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Audit Final

150 Questions  I  By Jprohoroff
Finance Quizzes & Trivia

  
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1.  Which of the following statements about the study of auditing is NOT true?
A.
B.
C.
D.
2.  The basic purpose of a financial statement audit is to
A.
B.
C.
D.
3.  Which of the following best describes the concept of audit risk?
A.
B.
C.
D.
4.  Which of the following best describes the fundamental, underlying reason for why there us demand for an independent auditor to report on financial statements?
A.
B.
C.
D.
5.  Auditors are most likely to use the most rigorous audit procedures to examine
A.
B.
C.
D.
6.  For publicly-held companies, the external auditor is required to audit which of the following:
A.
B.
C.
D.
7.  When obtaining an understanding of the entity and its environment, the auditor should obtain an understanding of internal controls primarily to:
A.
B.
C.
D.
8.  Which one of the following statements best describes the concept of materiality?
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.  An auditor would issue an adverse opinion if
A.
B.
C.
D.
11.  The primary audit context with which an auditor is concerned is the client's industry or business
A.
B.
12.  Which of the following is NOT a requirement of the Sarbanes-Oxley Act?
A.
B.
C.
D.
13.  A series of business and related auditing failures led to the passage of the Sarbanes-Oxley Act (2002)
A.
B.
14.  Which is not an attribute of an external auditor?
A.
B.
C.
D.
15.  The three standards of fieldwork are concerned with:
A.
B.
C.
D.
16.  Which of the following best describes the role of corporate governance?
A.
B.
C.
D.
17.  PCAOB auditing standards must be followed on all financial statement audits performed in the US
A.
B.
18.  A financial statement audit is generally organized based on the five basic business processes or cycles
A.
B.
19.  Which assertions may be tested for the 'presentation and disclosure' categury of management
A.
B.
C.
D.
20.  Which assertions may be tested for the 'account balances' category of management assertions?
A.
B.
C.
D.
21.  Which assertions may be tested for the 'transactions and events' category of management assertions?
A.
B.
C.
D.
22.  The audit committee consists of:
A.
B.
C.
D.
23.  The primary responsibility for the adequacy of disclosures in the financial statements of a publicly held company rests with the
A.
B.
C.
D.
24.  With regard to detecting fraud, auditing standards require auditors to
A.
B.
C.
D.
25.  An internal auditor is likely to be more concerned with ______ than the external auditor
A.
B.
C.
D.
26.  Which of the following statements regarding the PCAOB is incorrect?
A.
B.
C.
D.
27.  Inherent risk is the susceptibility of an assertion to material misstatement, assuming no related controls
A.
B.
28.  Materiality is based on a quantitative analysis of the financial statements only
A.
B.
29.  Which of the following is a know misstatement?
A.
B.
C.
D.
30.  Al of the following represent an increased opportunity to commit fraud except:
A.
B.
C.
D.
31.  The auditor is most likely to presume that a high risk of a fraud exists if
A.
B.
C.
D.
32.  Under statements on auditing standards, which of the following would be classified as an error?
A.
B.
C.
D.
33.  Which of the following characteristics most likely would heighten an auditor's concern about the risk of intentional manipulation of financial statements?
A.
B.
C.
D.
34.  Which of the following is not a qualitative factor that may affect an auditor's establishment of materiality?
A.
B.
C.
D.
35.  Which of the following is not a concern as to whether a misstatement os qualitatively material?
A.
B.
C.
D.
36.  An auditor knows that an audit client operating in an industry in which common stock is valued based on the price-earnings ratio will soon make an initial public offering.  all the the following are true except:
A.
B.
C.
D.
37.  In designing written audit programs, an auditor should plan specific audit procedures to test
A.
B.
C.
D.
38.  Management assertions fall into four main categories
A.
B.
39.  The classification assertion refers to transactions and events being recorded in the correct accounting period
A.
B.
40.  You are auditing a manufacturing company which has a large production facility.  some of the production equipment is held through lease agreements. which of the following is the account balance assertion you would be most concerned about?
A.
B.
C.
D.
41.  A confirmation is used to:
A.
B.
C.
D.
42.  In determining whether transactions have been recorded, the direction of the audit testing should start from the
A.
B.
C.
D.
