a "PA REVIEW SCHOOL OF THE PHILIPPINES FIRST Pane “ene FEBRUARY 10, 2018 'D EXAMINATION SATURDAY, 5:00PM ~ 6:00PM SETA IN ONL RECTIONS: CHOOSE THE BEST ANSWER FOR EACH OF THE FOLLOWING. FULLY SHADE BOX FOR EACH ITEM. STRICTLY NO ERASURES ALLOWED. 1 | |. The objective of a: A Audit committees have been identified as a major factor in promoting independence in both interna! and externa! auditors, Which of the following is the most important limitation on the effectiveness of audit committees? i A uct committee members do not normaly hive degrees in the accounting or auditing fs. ' B. Audit committees devote most of their efforts to external audit concerns and do not pay: much attention to intemal auditing and the overall control environment. C. Audit committee members are compensated by the organization and thus favor a shareholder's view. ! . Audit committees are composed of independent directors. However, those directors may have close personal and professional fiéndships with management. Which of the following services, if any, may a practitioner who is not independent provide? ‘A. Reviews but not compilations. 8. Compilations but not reviews. | C. Both compilations and reviews. | D. No services. rance services is to Improve the firm's outcomes. o B. Compare internal information and policies to fhose of other firms. C. Enhance decisian making. D. Provide more timely information. ACPA firm is reascnably assured of meeting its responsibility to provide services that conform with professional standards by | A. Maintaining an attitude of independence in its engagements. 8. Aghering to Philippine Standards on Auditing (PSAS). C. Having an appropriate system of quality contfol, D. Joining professional societies that entorce eti\ical conduct. \ [An auditor’s engagement letter most likely will in¢lude A. Management's acknowiedgraent of its responsibility for maintaining effective control. B. A request for permission to contact the client’s lawyer for assistance in identifying litigation, daims, and assessments. C. Aremindes that management is responsible for illegal acts committed by employees. 1. The auditor's preliminary assessment of the risk factors relating to misstatements arising from fraudulent financial reporting. Which of the following factors most likely would cause an auditor to decline a new engagement? A. Failure of management to satisfy the preconditions for an audit. B. An inability to preform preliminary analytical procedures before assessing control risk. C. The close proximity to the end af the entty’s fiscal year 1D. An inadequate understanding of the entity’s interna: control. In an audit hased on Philipsine Standards on Auditing (PSAs), a successor auditor would normally become satisfied with opening balances by Page 1 of 16 PagesCPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) ~ MANILA FIRST PREBOARD EXAMINATION AUDITING THEORY. FEBRUARY 10, 2018 / SATURDAY./ 5:00PM = 6.00PM A. Auditing the prior years financial statements. B. Interviewing the cent. C. Reviewing the predecessor's worung papers. D. Performing analytical procedures. Which of the following circumstances would permit an independent auditor to accept an engagement after the close of the fiscal year? Receipt of an assertion from the preceding auditor that the entity will be able to continue 5 @ going concern. An expectation of the effectiveness of internal control Issuance of a disdaimer of opinion as a result of inability to conduct certain tests required by PSAs due to the tming of the acceptance of the engagement. ©. Remedy of limitations resulting from accepting the engagement after the close of the end of the year, such as those relating to the existence of physical inventory. 8, . Se ee eae auditor about the termination of the engagement, the predecessor auditor should ete ter EE eb eel ieg te Sesto ore ee ae Seas cep See ey cee ee ene eee eee eee eee oem eae eae C. An internal contro! questionnaire identifying policies and procedures that assure specific / EEE eae ‘emcee en 21, Directors, management, extemal auditors, end internal auctors all play important roles in Greating proper control provesves, Senior management fs primarily fesponsible for A. Implementing and ontoring controls des-gred by the board of directors. B. Ensuring. thet external and internal auditors oversee the adminstration of risk | management and control processes, Cc. Reviewing the relooity and integrity of fnencial and operational information 5. Establishing nsk management and contol provesses. 12. Internal controts are designed to provide reasonable assurance thet ne fiSterialerroct or roud with prevenies, or detected ond carected, witvn a Umely ea by employess in te Course oF perfcrming their asaigned duties. ianagatmants pisnina, orsncina nd crn prose are propery evauoed sana aer errs plans have tox been crcuraventod By worker CoNMBON woe ier pov Jopartments, pucdance arid oversight of management's seSonmance is accomplished soonearicaly and emicient. one wean which of the following : from sales on account have ceen misappropriated, Which of te f 13. Cash recat from oe dctotention ana he laos iat 0 be detected by an autor? Fe rote eg tre anroutsrecelvatie contra acount A Srersating the accounts recelvaite subir #20 © Ghaerstaning the sales journal. S. UAderstating the cash roce ps souno! materials by the cient is to 14. The primary audit objective regarding the purchasing of materials By ¢ Te Soserve the annual physical count Br Ascertain that materials paid for are on page 2 of 18 PanesCPA REVIEW scx AUDTUNG THEORY. ME PALIPPINES (Coan) ~ ran FIRST PREBOARD EXAMINATION —_ FEBRUARY 10, 2018 / SATURDAY / 5:002M = 6:00PM Inve 9. caren Fecording of unusual transactions erates materials. Feliability of financial reporting by the purchasing function. 