When an auditor increases the risk of material misstatement because certain control procedures were determined to be ineffective, the auditor would most likely increase the
Answer
[removed]
Extent of tests of details.
[removed]
Levels of inherent risk.
[removed]
Extent of tests of controls.
[removed]
Level of detection risk.
In the consideration of internal control, the auditor is basically concerned that internal control provides reasonable assurance that
Answer
[removed]
Controls have not been circumvented by collusion.
[removed]
Misstatements have been prevented or detected.
[removed]
Operational efficiency has been achieved in accordance with management plans.
[removed]
Management cannot override controls.
Which of the following statements concerning audit evidence is true?
Answer
[removed]
A client’s accounting data can be sufficient audit evidence to support the financial statements.
[removed]
To be competent, audit evidence should be either persuasive or relevant, but it need not be both
[removed]
The measure of the validity of audit evidence lies in the auditor’s judgment.
[removed]
The difficulty and expense of obtaining audit evidence concerning an account balance is a valid basis for omitting the test
Which of the following is not an objective of a well-designed system of internal control?
Answer
[removed]
Accurate reliable financial statements
[removed]
Safeguarding of assets.
[removed]
Adherence with applicable laws and regulations.
[removed]
Maintaining proper segregation of duties
The ultimate purpose of assessing control risk is to contribute to the auditor’s evaluation of the risk that
Answer
[removed]
Entity policies may be inappropriately overridden by senior management.
[removed]
Specified controls requiring segregation of duties may be circumvented by collusion.
[removed]
Tests of controls may fail to identify procedures relevant to assertions.
[removed]
Material misstatements may exist in the financial statements
Although the quantity and content of audit working papers vary with each particular engagement, an auditor's permanent files most likely include
Answer
[removed]
Schedules that support the current year’s adjusting entries.
[removed]
Prior years’ accounts receivable confirmations that were classified as exceptions.
[removed]
Documentation indicating that the audit work was adequately planned and supervised.
[removed]
Analyses of capital stock and other owners’ equity accounts.
Although the quantity and content of audit working papers vary with each particular engagement, an auditor's permanent files most likely include
Answer
[removed]
Schedules that support the current year’s adjusting entries.
[removed]
Prior years’ accounts receivable confirmations that were classified as exceptions.
[removed]
Documentation indicating that the audit work was adequately planned and supervised.
[removed]
Analyses of capital stock and other owners’ equity accounts.
Although the quantity an.
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When an auditor increases the risk of material misstatement because .docx
1. When an auditor increases the risk of material misstatement
because certain control procedures were determined to be
ineffective, the auditor would most likely increase the
Answer
[removed]
Extent of tests of details.
[removed]
Levels of inherent risk.
[removed]
Extent of tests of controls.
[removed]
Level of detection risk.
In the consideration of internal control, the auditor is basically
concerned that internal control provides reasonable assurance
that
Answer
[removed]
Controls have not been circumvented by collusion.
[removed]
Misstatements have been prevented or detected.
[removed]
Operational efficiency has been achieved in accordance with
management plans.
[removed]
Management cannot override controls.
2. Which of the following statements concerning audit evidence is
true?
Answer
[removed]
A client’s accounting data can be sufficient audit evidence to
support the financial statements.
[removed]
To be competent, audit evidence should be either persuasive or
relevant, but it need not be both
[removed]
The measure of the validity of audit evidence lies in the
auditor’s judgment.
[removed]
The difficulty and expense of obtaining audit evidence
concerning an account balance is a valid basis for omitting the
test
Which of the following is not an objective of a well-designed
system of internal control?
Answer
[removed]
Accurate reliable financial statements
[removed]
Safeguarding of assets.
[removed]
Adherence with applicable laws and regulations.
[removed]
Maintaining proper segregation of duties
3. The ultimate purpose of assessing control risk is to contribute to
the auditor’s evaluation of the risk that
Answer
[removed]
Entity policies may be inappropriately overridden by senior
management.
