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28 terms

Auditing Final

1.) An auditor performs a test to determine whether all merchandise for which the client was billed was received. The population for this test consists of all:
A) Merchandise received.
B) Vendor's invoices.
C) Canceled checks.
D) Receiving reports.
2.) Which one of the following procedures would not be appropriate for the auditors in discharging their responsibilities concerning the client's physical inventories?
A) Confirmation of goods in the hands of public warehouses.
B) Supervising the taking of the annual physical inventory.
C) Carrying out physical inventory procedures at an interim date.
D) Obtaining written representation from the client as to the existence, quality, and dollar amount of the inventory.
3.) Purchase cutoff procedures should be designed to test whether all inventory:
A) Owned by the company was recorded.
B) On the year end balance sheet was carried at lower of cost or market.
C) On the year end balance sheet was paid for by the company.
D) Owned by the company is in the possession of the company.
4.) In auditing a manufacturing entity, which of the following procedures would an auditor least likely perform to determine whether slow-moving, defective, and obsolete items included in inventory are properly identified?
A) Test the computation of standard overhead rates.
B) Tour the manufacturing plant or production facility.
C) Compare inventory balances to anticipated sales volume.
D) Review inventory experience and trends.
1. An auditor has identified numerous debits to accumulated depreciation of equipment. Which of the following is most likely?
A) The estimated remaining useful lives of equipment were increased.
B) Plant assets were retired during the year.
C) The prior year's deprecation expense was erroneously understated.
D) Overhead allocations were revised at year-end.
2. Which of the following best describes the auditors' typical observation of plant and equipment?
A) The auditors observe a physical inventory of plant and equipment, annually.
B) The auditors observe all additions to plant and equipment made during the year.
C) The auditors observe all major plant and equipment items in the clients' accounts each year.
D) The auditors observe major additions to plant and equipment made during the year.
1. Which of the following tests of controls most likely would help assure an auditor that goods shipped are properly billed?
A) Scan the sales journal for sequential and unusual entries.
B) Examine shipping documents for matching sales invoices.
C) Compare the accounts receivable ledger to daily sales summaries.
D) Inspect unused sales invoices for consecutive pre-numbering.
2. Which of the following audit procedures is best for identifying unrecorded trade accounts payable?
A) Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payable applies to the prior period.
B) Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether they are supported by receiving reports.
C) Examining unusual relationships between monthly accounts payable balances and recorded cash payments.
D) Reconciling vendors' statements to the file of receiving reports to identify items received just prior to the balance sheet date.
3. The assertion most directly addressed when performing the search for unrecorded liabilities is:
A) Completeness.
B) Existence.
C) Presentation.
D) Rights.
4. The confirmation of accounts payable is most closely associated with:
A) Assertion risk.
B) Detection risk.
C) Inherent risk.
D) Relative risk.
5. The auditors' search for unrecorded liabilities is completed:
A) During an interim period.
B) At the balance sheet date.
C) Subsequent to the balance sheet date.
D) At any time during the examination.
6. The auditor will most likely perform extensive tests for possible understatement of:
A) Revenues.
B) Assets.
C) Liabilities.
D) Capital.
1. In auditing long-term debt, an auditor would be most likely to:
A) Perform analytical procedures on the bond prenumbered discount accounts.
B) Examine documentation of assets purchased with bond proceeds for liens.
C) Compare interest expense with the long-term debt amount for reasonableness.
D) Confirm the existence of individual long-term debt holders at year-end.
2. An auditor obtains evidence of stockholders' equity transactions for a publicly traded company by reviewing the entity's:
A) Minutes of board of directors meetings.
B) Registrar's record of interbank transfers.
C) Canceled stock certificates.
D) Treasury stock certificate book.
3. Which of the following is an auditor most likely to confirm from the transfer agent and registrar?
A) Total shares of stock issued.
B) Restrictions on the payment of dividends.
C) Total market value of outstanding shares of stock.
D) Gains from sale of treasury stock.
1. Which of the following audit procedures is aimed at determining whether every name on the company payroll is an employee actually on the job?