15. Th expert SPOU perform tests of controls when the auditor's risk assessment includes an A. That the B. That the C. Of the D. Of ar controls are not bei | ing applied. '€ controls are not suitably designed. | | ‘Operating effectiveness of internal control. low level of inherent risk. i 16. Observation is considered a reliable audit procedure but one that is limited in usefulness. now ‘ever, it is used in a number of different audit situations. Which of the following qatements is true regarding observation as audit technique? - tis most persuasive about the performance of a process but is limited to the moment in time at which the observation takes place, 1 B. It is the most Persuasive audit technique for determining if fraud has occurred. C. It is the most persuasive methodology to leam how transactions are really processed during the period under audit. ! ©. It is the most effective audit methodology to use in filling out internal contro! Questionnaires. ; 17. An auditor’s documentation will least likely show how the A. Significant issues were resolved. B. Understanding of the dlient’s internal control was obtained and the risks of material misstatement were assessed, C. Client's schedules were prepared. | D. Engagement was planned. 18. Which of the following is not a financial statement assertion about cash? ‘A. The reported cash balance includes all cash transactions that should have been recorded. 8. Compensating cash balances are classified as other current assets. C. The client has rights to the reported cash. 1 D. rted cash exists. | 19. Confirmation of accounts payable with creditors is most appropriate when A. The majority of accounts payable balances are owed to related parties. 8. Accounts payable balances are immaterial. CC. Internal contro! over accounts payable is effective, and sufficient evidence exists to minimize the risk of a material misstatement. D. Creditor statements are not available, and internal control over accounts payable is unsatisfactory. 5 20. For several years a client's physical Inventory count has been lower than what was shown ‘on the books at the time of the count, and downward adjustments of the inventory account have been required. Contributing to the inventory problem could be material weaknesses in internal control that led to the failure to record some A. Sales returns received. B. Cash purchases. C. Sales discounts allowed. D. Purchases returned to vendors. | 24. During an audit engagement, pertinent data are compiled and included in the audit working papers. The working papers primarily are considered to be J. A dient-owned record of conclusions reached by the auditors who performed the engagement. F Evidence supporting financial statements. ‘Support for the auditor's representations as to compliance with relevant PSAS. ‘A record to be used as a basis for the following year’s engagement. poe Page 3 of 10 PagesCPA REVIEW SOHOOL OF THE PHI | ILIPPINES (CPAR} - MANILA FIRST PREBOARD EXAMINATION | AUDITING THEORY TT eraauany.10, 2038 / SATURDAY /3: 002M — 6-008M | 22. Which of the folowing is the least persuasive documentation in support of an auditor's fy opinion? { ‘A. Schedules of details of physical inventory counts conducted by the client. i B. Notation of inferences drawn from ratios and trends. | | C. Notation of appraisers’ conclusions documented in the auditor's working papers. | D. Lists of negative confirmation requests for which no response was received by the i | auditor. ‘ | i 23. An auditor has identified the controller’s review of the bank reconciliation as 2 control to test. In connection with this test, the auditor interviews the controller to understand the specific data reviewed on the reconciliation. In addition, the auditor verifies that the bank reconciliation is properly prepared by the accountant and reviewed by the controller as ‘evidenced by their respective sign-offs. Which of the following types of audit procedures do these actions illustrate? ‘ | A. Observation and inspection of records. B. Confirmation and reperformance. C, Inquiry and inspection of records. | BD. Analytical procedures and reperformance. 24, The overall attitude and awareness of an entity's board of directors concerning the = importance of internal contro! usuatly is reflected in its | | A, Computer-based controls. | B. System of segregation of duties. | C. Control environment. | D. Safeguards over access to assets. 