** Its a practice test that prof gave us for the preparation so its not homework or anything like that

1. Which of the following is a characteristic of monetary unit sampling (MUS)?

A) MUS is a form of non-statistical sampling

B) Sample sizes using MUS generally are smaller than other sampling methods

C) MUS can accept a lot of errors in the sample, and still conclude that the population is correct

D) Each account balance (such as in a listing of accounts receivable) has an equal probability of being selected

2. The auditor performed a test of controls on a random sample of sales transactions, and had set a tolerable

exception rate of 1.0%. The results of the test showed a sample exception rate of 1.1%. In response to this result,

which of the following actions by the auditor would be appropriate?

A) Conclude that the control tested did, in fact, operate effectively.

B) Consider whether it may be appropriate to decrease the sample exception rate.

C) Consider whether it may be appropriate to increase the tolerable exception rate.

D) Any one of the above actions is appropriate.

3. Which of the following audit procedures are usually performed to audit the allowance for doubtful accounts?

A) Test the aging of the accounts receivable balances

B) Compare the aging of the accounts receivable balance to prior years

C) Compare the ratio of the allowance for doubtful accounts to the accounts receivable balance to previous years

D) All of the above

4. The accounts payable accounting clerk recorded the same purchase twice. Which of the following tests would

most likely detect the duplicate entry?

A) Reconciling the vendors' statements to the accounts payable trial balance

B) Tracing monthly balances from the purchases journal to the general ledger

C) Vouching from the general ledger to the purchases journal

D) Recalculating the purchases journal

5. Which of the following procedures would the auditor likely perform to test the completeness of accounts payable:

A) Vouch a sample of items from the accounts payable trial balance to invoices received from the client's vendors

B) Vouch a sample of items from the accounts payable trial balance to expenses recorded in the general ledger

C) Compare the year-end statements received from the client's vendors to the accounts payable trial balance

D) Perform substantive analytical procedures comparing ending accounts payable balances by year

6. Which of the following audit procedures would the auditor use to test for the existence of equipment recorded in

the property, plant and equipment accounting records?

A) Examine vendor invoices and receiving reports

B) Review transactions near the balance sheet date

C) Recalculate vendor invoices

D) Examine the company purchase order for authorization by an appropriate company employee

7. To audit the existence of cash, the auditor is most likely to confirm the bank balance with the bank and:

A) perform substantive analytical procedures

B) test the completeness and accuracy of the reconciling items on the bank reconciliation

C) inquire as to whether the balance per the bank agrees to the company's general ledger balance

D) count and observe the cash in the bank

8. The auditor normally does not need to test the existence, accuracy or classification of property, plant and

equipment recorded in prior periods if the auditor is the continuing auditor (i.e., the auditor has previously audited

one or more of the immediately preceding periods) because the related financial statement assertions:

A) usually have low inherent risk

B) don't affect the company's net income

C) are not important to financial statement users

D) were verified in previous audits

9. As a part of auditing depreciation expense the auditor tests whether the client has followed a consistent policy and

the calculations are correct. Which of the following audit objectives is the auditor addressing?

A) Cut-off

B) Occurrence

C) Completeness

D) Accuracy

10. The auditor used positive confirmations to test accounts receivable, but several of the confirmations were not

returned. Which of the following auditing procedures would the auditor perform on the non-responses?

A) Inspect shipping documents to verify that the products were shipped prior to year-end

B) Inspect the sales invoices included in the balance to verify that the balance was billed prior to year-end

C) Discuss with the credit manager the likelihood that the client will be paid

D) No additional procedures would be performed because it is likely that the customer agrees with the information

on the confirmation.

