Auditing - Final - Multiple Choice

53 Questions  I  By Dodonutt
Final Exam - Multiple Choice Review

  
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1.  In auditing accounts payable, an auditor's procedures most likely will focus primarily on management's assertion of
A.
B.
C.
D.
2.  Budd, the purchasing agent of 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.
3.  An example of an event occurring in the period of the auditor's field work subsequent to the end of the year being audited that normally will not require disclosure in the financial statements or auditor's report is
A.
B.
C.
D.
4.  Kar has audited the financial statements of Lurch Corporation for the year ended December 31, 2009.  Karr's field work was completed on February 27, 2010; Karr's auditor's report was dated February 28, 2010, and was received by the management of Lurch on March 5, 2010.  On April 4, 2010, the management of Lurch asked that karr approve inclusion of this report in their anual report to stockholders, which will included unaudited financial statements for the first quarter ended March 31, 2010.  Karr approved the inclusion of the auditor's report in the annual report to stockholders.  Under the circumstances, Karr is responsible for inquiring as to subsequent events occuring through
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B.
C.
D.
5.  Which of the following best describes the independent auditor's approach to obtaining satisfaction concerning depreciation expense in the income statement?
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B.
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D.
6.  When a contingency is resolved subsequent to the issuance of audited financial statements, which correctly contained disclosure of the contingency in the footnotes base on information available at the date of issuance, the auditor should
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D.
7.  Which of the following best describes the auditor's reporting responsibility concerning information accompanying the basic financial statements in the auditor-submitted document?
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B.
C.
D.
8.  When evaluating inventory controls with respect to segregation of duties, a CPA wil be lest likely to
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D.
9.  Which of the following controls most likely will justify a reduced assessed level of control risk concerning plant and equipment acquisitions
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B.
C.
D.
10.  When obtaining evidence regarding litigation against a client, the CPA will be lest interested in determining
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D.
11.  Which of the following is not an internal control deficiency related to factory equipment?
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D.
12.  Which of the following comparisons will be most useful to an auditor in aduting an entity's income and expense accounts?
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B.
C.
D.
13.  The audit step mot likely to receal the existence of contingent liabilities is
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D.
14.  After a CPA has determined that accounts receivable have increased as a result of slow collections in a "tight money" environment, the CPA will be likely to
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D.
15.  Subsequent events for reporting purposes are defined as events that occur subsequent to the
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D.
16.  Mr. Murray decides to use stratified sampling.  The reason for using stratified sampling rather than unrestricted random sampling is to
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D.
17.  Which of the follwoing procedures will best detect the theft of valuable items from an inventory that consists of hundreds of different items selling for $1 to $10 and a few items selling for hundreds of dollars?
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B.
C.
D.
18.  In testing for unrecorded retirements of equipment, an auditor most likely will
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D.
19.  In an audit of financial statements, a CPA wil generally find stratified sampling techniques to be most applicable to
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C.
D.
20.  Analysis of which account is least likely to reveal evidence related to unrecorded retirement of equipment?
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D.
21.  For control purposes, the quantities of materials ordered may be omitted from the copy of the purchse order that is
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22.  Which of the following is an internal control that will prevent paid cash disbursement documents from being presented for payment a second time?
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23.  Ansman, CPA, has been requested by a client, Rainco Corp., to prepare additional information accompanying the basic financial statements for this year's audit.  In issuing the additional information, Ansman must be certain to
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B.
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D.
24.  Which of the following sample planning factors will influence the sample size for a test of details of balances for a specific account?EXPECTED AMOUNT                          MEASURE OFOF MISSTATEMENTS                         TOLERABLE MISSTATEMENT
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B.
C.
D.
25.  Which of the following analytical procedures should be applied to the income statement?
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D.
26.  An auditor uses audit sampling to perform tests of controls in the acquisition and payment cycle.  Those tests indicate that the related controls are operating effectively.  The auditor plans to use audit sampling to perform tests of details of balances for accounts payable.  The auditor's acceptable risk of incorrect acceptance (ARIA) for the test of details of balances for accounts payable will most likely be
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D.
27.  The date of the management representation letter should coincide with the
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D.
28.  In confirming a client's accounts receivable in prior years, an auditor found that there were many differences between the recorded accounts balances and the confirmation responses.  These differences, which were not misstatements, required substantial time to resolve.  In defining the sampling unit for the current year's audit, the auditor will most likely choose
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D.
29.  An inventory turnover analysis is useful to the auditor because it may detect
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D.
30.  In a company with materials and supplies that include a great number of items, a fundamental deficiency in control requirements will be indicated if
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B.
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D.
31.  The return of a positive confirmation of accounts receivable without an exception attests to the
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D.
32.  When an auditor tests a client's cost accounting reords, the auditor's tests are primarily designed to determine that
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D.
33.  Management's refusal to furnish a written representation on a matter that the auditor considers essential constitutes
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34.  With respect to an internal control measure that wil ensure accountability for fixed asset retirements, management should implement controls that include
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D.
35.  An auditor will be most likely to learn of slo-moving inventory through
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D.
36.  The controler of Excello Manufacturing, Inc., wants to use analytical procedures to identify the possible existence of idle equipment or the possibility that equipment has been disposed of without having been written off.  Which of the following ratios will best accomplish this objective?
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B.
C.
D.
37.  In connection with the review of key ratios, the CPA notes that Pyzi had accounts receivable equal to 30 days' sales at December 31, 2008, and to 4 days' sales at December 31, 2009.  Assuming that there have been no changes in economic conditions, clientele, or sales mix, this change most likely will indicate
A.
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C.
D.
38.  The negative form of accounts receivable confirmation request is useful except when
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39.  Before expresing an opinion concerning the audit of income and expenses, the auditor will best proceed with the audit of ithe income statement by
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40.  The accuracy of perpetual inventory master files may be established, in part, by comparing perpetual inventory records with
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D.
41.  A CPA auditing inventory may appropriately apply attributes sampling to estimate the
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D.
42.  Which of the following audit procedures is best for identifying unrecorded trade accounts payable?
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D.
43.  Which of the following audit procedures will best uncover an understatement of sales and accounts receivables?
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C.
D.
44.  Ansman, CPA, has been requested by a client, Rainco Corp., to prepare information in addition to the basic financial statements for this year's audit.  Which of the following is the best reason for Rainco's requesting the additional information?
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B.
C.
D.
45.  In connection with the audit of the prepaid insurance account, which of the following procedures is usually not performed by the auditor?
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D.
46.  From prior experience, a CPA is aware that the accounts receivable trial balance contains a few unusually large balances.  In using statistical sampling, the CPA's best course of action is to
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D.
47.  When evaluating the adequay of the allowance for uncollectible accounts, an auditor recviews the entity's aging of receivables to support management's balance-related assertion of
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D.
48.  A client erroneously recorded a large purchse twice.  Which of the following internal control measures would be most likely to detect this error in a timely and efficient manner?
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B.
C.
D.
49.  Which of the follwing audit procedures is least likely to detect an unrecorded liability?
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B.
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D.
50.  When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely is
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C.
D.
51.  As a result of analytical procedures, the auditor determines that the gross profit percentage has declined from 30% in the preceding year to 20% in the current year.  The auditor should:
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D.
52.  A principal purpose of a letter of representation from management is to
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53.  A number of factors influence the sample size for a substantive test of details of an account balance.  All other things being equal, which of the following would lead to a larger sample size?
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B.
C.
D.
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