43.  Which of the following statements concerning audit evidence is correct?
A.
B.
C.
D.
44.  Which of the following is the least persuasive documentation in support of an auditor's opinion?
A.
B.
C.
D.
45.  Which of the following presumptions does not relate to the appropriateness of audit evidence?
A.
B.
C.
D.
46.  Which of the following is an essential factor in evaluating the sufficiency of evidence? the evidence must
A.
B.
C.
D.
47.  Which set of assertions is tested when, during the completion of the audit, the audit partner conducts a final review of the format of the entity's balance sheet?
A.
B.
C.
D.
48.  The third general auditing standard requires that due professional care be exercised in the performance of the examination and the preparation of the report.  due professional care deals with what is done by the independent auditor and how will it is done.  for example, due care in the matter of audit documents requires that audit documents'
A.
B.
C.
D.
49.  The permanent (continuing) file of an auditor's working papers most likely would include copies of the
A.
B.
C.
D.
50.  Audit documentation prepared on audits of publicly held clients is the property of the
A.
B.
C.
D.
51.  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.
52.  Which of the following matters generally is included in an auditor's engagement latter?
A.
B.
C.
D.
53.  In order to properly preplan the audit, the auditor must determine the engagement team requirements and ensure the independence of the audit team ad audit firm
A.
B.
54.  The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the
A.
B.
C.
D.
55.  An independent auditor finds that Holdaway Corporation occupies office space, at no charge, in an office building owned by a shareholder. This finding likely indicates the existence of
A.
B.
C.
D.
56.  A dual-purpose test
A.
B.
C.
D.
57.  Analytical procedures are
A.
B.
C.
D.
58.  Which of the following tends to be most predictable for purposes of analytical procedures applied as substantive procedures?
A.
B.
C.
D.
59.  In correct order, general types of audit tests include:
A.
B.
C.
D.
60.  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
A.
B.
C.
D.
61.  As a result of analytical procedures conducted during the planning phase, the independent auditor determines that the gross profit percentage has declined from 30% in the preceding year to 20% in the current year.  The auditor should
A.
B.
C.
D.
62.  An independent auditor might consider the procedures performed by the internal auditors because
A.
B.
C.
D.
63.  To emphasize auditor independence from management, publicly traded corporations are requires to
A.
B.
C.
D.
64.  Which of the following situations would most likely require special audit planning?
A.
B.
C.
D.
65.  An auditor obtains knowledge about a new client's business and its industry in order to
A.
B.
C.
D.
66.  An auditor who discovers that a client's employees paid small bribed to municipal officials most likely would withdraw from the engagement if
A.
B.
C.
D.
67.  In obtaining an understanding of an entity's internal control in a financial statement audit of a non-public company, an auditor is not obligated to
A.
B.
C.
D.
68.  To obtain evidential matter about control risk, an auditor selects tests from a variety of techniques including
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.  Management's attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity's control enviornment when
A.
B.
C.
D.
71.  Internal control consists of six components
A.
B.
72.  The risk assessment component of internal controls refers to
A.
B.
C.
D.
73.  A substantive strategy differs from a reliance strategy in that a substantive strategy includes
A.
B.
C.
D.
74.  A substantive strategy is used when control risk has been set at the maximum level
A.
B.
75.  Assessing control risk at below the maximum most likely would invlove:
A.
B.
C.
D.
76.  In an audit of financial statements in accordance with generally accepted auditing standards, an auditor is required to
A.
B.
C.
D.
77.  An auditor would most likely be concerned with internal control policies and procedures that provide reasonable assurance aboout the
A.
B.
C.
D.
78.  Management philosophy and operating style most likely would have a significant influence on an entity's control environment when
A.
B.
C.
D.
79.  Proper monitoring within an internal control framework includes all of the following except
A.
B.
C.
D.
80.  Proper segregation of functional responsibilities in an effective system of internal control calls for separation of the functions of
A.
B.
C.
D.
81.  Factors that the auditor should consider as increasing the effectiveness of the audit committee include all of the following except whether
A.
B.
C.
D.
82.  The documentation of an auditor's understanding of internal controls
A.
B.
C.
D.
83.  Reports on service organizations typically
A.
B.
C.
D.
84.  Based on PCAOB guidelines, the audit of ICFR and financial statements audit should be conduced as an 'integrated audit'
A.