11. Which of the following are relevant to the auditor's evaluation of depreciation expense?

A) The assigned useful lives of property, plant and equipment

B) The detailed deprecation calculations made by the client

C) Analytical relationships between depreciation expense, accumulated depreciation, and fixed asset balances

D) All of the above

12. You obtained a detailed list of all items included in the Other Expenses account on the client's financial

statements, and noted a large number of losses on fixed assets disposed of during the year. You may conclude that:

A) Insured values are greater than book values

B) There are a large number of fully depreciated assets

C) Depreciation charges may by insufficient

D) Assigned useful lives of assets are too short

13. Which of the following misstatements is most likely to be discovered during an audit of a bank reconciliation?

A) Failure to include an outstanding check on the bank reconciliation

B) Duplicate payment of a vendor's invoice

C) Billing a customer at a lower price than indicated by company policy

D) Payment to an employee for more than the hours actually worked

14. The auditor compared the information from a sample of transactions that had been posted to the accounts

payable master file to supporting documents. Which audit objective(s) does this test address?

A) Occurrence and accuracy

B) Classification and completeness

C) Accuracy and completeness

D) Completeness only

15. The general cash account usually is included in the scope of the audit:

A) only when the ending balance is material

B) only if either the beginning or ending balance is material

C) even if the balance is not material

D) only when the auditor identifies unusual transactions flowing through the account

16. Which of the following things would an auditor do to audit a company's accounting for contingent liabilities?

A) Confirm identified contingent liabilities with the injured parties

B) Compare the amount of the recorded loss to vendor invoices

C) Perform analytical procedures, including comparing contingent liability balances with prior year amounts

D) Obtain information to assess the probability that a loss has been incurred and its amount

17. The auditor identified a check issued by the client dated December 29, 2016, for $10,000 in the January 2017

cut-off bank statement for the general account. The auditor should find the following reconciling item on the bank

reconciliation for the general account as of December 31, 2016:

A) A subtraction of $10,000 from the cash balance recorded in the client's general ledger to reconcile to the bank

balance at December 31, 2016

B) An addition of $10,000 to the bank balance at December 31, 2016 to reconcile to the client's general ledger cash

balance

C) A subtraction of $10,000 from the bank balance at December 31, 2016 to reconcile to the client's general ledger

cash balance

D) There would not be any reconciling item associated with this check as it is properly recorded in both the client's

general ledger and the bank statement

18. Which of the following events occurring between the date of the client's year end and the date of the auditor's

report is most likely to result only in a disclosure in the company's financial statements?

A) Payment of a material amount to settle a contingent liability that was assessed as reasonably possible at year end

B) An uninsured loss of inventories due to a fire

C) Bankruptcy filing of a customer with an accounts receivable balance owed to the company at year end

D) Sale of equipment not being used in operations at a price less than their net book value at year end

19. Violation of the accounting profession's ethics requirements plays only a very small role in audit failures.

A) True

B) False

20. Why does the auditor require that the client provide a representation letter?

A) Professional auditing standards recommend that it is usually a good idea to obtain one

B) It clarifies the auditor's responsibilities in an audit of financial statements

C) It confirms in writing representations made by management to the auditor during the audit

D) It provides confirmation of the amounts of contingent liabilities at the end of the year

21. The auditor's responsibility for other information in documents containing audited financial statements and the

auditor's report includes:

A) Reading the other information

B) Considering whether the other information is inconsistent with information included in the financial statements

C) Requesting management to correct information that is inconsistent with the financial statements

D) All of the above

22. Which of the following would be a subsequent discovery of facts (after the date the audited financial statements

are issued) that would require a response by the auditor?

A) Discovery of a material overstatement of sales in the audited financial statements

B) The auditor's client entered into a significant unusual transaction in the new year that substantially increased its

profitability

C) News reports that the auditor's client will be acquired by another entity

D) Settlement of a lawsuit after the financial statements had been issued for an amount materially different than

what was accrued in the audited financial statements

23. An auditor has a responsibility to actively search for subsequent events up to:

A) the balance sheet date of the audited financial statements

B) the date of the auditor's report

C) the date the audited financial statements are issued

D) the latest date in a dual-dated auditor's report on the audited financial statements

24. Auditing standards require the auditor to communicate which of the following matters to the audit committee?

A) Auditor's evaluation of the quality of the company's financial reporting

B) Opportunities for efficiencies identified by the auditor

C) The audit program

D) All of the above

25. Which of the following misstatements are not likely to be discovered during an audit of a bank reconciliation?

A) Double-counting a deposit by showing it as a deposit-in-transit

B) Payment for materials not received

C) Failure to include an outstanding check on the bank reconciliation

D) Payments on notes payable debited directly to the bank balance but not recorded on books

26. Which one of the choices below is most correct regarding a cause of non-sampling risk?

A) The use of random sampling

B) Testing less than the entire population

C) Ineffective performance by the auditor of audit procedures

D) Use of non-statistical sampling instead of a statistical method

27. The auditor performed a test of details of balances on a random sample of items included in the company's

inventory. The auditor determined that the projected error in the population exceeded, by a small amount, the

auditor's judgment about materiality for the financial statements taken as a whole. Which of the following is the

auditor most likely to do next?

