1. Mark is engaged to audit the financial statements of Alpha Company. Mark uses industrial averages to determine that Accounts Receivable balances typically comprise 25% of total sales for a period for companies in the same industry as Alpha. Mark calculates that Accounts Receivable makes up 40% of sales for Alpha for the year. What can Mark deduce from this?

1. the accounts receivable balance does not conform to expectations and additional testing is warranted
2. accounts receivable must be overstated by 15%
3. the allowance for bad debts account must be understated
4. accounts receivable should never be audited given the nature of the account, misstatements in the account are extremely rare.

2. As part of the 2021 audit on accounts payable, Sarah, the auditor, examines payments made in 202 For the payments made in 2022 that relate to expenses from 2021, she then traces them to the accounts payable ledger as of December 31, 2021 to ensure that they were included in the balance. This evidence is relevant to what assertion of accounts payable?

1. Completeness
2. Existence
3. Presentation
4. Disclosure

3. The highest risk assertion with respect to liabilities, in general, is

1. completeness
2. Existence
3. Presentation
4. Disclosure

4. An auditor selects a number of revenue transactions from December 15 - December 31, 2021. The auditor examines the sales contracts from those transactions to verify that the revenue is earned in December of 2021, instead of January, 2022. The auditor is most likely testing which assertion?

1. cutoff
2. presentation
3. disclosure
4. valuation

5. Which of the following pieces of evidence would be considered the most reliable in an audit (See AU-C 500, paragraph .A22)?

1. Written evidence obtained directly from the client
2. Evidence obtained directly by the auditor from an independent 3rd party.
3. Oral evidence obtained directly from the client
4. None of this evidence would be considered reliable

6. Which of the following tests would most likely test the rights assertion for fixed assets?

1. Conducting an internet search to determine the fair market value of similar assets
2. All of these test the rights assertion.
3. Physically viewing the asset
4. Observing the title of the asset to ensure that the company owns it

7. Which of the following would test the mathematical accuracy of a statement?

1. Vouching
2. Confirming
3. Tracing
4. Footing