QUESTION 2 Which of the following factors will influence the auditor the greatest into taking a substantive audit approach as part of a financial statement audit? O The company implemented an EDI system at the start of the fiscal year under audit O Due to downsizing, Internal Audit was unable to audit the sales process during the fiscal year under audit O A company's transactions are uniform and there has not been a change in the company's processes in three years O A small company has few transactions however controls are expected to be effective QUESTION 3 Your client has refused to adjust its inventory balance for a write-down in value that you believe is permanent based on your audit procedures. The amount that you believe should be written-off is $35 million. Overall audit materiality is $25 million. No other adjustments are required as you believe all other balances are fairly stated. What type of opinion would you issue? Issue an unqualified opinion OIssue a disclaimer of opinion O Issue a qualified "except for" opinion O Issue an adverse opinionQUESTION 4 Which of the following factors would drive an increase in the number of receivables confirmations that the auditor would send to the client's customers? O Use of negative confirmations rather than positive confirmations High planned detection risk O Low control risk O Management refusal to auditor to send out confirmations due to lawsuit with customers QUESTION 5 Which of the following factors will influence the auditor the greatest into taking a substantive audit approach as part of a financial statement audit? O The company implemented an EDI system at the start of the fiscal year under audit O Due to downsizing, Internal Audit was unable to audit the sales process during the year O A company's transactions are uniform and there has been no change in three years A small company has few transactions, however controls are expected to be effectiveQUESTION 6 Which of the following provides highest quality of evidence for valuation of Accounts Receivable? 0 External conrmations of account balances with your client's customers (insurance companies) A External conrmation of large balances with your client's customers (university students) A Inquiry of internal audit over the results of past audits of Accounts Receivable A Inspection of process narratives for the sales and receivables process QUESTION 7 Which following scenarios make sense for auditor to utilize substantive analytical procedures? A A substantive audit approach is necessary as the company has a poor control environment A A client must maintain a 2:1 Current ratio or bank loan must be paid back in full within 30 days A A client's payroll consists of 3 full-time employees A A company has several capital assets that are each depreciated using a different rate QUESTION 8 At the review stage of an audit, the application of analytical procedures is C Recommended by auditing standards. C Not mentioned by auditing standards. C Not useful, since detailed substantive tests have already been performed. C' Required by auditing standards. QUESTION 9 One of the auditor's primary concerns with regard to internal controls is: C The degree to which the internal controls are working as designed. C The possibility of an inherent risk which has to be controlled. C The impact the controls have on the accuracy of the accounting records. C The amount of substantive work to be saved by testing controls instead. QUESTION 10 Purchase cut o' procedures should be designed to produce evidence about whether or not merchandise that is included in the inventory of the company A Has been paid for. A Is physically present in the warehouse. A Is owned by the company (legal title has been transferred). A Relates to the shipping documents for the merchandise issued in the company's name