Audit Final Exam 2022 Solved Correctly. Garded A, latest updates

Document Content and Description Below

Audit Final Exam 2022 Solved Correctly Which of the following is not one of the four decisions about what evidence to gather and how much of it to accumulate? A) Which audit procedures to use B) W... hich accounts must agree to the general ledger C) When to perform the procedures D) What sample size to select for a given procedure - Ans-B Which of the following is not a characteristic of the reliability of evidence? A) Effectiveness of client internal controls B) Education of auditor C) Independence of information provider D) Timeliness - Ans-B The auditor must gather sufficient and appropriate evidence during the course of the audit. Sufficient evidence must: A) be well documented and cross-referenced in the audit documents. B) be based on sources that are external to company. C) provide evidence that prove or disprove an audit objective/assertion. D) be persuasive enough to enable the auditor to issue an audit report. - Ans-D Which of the following forms of evidence would be least persuasive in forming the auditor's opinion about marketable securities and other investments held by the company? A) Responses to auditor's questions by the president and controller regarding the investments account B) Correspondence with a stockbroker regarding the quantity of client's investments held in street name by the broker C) Minutes of the board of directors authorizing the purchase of stock as an investment D) The auditor's count of marketable securities - Ans-A Determine which of the following is most correct regarding the reliability of audit evidence. A) Information that is indirectly obtained from external sources is the most reliable audit evidence. B) Reliability of audit evidence is dependent upon the evidence being subjective. C) Reliability of evidence refers to the amount of evidence obtained. D) If internal controls are effective, evidence obtained is more reliable than when the controls are not effective. - Ans-D To be considered reliable evidence, confirmations must be controlled by: A) the client's employee responsible for accounts receivable. B) the external auditor. C) the client's internal audit department. D) the client's controller or CFO. - Ans-BA measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the: A) inherent risk. B) acceptable audit risk. C) statistical risk. D) financial risk. - Ans-B A measure of the auditor's assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client's internal control is called: A) control risk. B) acceptable audit risk. C) statistical risk. D) inherent risk. - Ans-D When dealing with audit risk: A) auditors accept some level of risk in performing the audit function. B) most risks that auditors encounter are relatively easy to measure. C) the audit risk model is only used for classes of transactions. D) most audit firms prefer to use a quantitative assessment for risk - Ans-A Initial audit planning involves four matters. Which of the following is not one of these? A) Develop an overall audit strategy. B) Request that bank balances be confirmed. C) Schedule engagement staff and audit specialists. D) Identify the client's reason for the audit. - Ans-B Most auditors assess inherent risk as high for related parties and related-party transactions because: A) of the unique classification of related-party transactions required on the balance sheet. B) of the lack of independence between the parties. C) of the unique classification of related-party transactions required on the income statement. D) it is required by generally accepted accounting principles. - Ans-B An official record of meetings of the board of directors and stockholders is included in the corporate: A) bylaws. B) charter. C) minutes. D) license. - Ans-C Analytical procedures:A) are not a type of audit evidence. B) are not required during the completion phase of the audit. C) performed during the planning phase of the audit are used as a substantive test in support of account balances. D) performed in the completion phase serve as a final review for material misstatements or financial problems. - Ans-D Which of the following statements is not correct with respect to analytical procedures? A) Auditing standards emphasize the need for auditors to develop and use expectations. B) Analytical procedures must be performed throughout the audit. C) Analytical procedures may be performed at any time during the audit. D) Analytical procedures use comparisons and relationships to assess whether account balances appear reasonable. - Ans-B Audit standards require the auditor to consider materiality early in the audit. Which statement(s) regarding preliminary materiality are true? I. Preliminary materiality may change during the engagement. II. Preliminary materiality is the maximum amount by which the auditor believes the financials could be misstated and still not affect the decisions of reasonable users. A) I only B) II only C) both I and II D) neither are true - Ans-C The measurement of the auditor's assessment of the likelihood that there