Question
Question 1 If an auditor wishes to reduce the level of audit risk, then the auditor should: lower the level of inherent risk of the
Question 1
- If an auditor wishes to reduce the level of audit risk, then the auditor should:
- lower the level of inherent risk of the client.
- increase the level of detection risk.
- lower the level of control risk.
- decrease the level of detection risk.
1 points
Question 2
- Which one of the following statements about materiality is NOT true?
- 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.
- Auditors use their professional judgment to arrive at an appropriate planning materiality amount for each client
- Information is considered quantitatively material if it exceeds the magnitude of an auditor's planning materiality assessment
- 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
- The specific audit objective "revenue has been recorded in the correct period" is derived from the :
- Classification assertion
- Occurrence assertion
- Completeness assertion
- Cut-off assertion
1 points
Question 4
- The specific audit objective "Financial information is appropriately presented and described" is derived from the:
- Completeness assertion
- Occurrence assertion
- Accuracy and Valuation assertion
- Classification and Understandability assertion
1 points
Question 5
- Written representations are obtained from all lawyers with whom management has consulted for material legal matters. These representations are known as:
- Engagement letters.
- Management letters.
- Auditors confirmation letters.
- Legal representation letters.
1 points
Question 6
- If inherent risk is medium and control risk is high, then:
- Detection risk is low.
- Detection risk is high.
- The acceptable level of audit risk is high.
- Detection risk is medium.
1 points
Question 7
- If inherent risk is medium and control risk is low, then:
- Detection risk is low.
- Detection risk is high.
- The acceptable level of audit risk is high.
- Detection risk is medium.
1 points
Question 8
- When a test of controls reveals some deviations, under what conditions will the auditor still be able to depend on the control system?
- The error was immaterial and discovered to be an isolated departure.
- The circumstances did not lead to a material error in the financial statements.
- Substantive procedures indicate that no further errors exist.
- The total error found was immaterial to the financial statements.
1 points
Question 9
- 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.
- Sales invoice numbers, prices, discounts extensions and additions are independently checked
- Unauthorised deductions from payments made by customers, or other matters in dispute, are investigated promptly by a person independent of the accounts receivable function
- Prelistings and predetermined totals are used to control postings
- Customers monthly statements are verified and mailed by a responsible person other than the sales clerk who prepared them
1 points
Question 10
- Which one of the following tests of details would be appropriate to test the completeness assertion of receivables:
- Test the mathematical accuracy of the sales transaction file.
- Vouch recorded sales to the records of products ordered and shipped.
- Compare the current year s to the prior year s allowance for doubtful debts as a percentage of receivables and sales.
- Trace the postings of the totals in sales transaction file to the general Ledger.
1 points
Question 11
- 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:
- Tracing.
- Inspection.
- Vouching.
- Analytical procedure.
1 points
Question 12
- Which one of the following would be kept on the permanent audit file?
- Planning information for the current audit.
- Reclassifying entries
- Working trial balance.
- Description of client entity activities.
1 points
Question 13
- Which one of the following is NOT one of the phases in planning an audit?
- Understand the client's industry and business
- Perform preliminary analytical procedures
- Client acceptance and continuance
- Audit of transaction cycle
1 points
Question 14
- Which one of the following statements is false?
- Stratification increases audit efficiency.
- Stratification can be done based on the monetary value of items in the population.
- An item in the population cannot be included in more than one stratum.
- Stratification is a method of sampling using probability theories to form statistical inference about the population.
1 points
Question 15
- Which one of the following statements about fraud is NOT true?
- The responsibility for preventing fraud rests with those charged with governance.
- Fraud is an intentional act involving deception and results in misstatement of the financial statements that are being audited.
- Auditors should adopt an attitude of professional skepticism to ensure any indicator of a potential fraud is properly investigated.
- Auditors are responsible for preventing and detecting fraud.
1 points
Question 16
- Which one of the following steps does NOT form part of the risk assessmnet phase of the audit?
- Understanding the client
- Risk identification and strategy
- Risk and materiality assessment
- Tests of control
1 points
Question 17 (THIS IS A MULTIPLE ANSWER QUESTION, SELECT ALL THAT ARE CORRECT)
- Which assertions are tested by the audit procedure tracing ?
- Completeness.
- Accuracy.
- Occurrence.
- Rights and obligations.
1 points
Question 18 (THIS IS A MULTIPLE ANSWER QUESTION, SELECT ALL THAT ARE CORRECT)
- Which of the following is true about audit risk?
- It can never be zero, but can be minimised by identifying key risks and adjusting the audit effort accordingly.
- It is the risk that the auditor will give a wrong opinion when the financial statements are materially misstated.
- It cannot be controlled by the auditor.
- 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)
- Which of the following are part of the risk assessment phase of an audit?
- Tests of controls
- Risk and materiality assessment
- Understanding the client
- Substantive testing
1 points
Question 20 (THIS IS A MULTIPLE ANSWER QUESTION, SELECT ALL THAT ARE CORRECT)
- Which of the following statements regarding the quantity of evidence that an auditor will collect are true?
- It is dependent on the level of detection risk.
- It is proportional to the size of the audit client.
- It is firmly established at the commencement of the audit.
- It may vary with the level of assessed control risk.
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