of report. Which of these reports includes the auditors comments of the absence of key controls which may affect the fairness of the financial statements: (A) Letter to those charge with governance (B) Management letter (C) Audited financial statement (D) All the above

11. After finishing the procedures to obtain an understanding of internal control, the auditor should perform tests of controls on: (A) key controls that have a material effect on the financial statements (B) key controls upon which the auditor intends to rely and plans to assess control risk below maximum (C) key controls which represent material weaknesses (D) a random sample of key controls that were reviewed

12. Auditors usually plan the audit to minimize the use of tests of details of balances because: (A) other types of audit tests are more reliable (B) other types of audit tests require less experienced audit personnel (C) other types of audit tests are less costly (D) all of the above

13. ------------- ----- provide an overview of the system, while offer useful checklists to remind the auditor of many different types of internal controls that should exist. (A) Narrative or Flowchart provide an overview and offer useful checklists. (B) Questionnaire provide an overview and offer useful checklists. (C) Narrative or Flowchart and Questionnaire, respectively. (D) Questionnaire and Narrative or Flowchart, respectively.

14. When the auditor decided to rely on the internal control this mean that: (A) Internal control is effective and control risk is low (B) Internal control is effective and control risk is high (C) Internal control is ineffective and control risk is low (D) Internal control is ineffective and control risk is high

15. Assume that the auditor is doing a first -year audit for XYZ Company, and he concludes that the internal controls are not likely to be effective, and he sets the acceptable audit risk of 10%. The planned detection risk will assessed as: (A) The same as IR and CR (B) The same as the AAR (C) Should be high as IR and CR are high (D) All of the above