1. When an auditor is ascertaining the reasonableness of an accounting estimate, the auditor would concentrate on which of the following issues concerning the management estimate:
   1. Material differences from prior historical indications and patterns
   2. The estimate is consistent with prior periods
   3. The estimate is similar to industry guidelines
   4. The estimate is determined to be objective and free on management bias.

2. Which of the following statements concerning the competence of evidence is not correct?
   1. Competence cannot be improved by selecting different population items to include in the sample size
   2. Competence can be improved by selecting a larger sample size
   3. Competence can be improved by selecting audit procedures that contain a higher quality of the information sought
   4. Competence is defined by the specific audit procedures selected

3. Analytical procedures implemented during the audit process would indicate a relatively high risk of financial and business failure in which of the following instances?
   1. An increase in the property, plant & equipment asset values
   2. An above average ratio of long-term debt to net worth and a lower than average ratio of net income to total assets
   3. A decline in gross margin percentages
   4. An increase in the ratio allowance for uncollectible accounts to gross accounts receivable, while at the same time accounts receivable turnover also decreased

4. An auditor needs to establish a methodology for allocating materiality, the primary methodology employed is:
   1. All of the financial statements because there could be errors on any one of the 4 statements
   2. The income statement because the balances and results are more important to the reporting process
   3. Both the income statement and the balance sheet because there could be errors on either one
   4. The balance sheet accounts because there are fewer.

5. If a CPA accepts an audit engagement and they do not possess the industry expertise regarding the specifics of that industry, the auditor should:
   1. Inform management that an unqualified opinion cannot be issued
   2. Refer a substantial portion of the audit to a CPA that will act as the principal auditor
   3. Engage financial experts that are familiar with the industry standards
   4. Obtain a knowledge of matters that relate to the nature of the entitys business.