B.
85.  An 'integrated audit' as stated on section 404 of the sarbanes-oxley act means
A.
B.
C.
D.
86.  Setion 404 of the sarbanes-oxley act requires the auditor to provide which of the following
A.
B.
C.
D.
87.  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.
88.  The main goal of auditing internal control is:
A.
B.
C.
D.
89.  The five step process in the audit of ICFR includes
A.
B.
C.
D.
90.  Examples of company-level controls include:
A.
B.
C.
D.
91.  Public reporting on the effectiveness of internal control over financial reporting, as required by the sarbanes-oxley act, includes:
A.
B.
C.
D.
92.  Prior ti issuing a report on internal controls over financial reporting, an auditor is required to:
A.
B.
C.
D.
93.  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.
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.  Management documentation should include all of the following except:
A.
B.
C.
D.
96.  Which of the following is not a primary objective of internal control as established by COSO?
A.
B.
C.
D.
97.  In determining the extent to which the auditor may use the work of other in the audit of ICFR, the auditor should do all of the following expect
A.
B.
C.
D.
98.  Which of the following is the least likely to represent a material weakness in internal control for Flynt Corporation?
A.
B.
C.
D.
99.  S&H Accounting has just performed an audit of Bob's Bikes.  S&H was unable to obtain a written representation from management from management about internal control.  Which of the following is true?
A.
B.
C.
D.
100.  An 'integrated audit'
A.
B.
C.
D.
101.  Which of the following is not an inherent risk factor for the revenue process?
A.
B.
C.
D.
102.  An example of a contingent liability is an income tax dispute
A.
B.
103.  Cooper, CPA is auditing the financial statements of a small rural municipality.  the receivable balances represent residents' delinquent real estate taxes.  internal control at the municipality is weak.  to determine the existence of the accounts receivable balances at the balance sheet date, Cooper would most likely
A.
B.
C.
D.
104.  A disclosure of a contingent liability in the footnotes is made rather than adjusting the financial statement accounts when:
A.
B.
C.
D.
105.  Which of the following most likely would give the most assurance concerning the valuation assertion for accounts receivable?
A.
B.
C.
D.
106.  Which of the following is not an audit procedure that the independent auditor would perform with respect to litigation, claims and assessments?
A.
B.
C.
D.
107.  Auditors sometimes use ratios as audit evidence.  for example, an unexplained increase in the ratio of gross profit to sales may suggest which of the following possibilities?q
A.
B.
C.
D.
108.  An example of a Type 1 event or condition is the settlement of a lawsuit after the balance sheet date for an amount different from the amount recorded in the year-end financial statements
A.
B.
109.  Tests designed to detect credit sales made after the end of the year that have been recorded in the current year provide assurance about management's assertion
A.
B.
C.
D.
110.  A type 2 subsequent event usually requires:
A.
B.
C.
D.
111.  Audit documents often include a client-prepared aged trial balance of accounts receivable as of the balance sheet date.  this aging is used by the auditor to
A.
B.
C.
D.
112.  If an auditor dates the auditor's report on financial statements for the year ended dec 31 2009, as of feb 10 2010, except for note j, as to which the date is march 3 2010, the auditor is acknowledging responsibility to actively search for and ensure proper handling by management of
A.
B.
C.
D.
113.  Customers having substantial year-end past due balances fail to reply after second request forms have been mailed directly to them.  which of the following is the most appropriate audit procedure?
A.
B.
C.
D.
114.  Which of the following auditing procedures is ordinarily performed last
A.
B.
C.
D.
115.  Which of the following is the best argument against the use of negative accounts receivable confirmations?
A.
B.
C.
D.
116.  Which of the following is not an issue related to the valuation of accounts receivable?
A.
B.
C.
D.
117.  'there are no violations or possible violations of laws or regulations whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency' the foregoing passage most likely is from a (an)
A.
B.
C.
D.
118.  An auditor's purpose in reviewing credit rating of customers with delinquent accounts receivable most likely is to obtain evidence concerning management's assertions about
A.
B.
C.
D.
119.  A client erroneously recorded a large purchase twice.  which of the following internal controls would be most likely to detect this error in a timely and efficient manner?
A.
B.
C.