25. Which of the following services provides the lowest level of assurance on @ financial statement? A. An audit. B. Areview : CC. Neither service provides assurance on financial statements. ©. Each service provides the same level of assurance on financial statements. . 26. The ptimary reason for an audit by an independent, external audit firm is to A. Relieve management of responsibility for the financial statements. B. Guarantee that there are no misstatements the financal statements and ensure that any fraud will be discovered. CC. Satisfy government regulatory requirements. D. Provide increased assurance to users as to the faimess of the financial statements. 27. Tn comparing management fraud with employee fraud, the auditor's risk of failing to discover the fraud is Q A. Greater for management fraud because managers are inherently more deceptive than employees. ‘ B. Greater for management fraud because of management’ ability to override existing intemal controls, CC. Greater for employee fraud because of the higher crime rate among blue collar workers. D. Greater for employee fraud because of the larger number of employees in the organization. 28. __ risk reflects the possibility that the information upon which the business decision was made was inaccurate. A. Client acceptance. C. Information. B. Business. D. Control. | 29, Which of the following is an important consideration when deciding the nature of tests to use in'a financial statement audit? ‘A. Tests of details typically provide a low level of assurance. B. Analytical procedures are an inefficient means of obtaining assurance 7 C. The procedures to be applied on a particular engagement are a matter of the auditor's professional judgment. ’ > { Page 4 of 10 Pages, PP zAmemew SOACO OF THE PHILIPPINES (CFAR)- MANILA FIRST PREBOARD EXAMINATION po FEBRUARY 10, 2018 / SATURDAY / 5:00PM — 6:00PM D. The use of test trois st eeanaee fe a controls should be considered without regard to the ievel of 30. Jaherent risk and control risk differ from planned detection risk in that they ae = fon the misapplication of auditing pro¢edures. Cette assessed in either quantitative or nonquanbtative terms. ot a independently of the finanaal statement audit. - Can be changed at the auaitor’s discretion. 31. When considering internal control, an auditor must be aware of the concept of reasonable assurance which recognizes that the A. Employment of competent personne! provides assurance that management's control ‘objectives will be achieved. Establishment and maintenance of internal control is an important responsibility of the management and not of the auditor. \ C. Cost of intemal contro! should not exceed the benefits expected to be derived therefrom. D. Separation of incompatible functions Is necessary to ascertain that the internal control is effective, B. 32. Prior to, or in conjunction with, the informatior-gethering procedures for an audit, audit team members should discuss the potential for materia! misstatement due to fraud. Which of the following best characterizes the mindset that the audit team should maintain during this discussion? ‘A. Presumptive . Critieizing B. Judgmental B. Questioning 33. Assume that a company has a contro! deficiency'regerding the processing of cash receipts. Reconciliation of cach accounts by a competent individual otherwise independent of the Cash function might make the likelihood of a sipnificent misstatement due to the control Gefciency remote. In this situation, reconctiatjan may be referred to as what type of control? A. Compensating, c. Adjustive. 2 B. Preventive, D. Nenroutine. 34. If the auditor belleves that the financial statements are not fairly stated or is unabie to reach @ conclusion because of insufficient evidence, the auditor ‘A. Should withdraw from the engagement. B. Should request an merease In audit fees so that more resources can be used to conduct the audit. C. Has the respensibilty of notifving financial statement users through the auditor's report. 1D. Should notify regulators of the circumstances. to consultation services engagements? ferstancing of the internal contro! to assess control 35. Which of the follonina statements appl A. A practitioner should obtain an uP risk. B.A practitioner is rot permitted to compile a financiat forecast. C. A practitioner 's &e maintain en appearance of independence. D. A practitioner should obtain sufficient relevant data to complete the engagement. 36. For audit evidence to be competing to the aucitor 't must Le suficient and appropriate. Which Statement below 6s noe exrrect regarding the aoprepriatoness of audit evidence? A. The more effective the internal conrol system, the more assurance it provides the auditor about the relianilty of financial reporting 97 the chent. 1B. An auditor's opinion to be economically useful ana profitable to the auditing firm needs to bbe formed witin a rexsoriabie time end based on evidence ostained that assures profits for the auditing firm. C. Evidence ehtanad “rom indapendent sources outside th than evidence secured sole'y within the ennity, 1D. The independent atiate”s direct nersona! Mnowledge, ehteined through inquiry, observation and inspection, is generally more parsussive than icformation cbtained indirectly. entity 1S generally more reliable Page 6 af 19 Paz:(CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) ~ MANILA, FIRST PREBOARD EXAMINATION AUDITING THEORY 0 eeusary 10, 2918 / SATURDAY 5:000M — 6:008M a7 38, 39. an. 42. 