Audit Chs. 1-7

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1.  Which of the following statements best describes a relationship between sample size and other elements of auditing?
A.
B.
C.
D.
2.  Which of the following statements is not true with respect to assurance, attest, and audit services?
A.
B.
C.
D.
3.  Why do auditors generally use a sampling approach to evidence gathering?
A.
B.
C.
D.
4.  Which of the following statements about the study of accounting is NOT true?
A.
B.
C.
D.
5.  Which of the following best describes the concept of audit risk?
A.
B.
C.
D.
6.  In the context of agency theory, information asymmetry refers to the idea that...
A.
B.
C.
D.
7.  Which of the following best describes why publicly-traded corporations follow the practice of having the external auditor appointed by the board of directors or elected by the stockholders?
A.
B.
C.
D.
8.  Auditors are most likely to use the most rigorous audit procedures to examine
A.
B.
C.
D.
9.  An investor is reading the financial statements of the Stankey Corporation and observes that the statements are accompanied by an auditor's unqualified report. From this, the investor may conclude that:
A.
B.
C.
D.
10.  Which of the following is not a concept that is included in the scope paragraph of the auditor's report?
A.
B.
C.
D.
11.  The basic purpose of a financial statement audit is to...
A.
B.
C.
D.
12.  The authoritative body designed to promulgate standards concerning an accountant's association with audited financial statements of an entity that is required to file financial statements with the SEC is the...
A.
B.
C.
D.
13.  Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed within an attitude of...
A.
B.
C.
D.
14.  Which of the following is NOT a requirement of the Sarbanes-Oxley Act?
A.
B.
C.
D.
15.  The main difference between SAS and AU is:
A.
B.
C.
D.
16.  The AICPA's Statements on Auditing Standards can be described as...
A.
B.
C.
D.
17.  With regard to detecting fraud, auditing standards require auditors to...
A.
B.
C.
D.
18.  The three general standards are concerned with:
A.
B.
C.
D.
19.  Which assertions may be tested for the "transactions and events" category of management assertions?
A.
B.
C.
D.
20.  The three standards of fieldwork are concerned with:
A.
B.
C.
D.
21.  What is the general character of the work conducted in performing a forensic audit for a company?
A.
B.
C.
D.
22.  Due professional care requires...
A.
B.
C.
D.
23.  The achieved (actual) level of audit risk...
A.
B.
C.
D.
24.  The risk that an auditor will conclude, based on substantive procedures, that a material error does not exist in an account balance when, in fact, such error does exist is referred to as...
A.
B.
C.
D.
25.  All of the following are inherent risk factors that are pervasive to the financial statements except...
A.
B.
C.
D.
26.  Which of the following is not a misstatement of the financial statements?
A.
B.
C.
D.
27.  All of the following represent an increased opportunity to commit fraud except:
A.
B.
C.
D.
28.  The auditor can respond to an increased risk of fraud by doing all of the following except...
A.
B.
C.
D.
29.  Which of the following is the most important qualitative factor that auditors should consider when making materiality judgments?
A.
B.
C.
D.
30.  The auditor is most likely to presume that a high risk of a fraud exists if...
A.
B.
C.
D.
31.  Which of the following is correct concerning required auditor communications about fraud?
A.
B.
C.
D.
32.  The risk of material misstatement includes which of the following:
A.
B.
C.
D.
33.  Tolerable misstatements is...
A.
B.
C.
D.
34.  Tracing is used primarily to test which of the following assertions about classes of transactions?
A.
B.
C.
D.
35.  A confirmation is used to:
A.
B.
C.
D.
36.  Vouching is used primarily to test which of the following assertions about classes of transaction?
A.
B.
C.
D.
37.  Of the following, which is the least persuasive type of audit evidence?
A.
B.
C.
D.
38.  Which of the following show the detailed general ledger accounts that make up a financial statement category on the auditor's working trial balance?
A.
B.
C.
D.
39.  An example of audit evidence with a medium level of reliability is:
A.
B.
C.
D.
40.  The permanent audit file usually includes:
A.
B.
C.
D.
41.  The current audit file usually includes:
A.
B.
C.
D.
42.  Audit documentation prepared on audits of publicly held clients is the property of the...
A.
B.
C.
D.
43.  Each of the following might, by itself, form a valid basis for an auditor to reduce substantive testing except for the...
A.
B.
C.
D.
44.  Which of the following presumptions is correct about the reliability of audit evidence?
A.
B.
C.
D.
45.  Of the following, the most reliable type of evidence typically is...
A.
B.
C.
D.
46.  Which of the following types of documentary evidence should the auditor consider to be the most reliable?
A.
B.
C.
D.
47.  Which of the following types of audit evidence is the most persuasive?
A.
B.
C.
D.
48.  You are concerned with unrecorded transactions in the purchasing cycle. Which audit procedure are you most likely to use when auditing purchases?
A.
B.
C.
D.
49.  Hawkins requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor's working papers. The prospective client's refusal to permit this will bear directly on Hawkins' decision concerning the...
A.
B.
C.
D.
50.  All of the following refer to an internal auditor's competence except...
A.
