Try each of the confirmations in Exercise we saw earlier, with a circular region as the unit.

Confirmations of accounts receivable provide evidence-primarily about which two assertions?

a. Valuation and rights and obligations

b. Existence and completeness

c. Existence and rights and obligations

d. Completeness and valuation

Which of the following is most closely related to the relevance of audit evidence?

a. Auditors decide to physically inspect investment securities held by a custodian instead of obtaining confirmations from the custodian.

b. In addition to confirmations of accounts receivable, auditors perform an analysis of the aging of accounts receivable to evaluate the collectability of accounts receivable.

c. In response to less effective internal control, auditors increase the number of customer accounts receivable confirmations mailed compared to that in the prior year.

d. Because of a large number of transactions occurring near year-end, auditors decide to confirm a larger number of receivables following year-end instead of during the interim period.

Select the best answer for each of the following questions. Explain the reasons for your selection.

a. Which of the following is not a financial statement assertion made by management?

(1) Existence of recorded assets and liabilities.

(2) Completeness of recorded assets and liabilities.

(3) Valuation of assets and liabilities.

(4) Effectiveness of internal control.

b. Which of the following business characteristics is not indicative of high inherent risk?

(1) Operating results that are highly sensitive to economic factors.

(2) Large likely misstatements detected in prior audits.

(3) Substantial turnover of management.

(4) A large amount of assets.

c. As part of their audit, auditors obtain a representation letter from their client. Which of the following is not a valid purpose of such a letter?

(1) To increase the efficiency of the audit by eliminating the need for other audit procedures.

(2) To remind the client's management of its primary responsibility for the financial statements.

(3) To document in the audit working papers the client's responses to certain verbal inquiries made by the auditors during the engagement.

(4) To provide evidence in those areas dependent upon management's future intentions.

d. Which of the following statements best describes why auditors investigate related party transactions?

(1) Related party transactions generally are illegal acts.

(2) The substance of related party transactions may differ from their form.

(3) All related party transactions must be eliminated as a step in preparing consolidated financial statements.

(4) Related party transactions are a form of management fraud.

e. Of the following, which is the least reliable type of audit evidence?

(1) Confirmations mailed by outsiders to the auditors.

(2) Correspondence between the auditors and suppliers.

(3) Copies of sales invoices inspected by the auditors.

(4) Canceled checks returned in the year-end bank statement directly to the client.

f. Analytical procedures are most likely to detect:

(1) Weaknesses of a material nature in internal control.

(2) Unusual transactions.

(3) Noncompliance with prescribed control activities.

(4) Improper separation of accounting and other financial duties.

g. Which of the following is not a primary approach to auditing an accounting estimate?

(1) Review and test management's process for developing the estimate.

(2) Review subsequent transactions.

(3) Confirm the amounts.

(4) Develop an independent estimate.

h. A primary purpose of the audit working papers is to:

(1) Aid the auditors by providing a list of required procedures.

(2) Provide a point of reference for future audit engagements.

(3) Support the underlying concepts included in the preparation of the basic financial statements.

(4) Support the auditors' opinion.

i. In what section of the audit working papers would a long-term lease agreement be filed?

(1) Current working paper file.

(2) Permanent working paper file.

(3) Lead schedule file.

(4) Corroborating documents file.

j. Which of the following is not a function of audit working papers?

(1) Assist management in illustrating that the financial statements are in accordance with generally accepted accounting principles.

(2) Assist audit team members responsible for supervision in reviewing the work.

(3) Assist auditors in planning future engagements.

(4) Assist peer reviewers and inspectors in performing their roles.

k. In using the work of a specialist, the auditors referred to the specialist's findings in their report. This would be an appropriate reporting practice if the:

(1) Client is not familiar with the professional certification, personal reputation, or particular competence of the specialist.

(2) Auditors, as a result of the specialist's findings, give a qualified opinion on the financial statements.

(3) Client understands the auditors' corroborative use of the specialist's findings in relation to the representations in the financial statements.

(4) Auditors, as a result of the specialist's findings, decide to indicate a division of responsibility with the specialist.

l. A difference of opinion concerning accounting and auditing matters relative to a particular phase of the audit arises between an assistant auditor and the auditor responsible for the engagement. After appropriate consultation, the assistant auditor asks to be disassociated from the resolution of the matter. The working papers would probably:

(1) Remain silent on the matter since it is an internal matter of the auditing firm.

(2) Note that the assistant auditor is completely dissociated from responsibility for the auditors' opinion.

(3) Document the additional work required, since all disagreements of this type will require expanded substantive procedures.

(4) Document the assistant auditor's position and how the difference of opinion was resolved.

Select the correct answer for each of the following multiple choice questions.

1. With respect to audit planning, which of the following statements is false? a. It determines why, how, when, and by whom the audit will be performed. b. Among the final steps in audit planning is establishing the audit's scope and objectives. c. Except for the smallest audits, an audit team with the necessary experience and expertise is formed. d. An audit program is prepared to show the nature, extent, and timing of the procedures needed to achieve audit objectives and minimize audit risks. e. A typical audit has a mix of audit procedures, such as observations, documentation reviews, sending confirmations, and analytical reviews.

