Materiality in the context of audit planning means:

Multiple Choice

• a dollar amount of materiality assigned to an account as required by auditing standards.
• the largest amount of uncorrected dollar misstatement that could exist in published financial statements while still fairly presenting the company's financial position and results of operations in conformity with GAAP.
• amounts that should be disclosed if they are likely to influence the economic decisions of financial statement users.
• part of the overall materiality amount for the financial statements assigned to a particular account.

When the auditor performs a vertical analysis, the auditor compares the financial statements to:

Multiple Choice

• financial statements of a competitor
• the budgeted financial statements of the company for the same accounting period
• a common base such as sales or total assets
• financial statements of prior years

Analytical procedures are generally used to produce evidence from:

Multiple Choice

• detailed examination of external and internal documents.
• confirmations mailed directly to the auditors by auditee customers.
• physical observation of inventories.
• relationships among current financial balances and prior balances, forecasts, and non-financial data.

One of the overall objectives of the auditor when conducting an audit is:

Multiple Choice

• to ensure that there was no instance of fraud for the reporting period.
• to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatements.
• to review the financial statements prepared by management and confirm that nothing unusual came to their attention.
• to obtain assurance that the financial statements are accurate and are free from errors.

Which of the following procedures would not be considered an analytical procedure?

Multiple Choice

• Performing a horizontal analysis of the financial statements of the firm
• Conducting a review and study of the minutes of the meeting of the board of directors
• Confirming the amount of accounts receivable with major clients of the company
• Comparing the current year's result with the budgets

When auditors determine financial statement materiality for a given audit engagement, they should primarily base their decisions on:

Multiple Choice

• the risk level determined in the preliminary assessment.
• the prior year's materiality level.
• the materiality level used by the company's management for internal audits.
• users of the financial statements and their specific needs.

Which of the following procedures would represent an interim audit procedure for a company with a year-end of December 31.

Multiple Choice

• Confirmation of the cash balance at December 31 with the auditee's bank
• A discussion at the beginning of the audit with the firm's management to discuss the risk of fraud
• Analytical procedures done at the beginning of the audit to identify high-risk areas of the auditee's business
• A control test done in the third quarter to ensure that the payroll ledger was reviewed and reconciled by the human resources director

The overall audit strategy required by CAS 300:

Multiple Choice

• includes detailed plans for gathering audit evidence.
• identifies characteristics of the auditee's entity and the engagement that define its scope.
• cannot be decided by the audit engagement partner to avoid independence threats.
• requires the audit engagement partner to set the scope, timing, and direction of the audit, which cannot be changed until the auditor's report is issued at the end of the engagement.

Which of the following match-ups of types of analytical procedures and sources of information makes the most sense?

Type of Analytical ProcedureSource of Informatio

Multiple Choice

• Comparison of current account balances with prior-period statisticsPhysical production
• Evaluation of current account balances in relation to predictable historical patternsPublished industry ratios
• Evaluation of current account balances in relation to non-financial informationCompany's own comparative financial statements
• Comparison of current account balances with expected balancesCompany's budgets and forecast

When taking an engagement, the auditor's risk is best described as follows:

Multiple Choice

• The risk that the auditor will uncover fraudulent activities during the engagement
• The risk that the auditor will need to qualify their opinion for the audit engagement
• The risk that negative consequences will arise for the auditor's professional practice as a result of taking on a particular audit engagement
• The risk that the auditor will find a material misstatement in the financial statements during the course of the audit

CAS 200 indicates that an audit does not relieve management and those charged with governance of their responsibilities. Those charged with governance include:

Multiple Choice

• the board of directors.
• all employees of the firm.
• shareholders of the firm.
• the auditors.

Analytical procedures can be used in which of the following ways?

Multiple Choice

• As substantive audit procedures to obtain evidence when planning an audit
• As attention-directing methods at the end of an audit
• As a means of overall review of the financial statementsat the end of an audit
• As a substitute for control testing to assess control effectiveness