1.

 Which of the following matters would an auditor most likely consider to be a significant
deficiency to be communicated to the audit committee? 
A. Management's failure to renegotiate unfavorable long-term purchase commitments.
B. Recurring operating losses that may indicate going concern problems.
C. Evidence of a lack of objectivity by those responsible for accounting decisions.
D. Management's current plans to reduce its ownership equity in the entity.

 2. In
assessing the objectivity of a client's internal auditors, the CPA would be most likely to
consider internal auditor: 
A. Education levels.
B. Experience.
C. Organizational status within the company.
D. Training and supervisory skills.

3. In a financial statement audit performed following AICPA Professional Standards, how
frequently must an auditor test operating effectiveness of controls that appear to function as they
have in past years and on which the auditor wishes to rely upon in the current year? 
A. Monthly.
B. Each audit.
C. At least every second audit.
D. At least every third audit.
 

4. After obtaining an understanding of internal control and arriving at a preliminary assessed

level of control risk, an auditor decided to perform tests of controls. The auditor most likely
decided that: 
A. Additional evidence to support a reduction in the assessed level of control risk is not
available.
B. An increase in the assessed level of control risk is justified for certain financial statement
assertions.
C. It would be efficient to perform tests of controls that would result in a reduction in planned
substantive procedures.
D. There were many internal control deficiencies that would allow misstatements to enter the
accounting system.

5. Which of the following is least likely to be evidence of operating effectiveness of controls? 

A. Cancelled supporting documents.
B. Confirmations of accounts receivable.
C. Records documenting usage of computer programs.
D. Signatures on authorization forms.