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9 The element of the audit planning process most likely to be agreed upon
with the client before implementation of the audit strategy is the
determination of the
A Timing of inventory observation procedures to be performed.
B Evidence to be gathered to provide a sufficient basis for the auditor's
opinion.
C Procedures to be undertaken to discover litigation, claims, and
assessments.
D Pending legal matters to be included in the inquiry of the client's
attorney.
10 Having evaluated inherent risk and control risk, the auditor determines
detection risk
A As the complement of overall audit risk.
B By performing substantive audit tests.
C As a product of further study of the business and industry and
application of analytical procedures.
D At a level that equates the joint probability of inherent risk, control
risk, and detection risk with overall audit risk.
11 An auditor compares 2014 revenues and expenses with those of the prior
year and investigates all changes exceeding 10%. By this procedure the
auditor would be most likely to learn that
A An increase in property tax rates has not been recognized in the
client's accrual.
B The 2014 provision for uncollectible accounts is inadequate, because of
worsening economic conditions.
C Fourth quarter payroll taxes were not paid.
D The client changed its capitalization policy for small tools in 2014.
The marketing department for a major retailer assigns separate product
managers for each product line. Product managers are responsible for ordering
products and determining retail pricing. Each product manager’s purchasing
budget is set by the marketing manager. Products are delivered to a central
distribution center where goods are segregated for distribution to the
company’s 52 department stores. Because receipts are recorded at the
distribution center, the company does not maintain a receiving function at
each store. Product managers are evaluated on a combination of sales and gross
profit generated from their product lines. Many products are seasonal and
individual store managers can require that seasonal products be removed to
make space for the next season’s products.
36 Mai, CPA discussed selected elements of the overall audit plan and
certain audit procedures with the audit committee, management and staff
of Dawn Traders. This move by the auditor has the following benefits,
except:
A The overall audit plan and the audit program becomes a shared
responsibility between the auditor and the client's management.
B The audit can be performed with improved effectiveness and efficiency.
C Coordination of audit procedures with work of the entity's personnel can
be initiated.
D Improved business relationship between the client and the auditor is
established.
A inquiry
B confirmation
C inspection
D reperformance
39 Inherent risk is ___________ related to detection risk and ____________
related to the amount of audit evidence.
A directly, inversely
B directly, directly
C inversely, inversely
D inversely, directly
41 Which of the following least likely affect the form and content of the
overall audit plan?
A Complexity of the audit engagement
B Methodology and technology used by the auditor
C The entity’s form of business organization
D The size of the entity
42 The auditor faces a risk that the examination will not detect material
misstatements in the financial statements. In regard to minimizing this
risk, the auditor primarily relies on
A Substantive tests
B Tests of controls
C Internal control
D Statistical analysis