2. With respect to evaluating audit evidence, which of the following statements is false? a. The auditor evaluates the evidence gathered and decides whether it supports a favorable or unfavorable conclusion. b. Auditors focus on detecting and reporting errors that significantly impact management's interpretation of the audit findings. c. To avoid lawsuits, the auditor seeks near absolute assurance that no material error exists in the information or process audited. d. In all audit stages, findings and conclusions are documented in audit working papers.

3. A four-part, risk-based audit approach provides a framework for conducting information system audits. Performing a systems review is done in which of the four parts? a. Determine the threats (accidental or intentional abuse and damage) to which the system is exposed. b. Identify the control procedures that management has put into place to prevent, detect, or correct the threats. c. Evaluate whether control procedures are actually in place and if they work as intended. d. Evaluate control weaknesses to determine their effect on the nature, timing, or extent of auditing procedures.

4. The first objective in an IS audit is ensuring the overall security of the system. Select all of the following controls that would be effective in minimizing the overall security threats faced by an information system. a. Proper use of internal and extemal file labels b. Information security/protection plan c. Limiting physical access to computer equipment d. Limiting logical access to the system using authentication and authorization controls c. Key verification

5. The second objective in an IS audit is ensuring proper program development and acquisition. Select all of the following controls that would be effective in minimizing the program development and acquisition threats faced by an information system. a. Management authorization for program development and software acquisition b. Reconciliation of batch totals c. Thorough testing of new programs, including user acceptance tests d. Fault-tolerant systems design e. Casualty and business interruption insurance

6. The third objective in an IS audit is ensuring proper program modification. Select all of the following controls that would be effective in minimizing the program modification threats faced by an information system. a. User authorization of source data input b. Use of tumaround documents c. List program components to be modified d. Management authorization and approval of program modifications e. User approval of program change specifications

7. The fourth objective in an IS audit is ensuring accurate computer processing. Select all of the following controls that would be effective in minimizing the computer processing threats faced by an information system. a. Check digit verification b. Complete program change documentation, including approvals c. Competent supervision of computer operations d. Maintenance of proper environmental conditions in a computer facility e. Firewalls

8. The fifth objective in an IS audit is ensuring accurate source data. Select all of the following controls that would be effective in minimizing the threats to source data in an information system. a. Effective handling of source data input by data control personnel b. Logging the receipt, movement, and disposition of source data input c. Management and user approval of programming specifications d. Effective procedures for correcting and resubmitting erroneous data e. Disaster recovery plan

9. The sixth objective in an IS audit is protecting data files. Select all of the following controls that would be effective in minimizing the threats to a company's data files. a. Storage of data in a secure file library and restriction of physical access to data files b. Concurrent update controls c. Data editing routines d. Off-site backup of all data files e. Thorough test of program changes, including user acceptance tests

Which of the following elements of a system of quality control is related to firms receiving independence confirmations from its professionals with respect to clients?

a. Acceptance and continuance of client relationships and specific engagements.

b. Engagement performance.

c. Monitoring.

d. Relevant ethical requirements.

The following questions concern the audit of accounts in the capital acquisition and repayment cycle. Choose the best response.

a. During an audit of a publicly held company, the auditor should obtain written confirmation regarding debenture transactions from the

$\quad\quad$ (1) debenture holders.

$\quad\quad$ (2) client’s attorney.

$\quad\quad$ (3) internal auditors.

$\quad\quad$ (4) trustee.

b. Which of the following internal controls is least likely to reduce risks related to the occurrence transaction-related audit objective for issuances of stock?

$\quad\quad$ (1) The board of directors must approve the distribution of cash dividends.

$\quad\quad$ (2) The issuance of any shares of stock must be preapproved by the board of directors.

$\quad\quad$ (3) The company engages an independent registrar to issue stock certificates.

$\quad\quad$ (4) The company maintains a capital stock certificate record that includes certificate number, number of shares issued, issue date, and name of person to whom certificates are issued.

c. Which of the following audit procedures would be most relevant when examining the completeness transaction-related audit objective for capital stock?

$\quad\quad$ (1) The auditor examines minutes of the board of directors’ meetings to identify any actions involving the issuance of capital stock.

$\quad\quad$ (2) The auditor vouches entries in the client’s capital stock records to board minutes.

$\quad\quad$ (3) Confirmations of new stock issuances are sent to the client’s stock transfer agent.

$\quad\quad$ (4) The auditor traces entries of new stock issuances to the cash receipts journal.

Find x and y as functions of t for the example above, and verify for this case that $v$ and $a$ are correctly given by the method of the example.

Repeat the Example using the more accurate the Equation for the gravitational redshift. Compare with the result of the Example.

Give an example of two mutually exclusive events and an example of two events that are not mutually exclusive.

Give one example of a circuit found in nature and one example of a circuit created by people.

Describe an example of a surplus and an example of a shortage, including what may have caused them.

Give an example of a ring satisfying the given conditions or, if there is no example, so state. A finite field.

Describe each type of-chemical reaction in words. Give the general form if it exists and an example for each. I. Combustion Reaction Description: ____. Example: ____. II. Synthesis Reaction Description: ____. General form: ____. Example: . III. Decomposition Reaction Description:. General form: ____. Example: ____. IV. Single-Displacement Reaction Description: ____. General form: ____. Example: ____. V. Double-Displacement Reaction Description: ____. General form: ____. Example: ____. VI. Oxidation-Reduction Reaction Description: ____.