A) A surprise observation of a paycheck distribution.
B) A test of payroll extensions.
C) Analytical comparisons of budgeted to actual payroll expense.
D) Comparison of payee names on canceled payroll checks with the payroll register.
2. Which of the following is not a procedure that auditors typically perform to search for significant events during the period after year-end but prior to the audit report date?
A) Review minutes of board of directors' meeting.
B) Review the latest available interim financial statements.
C) Inquire about any unusual adjustments made subsequent to the balance sheet date.
D) Review changes in internal control during the period subsequent to the balance sheet date.
3. Which of the following subsequent events might require an adjustment to the client's financial statements?
A) A business combination with another company.
B) Loss on the sale of a closely-held investment.
C) Loss of plant and equipment due to a fire.
D) Retirement of bonds payable at a loss.
4. The auditors' best course of action with respect to "other information (not including required supplemental information)" included in an annual report containing the auditors' report is to:
A) Indicate in the auditors' report, that the "other financial information" is only compiled.
B) Consider whether the "other financial information" is accurate by performing a limited review.
C) Obtain written representations from managements as to the material accuracy of the "other financial information."
D) Read and consider the manner of presentation of the "other financial information."
1. When an auditor does not confirm material accounts receivable, but is satisfied by the application of alternative auditing procedures, she normally should:
A) Issue an unmodified opinion, but disclose elsewhere in the report this departure from a customary procedure.
B) Issue an unmodified opinion with no reference to this omission.
C) Issue a qualified opinion or a disclaimer, depending on the materiality of the receivables.
D) Issue an adverse opinion.
2. Which of the following is not explicitly included in an audit report for a nonpublic company?
A) A statement that he auditor believes that his or her audit provides a reasonable basis for expressing negative assurance.
B) A statement that the auditor's responsibility is to express an opinion on the financial statements.
C) A statement that the financial statements are the responsibility of management.
D) A title with the word "independent."
3. An auditor's report on comparative financial statements should be dated as of the date of the:
A) Issuance of the report.
B) Accumulation of sufficient appropriate audit evidence.
C) Latest financial statements being reported on.
D) Last related-party transaction disclosed in the statements.
4. A client has changed the salvage values of a number of its fixed assets. The auditors believe that the salvage values are realistic. The appropriate report on the financial statements is:
A) Standard unmodified.
B) Unmodified with explanatory language as to consistency.
C) Qualified for consistency.
5. The unmodified standard audit report of a nonpublic company does not explicitly state that:
A) The financial statements are the responsibility of the company's management.
B) The audit was conducted in accordance with accounting principles generally accepted in the United States of America.
C) The auditors believe that the audit provides a reasonable basis for their opinion.
D) An audit includes assessing the accounting principles used.
6. Which of the following is not a difference between the audit report of a nonpublic and public company?
A) The public company report includes the word "Registered" in the title.
B) The public company report refers to standards of the PCAOB.
C) The public company report has an additional paragraph referring to the client's fraud prevention procedures.
D) The public company report is shorter.
7. Which of the following circumstances generally results in the issuance of a report that includes an opinion that is other than unmodified?
A) The auditor is unable to obtain sufficient appropriate audit evidence.
B) The group auditors for the engagement are relying on the work of component auditors.
C) The financial statements are affected by a change in accounting principle due to a new FASB pronouncement.
D) The auditors have decided to emphasize the fact that the company has engaged in material amounts of related party transactions.
8. Under which of the following set of circumstances might the auditors disclaim an opinion?
A) The financial statements contain a departure from generally accepted accounting principles, the effect of which is material.
B) The group auditors decide to make reference to the report of component auditor who audited a subsidiary.
C) There has been a material change between periods in the method of application of accounting principles.
D) There are significant scope limitations on the audit.
9. An emphasis of a matter paragraph ordinarily:
A) Relates to a report with a modified opinion.
B) Follows the opinion paragraph.
C) May either precede or follow the opinion paragraph.
D) Is only included in an audit report with an adverse opinion.