ch. 5- audit

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1

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

Effectiveness of Internal Control

2

Which of the following business characteristics is NOT indicative of high inherent risk?

A large amount of assets

3

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?

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

4

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

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

5

Of the following, which is the LEAST reliable type of audit evidence?

Copies of sales invoices inspected by the auditors.

6

Analytical procedures are most likely to detect:

Unusual transactions

7

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

Confirm the accounts

8

A primary purpose of the audit working papers is to:

Support the auditors opinion

9

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

Permanent working paper file

10

Which of the following is NOT a function of audit working papers?

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

11

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

Auditors, as a result of the specialists findings, give a qualified opinion on this financial statements.

12

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?

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

13

To be effective, analytical procedures performed near the end of the audit should be performed by?

A manager or partner who has a comprehensive knowledge of the clients business and industry.

14

Which of the following is not an assertion relating to classes of transactions?

Sufficiency

15

Assertions relating to classes of transactions?

Occurrence

Completeness

Accuracy

Cutoff

Classification

16

The inspection of a vendors invoice by the auditors is:

Documentary evidence about occurrence of a transaction.

17

Which of the following is not a financial statement assertion relating to account balances?

Recorded value and discounts

18

Assertions relating to account balances?

Existence

Rights and obligations

Completeness

Valuation and allocation

19

Which of the following is generally true about the sufficiency of audit evidence?

The amount of evidence that is sufficient varies directly with the acceptable risk of material misstatement.

20

The auditors use analytical procedures during the course of an audit. The most important phase of performing these procedures is the:

Investigation of significant variations and unusual relationships.

21

Which of the following ultimately determines the specific audit procedures necessary to provide independent auditors with a reasonable basis for the expression of an opinion?

The auditors judgement

22

Failure to detect material dollar errors in financial statements is a risk which the auditors primarily mitigate by:

Performing substantive procedures

23

Which of the following expressions is least likely to be included in a clients representation letter?

Management acknowledges responsibility for illegal actions committed by employees.

24

Which of the following statements is generally correct about audit evidence?

The auditors direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly from independent outside sources.

25

During an audit engagement pertinent data are prepared and included in the audit working papers. The working papers primarily are considered to be?

Support for the auditors representations as to compliance with generally accepted auditing standards.