43. A financial statement audit dient has an information processing system where all information is transmitted, processed, and maintained electronically. Because the company has very little tangible data available, the auditor has decided that it will be impossible to do enough substantive testing to reduce the risk of material misstatement to an acceptably low level. What should the auditor do in that situation? Express a qualified opinion or disciaim an opinion. Withdraw from the engagement. Perform additional tests of controls to reduce the risk of material misstatement. Recommend that the client convert a portion of the information processing system to 2 manual system so backup documentation can be made availabie to the auditor. ooe> Which of the following types of risk increases when an auditor performs substantive analytical audit procedures for finanaal statement accounts at an interim date? ‘A. Inherent. B. Control. C. Detection. 1D. Sampling The auditor looks for an indication on duplicate sales invoices to see if the invoices have been verified. This is an example of ‘A. A test of details of balances. B. A test of control. C. A substantive test of transactions. 1. Both a test of control and a substantive test of transactions. “The auditor faces a risk that the audit will not detect material misstatements that occur in the accounting process. In regard to minirnizing this risk, the auditor relies primanty On A. Substantive tests. 8. Tests of controls. C. Internal control. ©. Statistical analyst Which of the following should an ausitor do when control risk Is assessed at the maximum level? A. Perform fewer substantive tests of detais. B. Perform more tests of controls. C. Document the assessment. 1D. Document the internal control system more: tensively A procedure that involves tracing @ transaction from its crigination through the company’s information systems until it is reflected in the company’s financial report is referred to as a(n) x A. Analytical analysis. &B. Substantive procedure. CC. Test of a control. D. Walk-through. Which of the following statements best describes the aiidivor’s responsibility regarding the detection of fraud? The auditor is responsible for the failure to detect fraud only when such failure clearly Tests from non-performance of audit procedures specifically described in the engagement letter. B, ‘The auditor Is required 19 provide reasonable assurance that the financial statements are free of both materiel errors and fraud. c. the auditor may extend auditing provadures to actively search for evidence of fraud where examination indicates that fraud may exist 1b. Tho auditor is responsible for the failure ta detect fraud only when an unmodified opinion is issued. Page 6 of 10 PagesAvorring makoRy ME PMILPINES (PAR) — anna 44, 45, 46. 47. 43. 50. eae FIRST PREBOARD EXAMINATION ——__FEBR Three conditi WARY 10. 20187 SATURDAY! 5. Q0EM = 002M When! maki ! sufficient Peas about evidence for a given audit, In adsition, the goal Uimely, reliable evidence that is relevant to the information being verified. A. No marian 002! f audit efficiency is to gather and evaluate the informat : B. Ever cos Cost NONEd in obtaining Such ewence ee © Atha tomest Spa the auctor, Because they bil the chent for costs incurred. » At the cost suggested in the engagement letter. the auditor's goal is to obtain a AN exar Srelutng ery a ea ee omer a metds forthe mura of A. Operational audit, Neness is what iype of uot? f Semana si In planning an audit, the auditor considers audit risk. Audit risk is the A. Susceptibility of an assertion to material misstatement assuming there are no related controls. 8. Risk that a material misstatement in an assertion will not be prevented or detected on a timely basis by the client's internal control. C. Risk that the auditor's procedures for verifying account balances will not detect a ‘material misstatement that in fact exists. b D. Risk that the auditor may unknowingly fail to appropriately modify the Opinion on financial statements that are materially misstated. The two phases of the auditor’s involvement with internal control are sometimes referred to as “understanding and assessment” and “tests of controls.” In the tests of controls phase, the auditor attempts to J. Obtain a reasonable degree of assurance that the client's controls are in use and are operating as planned. B. Obtein sufficient, appropriate evidential matter to afford a reasonable basis for the auditor's opinion. C. Obtain assurances that informative disclosures in the financial statements are reasonably adequate. 