are material misstatements due to error or fraud in a segment before considering the effectiveness of internal controls is defined as: A) audit risk. B) inherent risk. C) sampling risk. D) detection risk - Ans-B Auditors respond to risk primarily by: I. changing the extent of testing. II. changing the types of audit procedures. A) I only B) II only C) I and II D) neither I nor II - Ans-C Which of the following is not one of the three primary objectives of effective internal control? A) Reliability of financial reporting B) Efficiency and effectiveness of operations C) Compliance with laws and regulationsD) Assurance of elimination of business risk - Ans-D Internal controls: A) are implemented by and are the responsibility of the auditors. B) consist of policies and procedures designed to provide reasonable assurance that the company achieves its objectives and goals. C) guarantee that the company complies with all laws and regulations. D) only apply to SEC companies. - Ans-B The PCAOB places responsibility for the reliability of internal controls over the financial reporting process on: A) the company's board of directors. B) the audit committee of the board of directors. C) management. D) the CFO and the independent auditors. - Ans-C Which of the following statements is most correct with respect to separation of duties? A) A person who has temporary or permanent custody of an asset should account for that asset. B) Employees who authorize transactions should not have custody of related assets. C) Employees who open cash receipts should record the amounts in the subsidiary ledgers. D) Employees who authorize transactions should have recording responsibility for these - Ans-B Authorizations can be either general or specific. Which of the following is not an example of a general authorization? A) Automatic reorder points for raw materials inventory B) A sales manager's authorization for a sales return C) Credit limits for various classes of customers D) A sales price list for merchandise - Ans-B Which of the following is correct with respect to the design and use of business documents? A) The documents should be in paper format. B) Documents should be designed for a single purposes to avoid confusion in their use. C) Documents should be designed to be understandable only by those who use them. D) Documents should be prenumbered consecutively to facilitate control over missing documents. - Ans-D It is important for the CPA to consider the competence of the clients' personnel because their competence has a direct impact upon the: A) cost/benefit relationship of the system of internal control. B) achievement of the objectives of internal control. C) comparison of recorded accountability with assets. D) timing of the tests to be performed. - Ans-BWhen the auditor attempts to understand the operation of the accounting system by tracing a few transactions through the accounting system, the auditor is said to be: A) tracing. B) vouching. C) performing a walk-through. D) testing controls. - Ans-C Narratives, flowcharts, and internal control questionnaires are three common methods of: A) testing the internal controls. B) documenting the auditor's understanding of internal controls. C) designing the audit manual and procedures. D) documenting the auditor's understanding of a client's organizational structure. - AnsB How must significant deficiencies and material weaknesses be communicated to those charged with governance? A) Either oral or written communication is acceptable. B) Oral communication is required. C) Written communication is required. D) Written communication is required for material weaknesses, but oral communication is allowed for significant deficiencies. - Ans-C A system walkthrough is primarily used to help the auditor: A) test the ending account balances. B) test the details of transactions. C) determine whether internal controls are in place. D) determine whether the audit engagement should be accepted. - Ans-C When controls are deemed ineffective and assessed control risk is at the maximum for a private company, which of the following would normally be true? A) No emphasis is placed on the controls. B) Relatively little emphasis is placed on the controls. C) Moderate emphasis is placed on the controls. D) Heavy emphasis is placed on the controls. - Ans-A Which of the following ultimately determines the specific audit procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion? A) The audit program B) The auditor's judgment C) Generally accepted auditing standards D) The auditor's working papers - Ans-B Which of the following tests commonly occur together?A) Substantive tests of transactions and tests of controls B) Substantive tests of transactions and obtaining an understanding of internal controls C) Analytical procedures and tests of controls D) Tests of controls and tests of details of balances - Ans-A Presentation and disclosure related audit objectives would be performed in which phase of the audit process? A) Plan and design audit approach B) Perform audit tests for controls and transactions C) Perform analytical procedures