Question;1. Question: (TCO 6) Which of the following statements regarding documentation is not correct? Student Answer: Documentation includes examining client records, such as general ledgers and supporting journals. Internal documents are documents that are generated within the company and used to communicate with external parties. External documents are documents that are generated outside of the company and are used to communicate the results of a transaction. All of the above are correct statements Question 2. Question: (TCO 6) When analytical procedures reveal no unusual fluctuations, the implication is that Student Answer: there are no material errors or irregularities. there are no material errors. there are no material irregularities. the possibility of a material error or irregularity is lessened. Question 3. Question: (TCO 6) The primary purpose of performing analytical procedures in the testing phase of an audit is to Student Answer: help the auditor obtain an understanding of the client's industry and business. assess the going concern assumption. indicate possible misstatements. reduce detailed tests. Question 4. Question: (TCO 6) Three common types of confirmations used by auditors are (1) negative confirmations where only a response is requested if the debtor disagrees with the amount, (2) positive confirmations with a request for information where the debtor is requested to respond and to include their believed balance, and (3) positive confirmations with the information included where the debtor is requested to respond and to confirm the balance we give them. If they were placed in the order of their competence, from highest to lowest, the sequence would be Student Answer: 3, 1, 2. 1, 2, 3. 3, 2, 1. 2, 3, 1. Question 5. Question: (TCO 7) Analytical procedures used in planning an audit should focus on identifying Student Answer: material weaknesses of internal control. the predictability of financial data from individual transactions. the various assertions that are embodied in the financial statements. areas that may represent specific risks relevant to the audit. Question 6. Question: (TCO 7) A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the Student Answer: inherent risk. acceptable audit risk. statistical risk. financial risk. Question 7. Question: (TCO 7) Which of the following is not correct regarding the communications between successor and predecessor auditors? Student Answer: The burden of initiating the communication rests with the predecessor auditor. The burden of initiating the communication rests with the successor auditor. The predecessor auditor must receive their former client's permission prior to divulging information to the successor auditor. The predecessor auditor may choose to provide a limited response to a successor auditor. Question 8. Question: (TCO 8) The FASB definition of materiality emphasizes what class of financial statement users? Student Answer: Regulators Informed investors Reasonable persons Potential investorsQuestion 9. Question: (TCO 8) Auditors are _____ to decide on the combined amount of misstatements in the financial statements that they would consider material early in the audit. Student Answer: permitted required not allowed strongly encouragedQuestion 10. Question: (TCO 8) Which of the following is not a correct statement regarding the allocation of the preliminary judgment about materiality to balance sheet accounts? Student Answer: Auditors expect certain accounts to have more misstatements than others. The allocation has virtually no effect on audit costs because the auditor must collect sufficient appropriate audit evidence. Auditors expect to identify overstatements as well as understatements in the accounts. Relative audit costs affect the allocation.
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