Audit Chs. 1-7

98 Questions  I  By Pimen103

  
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1.  The PCAOB's definition of internal control over financial reporting specifically mentions all of the following control activities, except...
A.
B.
C.
D.
2.  With regard to detecting fraud, auditing standards require auditors to...
A.
B.
C.
D.
3.  Vouching is used primarily to test which of the following assertions about classes of transaction?
A.
B.
C.
D.
4.  The three general standards are concerned with:
A.
B.
C.
D.
5.  An auditor obtains knowledge about a new client's business and its industry in order to...
A.
B.
C.
D.
6.  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.
7.  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.
8.  The three standards of fieldwork are concerned with:
A.
B.
C.
D.
9.  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.
10.  All of the following refer to an internal auditor's competence except...
A.
B.
C.
D.
11.  Tolerable misstatements is...
A.
B.
C.
D.
12.  An example of audit evidence with a medium level of reliability is:
A.
B.
C.
D.
13.  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.
14.  In the context of agency theory, information asymmetry refers to the idea that...
A.
B.
C.
D.
15.  A substantive strategy differs from a reliance strategy in that a substantive strategy includes...
A.
B.
C.
D.
16.  Examples of company-level controls include:
A.
B.
C.
D.
17.  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.
18.  Reports on service organizations typically...
A.
B.
C.
D.
19.  All of the following are inherent risk factors that are pervasive to the financial statements except...
A.
B.
C.
D.
20.  Which of the following tends to be most predictable for purposes of analytical procedures applied as substantive procedures?
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.  Auditors are most likely to use the most rigorous audit procedures to examine
A.
B.
C.
D.
23.  Which of the following presumptions is correct about the reliability of audit evidence?
A.
B.
C.
D.
24.  An "integrated audit" as stated in Section 404 of the Sarbanes-Oxley Act means...
A.
B.
C.
D.
25.  Section 404 of the Sarbanes-Oxley Act requires the auditor to provide which of the following:
A.
B.
C.
D.
26.  Which of the following statements best describes a relationship between sample size and other elements of auditing?
A.
B.
C.
D.
27.  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.
28.  Which of the following is not a concept that is included in the scope paragraph of the auditor's report?
A.
B.
C.
D.
29.  All of the following represent an increased opportunity to commit fraud except:
A.
B.
C.
D.
30.  An entity's control activities include all of the following except...
A.
B.
C.
D.
31.  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.
32.  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.
33.  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.
34.  Due professional care requires...
A.
B.
C.
D.
35.  Of the following, the most reliable type of evidence typically is...
A.
B.
C.
D.
36.  The five step process in the audit of ICFR includes...
A.
B.
C.
D.
37.  A primary purpose of internal controls is to...
A.
B.
C.
D.
38.  The permanent audit file usually includes:
A.
B.
C.
D.
39.  Which of the following is not a misstatement of the financial statements?
A.
B.
C.
D.
40.  A dual-purpose test...
A.
B.
C.
D.
41.  Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit?
A.
B.
C.
D.
42.  Which of the following is the most important qualitative factor that auditors should consider when making materiality judgments?
A.
B.
C.
D.
43.  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.
44.  In an audit of financial statements in accordance with generally accepted auditing standards, an auditor is required to...
A.
B.
C.
D.
45.  Of the following, which is the least persuasive type of audit evidence?
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.  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.
48.  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.
49.  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.
50.  Internal control consists of six components.
A.
B.
51.  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.
52.  The auditor can respond to an increased risk of fraud by doing all of the following except...
A.
B.
C.
D.
53.  Which of the following is NOT a requirement of the Sarbanes-Oxley Act?
A.
B.
C.
D.
54.  Which of the following is not a primary objective of internal control as established by COSO?
A.
B.
C.
D.
55.  Which of the following procedures most likely would be included as part of an auditor's test of controls?
A.
B.
C.
D.
56.  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.
57.  Which of the following statements about the study of accounting is NOT true?
A.
B.
C.
D.
58.  Under the Sarbanes-Oxley Act, the audit committee of a public company has the following requirement(s):
A.
B.
C.
D.
59.  In the context of an audit of financial statements, substantive procedures are audit procedures that...
A.
B.
C.
D.
60.  The risk of material misstatement includes which of the following:
A.
B.
C.
D.
61.  In the context of an audit of internal controls, the auditor must document all of the following except...
A.
B.
C.
D.
62.  Which of the following statements is not true with respect to assurance, attest, and audit services?
A.
B.
C.
D.
63.  Which of the following types of audit evidence is the most persuasive?
A.
B.
C.
D.
64.  Why do auditors generally use a sampling approach to evidence gathering?
A.
B.
C.
D.
65.  The main difference between SAS and AU is:
A.
B.
C.
D.
66.  The basic purpose of a financial statement audit is to...
A.
B.
C.
D.
67.  Prior to issuing a report on internal controls over financial reporting, an auditor is required to:
A.
B.
C.
D.
68.  The auditor is most likely to presume that a high risk of a fraud exists if...
A.
B.
C.
D.
69.  Audit documentation prepared on audits of publicly held clients is the property of the...
A.
B.
C.
D.
70.  Which of the following is correct concerning required auditor communications about fraud?
A.
B.
C.
D.
71.  What is the general character of the work conducted in performing a forensic audit for a company?
A.
B.
C.
D.
72.  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.
73.  The AICPA's Statements on Auditing Standards can be described as...
A.
B.
C.
D.
74.  Which of the following is not an audit procedure that is commonly used in performing tests of controls?
A.
B.
C.
D.
75.  A confirmation is used to:
A.
B.
C.
D.
76.  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.
77.  Which of the following best describes the concept of audit risk?
A.
B.
C.
D.
78.  Which of the following is not a typical analytical procedure?
A.
B.
C.
D.
79.  Auditors are most likely to gather audit evidence solely using substantive procedures...
A.
B.
C.
D.
80.  A modification of the standard report is required for all of the following conditions, except:
A.
B.
C.
D.
81.  The achieved (actual) level of audit risk...
A.
B.
C.
D.
82.  The auditor must understand internal control before assessing inherent risk.
A.
B.
83.  An independent auditor might consider the procedures performed by the internal auditors because...
A.
B.
C.
D.
84.  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.
85.  Proper segregation of functional responsibilities in an effective system of internal control calls for separation of the functions of...
A.
B.
C.
D.
86.  The current audit file usually includes:
A.
B.
C.
D.
87.  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.
88.  Which of the following statements is false?
A.
B.
C.
D.
89.  In correct order, general types of audit tests include:
A.
B.
C.
D.
90.  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.
91.  The documentation of an auditor's understanding of internal controls...
A.
B.
C.
D.
92.  Management's written representations concerning internal control are:
A.
B.
C.
D.
93.  Analytical procedures are...
A.
B.
C.
D.
94.  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.
95.  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.
96.  Which of the following is false?
A.
B.
C.
D.
97.  Which assertions may be tested for the "transactions and events" category of management assertions?
A.
B.
C.
D.