1. Reviewing sales invoices and asking a sales manager to explain why a price deviation occurred is an example of which audit testing procedure(s):

1. observation
2. inquiry.
3. inspection.
4. Both b and c.

2. When testing the occurrence assertion, the auditor may:

1. examine supporting documentation for paid invoices.
2. examine open purchase orders.
3. examine the appropriate journals for evidence of posting.
4. All of the above.

3. Sample size increases as the:

1. risk of assessing control risk too high increases.
2. risk of assessing control risk too low decreases.
3. tolerable rate of deviation increases.
4. All of the above.

4. The difference between a significant deficiency and a material weakness is:

1. one of dollars amounts; the material weakness has a greater dollar impact than a significant deficiency.
2. a material weakness has a reasonable possibility that a material misstatement will not be detected; a significant deficiency is less severe.
3. a material weakness has a reasonable probability that a material misstatement will not be detected; a significant deficiency is less severe.
4. All of the above.

5. Client A hires part-time seasonal employees to perform routine accounting tasks during periods of high transaction volume. The employees frequently make mistakes, some of which are material, but these are usually detected by a supervisor who reviews their work. This arrangement in said to:

1. be a serious control problem .
2. be a serious problem with an effective compensating control.
3. be a serious problem without an effective compensating control.
4. require a qualified audit opinion regarding the ICFR.

6. Entity-level controls:

1. are pervasive.
2. affect only top management.
3. can be less than effective if application controls are strong.
4. All of the above.

7. Which of the following is an example of sampling error?

1. Selection of the wrong transactions.
2. Misapplication of random sampling.
3. Selecting transactions not representative of the population.
4. All of the above are examples of sampling errors.

8. An audit efficiency problems occurs when:

1. the auditor concludes there is no material misstatement when in fact there is.
2. the auditor concludes there is a material misstatement when in fact there is not.
3. the auditor concludes that the transactions need to be reperformed.
4. None of the above are audit efficiency problems.

9. You are assigned to audit accounts payable for a manufacturing client. As part of the planning, your manager sets a tolerable misstatement amount of+/- $125,000. Your review of unpaid invoices indicates an understatement error of $25,253 from a sample of $675,467. The population value of A/P is $5,241,687 at October 31st. The minimum amount of the adjustment (rounded) is:

1. $125,000.
2. $25,253.
3. $157,251.
4. $32,251.

10. Going concern affects:

1. the scope of the audit.
2. the audit opinion.
3. the decision whether or not to accept a client.
4. All of the above

11. Cut-off procedures:

1. can be tested at interim and rolled forward.
2. can be tested at any point in the audit.
3. apply only to balance sheet accounts.
4. can only be tested at year-end.

12. Which of the following procedures would you perform for an audit of cash and cash equivalents at year-end?

1. Obtain the cut-off bank statement from the client.
2. Trace deposits in transit to the bank statement and to the books for proper recording.
3. Perform the bank reconciliation.
4. All of the above.

13. An auditor would search for unrecorded liabilities by:

1. examining paid invoices for inclusion in the proper accounting period.
2. examining bank statements for outstanding checks written to vendors.
3. examining the cash disbursements journal for the period subsequent to year-end but prior to issuance of the financial statements for payments made but not properly recorded as a liability in the correct period.
4. All of the above

14. Accounts involved in the sales and collection cycle includes all of the following except:

1. Cash.
2. Accounts Receivable.
3. Sales.
4. Bad Debt Expense.
5. Purchase Returns and Allowances.

15. Which of the following internal control activities most likely would assure that all billed sales are correctly posted to the accounts receivable ledger

1. Each sales invoice is supported by a prenumbered shipping document.
2. The accounts receivable ledger is reconciled daily to the control account in the general ledger.
3. Each shipment on credit is supported by a prenumbered sales invoice.
4. The accounts payable ledger is reconciled weekly to the control account in the general ledger.
5. Daily sales summaries are compared to daily postings to the accounts receivable ledger.

16. In evaluating the adequacy of the allowance for doubtful accounts, an auditor most likely reviews the entity's aging of receivables to support management's financial statement assertion of:

1. existence.
2. completeness.
3. rights and obligations.
4. valuation or allocation.
5. occurrence.

17. Inquiry of a clients lawyer:

1. is required by GAAS.
2. requests that the lawyer identify the nature and reason for any limitation on her response.
3. requires disclosure of any omission made by management in identifying existing and pending litigation.
4. All of the above

18. As part of the wrap-up procedures, Mary Ellen Dillon reviews the minutes of the Board of Directors for a client. During her review, she discovers that a major acquisition is planned in the coming months. This planned acquisition should:

1. be disclosed in the footnotes to the financial statements.
2. be disclosed in an explanatory paragraph of the audit report.
3. be audited by the audit firm as part of its wrap-up work.
4. None of the above.

19. In a financial statement audit, the difference between when an auditor issues a disclaimer or issues a qualified opinion because of a scope limitation centers on:

1. the reason for the scope limitation.
2. managements attitude and response to the auditor.
3. the cause and severity of the scope limitation.
4. Both a and b.

20. Under GAAS,:

1. the auditor can amend the language of the ICFR audit report.
2. the auditor can issue an adverse opinion on the ICFR without withdrawing from the engagement.
3. the auditor cannot issue an adverse opinion on ICFR without citing scope limitation.
4. the auditor can issue an adverse opinion on the ICFR only if (s)he issues a qualified opinion on the financial statements.

21. Dillon is auditing Byrne Corp., a public company. Byrne recently implemented a new accounting system. As part of the ICFR audit, Dillon discovers that material controls surrounding access to the new software were only partially installed. Dillon should:

1. withdraw from the audit.
2. issue a disclaimer opinion on the ICFR.
3. issue an adverse opinion on the ICFR.
4. depending on the circumstances, the auditor may choose any of the above.

22. Time worked not accepted by the payroll application program because the employee is not in the payroll master file is an example of which assertion(s)?

1. Completeness and existence.
2. Existence.
3. Authorization and existence.
4. None of the above.

23. The payroll master file serves which purpose?

1. It is a repository of all employees currently employed and recently discharged.
2. It lists key employee data such as pay rate and deduction information.
3. It lists the year-to-date earnings information for each employee.
4. All of the above.

24. Purchase authorization is granted by:

1. using a pre-approved supplier list.
2. using a pre-approved price list.
3. requiring management approval for all purchases.
4. All of the above.

25. Pre-numbering purchase orders achieves which assertion(s)?

1. Authorization.
2. Existence.
3. Completeness.
4. Both a and c.

26. Comparing prices and quantities on a suppliers invoice achieves which assertion(s)?

1. Existence.
2. Valuation.
3. Rights and obligations.
4. Both b and c.