Aud 1

Question 1

The engagement letter for compilation of unaudited finanical stmnts will include

Answer 1

objective of the the compilation:

• -no opinion or form of assurance
• -acknowledgement of mngmnts representation
• -not used by 3rd parties

Question 2

Ratio estimation sampling technique is most effective, when

Answer 2

the calculated audit amounts approximately proportional to the client’s book amounts

Question 3

Overall responses to address the assessed risk of material misstatements include the following:

Answer 3

• -emphasizing to the audit team the need to maintain professional skepticism
• -Assigning more experienced staff
• -Providing more supervision
• -Incorporating more elements of unpredictability
• -Making general changes to the nature, timing or extent of the audit procedures

Question 4

Risk assessment procedures include;

Answer 4

• -Inquiries of management and other within the entity
• -Analytical procedures, and
• -observation and inspection
• -as well as, other procedures to obtain other helpful information

Question 5

The purpose of an embedded audit module is to :

Answer 5

enable continuous monitoring and analysis of transaction processing

Question 6

When an accountant issues to an underwriter a comfort letter with comments on data that has not been audited:

Answer 6

the underwriter most likely will receive negative assurance on the capsule information.

Question 7

Stmnts on Standards for Attestation Engagements (SSAE) are:

Answer 7

–Practitioners engaged to perform exam or review or issue an agreed-upon procedure report on a matter, or an assertion about the matter of another party.

Question 8

the first section of an audit report for an issuer is:

Answer 8

–Opinion on the Financial Stmnts.

Question 9

If internal controls are effective, should the auditor perform substantive procedures?

Answer 9

yes, because effective internal controls reduce the risk, but do not eliminate the needs for substantive testing.

Question 10

When testing the operation effectiveness of internal controls, the auditor should use:

Answer 10

inquiry with other procedures to obtain sufficient appropriate evidence about the effectiveness of relevant controls

Question 11

A compilation should include a statement that:

Answer 11

the auditor does not express an opinion on the financial statements.

Question 12

The only time an auditor makes reference to a specialists work is when:

Answer 12

if the reference to the specialist’s work clarifies the emphasis-of-matter paragraph of the audit report

Question 13

when assessing the competence of the internal auditor, and independent CPA should obtain information about the:

Answer 13

quality of the internal auditors’ working-paper documentation

Question 14

a cash basis report title should be:

Answer 14

Statement of revenues collected and expenses paid.

Question 15

When testing journal entries, the auditor should focus on:

Answer 15

–journal entries made at the end of the reporting period, and

–journal entries made during the reporting period.

Question 16

What is the objective of an audit of internal control?

Answer 16

The objective of an audit of internal control is to express an opinion on the effectiveness of the internal controls over financial reporting.

Question 17

What is the inventory turnover ratio?

Answer 17

Cost of good sold / average inventory

Question 18

What it the accounts receivable turnover ratio?

Answer 18

net credit sales / average receivables

Question 19

What is the total asset turnover ratio?

Answer 19

net sales / average total assets

Question 20

Which type of sampling allows the auditor to quantify sampling risk?

Answer 20

Sampling risk can be quantified by using attribute sampling.