1b. Obtain knowledge and understanding of the client's prescribed procedures and methods. “The negative form of accounts receivable confirmation request is useful except when hy internal contro! surrounding accounts receivable Is considered to be effective. B. A large number of small balances are involved. i © The auditor has reason to believe the persons receiving the requests are likely to give them consideration. D. Individual account balances are relative large. “The company being audited has an internat auditor that is both competent and objective. ‘The independent auditor wants to assign tasks for the internal auditor to perform. Under these circumstances, the independent auditor may. A. Allow the internal auditor to perform tests of internal controls. B. Allow the internal auditor to audit a major subsidiary of the company. C. Not assign any task to the internal auditor because of the intemal auditor's lack of independence. D. Allow the internal auditor to perform analytical procedures, but not be involved with any test of details. Page 7 of 10 Pages‘CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) ~ MANILA FIRST PREBOARD EXAMINATION AUDITING THEORY FEBRUARY 10, 2018 / SATURDAY / 5:00PM = 6:002M 51. Which of the following presumptions is correct about the reliability of audit evidence? ‘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 CC. Reliabality of audit evidence refers to the amount of corroborative evidence obtained. . Effective internal control provides more assurance about the reliability of audit evidence. 52. Which of the following is not a correct use of the terminology in relation to audit evidence? A. Evidence obtained from an independent source outside the client organization is more | reliable than that obtained from within. i 8. Documentary evidence is more reliable when itis recevved by the auditor indirectly rather than directy C. Documents that originate outside the company are considered more reliable than those that oniginate within the cient’s organization. D. External evidence, such as communications form banks, is generally regarded 2s more reliable than answers obtained from inquiries of the cent 53. Why do auditors generally use a sampiing aporcach to evidence gathering? A. Auditors are experts and do not need to look at much to know whether the financial ‘Statements are correct or not. ‘Auditors must balance the cost of the audit with the need for precision. ‘Auditors must limit their exposure to their clent to maintain independence. |. The auditor's relationship with the client 's generally adversarial, so the auditor will not have access to all of the financial information of the company. poe 54. An auditor is performing substantive tests of transactions for sales, One step isto trace 2 sample | or aor entnics from ve accouts reenable master fle back to the supporting duplicate sales | Invoices, What would the auctor Intend to estabiish by Uns sep? | A Sales invoices represent existing sales. 8. Allsates have been recorded. | CA sales imvorces nave been properly posted to customer accounts | 5. Bebe enuncs in tne accounts receivable master fle are properly supsorted by sales invoices | ss. Themes us vce ane eng tar mesons ine rane aro ene seaia ee aoen Fee og Be musaromrain EB Sar ey oi es rer are BT Ren cr en cy ey, ee eee eee en 56. A proposed assurance engagement cen be accepted when the practitioner's preliminary Knowledge about the engagement circumstances indicates that relevant ethical | requirements will be satisfied and ‘ 1. “The subject matter of the engagement. 's eopropriste. vailable to the intended users. Ii, The critena to be used are suitabie and are priate evidence to support the conclusion. Il. The practitioner has access to sufficient aap | IV. The conclusion Is to be contained in 2 wristen report. | V. There is a rational purpose for the engagement. | | A. 1,1, and MII only 1,11, 1, and IV only B. 1, 0, 1V, and Vonly BL a, 1y, and v percentage has declined from 30 percent in the preceding year to 20 percent in the current year. The auditor should Express 2 qualified opinion due to inability of the cient company to continue 2s @ going concern. | Evaluate management's serformance in cousing this decti Require note disclosure. Consider the possibility of a misstatement in the financial staterents. | 57. Asa result of analytical procecures, the indenendant ausitor determines that the gross profit i poe Page B of 10 ParesCO EOESSTSO‘C:':-’S a ALARA TEMES AMEN RKOOASSS ad 57 (PA REVIEW SCHOOL OF THE PHL AUDITING THEORY.” PHIPPINES (cPaR) — MaNLLA FIRST PREBOARD EXAMINATION ——________EFBRUARY 10, 2018 / SATURDAY / 5:009M — 6:008M 58. The CPA reviews to 265)gn te ge PY" Payroll procedures. An exampie of an internal control weakness iS fepartment superviser t! Sl he responsability for ns Ratrbuting Payroll checks to subordinate employees. Carentan 274 appronng time reports for subordinates. departnen’ applicants for subordinate positons prior to hiring by the personnel D. Initiating requests for saiary adjustments for subordinate employees. Ee Which of the following controls may prevent ithe faiure to bil customers for some A eae shipment should be supported by a prenumbered sales invoice that is accounted on 1 B. Each sales order should be approved by authorized personne. C. Sales journal entnes should be reconciled to daily sales summaries. D. Each soies invoice should be supportes by a shipping document. i 60. To reduce the risks associated with accepting e-mail responses to requests for confirmation. of accounts recenabie, an auditor most Fkely would A. Request the sendei's to mail the onginal forms to the auditor. 