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Auditing Exam 2 Quizzes

Terms in this set (20)

Which of the following is not one of the steps used to develop audit objectives?
1) know the proper type of audit opinion to issue
2) divide the financial statements into cycles
3) know the specific audit objectives for classes of transactions
4) know the management assertions about the financial statements
1)
A questioning mindset:
1) means the auditor should approach the audit with a "do not trust anyone" mental outlook.
2) means the auditor should approach the audit with a "trust but verify" mental outlook.
3) assures that the auditor will only accept honest clients.
4) means the auditor must prove every statement that management makes to them.
2)
Which of the following management assertions is not associated with classes of transactions and events?
1) occurrence
2) rights and obligations
3) classification
4) accuracy
2)
The posting and summarization audit objective are the auditor's counterpart to management's assertion of:
1) classification.
2) accuracy.
3) occurrence.
4) completeness.
2)
The classification balance-related audit objective:
1) involves determining if items included on a client's listing are disclosed properly in the financial statements.
2) involves tying in the account balances to the general ledger.
3) is the counterpart to the management assertion of completeness.
4) involves determining if items included on a client's listing are included in the correct general ledger accounts.
4)
Which of the following assertions is described as "this assertion addresses whether all transactions that should be included in the financial statements are in fact included"?
1) occurence
2) existence
3) completeness
4) rights and obligations
3)
Physical examination:
1) can be used for both tangible assets and documents.
2) is not generally a reliable type of audit evidence.
3) is sufficient evidence to verify that the existing assets are owned by the client.
4) is a direct means of verifying that an asset really exists.
4)
Factors that determine the auditor's willingness to accept a document as reliable evidence include:
1) whether it was created and processed under conditions of effective internal control.
2) whether it is internal or external.
3) whether it is an original document or a photocopy.
4) all of the above.
4)
Auditors may decide to replace tests of details with analytical procedures when possible because the:
1) analytical procedures are more reliable.
2) analytical procedures are more persuasive.
3) analytical procedures are considerably less expensive.
4) tests of details are more difficult to interpret.
3)
You are auditing the company's purchasing process for goods and services. You are primarily concerned with the company not recording all purchase transactions. Which audit procedure below would be the most effective audit procedure in this case?
1) reconciling the accounts payable subsidiary ledger to the accounts payable account
2) confirming accounts payable recorded amounts
3) vouching from the accounts payable account to the vendor invoices
4) tracing vendor invoices to recorded amounts in the accounts payable account
4)
The two characteristics of the appropriateness of evidence are:
1) reliability and accuracy.
2) relevance and timeliness.
3) relevance and reliability.
4) relevance and accuracy.
3)
Factors that determine the auditor's willingness to accept a document as reliable evidence include:
1) whether it was created and processed under conditions of effective internal control.
2) whether it is internal or external.
3) whether it is an original document or a photocopy.
4) all of the above.
4)
The ________ always includes a list of the ________, and it usually includes sample sizes, items to select, and the timing of the tests:
1) audit program; audit procedures
2) audit program; audit objectives
3) audit assertion; audit objectives
4) audit assertion; audit programs
1)
You are auditing the company's purchasing process for goods and services. You are primarily concerned with the company not recording all purchase transactions. Which audit procedure below would be the most effective audit procedure in this case?
1) confirming accounts payable recorded amounts
2) vouching from the accounts payable account to the vendor invoices
3) tracing vendor invoices to recorded amounts in the accounts payable account
4) reconciling the accounts payable subsidiary ledger to the accounts payable account
3)
Analytical procedures performed during the completion stage of the audit:
1) are typically performed by a senior partner with extensive knowledge of the client's business.
2) help the auditor identify significant matters requiring special attention later in the engagement.
3) help the auditor understand the client's business and industry.
4) all of the above.
1)
The permanent files included as part of audit documentation do not normally include:
1) a copy of the current and prior years' audit programs.
2) results of analytical procedures from prior years.
3) information related to the understanding of internal control.
4) copies of articles of incorporation, bylaws and contracts.
1)
A 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:
1) statistical risk.
2) inherent risk.
3) financial risk.
4) acceptable audit risk.
4)
The two major factors affecting acceptable audit risk are:
1) inherent risk and the intended uses of the financial statements.
2) the audit firm and the intended uses of the statements.
3) control risk and the intended uses of the financial statements.
4) the likely statement users and their intended uses of the statements.
4)
The auditor determines that Matthews Company occupies the 3rd floor of an office tower for which it pays no rent. The most likely explanation is:
1) Matthews Company is engaging in fraudulent activities.
2) a related party transaction in which a major shareholder owns the office tower.
3) the landlord has weak internal controls over billings.
4) they got lucky the landlord hasn't noticed the lack of payments.
2)
When performing planning analytical procedures for a client the auditor detected that the gross profit percentage had declined by 50% from the previous year to the year currently under audit. The auditor should:
1) prepare a going concern opinion for the client.
2) advise the client to have extensive disclosure to alleviate investor concerns.
3) investigate the possibility the client may have made an error in their cost of goods sold computation.
4) assist management in developing greater cost efficiencies in their product line.
3)
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