[removed]
Specified controls requiring segregation of duties may be
circumvented by collusion.
[removed]
Tests of controls may fail to identify procedures relevant to
assertions.
[removed]
Material misstatements may exist in the financial statements
Although the quantity and content of audit working papers vary
with each particular engagement, an auditor's permanent files
most likely include
Answer
[removed]
Schedules that support the current year’s adjusting entries.
[removed]
Prior years’ accounts receivable confirmations that were
classified as exceptions.
[removed]
Documentation indicating that the audit work was adequately
4. planned and supervised.
[removed]
Analyses of capital stock and other owners’ equity accounts.
Although the quantity and content of audit working papers vary
with each particular engagement, an auditor's permanent files
most likely include
Answer
[removed]
Schedules that support the current year’s adjusting entries.
[removed]
Prior years’ accounts receivable confirmations that were
classified as exceptions.
[removed]
Documentation indicating that the audit work was adequately
planned and supervised.
[removed]
Analyses of capital stock and other owners’ equity accounts.
Although the quantity and content of audit working papers vary
with each particular engagement, an auditor's permanent files
most likely include
Answer
[removed]
Schedules that support the current year’s adjusting entries.
[removed]
Prior years’ accounts receivable confirmations that were
classified as exceptions.
[removed]
5. Documentation indicating that the audit work was adequately
planned and supervised.
[removed]
Analyses of capital stock and other owners’ equity accounts.
Which of the following procedures is least likely to be
performed as a part of obtaining an understanding during an
audit engagement of a new audit client previously audited by
another CPA?
Answer
[removed]
Communication with the predecessor auditor.
[removed]
Performing analytical procedures.
[removed]
Obtaining confirmation of cash balances.
[removed]
Considering internal control.
An auditor traced a sample of purchase orders and the related
receiving reports to the purchases journal and the cash
disbursements journal. The purpose of this substantive audit
procedure most likely was to
Answer
[removed]
Verify that cash disbursements were for goods actually
received.
[removed]
6. Test whether payments were for goods actually ordered.
[removed]
Determine that purchases were properly recorded.
[removed]
Identify unusually large purchases that should be investigated
further
Which audit assertion ensures that all recorded sales are valid?
Answer
[removed]
Documentation.
[removed]
Vouching.
[removed]
Existence or occurrence.
[removed]
Valuation or allocation
Which of the following did not have substantive changes under
the new clarification standards?
Answer
[removed]
evidence
[removed]
internal control
[removed]
reporting
7. [removed]
related parties
During the process of confirming receivables as of December
31, 2007, a positive confirmation was returned indicating the
"balance owed as of December 31 was paid on January 9,
2008." The auditor would most likely
Answer
[removed]
Determine whether there were any changes in the account
between January 1 and January 9, 2008
[removed]
Determine whether a customary trade discount was taken by the
customer.
[removed]
Reconfirm the zero balance as of January 10, 2008.
[removed]
Verify that the amount was received.
Which of the following has the lowest authoritative status but
may be useful in assisting the auditor in applying the SASs?
Answer
[removed]
Statements on Auditing Standards
[removed]
8. Auditing Statements of Position.
[removed]
Journal of Accountancy articles.
[removed]
Auditing Interpretations
When auditing related party transactions, an auditor places
primary emphasis on
Answer
[removed]
Ascertaining the rights and obligations of the related parties.
[removed]
Evaluating the disclosure of the related party transactions.
[removed]
Verifying the valuation of the related party transactions.
[removed]
Confirming the existence of the related parties
Which of the following is true?
Answer
[removed]
the auditor must document the reasons for assessing control risk
at the maximum
[removed]
detection risk is equal to audit risk divided by the product of
inherent risk and control risk
9. [removed]
the auditor has no control over detection risk, control risk or
inherent risk
[removed]
the auditor should not accept an engagement when inherent risk
is set at maximum
Which of the following controls would an auditor be least likely
to review
Answer
[removed]
Segregation of the asset-handling and recordkeeping functions.
