Question 1

1. If an auditor wishes to reduce the level of audit risk, then the auditor should:
2. lower the level of inherent risk of the client.
3. increase the level of detection risk.
4. lower the level of control risk.
5. decrease the level of detection risk.

1 points

Question 2

1. Which one of the following statements about materiality is NOT true?
2. Any misstatements in the income statement less than 10% of revenue would be material to users.Any misstatements in the income statement less than 10% of revenue would be material to users.
3. Auditors use their professional judgment to arrive at an appropriate planning materiality amount for each client
4. Information is considered quantitatively material if it exceeds the magnitude of an auditor's planning materiality assessment
5. Information is considered qualitatively material if it affects a user's decision-making process for a reason other than its magnitude

1 points

Question 3

1. The specific audit objective "revenue has been recorded in the correct period" is derived from the :
2. Classification assertion
3. Occurrence assertion
4. Completeness assertion
5. Cut-off assertion

1 points

Question 4

1. The specific audit objective "Financial information is appropriately presented and described" is derived from the:
2. Completeness assertion
3. Occurrence assertion
4. Accuracy and Valuation assertion
5. Classification and Understandability assertion

1 points

Question 5

1. Written representations are obtained from all lawyers with whom management has consulted for material legal matters. These representations are known as:
2. Engagement letters.
3. Management letters.
4. Auditors confirmation letters.
5. Legal representation letters.

1 points

Question 6

1. If inherent risk is medium and control risk is high, then:
2. Detection risk is low.
3. Detection risk is high.
4. The acceptable level of audit risk is high.
5. Detection risk is medium.

1 points

Question 7

1. If inherent risk is medium and control risk is low, then:
2. Detection risk is low.
3. Detection risk is high.
4. The acceptable level of audit risk is high.
5. Detection risk is medium.

1 points

Question 8

1. When a test of controls reveals some deviations, under what conditions will the auditor still be able to depend on the control system?
2. The error was immaterial and discovered to be an isolated departure.
3. The circumstances did not lead to a material error in the financial statements.
4. Substantive procedures indicate that no further errors exist.
5. The total error found was immaterial to the financial statements.

1 points

Question 9

1. Which one of the controls listed below should have prevented the following misstatement: A sales invoice for $8,400 was calculated correctly but, by mistake, was key-entered as $4,800 to the sales journal and to the accounts receivable master file. The customer paid the amount on his monthly statement, $4,800.
2. Sales invoice numbers, prices, discounts extensions and additions are independently checked
3. Unauthorised deductions from payments made by customers, or other matters in dispute, are investigated promptly by a person independent of the accounts receivable function
4. Prelistings and predetermined totals are used to control postings
5. Customers monthly statements are verified and mailed by a responsible person other than the sales clerk who prepared them

1 points

Question 10

1. Which one of the following tests of details would be appropriate to test the completeness assertion of receivables:
2. Test the mathematical accuracy of the sales transaction file.
3. Vouch recorded sales to the records of products ordered and shipped.
4. Compare the current year s to the prior year s allowance for doubtful debts as a percentage of receivables and sales.
5. Trace the postings of the totals in sales transaction file to the general Ledger.

1 points

Question 11

1. The auditor calculates the inventory turnover ratio and compares it with those of previous years as a test of inventory obsolescence. This procedure is best described as:
2. Tracing.
3. Inspection.
4. Vouching.
5. Analytical procedure.

1 points

Question 12

1. Which one of the following would be kept on the permanent audit file?
2. Planning information for the current audit.
3. Reclassifying entries
4. Working trial balance.
5. Description of client entity activities.

1 points

Question 13

1. Which one of the following is NOT one of the phases in planning an audit?
2. Understand the client's industry and business
3. Perform preliminary analytical procedures
4. Client acceptance and continuance
5. Audit of transaction cycle

1 points

Question 14

1. Which one of the following statements is false?
2. Stratification increases audit efficiency.
3. Stratification can be done based on the monetary value of items in the population.
4. An item in the population cannot be included in more than one stratum.
5. Stratification is a method of sampling using probability theories to form statistical inference about the population.

1 points

Question 15

1. Which one of the following statements about fraud is NOT true?
2. The responsibility for preventing fraud rests with those charged with governance.
3. Fraud is an intentional act involving deception and results in misstatement of the financial statements that are being audited.
4. Auditors should adopt an attitude of professional skepticism to ensure any indicator of a potential fraud is properly investigated.
5. Auditors are responsible for preventing and detecting fraud.

1 points

Question 16

1. Which one of the following steps does NOT form part of the risk assessmnet phase of the audit?
2. Understanding the client
3. Risk identification and strategy
4. Risk and materiality assessment
5. Tests of control

1 points

Question 17 (THIS IS A MULTIPLE ANSWER QUESTION, SELECT ALL THAT ARE CORRECT)

1. Which assertions are tested by the audit procedure tracing ?
2. Completeness.
3. Accuracy.
4. Occurrence.
5. Rights and obligations.

1 points

Question 18 (THIS IS A MULTIPLE ANSWER QUESTION, SELECT ALL THAT ARE CORRECT)

1. Which of the following is true about audit risk?
2. It can never be zero, but can be minimised by identifying key risks and adjusting the audit effort accordingly.
3. It is the risk that the auditor will give a wrong opinion when the financial statements are materially misstated.
4. It cannot be controlled by the auditor.
5. It is the risk that the financial statements of the client are materially misstated.

1 points

Question 19 (THIS IS A MULTIPLE ANSWER QUESTION, SELECT ALL THAT ARE CORRECT)

1. Which of the following are part of the risk assessment phase of an audit?
2. Tests of controls
3. Risk and materiality assessment
4. Understanding the client
5. Substantive testing

1 points

Question 20 (THIS IS A MULTIPLE ANSWER QUESTION, SELECT ALL THAT ARE CORRECT)

1. Which of the following statements regarding the quantity of evidence that an auditor will collect are true?
2. It is dependent on the level of detection risk.
3. It is proportional to the size of the audit client.
4. It is firmly established at the commencement of the audit.
5. It may vary with the level of assessed control risk.