AUD 2

Question 1

When planning tests of details associated with long-term debt obligations, an auditor will most likely

Rely heavily on sampling long-term debt transactions Perform analytical procedures

A. Yes Yes
B. Yes No
C. No Yes
D. No No

Answer 1

C. No Yes

Question 2

Kiboshny Co. is very concerned with remaining in good standing with its long-term debt covenants. Which of the following measures, if not detected by the auditor, might allow Kiboshny to fraudulently overstate its current ratio?

Improperly classifyingnoncurrent assets as current Failing to record interestpayable on long-term debt

A. Yes Yes
B. Yes No
C. No Yes
D. No No

Answer 2

A. Yes Yes

Question 3

As guidance for measuring the quality of the performance of an auditor, the auditor should refer to

A. Statements of the Financial Accounting Standards Board.
B. Generally accepted auditing standards.
C. Interpretations of the Statements on Auditing Standards.
D. Statements on Quality Control Standards.

Answer 3

B. Generally accepted auditing standards.

Question 4

An accountant imported vendor invoice data from a comma-separated values (CSV) file into an analytics program. When verifying the import, the accountant expected to see the following:

Invoice Date Items Amount
7589 04/03/X1 Roses, tulips, and violets 102.56
Instead, the accountant saw the following:

Invoice Date Items Amount Unknown field 1 Unknown field 2
7589 04/03/X1 Roses tulips and violets 102.56
Which of the following strings could have created the error?

A. 7589,04/03/X1, Roses tulips and violets, 102.56
B. 7589,04/03/X1, Roses, tulips, and violets,102.56
C. 7589,04/03/X1,”Roses, tulips, and violets”,102.56
D. 7589,04/03/X1,”Roses” “tulips” “and violets”,102.56

Answer 4

B. 7589,04/03/X1, Roses, tulips, and violets,102.56

Question 5

A material change in an accounting estimate

A. Requires a consistency modification in the auditor’s report and disclosure in the financial statements.
B. Requires a consistency modification in the auditor’s report but does not require disclosure in the financial statements.
C. Affects comparability and may require disclosure in a note to the financial statements but does not require a consistency modification in the auditor’s report.
D. Involves the acceptability of the generally acceptable accounting principles used.

Answer 5

C. Affects comparability and may require disclosure in a note to the financial statements but does not require a consistency modification in the auditor’s report.

Question 6

Which of the following actions may an auditor take in preparing exported client data for audit data analytic procedures?

Reformat selected records Delete selected records

A. Yes Yes
B. Yes No
C. No Yes
D. No No

Answer 6

A. Yes Yes

Question 7

In order to reduce the risk that the aggregate of undetected misstatements in the group financial statements of a nonissuer exceeds the materiality for the group financial statements as a whole, an auditor should establish a

A. Materiality for the group financial statements that is lower than the component materiality.
B. Materiality for the group financial statement that exceeds prior-year materiality for the group financial statements.
C. Component materiality that is lower than the materiality for the group financial statements.
D. Component materiality that is equal to the materiality for the group financial statements.

Answer 7

C. Component materiality that is lower than the materiality for the group financial statements.

Question 8

In a financial statement audit of a nonissuer, an auditor would consider a judgmental misstatement to be a misstatement that

A. Involves an estimate.
B. Exists because of nonstatistical sampling performed by the auditor.
C. Arises from a flaw in the accounting system.
D. Arises from a routine calculation.

Answer 8

A. Involves an estimate.