ScholarMatic: Explanation & Answer
Your ready answer from a verified tutor is just a click away for as little as $14.99
Click Order Now to get 100% Original Answer Customized to your instructions!
1. Which of the following has the lowest authoritative status but may be useful in assisting the auditor in applying the SASs?
A. Statements on Auditing Standards.
B. Auditing Statements of Position.
C. Journal of Accountancy articles.
D. Auditing Interpretations.
2. The independent auditor’s plan for an examination in accordance with generally accepted auditing standards is influenced by the possibility of material misstatements. The auditor will therefore conduct the examination with an attitude of
A. Professional skepticism.
B. Subjective mistrust.
C. Objective indifference.
D. Professional responsiveness.
3. Hawkins requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor’s working papers. The prospective client’s refusal to permit this will bear directly on Hawkins’ decision concerning the
A. Adequacy of the preplanned audit program.
B. Ability to establish consistency in application of accounting principles between years.
C. Apparent scope limitation.
D. Integrity of management..
4. When a CPA is approached to perform an audit for the first time, the CPA should make inquiries of the predecessor auditor. This is a necessary procedure because the predecessor may be able to provide the successor with information that will assist the successor in determining
A. Whether the predecessor’s work should be utilized.
B. Whether the company follows the policy of rotating its auditors.
C. Whether in the predecessor’s opinion internal control of the company has been satisfactory.
D. Whether the engagement should be accepted.
5. Which of the following procedures is least likely to be performed as a part of obtaining an understanding during an audit engagement of a new audit client previously audited by another CPA?
A. Communication with the predecessor auditor.
B. Performing analytical procedures.
C. Obtaining confirmation of cash balances.
D. Considering internal control.
6, Which of the following is not a factor included in the control environment?
A. Board of directors or audit committee participation.
B. Commitment to competence.
C. Monitoring.
D. Organizational structure.
7. If internal control is properly designed, the same employee should not be permitted to
A. Sign checks and cancel supporting documents.
B. Receive merchandise and prepare a receiving report.
C. Prepare disbursement vouchers and sign checks.
D. Initiate a request to order merchandise and approve merchandise received.
8. In the consideration of internal control, the auditor is basically concerned that internal control provides reasonable assurance that
A. Controls have not been circumvented by collusion.
B. Misstatements have been prevented or detected.
C. Operational efficiency has been achieved in accordance with management plans.
D. Management cannot override controls.
9. Which of the following controls would an auditor be least likely to review?
A. Segregation of the asset-handling and recordkeeping functions.
B. Company policy regarding credit and collection efforts.
C. Cost records classified by date of product introduction.
D. Authorization of additions to plant and equipment
10. When tests of controls reveal that controls are not operating as anticipated, it is most likely that the assessed level of the risk of material misstatement will
A. Be less than the planned level.
B. Equal the planned level.
C. Be greater than the planned level.
D. Be less than the actual level.
11. When an auditor increases the risk of material misstatement because certain control procedures were determined to be ineffective, the auditor would most likely increase the
A. Extent of tests of details.
B. Levels of inherent risk.
C. Extent of tests of controls.
D. Level of detection risk.
12. Of the following, which is the least persuasive type of audit evidence?
A. Documents mailed by outsiders to the auditor.
B. Correspondence between auditor and vendors.
C. Copies of sales invoices inspected by the auditor.
D. Computations made by the auditor
13, Failure to detect material dollar misstatements in the financial statements is a risk which the auditor primarily mitigates by
A. Performing substantive procedures.
B. Performing tests of controls.
C. Assessing internal control.
D. Obtaining a client representation letter.
14. An auditor’s decision either to apply analytical procedures as substantive procedures or to perform tests of transactions and account balances usually is determined by the
A. Availability of data aggregated at a high level.
B. Relative effectiveness and efficiency of the tests.
C. Timing of tests performed after the balance sheet date.
D. Auditor’s familiarity with industry trends
15. As one of the year-end audit procedures, the auditor instructed the client’s personnel to prepare a standard bank confirmation request for a bank account that had been closed during the year. After the client’s treasurer had signed the request, it was mailed by the assistant treasurer. What is the major flaw in this audit procedure?
A. The confirmation request was signed by the treasurer.
B. Sending the request was meaningless because the account was closed before the year-end.
C. The request was mailed by the assistant treasurer.
D. The CPA did not sign the confirmation request before it was mailed.
16. During the process of confirming receivables as of December 31, 2007, a positive confirmation was returned indicating the “balance owed as of December 31 was paid on January 9, 2008.” The auditor would most likely
A. Determine whether there were any changes in the account between January 1 and January 9, 2008.
B. Determine whether a customary trade discount was taken by the customer.
C. Reconfirm the zero balance as of January 10, 2008.
D. Verify that the amount was received.
17. Although the quantity and content of audit working papers vary with each particular engagement, an auditor’s permanent files most likely include
A. Schedules that support the current year’s adjusting entries.
B. Prior years’ accounts receivable confirmations that were classified as exceptions.
C. Documentation indicating that the audit work was adequately planned and supervised.
D. Analyses of capital stock and other owners’ equity accounts.
18. Which of the following is not a typical analytical procedure?
A. Study of relationships of the financial information with relevant nonfinancial information.
B. Comparison of the financial information with similar information regarding the industry in which the entity operates.
C. Comparison of recorded amounts of major disbursements with appropriate invoices.
D. Comparison of the financial information with budgeted amounts.
19. An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal and the cash disbursements journal. The purpose of this substantive audit procedure most likely was to
A Verify that cash disbursements were for goods actually received.
B Test whether payments were for goods actually ordered.
C Determine that purchases were properly recorded.
D Identify unusually large purchases that should be investigated further
20. An auditor testing long-term investments would ordinarily use analytical procedures to ascertain the reasonableness of the
A. Existence of unrealized gains or losses.
B. Completeness of recorded investment income.
C. Valuation of tradin
ScholarMatic: Explanation & Answer
Your ready answer from a verified tutor is just a click away for as little as $14.99
Click Order Now to get 100% Original Answer Customized to your instructions!
