Question 1

The current file of an auditor's working papers is most likely to include a copy of the:

Accepted Answer

A)   superannuation fund contract.
B)   constitution.
C)   flowcharts of the internal control activities.
D)   bank reconciliation.E) All of the above
F) B) and C)

Question 2

Which of the following presumptions is correct about the reliability of audit evidence?

Accepted Answer

A)   Information obtained indirectly from outside sources is the most reliable audit evidence.
B)   To be reliable, audit evidence should be convincing rather than persuasive.
C)   Reliability of audit evidence refers to the amount of corroborative evidence obtained.
D)   An effective internal control system provides more reliable audit evidence than does an ineffective internal control system.E) A) and D)
F) A) and C)

Question 3

To be appropriate, evidence must be both:

Accepted Answer

A)   reliable and well documented.
B)   reliable and relevant.
C)   useful and independent.
D)   extensive and timely.E) B) and C)
F) A) and B)

Question 4

An auditor's working papers will generally be least likely to include documentation showing how the:

Accepted Answer

A)   client's schedules were prepared.
B)   engagement had been planned.
C)   client's internal control had been understood and the level of control risk assessed.
D)   unusual matters were resolved.E) None of the above
F) A) and D)

Question 5

Which of the following is an essential factor in evaluating the sufficiency of evidence? The evidence must:

Accepted Answer

A)   be well documented and cross-referenced in the audit documents.
B)   be based on sources that are considered reliable.
C)   bear a direct relationship to the audit objective.
D)   be of a quantity to enable the auditor to form an opinion.E) A) and B)
F) A) and D)

Question 6

In a financial report audit, substantive tests are audit procedures that:

Accepted Answer

A)   a re designed to discover significant subsequent events.
B)   may be either tests of transactions, tests of balances, tests of disclosure or analytical procedures.
C)   will decrease proportionately with the auditor's assessed level of control risk.
D)   may be eliminated under certain conditions.E) None of the above
F) A) and B)

Question 7

As part of accounts payable testing, an auditor reviews cash payments made post balance date. This is done mainly to gain evidence about the:

Accepted Answer

A)   valuation and allocation assertion.
B)   rights and obligations assertion.
C)   completeness assertion.
D)   existence assertion.E) A) and D)
F) C) and D)

Question 8

Your audit client is a shop that sells some of its own merchandise and some merchandise held on consignment.Which account balance assertion for inventory would you be most concerned about verifying?

Accepted Answer

A)   Existence.
B)   Completeness.
C)   Rights and obligations.
D)   Valuation and allocation.E) A) and D)
F) C) and D)

Question 9

Evidence is reliable if it:

Accepted Answer

A)   signals the true state of an assertion.
B)   applies to the period being audited.
C)   relates to the audit objective being tested.
D)   corroborates management's assertions.E) All of the above
F) A) and B)

Question 10

Which of the following factors will least affect the independent auditor's judgment as to the quantity, type and content of working papers desirable for a particular engagement?

Accepted Answer

A)   Nature of the auditor's report.
B)   Nature of the financial report, schedules, or other information upon which the auditor is reporting.
C)   Need for supervision and review.
D)   Number of personnel assigned to the audit.E) B) and C)
F) A) and C)

Question 11

As the acceptable level of detection risk increases, an auditor may change the:

Accepted Answer

A)   assessed level of control risk from less than high to high.
B)   assurance provided by tests of controls by using a larger sample size than planned.
C)   timing of substantive tests from year-end to an interim date.
D)   nature of substantive tests from less effective to more effective procedures.E) None of the above
F) A) and B)

Question 12

Which of the following is not a financial report assertion?

Accepted Answer

A)   Inspection.
B)   Rights and obligations.
C)   Valuation and allocation.
D)   Existence.E) B) and D)
F) C) and D)

Question 13

Vouching is used primarily to test which of the following assertions about classes of transaction?

Accepted Answer

A)   Occurrence.
B)   Completeness.
C)   Authorisation.
D)   Classification.E) B) and D)
F) C) and D)

Question 14

An auditor's decision either to apply analytical procedures as substantive tests or to perform tests of details usually is determined by the:

Accepted Answer

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 date.
D)   auditor's familiarity with industry trends.E) A) and B)
F) A) and C)

Question 15

Your audit client is under intense pressure to meet an earnings target. Which transaction assertion for purchases are you most concerned with?

Accepted Answer

A)   Occurrence.
B)   Completeness.
C)   Classification.
D)   Accuracy.E) B) and C)
F) A) and B)

Question 16

All of the following are typically in the current file except:

Accepted Answer

A)   adjusting journal entries.
B)   copies of the auditor's report.
C)   chart of accounts.
D)   copies of mins of important committee meetings.E) B) and C)
F) B) and D)

Question 17

Auditors can eliminate engagement risk:

Accepted Answer

A)   under no circumstances.
B)   by establishing policies for client acceptance and continuance.
C)   by lowering audit risk.
D)   by lowering materiality.E) A) and D)
F) A) and B)

Question 18

Which of the following audit risk components may be assessed in non-quantitative terms? Control risk
Detection risk
Inherent risk

Accepted Answer

A)   YesYesYes
B)   YesNoYes
C)   YesYesNo
D)   NoYesYesE) A) and D)
F) A) and B)

