1. In the planning of an audit, it was decided that cash would not be audited because it comprised only 1 per cent of total assets. How would you respond to this decision?

	a.	Cash is always going to be material, no matter what amount it is.
	b.	Whether or not this was acceptable would depend on the company and the type of industry.
	c.	An amount of 1 per cent of total assets is likely to be immaterial.
	d.	It is probable that this amount would still be considered material, due to the nature of cash.

2. Which of these factors contributes least to the risk of misstatement of inventories?

	a.	the volume of transactions
	b.	location at a large single site
	c.	vulnerability to spoilage or damage
	d.	all of the above factors listed contribute equally to the risk of misstatement of inventories.

Question 3

Which of these is not true regarding substantive procedures for property, plant, and equipment in an initial audit:

	a.	the auditor concentrates on the current years transactions only.
	b.	evidence must be obtained as to the fairness of the opening balances.
	c.	evidence must be obtained as to the ownership of the assets.
	d.	all of the above are untrue.

Question 4

The standard bank confirmation requests information about all of the following except:

	a.	account balances.
	b.	secondary endorsements.
	c.	other arrangements that the client may have with the bank.
	d.	loan balances.

Question 5

Cyclical inventory counts differ from full inventory counts in which way?

	a.	cyclical inventory counts are performed at balance date
	b.	cyclical inventory counts are only performed by internal audit
	c.	cyclical inventory counts may involve counting only a portion of inventory items
	d.	they differ in all of the above ways Question 6

The auditor is concerned that the client has committed a number of errors in the capital/repair expenditures distinction. In selecting items from the repairs expense account for investigation, the most appropriate audit procedure would involve:

	a.	tracing.
	b.	random selection.
	c.	systematic selection.
	d.	scanning. Question 7

Verifying the accuracy and valuation assertion for inventory involves which of the following?

	a.	verifying the cost of inventory
	b.	verifying the net realizable value of inventory
	c.	verifying the basis used by management in determining the value of each item of inventory
	d.	all of the above

Question 8

The auditors strategy in performing test counts during the inventory observation is to:

	a.	randomly select all test items.
	b.	concentrate tests on high dollar items with random selection of other items.
	c.	concentrate tests in areas where employees seem to be disregarding the inventory instructions.
	d.	test all large-dollar items.