8. Exemine subsequent cash receipts for the accounts in question. C. Consider the e-mail responses to the confirmations to be exceptions. ©. Mail second requests to the e-mail respondents 61, The purpose of an engagement letter isto | A. Document the CPA firm's responsibitity to|external users of the audited financial statements. B. Document the terms of the engagement. C. Notify the audit staff of an upcoming engageinent so that personnel scheduling can be facilitated, l D. Emphasize management's resporsibility for approving the audit program. 62. When engaged to compile the financial statements of an entity, an accountant Is required Torpossese o level of knowledge of the entity's socounting principles and prectices. This Fequirement most likely wil include obtaining a opneral understanding of the J intemel control awareness of the entity's senjor management. Risk foctors relating to misstatements arising from ilegal acts Design of the entity’s internat controls implemented. Nature of the entity’s business transactions, the form of its accounting records and the accounting basis on which the financial information is to be presented, poe | 63. ACPA has been engaged to perform review services for a client. Identify which of the following is a correct statement. A. The CPA must perform the basic aurlit protsdures necessary to determine that the statements are in conformity with che applicable financial reporting framework. 8. The financial statements are primerily representations of the CPA. C. The CPA may prepare the statements from the books but may not assist in adjusting and closing the books. D. The CPA is performing an assurance engagement other than an audit of the financial statements. 64. Evidence is generally considered appropriate when A. Ithas been obtained by randorn selection B. There is enough of it to afford a reasonable basis for an opinion on financial statements. CC. Ithas the qualities of being relevant, oojective, and free from known bias. D. It consists of written statemenis made by managers of the enterprise under audit. re of relevant factors relating to fraudulent 65, Auditing standards require thot auditacs be “ements is faise conceming fraudulent financial reporting. Which of thi financial reporting? lieoning ©(CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) ~ MANILA. FIRST PREBOARD EXAMINATION AUDITING THEORY FEARUARY 10. 204 SATURDAY / 5.008M = 6:008M 67. 63. 69, A. Fraud frequently involves a pressure or an incentive to commit fraud and a perceived opportunity to do so. B. Fraud invelves actions of management but excludes the actions of employees or third parties. C. Two types of froud relevant to the auditor include material misstatements arising from fraudulent financal reporting and matenat misstatemnents arising from misappropriation of assets. ©. An audit rarely involves the authentication of documentation; thus, fraud may 90 undetected by the auditor. Buddy, the purchasing agent of Lander Hardware Wholesalers, has a relative who owns @ ‘tall hardware store. Buddy arranged for hardware to be delvered by manufacturers to he fetal store on @ COD bass, thereby enabling his relative to buy at Lander’s wholesale Drices. Buddy was probably able to accomplish this because of Landers poor internat control A. Purchase requisitions. B. Cash receipts. C. Perpetual inventory records. B. Purchase orders. Prior to commencing field work, an auditor usually discusses the general audit strategy with the client's management. Which of the following details do management and the auditor usually agree upon at this time? A. The specific matters to be included in the communication with the audit committee. B. The minimum amount of misstatements that may be considered to be reportable conditions. C. The schedules and analyses that the client's staff should prepare. D. The effects that inadequate controls may have over the safeguarding of assets, Which of the following is a control weakness fer a company whose inventory of supplies: consists of a large number of individual items? ‘A. Supplies of relatively little value are expensed when purchased. B. The cycle basis is used for physical counts. C. The storekeeper is responsible for maintenance of perpetual inventory records. D. Perpetual inventory records are maintained cnly for items of significant value. Which of the following is not an assertion tested in an audit of traaing securities? A. The securities are authentic. B. The securities are properly classified on the statemrent of financial position. C. The securities actually exist. D. The securities are the property of the client. . ‘company is concerned with the theft of cash after the sale has been recorded. One way in which fraudsters conceal the theft is by & proces called “lapping.” Which of the following best describes tapping? ‘A. Reduce the customer's account by recor B. Write off the customer's account. C. Reduce the customer's account by reoovcing & sales allowance. D. 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