[removed]
Company policy regarding credit and collection efforts.
[removed]
Cost records classified by date of product introduction
[removed]
Authorization of additions to plant and equipment
When tests of controls reveal that controls are not operating as
anticipated, it is most likely that the assessed level of the risk
of material misstatement will
Answer
[removed]
Be less than the planned level.
[removed]
10. Equal the planned level.
[removed]
Be greater than the planned level.
[removed]
Be less than the actual level.
Which of the following gives, as Dr.
described, a "warm and fuzzy feeling" when an auditor
determines that the client has
Answer
[removed]
a requirement that two signatures are required on checks
[removed]
a budget and variance analysis system
[removed]
an annual quality control review
[removed]
an internal audit staff
Of the following, which is the least persuasive type of audit
evidence?
Answer
[removed]
Documents mailed by outsiders to the auditor.
[removed]
Correspondence between auditor and vendors.
[removed]
11. Copies of sales invoices inspected by the auditor.
[removed]
Computations made by the auditor
A weakness in internal control over recording retirements of
equipment may cause an auditor to
Answer
[removed]
Review the subsidiary ledger to ascertain whether depreciation
was taken on each item of equipment during the year.
[removed]
Select certain items of equipment from the accounting records
and locate them in the plant.
[removed]
Inspect certain items of equipment in the plant and trace those
items to the accounting records.
[removed]
Trace additions to the “other assets” account to search for
equipment that is still on hand but no longer being used
If internal control is properly designed, the same employee
should not be permitted to
Answer
[removed]
Sign checks and cancel supporting documents.
[removed]
Receive merchandise and prepare a receiving report.
12. [removed]
Prepare disbursement vouchers and sign checks.
[removed]
Initiate a request to order merchandise and approve merchandise
received.
When a CPA is approached to perform an audit for the first
time, the CPA should make inquiries of the predecessor
auditor. This is a necessary procedure because the predecessor
may be able to provide the successor with information that will
assist the successor in determining
Answer
[removed]
Whether the predecessor’s work should be utilized.
[removed]
Whether the company follows the policy of rotating its auditors.
[removed]
Whether in the predecessor’s opinion internal control of the
company has been satisfactory.
[removed]
Whether the engagement should be accepted.
Which of the following is least likely to be a procedure used for
planning/acceptance of an engagement?
Answer
[removed]
13. Contacting the predecessor auditor
[removed]
communicating with the client's attorney and other third parties
[removed]
review financial statements
[removed]
determine internal control risk
Which of the following is not an interrelated component of
internal control?
Answer
[removed]
Control activities
[removed]
Risk assessment
[removed]
Monitoring
[removed]
Management integrity
An auditor's decision either to apply analytical procedures as
substantive procedures or to perform tests of transactions and
account balances usually is determined by the
Answer
[removed]
Availability of data aggregated at a high level.
14. [removed]
Relative effectiveness and efficiency of the tests.
[removed]
Timing of tests performed after the balance sheet date.
[removed]
Auditor’s familiarity with industry trends
Factors or components of the control environment include all
except
Answer
[removed]
Organizational structure
[removed]
Human resources
[removed]
Integrity and ethical values
[removed]
All of the above are factors
Which of the following is not a typical analytical procedure?
Answer
[removed]
Study of relationships of the financial information with relevant
nonfinancial information.
[removed]
Comparison of the financial information with similar
information regarding the industry in which the entity operates.
15. [removed]
Comparison of recorded amounts of major disbursements with
appropriate invoices.
[removed]
Comparison of current year's financial statement with last years
Failure to detect material dollar misstatements in the financial
statements is a risk which the auditor primarily mitigates by
Answer
[removed]
Performing substantive procedures.
[removed]
Performing tests of controls.
[removed]
Assessing internal control.
[removed]
Obtaining a client representation letter.