A) Request the client to book an adjustment for the amount of the projected error.

B) Test all of the items in the population, to determine the exact amount of the error.

C) Because of sampling risk, the auditor may conclude that the sample was not representative of the population, and

that the account balance is fairly stated.

D) Discuss the results of the test with company management and request management to analyze the account details

to identify the extent of the errors, and then determine what additional tests should be performed.

28. During the audit, the auditor might identify certain misstatements that are not individually material but that he or

she believes have a possibility of affecting the fairness of the financial statements. The auditor is required to:

A) Accumulate and keep track of these misstatements.

B) Evaluate the materiality of these misstatements on a combined basis.

C) Obtain a representation from management that the adjustments are not material.

D) All of the above.

29. Which of the following statements is most correct regarding the evidence requirements in audits and reviews of

non-public companies?

A) The auditor (in an audit) needs to obtain an understanding of internal control over financial reporting, whereas

the accountant (in a review) has no such responsibility.

B) A review requires more substantive evidence than an audit since there is not a requirement to obtain an

understanding of internal control over financial reporting.

C) In an audit, the auditor searches for positive evidence; in a review, the accountant searches for negative evidence.

D) All of the above statements are correct.

30. In an agreed-upon procedures engagement, the CPA:

A) Performs procedures to obtain the level of assurance agreed upon with management

B) Agrees with management (and other specified parties, if applicable) on the specific procedures that will be

performed in the engagement

C) Agrees with management the procedures the auditor will perform to be able to express an overall conclusion

about the subject matter of the engagement

D) Agrees with management (and other specified parties, if applicable) that the CPA will apply his or her judgment

to determine procedures to be performed

31. Which of the following would be included in a CPA's report based upon a review of the financial statements of a

nonpublic entity?

A) A statement that the review was made in accordance with generally accepted auditing standards

B) A statement that all information included in the financial statements is the representation of management

C) An opinion by the auditor as to whether the financial statements are fairly presented in accordance with GAAP

D) All of the above

32. A CPA has accepted an engagement in which inquiry and analytical procedures are the primary procedures to be

performed. These procedures will form the basis for issuance of:

A) A compilation report

B) Audit report on supplemental information issued by the client

C) An agreed-upon procedures report

D) Review report on financial statements for a nonpublic company

33. The scope of a PCAOB inspection:

A) includes a sample of audits of public companies, broker-dealers, and other non-public companies

B) includes a representative sample of a firm's public company audits performed during the inspection period

C) generally includes higher risk audits and focuses on areas that presented auditing challenges and significant risks

D) uses each auditing firm's risk assessments to identify audits that will be inspected

34. To conclude that a management review control is effective, the auditor is required to identify a selection of

instances in which the control operated, evaluate whether management followed the procedures specified by the

control, and properly evaluated and resolved exceptions.

A) True

B) False

35. Tests of details of balances is a type of audit procedure used primarily to:

A) test for misstatement of financial statement account balances

B) test the completeness and fairness of the notes to the financial statements

C) test whether the general ledger trial balance is in balance

D) determine whether each account balance agrees to the general ledger

36. Which of the following statements about substantive analytical procedures is correct?

A) The results of the procedure provide evidence about the existence or absence of misstatement in an account.

B) The results of the procedure almost always identify the amount of a known misstatement, if one exists.

C) The auditor designs substantive analytical procedures to assess the risk that an account is misstated.

D) All of the above.