D.
120.  Which of the following items should an auditor communicate to those charges with governance in a publicly-held entity?
A.
B.
C.
D.
121.  Which of the following accounts is not affected by cash disbursement transactions?
A.
B.
C.
D.
122.  Budd, the purchasing agent for lake hardware wholesalers, has a relative who owns a retail hardware store.  budd arranged for hardware to be delivered by manufacturers to the retail store on a COD basis, thereby enabling his relative to buy at lake's wholesale prices.  budd was probably able to accomplish this because of lake's poor internal control over
A.
B.
C.
D.
123.  In the course of the examination of financial statements for the purpose of expressing an opinion, the auditor normally prepares a schedule of unadjusted differences for which the auditor did not propose adjustments when they were discovered.  what is the primary purpose of this schedule?
A.
B.
C.
D.
124.  The occurrence assertion for accounts payable includes
A.
B.
C.
D.
125.  The cutoff assertion for accounts payable includes
A.
B.
C.
D.
126.  Which of the following parties is responsible for the fairness of the representations made in financial statements?
A.
B.
C.
D.
127.  For effective internal control, the accounts payable department should compare the information on each vendor's invoice with the
A.
B.
C.
D.
128.  An auditor wishes to perform tests of control on a client's cash disbursements procedures.  if the control activities leave no audit trail of documentary evidence, the auditor most likely will test the procedures by
A.
B.
C.
D.
129.  Which of the following situations will not result in modification of the auditor's report because of a scope limitation?
A.
B.
C.
D.
130.  Analytical procedures can be used to examine the reasonableness of accounts payable and accrued expenses
A.
B.
131.  Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities?
A.
B.
C.
D.
132.  If the auditor believes that there us minimal likelihood that resolution of an uncertainty will have a material effect on the financial statements, the auditor would issue a(n)
A.
B.
C.
D.
133.  Tests designed to detect purchases made before the end of the year that have been recorded in the subsequent year most likely would provide assurance about management's assertion of
A.
B.
C.
D.
134.  A predecessor auditor should do the following before reissuing a report on statements presented on a comparative basis"
A.
B.
C.
D.
135.  Auditors are most likely to ensure that no production activity is scheduled prior to
A.
B.
C.
D.
136.  Inherent risk is typically assessed at a low to moderate level for inventory due to the nature of the asset
A.
B.
137.  In connection with the examination of the consolidated financial statements of molt industries, frazier, cpa, plans to refer to another cpa's examination of the financial statements of a subsidiary company.  under these sircumstances, frazier's report must disclose
A.
B.
C.
D.
138.  Which of the following is a plausible explanation for a large increase in the number of days outstanding in inventory?
A.
B.
C.
D.
139.  In a manufacturing company, which one of the following audit procedures would give the least assurance about the valuation of inventory at the audit date?
A.
B.
C.
D.
140.  Which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity's ability to continue as a going concern
A.
B.
C.
D.
141.  Which one of the following is not one of the independent auditor's objectives regarding the examination of inventories?
A.
B.
C.
D.
142.  A client's physical count of inventories was higher than the inventory quantities per the perpetual records.  this situation could be the result of the failure to record
A.
B.
C.
D.
143.  An auditor includes a separate paragraph in an otherwise unmodified report to emphasize that the entity being reported on had significant transactions with related parties.  the inclusion of this separate paragraph
A.
B.
C.
D.
144.  An auditor most likely would make inquiries of production and sales personnel concerning possible obsolete or slow-moving inventory to support management's financial statement assertion of
A.
B.
C.
D.
145.  Inventory should be valued using the lower-of-cost-or-market rule
A.
B.
146.  An auditor would issue an adverse opinion if
A.
B.
C.
D.
147.  Which of the following best describes the occurrence assertion for inventory?
A.
B.
C.
D.
148.  The audit of the year-end physical inventories should include steps to verify that the client's purchases and sales cutoffs were adequate.  the audit steps should be designed to detect whether merchandise included in the physical count at year-end was not recorded as a
A.
B.
C.
D.
149.  Other comprehensive bases of accounting (ocboa) include all of the following except
A.
B.
C.
D.
150.  An audit may be unable to express an unqualified opinion if an immaterial departure from gaap is present in the financial statements
A.
B.
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