Details of this Paper

1. Which of the following has the lowest authorit...

Description

Solution


Question

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 trading securities. D. Classification as available-for-sale or trading securities 21. In determining the adequacy of the allowance for uncollectible accounts, the least reliance should be placed upon which of the following? A. The credit manager?s opinion. B. An aging schedule of past due accounts. C. Collection experience of the client?s collection agency. D. Ratios calculated showing the past relationship of the valuation allowance to net credit sales. 22. Immediately upon receipt of cash, a responsible employee should A. Record the amount in the cash receipts journal. B. Prepare a remittance listing. C. Update the subsidiary accounts receivable records. D. Prepare a deposit slip in triplicate 23. Auditors should request that an audit client send a letter of inquiry to those attorneys who have been consulted concerning litigation, claims, or assessments. The primary reason for this request is to provide A. Corroborative evidential matter. B. An expert opinion as to whether a loss is possible, probable, or remote. C. An estimate of the dollar amount of the probable loss. D. Information concerning the progress of cases to date 24. When auditing related party transactions, an auditor places primary emphasis on A. Ascertaining the rights and obligations of the related parties. B. Evaluating the disclosure of the related party transactions. C. Verifying the valuation of the related party transactions. D. Confirming the existence of the related parties 25. Which of the following circumstances most likely will cause an auditor to consider whether material misstatements due to fraud exist in an entity?s financial statements? A. Reportable conditions previously communicated to management are not corrected. B. Management places little emphasis on meeting earnings projections of external parties. C. Transactions selected for testing are not supported by proper documentation. D. The board of directors oversees the financial reporting process and internal control 26. The existence of a related party transaction may be indicated when another entity A. Borrows from the corporation at a rate of interest equal to the current market rate. B. Absorbs expenses of the corporation. C. Lends to the corporation at a rate of interest equal to the current market rate. D. Sells real estate to the corporation at a price that is comparable to its appraised value. 27. Which of the following statements concerning the auditor?s use of the work of a specialist is true? A. If the auditor believes that the determinations made by the specialist are unreasonable, only a qualified opinion may be expressed. B. If the specialist is related to the client, the auditor is still permitted to use the specialist?s findings as corroborative evidence. C. The specialist may be identified in the auditor?s report only when the auditor expresses an unqualified opinion. D. The specialist need not have an understanding of the auditor?s corroborative use of the specialist?s findings 28. Which of the following is a false statement about materiality? A. An auditor?s consideration of materiality is influenced by the auditor?s perception of the needs of a reasonable person who will rely on the financial statements. B. The concept of materiality recognizes that some matters are important for fair presentation of financial statements in conformity with GAAP, while other matters are not important. C. Materiality judgments are made in light of surrounding circumstances and necessarily involve both quantitative and qualitative judgments. D. An auditor considers materiality for planning purposes in terms of the largest aggregate level of misstatements that could be material to any one of the financial statements. 29. Analytical procedures are A. Never required. B. Required for planning, substantive testing, and overall review of the financial statements. C. Required for planning and overall review of the financial statements. D. Required during planning only. 30. Which of the following situations would most likely require special audit planning? A. Some items of factory and office equipment do not bear identification numbers. B. Depreciation methods used on the client?s tax return differ from those used on the books. C. Assets costing less than $500 are expensed even though the expected life exceeds one year. D. Inventory is comprised of precious stones. 31. The objectives of internal control for a production cycle are to provide assurance that transactions are properly executed and recorded, and that A. Custody of work-in-process and of finished goods is properly maintained. B. Production orders are prenumbered and signed by a supervisor. C. Independent internal verification of activity reports is established. D. Transfers to finished goods are documented by a completed production report and a quality control report 32. The authority to accept incoming goods in receiving should be based on a(n) A. Bill of lading. B. Approved purchase order. C. Vendor?s invoice. D. Materials requisition 33. Which of the following questions would an auditor most likely include on an internal control questionnaire for notes payable? A. Are assets that collateralize notes payable critically needed for the entity?s continued existence? B. Are two or more authorized signatures required on checks that repay notes payable? C. Are the proceeds from notes payable used for the purchase of noncurrent assets? D. Are direct borrowings on notes payable authorized by the board of directors?

 

Paper#7826 | Written in 18-Jul-2015

Price : $25
SiteLock