37. Which type of audit procedures includes both inspection and recalculation?

A) Substantive analytical procedures

B) Tests of controls

C) Substantive tests of transactions

D) Risk assessment procedures

38. The auditor selects a sales transaction from the shipping records and compares the information for the sale to the

related information in the sales journal. Which audit objective(s) does this procedure address?

A) completeness

B) accuracy

C) timing

D) all of the above

39. Using a sample of purchase transactions during the year, the auditor examined the related purchase order for

evidence that the purchase had been properly approved by an authorized employee in the purchasing department.

This type of audit procedure is a:

A) Risk assessment procedure

B) Test of controls

C) Substantive test of transactions

D) Substantive analytical procedure

E) Test of details of balances

40. Which of the following is relevant to the auditor's judgment about the nature, timing, and extent of tests of

details of balances?

A) the auditor's assessment of inherent risk

B) the auditor's judgment about the acceptable level of audit risk

C) the results of substantive tests of transactions

D) all of the above

41. The occurrence and existence objectives are, in many audits, not important when auditing expenses and their

related liabilities because:

A) understatements of expenses and liabilities usually are a greater concern than overstatements

B) overstatements of expenses and liabilities usually are a greater concern than understatements

C) unrecorded expenses cause a reduction of accounts payable; therefore, the ratios of the two financial statement

accounts will not be misleading

D) in most cases, the related management assertions in the financial statements have a high inherent risk

42. The audit objectives applicable to the sales and cash collections cycle for a company whose sales transactions

are over the internet as compared to a company that sells through physical store locations are:

A) Different because of the different processes involved

B) Different because of different risks

C) Different because the risks are affected by the different uses of information technology

D) The same

43. Which of the following controls would provide the most assurance to management that recorded sales actually

occurred?

A) Statements are sent to customers at the end of each month, and customer complaints are investigated

B) Responsibilities for recording a customer order and shipping the products are segregated

C) A credit sale is recorded only after a credit check is performed

D) Shipping documents are prepared for every shipment made and filed in the shipping department

44. Which of the following controls would be considered an internal verification control?

A) The accounts receivable manager is not authorized to handle cash receipts.

B) Duplicate shipping documents are kept on file in the shipping department.

C) Sales orders for customized products are reviewed for accuracy by an assistant controller.

D) Credit is properly authorized before a shipment is made to a customer.

45. Because of increased competition and decreasing gross profit margins, company management decided to

streamline the sales process by eliminating the credit department and having the sales staff perform the credit

approval process.

A) The change will increase the company's efficiency by eliminating an unnecessary department.

B) The change will increase the likelihood that credit sales will be uncollectible.

C) The change is unlikely to affect either the auditor's risk assessment or substantive procedures.

D) The change is unlikely to have any meaningful impact on the ability of the company to achieve its objectives.

46. Which of the following is the best description of the tolerable exception rate?

A) The number of exceptions found in the sample divided by the sample size

B) The highest exception rate the auditor expects to find in the population

C) The highest exception rate the auditor will accept in a control being tested and still conclude the control operated

effectively

D) The projection of the sample exception rate to the sampled population

47. Which one of the following is the primary cause of sampling risk?

A) Testing less than the entire population

B) Using a probabilistic sample selection method to select items for testing

C) Ineffective performance by the auditor of audit procedures

D) Incorrectly defining the attribute to be tested

48. Whenever auditors use sampling, they risk making incorrect conclusions about the population. The risk that the

auditor concludes that the an account balance is correct when it actually contains a material misstatement is known

as the:

A) Risk of under detection

B) Risk of incorrect acceptance

C) Risk that the sample conclusions cannot be useful because of nonprobability sampling

D) Non-sampling risk

49. Which of the following would cause a decrease in the sample size?

A) Decrease acceptable risk of overreliance

B) An increase in the population size

C) Decrease the tolerable exception rate

D) Decrease in the estimated population exception rate

50. Which of the following controls would provide the most assurance to management that all sales have been

recorded (completeness)?

A) Responsibilities for recording a customer order and shipping the products are segregated

B) A sale is recorded only after a valid shipping document has been matched to the sales order

C) A credit sale is recorded only after a credit check is performed

D) Daily totals of quantities shipped are compared to quantities billed