Question 19

When reviewing a loan agreement to ascertain whether the bank's security over any of the client's assets has been included in the financial report, the audit assertion being achieved is:

Accepted Answer

A)   valuation and allocation.
B)   completeness.
C)   presentation and disclosure- accuracy and valuation.
D)   presentation and disclosure -completeness.E) A) and B)
F) All of the above

Question 20

This is your first audit of XYZ Ltd. During the initial planning you have discovered that the client lacks receiving reports and a policy as to the timing within which to record purchases. You have also observed that there are many adjusting entries to accounts payable, which is a material balance. The audit assertion most at risk when auditing accounts payable is:

Accepted Answer

A)   existence.
B)   valuation and allocation.
C)   completeness.
D)   rights and obligations.E) A) and D)
F) A) and C)

Exam 5: Overview of Elements of the Financial Report Audit Process

Correct Answer
verified

Your audit client is a shop that sells some of its own merchandise and some merchandise held on consignment.Which account balance assertion for inventory would you be most concerned about verifying?

Correct Answer
verified

As part of accounts payable testing, an auditor reviews cash payments made post balance date. This is done mainly to gain evidence about the:

Correct Answer
verified

An auditor's working papers will generally be least likely to include documentation showing how the:

Correct Answer
verified

Vouching is used primarily to test which of the following assertions about classes of transaction?

Correct Answer
verified

In a financial report audit, substantive tests are audit procedures that:

Correct Answer
verified

An auditor's decision either to apply analytical procedures as substantive tests or to perform tests of details usually is determined by the:

Correct Answer
verified

Evidence is reliable if it:

Correct Answer
verified

The current file of an auditor's working papers is most likely to include a copy of the:

Correct Answer
verified

Auditors can eliminate engagement risk:

Correct Answer
verified

Which of the following is not a financial report assertion?

Correct Answer
verified

Which of the following audit risk components may be assessed in non-quantitative terms? Control risk Detection risk Inherent risk

Correct Answer
verified

Your audit client is under intense pressure to meet an earnings target. Which transaction assertion for purchases are you most concerned with?

Correct Answer
verified

As the acceptable level of detection risk increases, an auditor may change the:

Correct Answer
verified

Which of the following presumptions is correct about the reliability of audit evidence?

Correct Answer
verified

All of the following are typically in the current file except:

Correct Answer
verified

Which of the following factors will least affect the independent auditor's judgment as to the quantity, type and content of working papers desirable for a particular engagement?

Correct Answer
verified

To be appropriate, evidence must be both:

Correct Answer
verified

Which of the following is an essential factor in evaluating the sufficiency of evidence? The evidence must:

Correct Answer
verified

When reviewing a loan agreement to ascertain whether the bank's security over any of the client's assets has been included in the financial report, the audit assertion being achieved is:

Correct Answer
verified

Exam 5: Overview of Elements of the Financial Report Audit Process

Correct AnswerverifiedShow Answer

Your audit client is a shop that sells some of its own merchandise and some merchandise held on consignment.Which account balance assertion for inventory would you be most concerned about verifying?

Correct AnswerverifiedShow Answer

As part of accounts payable testing, an auditor reviews cash payments made post balance date. This is done mainly to gain evidence about the:

Correct AnswerverifiedShow Answer

An auditor's working papers will generally be least likely to include documentation showing how the:

Correct AnswerverifiedShow Answer

Vouching is used primarily to test which of the following assertions about classes of transaction?

Correct AnswerverifiedShow Answer

In a financial report audit, substantive tests are audit procedures that:

Correct AnswerverifiedShow Answer

An auditor's decision either to apply analytical procedures as substantive tests or to perform tests of details usually is determined by the:

Correct AnswerverifiedShow Answer

Evidence is reliable if it:

Correct AnswerverifiedShow Answer

The current file of an auditor's working papers is most likely to include a copy of the:

Correct AnswerverifiedShow Answer

Auditors can eliminate engagement risk:

Correct AnswerverifiedShow Answer

Which of the following is not a financial report assertion?

Correct AnswerverifiedShow Answer

Which of the following audit risk components may be assessed in non-quantitative terms? Control risk Detection risk Inherent risk

Correct AnswerverifiedShow Answer

Your audit client is under intense pressure to meet an earnings target. Which transaction assertion for purchases are you most concerned with?

Correct AnswerverifiedShow Answer

As the acceptable level of detection risk increases, an auditor may change the:

Correct AnswerverifiedShow Answer

Which of the following presumptions is correct about the reliability of audit evidence?

Correct AnswerverifiedShow Answer

All of the following are typically in the current file except:

Correct AnswerverifiedShow Answer

Which of the following factors will least affect the independent auditor's judgment as to the quantity, type and content of working papers desirable for a particular engagement?

Correct AnswerverifiedShow Answer

To be appropriate, evidence must be both:

Correct AnswerverifiedShow Answer

Which of the following is an essential factor in evaluating the sufficiency of evidence? The evidence must:

Correct AnswerverifiedShow Answer

When reviewing a loan agreement to ascertain whether the bank's security over any of the client's assets has been included in the financial report, the audit assertion being achieved is:

Correct AnswerverifiedShow Answer

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