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The most important general ledger account included in and affecting several cycles is the: (Points : 10) cash account. inventory account. income tax expense and liability accounts. retained earnings account. 2. The detail tie-in is part of the_______ assertion for account balances. (Points : 10) classification valuation and allocation rights and obligations completeness 3. Management assertions are: (Points : 10) implied or expressed representations about accounts, transactions, and disclosures in the financial statements. stated in the footnotes to the financial statements. explicitly expressed representations about the financial statements. provided to the auditor in the assertions letter, but are not disclosed on the financial statements. 4. The occurrence assertion applies to _______. (Points : 10) presentation and disclosure matters classes of transactions and events during the period account balances proper classification of income statement accounts 5. The detail tie-in objective is not concerned that the details in the account balance: (Points : 10) agree with related subsidiary ledger amounts. are properly disclosed in accordance with GAAP. foot to the total in the account balance. agree with the total in the general ledger. 6. Which of the following statements about the existence and completeness assertions is not true? (Points : 10) The existence and completeness assertions emphasize different audit concerns. Existence deals with overstatements and completeness deals with understatements. Existence deals with understatements and completeness deals with overstatements. The completeness assertion deals with unrecorded transactions. 7. To be considered reliable evidence, confirmations must be controlled by: (Points : 10) a client employee responsible for accounts receivable. a financial statement auditor.
Compare – documentation. Compare client with budget. planning. Which of the following statements regarding analytical procedures is not correct? (Points : 10) Analytical tests emphasize a comparison of client internal controls to GAAP. Compare client with prior year. Chief financial officer.a client’s internal audit department. The primary purpose of performing analytical procedures in the planning phase of an audit is to: (Points : 10) help the auditor obtain an understanding of the client’s industry and business. reduce detailed tests. test of control and completion phases. Audit committee. Which of the following is not likely to be a related party? (Points : 10) . Which of the following is not a correct combination of terms and related type of audit evidence? (Points : 10) Foot – reperformance. Trace – analytical procedures. 10. Vouch – documentation. indicate possible misstatements. Which of the following normally signs the engagement letter for an audit of a public company? (Points : 10) Corporate treasurer. Analytical procedures are required on all audits. Analytical procedures can be used as substantive tests. 13. Compare client with SEC averages. 8. 9. analytical procedures alone may be sufficient evidence. planning and completion phases. For certain accounts with small balances. 11. and completion phases. The Auditing Standards Board has concluded that analytical procedures are so important that they are required during: (Points : 10) planning and test of control phases. Chairman of the board of directors. a client’s controller or CFO. test of control. 12. assess the going concern assumption. 14. Which of the following is not one of the major types of analytical procedures? (Points : 10) Compare client with industry averages.
16. Analytical procedures may be performed at any time during the audit. if any. One accounting issue that does not require management to use significant judgments is: (Points : 10) the allowance for doubtful accounts. The corporate charter must be annually reviewed by the PCAOB. 15. the liability for warranty payments. 19. obsolete inventory. A major stockholder of the company. Acceptable audit risk is ordinarily set by the auditor during planning and: (Points : 10) held constant for each major cycle and account. The chief executive officer. the useful life of equipment for tax purposes. Analytical procedures must be performed throughout the audit. A warehouse employee. appointment of the auditor subsequent to the physical count of inventories requires a disclaimer of opinion. 18. Which of the following statements is not correct with respect to analytical procedures? (Points : 10) Auditing standards emphasize the need for auditors to develop and use expectations. are to be properly supervised. Which of the following is correct with respect to a company’s corporate charter? (Points : 10) The corporate charter is granted by the federal government and is required to recognize the corporation as a separate entity.Affiliated companies. and the types of business the corporation is authorized to conduct. estimation of the time to be spent on the audit work by audit staff and management. which states that the work is to be adequately planned and that assistants. Analytical procedures use comparisons and relationships to assess whether account balances appear reasonable. The first standard of field work. performance of substantial parts of the examination is necessary at interim dates. The corporate charter includes the exact name of the corporation. reference to management’s responsibility for the financial statements. statement that management advisory services would be made available upon request. 17. An engagement letter sent to an audit client usually would not include a(n): (Points : 10) reference to the auditor’s responsibility for the detection of errors or irregularities. . recognizes that: (Points : 10) early appointment of the auditor is advantageous to the auditor and the client. acceptance of an audit engagement after the close of the client’s fiscal year is generally not permissible. The corporate charter includes the rules and procedures used to operate a corporation. 20. the date of incorporation.
22. To what extent do auditors typically rely on internal controls of their public company clients? (Points : 10) Extensively Only very little Infrequently Never 25. The relationship between control risk and evidence needed to support account balances is direct. monetary-unit sampling test.held constant for each major cycle but varies by account.. he/she would assign a low value (e. remain unchanged. 0%) to CR. . varies by each major cycle and by each account. If planned detection risk is reduced. varies by each major cycle but is constant by account. the same amount of evidence is required for either low or high dollar amounts. The relationship between control risk and detection risk is inverse. substantive test. test of attributes. 21. there is no relationship between it and the dollar amount of evidence needed.g. 23. decrease. the amount of evidence the auditor accumulates will: (Points : 10) increase. less evidence is required for a low dollar amount than for a high dollar amount. If the auditor concludes that internal control is completely ineffective to prevent or detect errors. A procedure designed to test for monetary misstatements directly affecting the correctness of financial statement balances is a: (Points : 10) test of controls. Tests of transactions are used to determine whether ___________ have been satisfied. (Points : 10) compliance test requirements. When setting a preliminary judgment about materiality: (Points : 10) more evidence is required for a low dollar amount than for a high dollar amount. 26. Chapter 13 24. be indeterminate. When discussing control risk (CR) and the audit risk model. which of the following is false? (Points : 10) CR is a measure of the auditor’s assessment of the likelihood that misstatements will not be prevented or detected by internal control.
cause the issuance of a qualified or adverse opinion. existence assertions 27. 28. When the auditor finds that there are missing controls in an area of the accounting system. Evaluate prior experience with the client. revenue accounts. client’s industry. expense accounts. the audit program in that area would be modified in such a way as to: (Points : 10) increase the amount of tests of controls. Observe control-related activities. increase the reliance on tests of controls. transaction-related audit objectives. 29. audit firm’s available personnel. 30. The primary emphasis in most tests of details of balances is on the: (Points : 10) balance sheet accounts. cash flow statement accounts. The most important consideration in developing the audit plan and audit program is the: (Points : 10) client’s size. . Reperform client procedures. the audit risk model used in its planning form. Which of the following is not appropriate for purposes of testing the effectiveness of controls? (Points : 10) Make inquiries of client personnel. eliminate the need for a test of controls.balance coverage requirements.