File attached with multiple choice questions for Advance Issues in Auditing ACT 5743 class

1. Which of the following has the lowest authoritative status but may be useful in assisting the auditor in applying the SASs? Statements on Auditing Standards Auditing Statements of Position. Journal of Accountancy articles. Auditing Interpretations 2. Which of the following procedures is least likely to be performed as a part of obtaining an understanding during an audit engagement of a new audit client previously audited by another CPA? Communication with the predecessor auditor. Performing analytical procedures. Obtaining confirmation of cash balances. Considering internal control. 3. Which of the following is not a typical analytical procedure? Study of relationships of the financial information with relevant nonfinancial information. Comparison of the financial information with similar information regarding the industry in which the entity operates. Comparison of recorded amounts of major disbursements with appropriate invoices. Comparison of current year's financial statement with last years 4. Which of the following characteristics most likely would heighten an auditor's concern about the risk of intentional manipulation of financial statements? Turnover of senior accounting personnel is low. Insiders recently purchased additional shares of the entity's stock. Management places substantial emphasis on meeting earnings projections The rate of change in the entity's industry is slow. 5. If, compared to last year, the expected population deviation rate increased and the population total went from 12,000 down to 10,000, the current year sample size would Increase Decrease Unable to determine No effect on sample size since they offset 6. Which of the following might lead to a Type 2 risk? Tolerable deviation rate increases Making an incorrect rejection decision A lower audit risk is chosen Choose a lower detection risk 7. The tolerable deviation rate for a test of controls is generally Lower than the expected rate of deviations in the related accounting records. Higher than the expected rate of deviations in the related accounting records. Equal to the expected rate of deviations in the related accounting records. Unrelated to the expected rate of deviations in the related accounting records 8. In examining cash disbursements, an auditor plans to choose a sample using systematic selection with a random start. The primary advantage of such a systematic selection is that population items Which include fraud will not be overlooked when the auditor exercises compatible reciprocal options May occur in a systematic pattern, thus using random sampling is more representative of the population May occur more than once in a sample Do not have to be prenumbered in order for the auditor to use the technique 9. An auditor obtains knowledge about a new client's business and its industry in order to To plan the audit To make an acceptance decision To help determine who is to be assigned to the audit All of the above 10. Which of the following procedures would an auditor likely include in the initial planning of a financial statement audit? Obtain an attorney's letter Examining documents to detect illegal acts having a material effect on the financial statements Considering whether the client's accounting estimates are reasonable in the circumstances None of the above 11. As part of the planning phase of an audit, an auditor most likely would Identify specific internal control activities that are likely to prevent fraud Evaluate the reasonableness of the client's accounting estimates Inquire of the client's attorney as to whether any unrecorded claims are probable of assertion None of the above would be performed during the planning phase 12. Before accepting an audit engagement , the auditor is required to obtain An understanding of the prospective client's industry The client's signature on the engagement letter A preliminary understanding of the prospective client's control environment The client's consent to make inquiries of the predecessor auditor 13. Which of the following would be least likely to be comparable between similar corporations in the same industry? Earnings per share Return on total assets before interest and taxes Accounts receivable turnover Operating cycle 14. An auditor would least likely consider which of the following while planning the engagement? Turnover of personnel in the accounting department Objectivity of audit committee members Comments of the client's attorney Management's plans to repurchase stock 15. Which of the following would most likely be asked by the auditor of the client's audit committee while planning the audit? Was there significant turnover in the accounting department Did the client consult with another CPA firm about installing a new computer system Were there changes in the application of significant accounting policies Does the audit committee agree with the auditor's selection of fraud detection procedures 16. While planning the audit the CPA would most likely performed which of the following procedures? Obtaining a written representation letter from the client's management Examining documents to detect illegal acts having a material effect on the financial statements Considering whether the client's accounting estimates are reasonable in the circumstances Determining the extent of involvement of the client's internal auditors 17. The actual level of audit risk Can always be accurately assessed by the auditor Should be greater than or equal to acceptable audit risk Can never be known with absolute certainty Is the same for all audit clients 18. Which statement is most accurate about inherent risk, control risk and detection risk? They all arise from the misapplication of auditing procedures Theyall can be changed by the auditor if needed Only detection risk can be changed by the auditor All of the above are false statements 19. Based on audit evidence gathered and evaluated during the planning phase the auditor decides to increase the assessed level of control risk from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would Decrease substantive testing Decrease detection risk Increase inherent risk Increase materiality levels 20. Which of the following procedures should not be used to obtain an understanding of the entity and its environment? Observe entity operations Reperform entity processes Verify proper evaluation of inventory subject to technological obsolescence Review prior year's audit documentation 21. The main source of sampling risk is Auditor error Poor client controls A non-representative sample Inherent risk assessed too high 22. In attribute sampling which of the following statements should be true? The tolerable rate is lower than the expected rate of deviations The tolerable rate is higher than the expected rate of deviations The tolerable rate is always equal to the expected rate of deviations None of the above statements is true 23. Which of the following would likely result in a larger sample size? Acceptable audit risk changes from .10 to .05 Control risk is increased Detection risk decreases All of the above would lead to a larger sample size 24. Which of the following would cause you the most concern about accepting an engagement? The existence of related party transactions Excessive turnover in the accounting department A large percentage of the potential client's income is generated overseas The internal auditors report to the controller 25. Which of the following would cause you least concern when deciding to accept an audit engagement? The potential client's loss of a major customer The existence of related party transactions A substantial decrease in the price of the potential client's stock A trend of decreased cash flow