Audit Chs. 1-7

98 Questions  I  By Pimen103
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1.  Which of the following is correct concerning required auditor communications about fraud?
A.
B.
C.
D.
2.  The achieved (actual) level of audit risk...
A.
B.
C.
D.
3.  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.
4.  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.
5.  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.
6.  Which of the following procedures most likely would be included as part of an auditor's test of controls?
A.
B.
C.
D.
7.  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.
8.  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.
9.  The three standards of fieldwork are concerned with:
A.
B.
C.
D.
10.  In the context of an audit of internal controls, the auditor must document all of the following except...
A.
B.
C.
D.
11.  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.
12.  The main difference between SAS and AU is:
A.
B.
C.
D.
13.  The PCAOB's definition of internal control over financial reporting specifically mentions all of the following control activities, except...
A.
B.
C.
D.
14.  Management's written representations concerning internal control are:
A.
B.
C.
D.
15.  A modification of the standard report is required for all of the following conditions, except:
A.
B.
C.
D.
16.  The three general standards are concerned with:
A.
B.
C.
D.
17.  The permanent audit file usually includes:
A.
B.
C.
D.
18.  All of the following are inherent risk factors that are pervasive to the financial statements except...
A.
B.
C.
D.
19.  The five step process in the audit of ICFR includes...
A.
B.
C.
D.
20.  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.
21.  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.
22.  In correct order, general types of audit tests include:
A.
B.
C.
D.
23.  An independent auditor might consider the procedures performed by the internal auditors because...
A.
B.
C.
D.
24.  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.
25.  In the context of agency theory, information asymmetry refers to the idea that...
A.
B.
C.
D.
26.  An "integrated audit" as stated in Section 404 of the Sarbanes-Oxley Act means...
A.
B.
C.
D.
27.  Of the following, the most reliable type of evidence typically is...
A.
B.
C.
D.
28.  All of the following represent an increased opportunity to commit fraud except:
A.
B.
C.
D.
29.  A primary purpose of internal controls is to...
A.
B.
C.
D.
30.  Vouching is used primarily to test which of the following assertions about classes of transaction?
A.
B.
C.
D.
31.  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.
32.  Tolerable misstatements is...
A.
B.
C.
D.
33.  The risk of material misstatement includes which of the following:
A.
B.
C.
D.
34.  Which of the following is not a typical analytical procedure?
A.
B.
C.
D.
35.  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.
36.  Which of the following is false?
A.
B.
C.
D.
37.  Due professional care requires...
A.
B.
C.
D.
38.  Prior to issuing a report on internal controls over financial reporting, an auditor is required to:
A.
B.
C.
D.
39.  Section 404 of the Sarbanes-Oxley Act requires the auditor to provide which of the following:
A.
B.
C.
D.
40.  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.
41.  Internal control consists of six components.
A.
B.
42.  Which of the following statements is not true with respect to assurance, attest, and audit services?
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.  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.
45.  Which assertions may be tested for the "transactions and events" category of management assertions?
A.
B.
C.
D.
46.  Proper segregation of functional responsibilities in an effective system of internal control calls for separation of the functions of...
A.
B.
C.
D.
47.  Which of the following tends to be most predictable for purposes of analytical procedures applied as substantive procedures?
A.
B.
C.
D.
48.  Which of the following presumptions is correct about the reliability of audit evidence?
A.
B.
C.
D.
49.  Tracing is used primarily to test which of the following assertions about classes of transactions?
A.
B.
C.
D.
50.  The auditor can respond to an increased risk of fraud by doing all of the following except...
A.
B.
C.
D.
51.  Which of the following types of documentary evidence should the auditor consider to be the most reliable?
A.
B.
C.
D.
52.  Which of the following is not a misstatement of the financial statements?
A.
B.
C.
D.
53.  Which of the following statements about the study of accounting is NOT true?
A.
B.
C.
D.
54.  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.
55.  Audit documentation prepared on audits of publicly held clients is the property of the...
A.
B.
C.
D.
56.  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.
57.  Which of the following is not a primary objective of internal control as established by COSO?
A.
B.
C.
D.
58.  Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit?
A.
B.
C.
D.
59.  An example of audit evidence with a medium level of reliability is:
A.
B.
C.
D.
60.  Auditors are most likely to gather audit evidence solely using substantive procedures...
A.
B.
C.
D.
61.  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.
62.  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.
63.  All of the following refer to an internal auditor's competence except...
A.
B.
C.
D.
64.  The documentation of an auditor's understanding of internal controls...
A.
B.
C.
D.
65.  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.
66.  Which of the following statements best describes a relationship between sample size and other elements of auditing?
A.
B.
C.
D.
67.  With regard to detecting fraud, auditing standards require auditors to...
A.
B.
C.
D.
68.  The auditor must understand internal control before assessing inherent risk.
A.
B.
69.  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.
70.  A substantive strategy differs from a reliance strategy in that a substantive strategy includes...
A.
B.
C.
D.
71.  Under the Sarbanes-Oxley Act, the audit committee of a public company has the following requirement(s):
A.
B.
C.
D.
72.  A dual-purpose test...
A.
B.
C.
D.
73.  Examples of company-level controls include:
A.
B.
C.
D.
74.  A confirmation is used to:
A.
B.
C.
D.
75.  Which of the following best describes the concept of audit risk?
A.
B.
C.
D.
76.  The basic purpose of a financial statement audit is to...
A.
B.
C.
D.
77.  Which of the following statements is false?
A.
B.
C.
D.
78.  The current audit file usually includes:
A.
B.
C.
D.
79.  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.
80.  Which of the following is not an audit procedure that is commonly used in performing tests of controls?
A.
B.
C.
D.
81.  The AICPA's Statements on Auditing Standards can be described as...
A.
B.
C.
D.
82.  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.
83.  In an audit of financial statements in accordance with generally accepted auditing standards, an auditor is required to...
A.
B.
C.
D.
84.  Analytical procedures are...
A.
B.
C.
D.
85.  An entity's control activities include all of the following except...
A.
B.
C.
D.
86.  Of the following, which is the least persuasive type of audit evidence?
A.
B.
C.
D.
87.  Auditors are most likely to use the most rigorous audit procedures to examine
A.
B.
C.
D.
88.  An auditor obtains knowledge about a new client's business and its industry in order to...
A.
B.
C.
D.
89.  In the context of an audit of financial statements, substantive procedures are audit procedures that...
A.
B.
C.
D.
90.  Which of the following is the most important qualitative factor that auditors should consider when making materiality judgments?
A.
B.
C.
D.
91.  Which of the following is NOT a requirement of the Sarbanes-Oxley Act?
A.
B.
C.
D.
92.  What is the general character of the work conducted in performing a forensic audit for a company?
A.
B.
C.
D.
93.  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.
94.  The auditor is most likely to presume that a high risk of a fraud exists if...
A.
B.
C.
D.
95.  Which of the following types of audit evidence is the most persuasive?
A.
B.
C.
D.
96.  Which of the following is not a concept that is included in the scope paragraph of the auditor's report?
A.
B.
C.
D.
97.  Why do auditors generally use a sampling approach to evidence gathering?
A.
B.
C.
D.
98.  Reports on service organizations typically...
A.
B.
C.
D.
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