B.
C.
D.
51.  An independent auditor might consider the procedures performed by the internal auditors because...
A.
B.
C.
D.
52.  An auditor obtains knowledge about a new client's business and its industry in order to...
A.
B.
C.
D.
53.  In the context of an audit of financial statements, substantive procedures are audit procedures that...
A.
B.
C.
D.
54.  Which of the following is not an audit procedure that is commonly used in performing tests of controls?
A.
B.
C.
D.
55.  Which of the following is not a typical analytical procedure?
A.
B.
C.
D.
56.  An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use of...
A.
B.
C.
D.
57.  Analytical procedures are...
A.
B.
C.
D.
58.  A dual-purpose test...
A.
B.
C.
D.
59.  In correct order, general types of audit tests include:
A.
B.
C.
D.
60.  Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit?
A.
B.
C.
D.
61.  Which of the following tends to be most predictable for purposes of analytical procedures applied as substantive procedures?
A.
B.
C.
D.
62.  Under the Sarbanes-Oxley Act, the audit committee of a public company has the following requirement(s):
A.
B.
C.
D.
63.  An auditor who discovers that a client's employees paid small bribes to municipal officials most likely would withdraw from the engagement if...
A.
B.
C.
D.
64.  A primary purpose of internal controls is to...
A.
B.
C.
D.
65.  An entity's control activities include all of the following except...
A.
B.
C.
D.
66.  Auditors are most likely to gather audit evidence solely using substantive procedures...
A.
B.
C.
D.
67.  Proper segregation of functional responsibilities in an effective system of internal control calls for separation of the functions of...
A.
B.
C.
D.
68.  The documentation of an auditor's understanding of internal controls...
A.
B.
C.
D.
69.  The independent auditor selects several transactions in each functional area and traces them through the entire system, paying special attention to evidence about whether or not the control activities are in operation. This is an example of a(n)...
A.
B.
C.
D.
70.  Where computer processing is used in significant accounting applications, internal control activities may be defined by classifying control activities into two types: general and...
A.
B.
C.
D.
71.  Reports on service organizations typically...
A.
B.
C.
D.
72.  A substantive strategy differs from a reliance strategy in that a substantive strategy includes...
A.
B.
C.
D.
73.  As part of gaining an initial understanding of internal control, an auditor is required to do all of the following except:
A.
B.
C.
D.
74.  Effective internal control in a small company that has an insufficient number of employees to permit proper division of responsibilities can best be enhanced by...
A.
B.
C.
D.
75.  In an audit of financial statements in accordance with generally accepted auditing standards, an auditor is required to...
A.
B.
C.
D.
76.  Which of the following procedures most likely would be included as part of an auditor's test of controls?
A.
B.
C.
D.
77.  The auditor must understand internal control before assessing inherent risk.
A.
B.
78.  Internal control consists of six components.
A.
B.
79.  In order for an external auditor to complete an audit of a publicly traded entity, the entity's management must comply with all of the following except:
A.
B.
C.
D.
80.  Section 404 of the Sarbanes-Oxley Act requires the auditor to provide which of the following:
A.
B.
C.
D.
81.  The PCAOB's definition of internal control over financial reporting specifically mentions all of the following control activities, except...
A.
B.
C.
D.
82.  A deficiency that implies that there is reasonable possibility of misstatement in the financial statements that is significant but not material is...
A.
B.
C.
D.
83.  Which of the following is not a primary objective of internal control as established by COSO?
A.
B.
C.
D.
84.  Which of the following statements is false?
A.
B.
C.
D.
85.  The five step process in the audit of ICFR includes...
A.
B.
C.
D.
86.  Which of the following is false?
A.
B.
C.
D.
87.  In determining the extent to which the auditor may use the work of others in the audit of ICFR, the auditor should do all of the following except...
A.
B.
C.
D.
88.  To obtain an understanding of significant processes and relevant subprocesses, auditors would be least likely to use which of the following techniques:
A.
B.
C.
D.
89.  Management's written representations concerning internal control are:
A.
B.
C.
D.
90.  In the context of an audit of internal controls, the auditor must document all of the following except...
A.
B.
C.
D.
91.  Which of the following statements included in management's assessment of the effectiveness of internal control over financial reporting would be considered acceptable for issuing an unqualified opinion?
A.
B.
C.
D.
92.  A modification of the standard report is required for all of the following conditions, except:
A.
B.
C.
D.
93.  Prior to issuing a report on internal controls over financial reporting, an auditor is required to:
A.
B.
C.
D.
94.  In obtaining an understanding of an entity's internal control in a financial statement audit, an auditor is not obligated to...
A.
B.
C.
D.
95.  An "integrated audit" as stated in Section 404 of the Sarbanes-Oxley Act means...
A.
B.
C.
D.
96.  According to the PCAOB, who is responsible for the reliability of the internal controls over financial reporting process of an entity?
A.
B.
C.
D.
97.  The person in charge of authorizing credit to customers does not properly understand what constitutes a credit risk. This is an example of?
A.
B.
C.
D.
98.  Examples of company-level controls include:
A.
B.
C.
D.
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