analytics

Question 1

When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor will most likely increase the:

Answer 1

extent of tests of details.

Question 2

Heath Co.’s current ratio is 4:1. Which of the following transactions would normally increase its current ratio?

Answer 2

Selling inventory on account

Question 3

Selected data pertaining to Lore Co. for the calendar year 20X1 is as follows:

Net cash sales $ 3,000
Cost of goods sold 18,000
Inventory at beginning of year 6,000
Purchases 24,000
Accounts receivable at beginning
of year 20,000
Accounts receivable at end of year 22,000

Lore would use which of the following to determine the average days sales in inventory?

Answer 3

Numerator: 365; Denominator: Inventory turnover

Question 4

n assessing control risk, an auditor ordinarily selects from a variety of techniques, including:

Answer 4

reperformance and observation.

Question 5

The procedure of an accountant making inquiries about events subsequent to the date of the financial statements that would have a material effect on the financial statements is:

Answer 5

required for a review only.

Question 6

After considering an entity’s negative trends and financial difficulties, an auditor has substantial doubt about the entity’s ability to continue as a going concern. The auditor’s considerations relating to management’s plans for dealing with the adverse effects of these conditions most likely would include management’s plans to:

Answer 6

increase ownership equity.

Question 7

If interim substantive procedures for an account identified no exceptions, which of the following would the auditor not perform on that account at year-end?

Answer 7

Tests of details for the entire year under audit