and tests of balances D) Complete the audit and issue the audit report - Ans-D Analytical procedures must be performed in: A) the planning and test of control stages. B) conjunction with tests of transactions and tests of details of balances. C) the planning and completion stages. D) the planning, test of control, and completion stages. - Ans-C In order to promote audit efficiency the auditor considers cost in selecting audit tests to perform. Which of the following audit tests would be the most costly? A) Analytical procedures B) Risk assessment procedures C) Tests of controls D) Tests of details of balances - Ans-D Which of the following is generally not included in the "evidence mix"? A) Tests of controls B) Substantive tests of transactions C) Risk assessment procedures D) Tests of details of balances - Ans-C The document that details the specific audit procedures for each type of test is the: A) audit strategy. B) audit program. C) audit procedure. D) audit risk model. - Ans-B Which of the following is an account that is not affected by the sales and collection cycle? A) Cash B) Accounts receivable C) Allowance for doubtful accounts D) Accounts payable - Ans-D The auditor's objectives for the sales and cash collections activities when the client is primarily an e-commerce business as compared to a "bricks and mortar" business are:A) unchanged. B) expanded. C) mitigated. D) decreased. - Ans-A What event initiates a transaction in the sales and collection cycle? A) Receipt of cash B) Delivery of product to a customer C) Identification of a new customer D) Customer request for goods - Ans-D What critical event must take place before goods can be shipped in order to assure payment can be reasonably expected? A) Determination of correct delivery address B) Credit approval C) Matching of shipping document with sales invoice D) Receipt of sales order from the customer - Ans-B Most companies recognize sales revenue when: A) sales are invoiced. B) payment is received from the customer. C) goods are shipped. D) the customer's order is received. - Ans-C The total of the individual account balances in the accounts receivable subsidiary ledger should equal the: A) total sales for the period. B) balance of the sales account in the general ledger. C) total sales less the total cash received for the period. D) balance of the accounts receivable account in the general ledger. - Ans-D Credit memos are normally issued to: A) adjust the customers balance to the amount owed to the company because of returned goods or an allowance. B) assist in the aging of accounts receivable. C) reduce customer frustration and sales losses. D) inform the customer of the balance due. - Ans-A When sales invoices are automatically calculated and posted by a computer, the auditor may be able to reduce substantive tests of transactions for which, if any, assertion? A) Accuracy B) Existence C) Completeness D) None of the above - Ans-A When assessing planned control risk for sales:A) the key internal controls and deficiencies for sales will be the same for every company. B) the audit objectives for sales will differ from company to company. C) a flowchart is required to help assess control risk for sales. D) assessing control risk for sales is a highly subjective decision. - Ans-D A sample in which the characteristics of the sample are the same as those of the population is a(n): A) variables sample. B) representative sample. C) attributes sample. D) random sample. - Ans-B There are three phases in both statistical and nonstatistical sampling. The first phase is to: A) generate random numbers for the sample. B) evaluate the results. C) plan the sample. D) select the sample. - Ans-C A sample in which every possible combination of items in the population has an equal chance of constituting the sample is a: A) random sample. B) statistical sample. C) judgment sample. D) representative sample. - Ans-A The process which requires the calculation of an interval and then selects the items based on the size of the interval is: A) statistical sampling. B) random sample selection. C) systematic sample selection. D) computerized sample selection. - Ans-C Which of the following types of receivables would not deserve the special attention of the auditor? A) Accounts receivables with credit balances B) Accounts that have been outstanding for a long time C) Receivables from related parties D) Each of the above would receive special attention. - Ans-D If the client's internal control for recording sales returns and allowances is evaluated as ineffective: A) a larger sample may be needed to verify cutoff. B) sampling is not appropriate. C) all sales returns must be traced to supporting documentation.D) all sales returns must be confirmed with the customer. - Ans-A An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is to satisfy the audit objective of: A) accuracy. B) existence. C) control. D) completeness. - Ans-D The net realizable value of accounts receivable is equal to: A) gross accounts receivable less allowance for unc [Show More]

Last updated: 2 years ago

Preview 1 out of 13 pages