Which of the following is not an example of the application of professional skepticism? (Points : 5) Designing additional auditing procedures to obtain more reliable evidence in support of a particular financial statement assertion Obtaining corroboration of management's explanations through consultation with a specialist Inquiring of prior year engagement personnel regarding their assessment of management's honesty and integrity Using third-party confirmations to provide support for management's representations Question 5.5. (TCO 3) Under the ethical standards of the profession, which of the following investments in a client is not considered to be a direct financial interest? (Points : 5) An investment held through a nonclient regulated mutual fund An investment held through a nonclient investment club An investment held in a blind trust An investment held by the trustee of a trust Question 6.6. (TCO 2) A client decides not to make an auditor's proposed adjustments that collectively are not material, and wants the auditor to issue the report based on the unadjusted numbers. Which of the following statements is correct regarding the financial statement presentation? (Points : 5) The financial statements are free from material misstatement, and no disclosure is required in the notes to the financial statements. The financial statements do not conform with generally accepted accounting principles (GAAP). The financial statements contain unadjusted misstatements that should result in a qualified opinion. The financial statements are free from material misstatement, but disclosure of the proposed adjustments is required in the notes to the financial statements. Question 7.7. (TCO 5) The use of prenumbered sales invoices is meant to prevent (Points : 5) the failure to bill or record sales. duplicate billings and recording of sales. Both A and B Neither A nor B Question 8.8. (TCO 6) Auditors must make decisions regarding what evidence to gather and how much to accumulate. Which of the following is not a decision that must be made by auditors related to evidence? (Points : 5) Audit procedure to use Sample size Timing of each audit procedure Each of the above is a decision that must be made Question 9.9. (TCO 7) A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the (Points : 5) inherent risk. acceptable audit risk. statistical risk. financial risk. Question 10.10. (TCO 8) In setting materiality guidelines for current assets, the two standard setters, FASB and the AICPA, provide the following guidelines to practitioners (Points : 5) both agree that it should be greater than 5%. both agree that materiality should be set at an amount greater than 10% of current assets. both agree that materiality should be set at an amount greater than 10% of current assets. no specific materiality guidelines are provided by either of them. Question 11.11. (TCO 9) Which of the following best illustrates the concept of sampling risk? (Points : 5) The documents related to the chosen sample may not be available to the auditor for inspection. An auditor may fail to recognize errors in the documents from the sample. A randomly chosen sample may not be representative of the population as a whole for the characteristic of interest. An auditor may select audit procedures that are not appropriate to achieve the specific objective. Question 12.12. (TCO 10) The audit procedure that is least useful in gathering evidence on significant computer processes is (Points : 5) documentation. observation. test decks. generalized audit software. Question 13.13. (TCO 11) Which of the following is not a condition for a contingent liability to exist? (Points : 5) There is a potential future payment to an outside party that would result from a current condition. There is uncertainty about the amount of the future payment. The outcome of an uncertainty will be resolved by some future event. The amount of the future payment is reasonably estimable. Question 14.14. (TCO 5) Which of the following audit tests would be regarded as a test of a control? (Points : 5) Tests of the specific items making up the balance in a given general ledger account Tests of the inventory pricing to vendor's invoices Tests of the signatures on canceled checks to the board of directors' authorizations Tests of the additions to property, plant, and equipment by physical inspections Question 15.15. (TCO 5) Which of the following audit tests would be regarded as a substantive test of transactions? (Points : 5) Trace recorded sales in the sales journal to the related accounts receivable master file, and compare the customer name, date, and amount for each one. Review the prelisting in the cash receipts book to determine whether cash is prelisted daily. Review cancelled checks for proper management authorizations. Examine sales returns for approval by an authorized official. Question 16.16. (TCO 6) Which of the following is not a potential effect of an auditor's decision that a lower acceptable audit risk is appropriate? (Points : 5) More evidence is required Less evidence is required Special care is required in assigning experienced staff Review of the working papers by personnel who were not assigned to the engagement Question 17.17. (TCO 6) Which of the following statements is correct regarding the costs involved in obtaining evidence? (Points : 5) Cost of obtaining evidence is a valid reason for excluding that evidence from the audit. Physical examination is the most expensive type of audit evidence. The least expensive type of evidence is analytical procedures. Each of the above is correct Question 18.18. (TCO 9) In attributes sampling, an estimate of the expected population exception rate is necessary to plan the sample size. The relationship of expected population exception rate (EPER) to sample size is (Points : 5) direct (small EPER = small sample). inverse (small EPER = large sample). a variable (sometimes small, sometimes large), dependent on other factors present. indeterminate