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Audit Exam 2: Practice Questions

Terms in this set (24)

Which of the following describes sampling risk?
The sample will not contain characteristics representative of the population such that inferences made about that population will be incorrect.
While auditors may use either statistical or nonstatistical sampling, some auditors restrict the use of nonstatistical sampling for what reason?
It is less objective.
Which one of the following issues need not be addressed when planning an audit sample to test control procedures?
Minimum failure rate.
Which of the following statistical sampling methods is most commonly used to test control procedures?
Attribute sampling.
When determining sample size in attributes sampling, which of the following is usually true?
Population size is not a major factor.
Which one of the following is not a typical step used to implement an attributes sampling plan?
Define the nonstatistical sampling method that is most effective and efficient.
In the audit of the revenue of Hiram Manufacturing Company, the auditors obtain a number of shipping documents shortly before year-end and immediately following the year under audit. The auditors compare the documents to the sales journal in order to test which of the following assertions?
Cutoff of sales transactions.
The aged accounts receivable report is utilized by the auditor to accomplish which of the following?
Assess the adequacy of the allowance for doubtful accounts.
For which of the following accounts receivable customer populations would the use of negative confirmations be most appropriate?
A cable company with control risk over the revenue cycle assessed low.
Alternative procedures that would provide evidence of the existence of receivables would include which of the following?
Review of subsequent collections.
Unreturned positive confirmations for accounts receivable warrant which of the following actions?
Sending second requests and possibly performing subsequent procedures.
Which of the following criteria must be met in order to recognize revenue in the current accounting period?
All of the above.
(Goods or services have been transferred to the customer, the transaction price has been determined, and collectability is reasonably assured.)
The cash account is significant to the auditor for which of the following reasons?
The cash account balance is the culmination of a large volume of transactions.
As cash processing systems become more automated and integrated, which of the following is true about the general concept of segregation of duties?
The importance of segregation of duties does not change.
Which of the following represents a typical substantive audit procedure for cash balances?
Verify material deposits in transit to subsequent statements.
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