AUD 9

Question 1

which of the following is MOST RELEVANT when an auditor considers the client’s organizational structure in the context of control risk?

Answer 1

the suitability of the client’s lines of reporting. These are necessary to prepare financials that follow GAAP.

Question 2

which of the following events LEAST LIKELY would indicate the existence of related-party transactions?

Answer 2

writing off obsolete inventory to net realizable value just before year-end. This is an ordinary procedure that is required by GAAP and not directly related to whether related-parties exist.

Question 3

when the report of a group auditor makes reference to the exam made by another auditor, the other auditor may be named if express permission to do so is given and

Answer 3

the report of the other auditor is presented together with the report of the group auditor.

Question 4

Accepting an engagements to compile a financial projection would MOST LIKELY be inappropriate if the projection is to be distributed to

Answer 4

potential stockholders in a private placement through a financial intermediary.

Question 5

an auditor reviews a clients accounting policies and procedures when considering which of the following planning matters?

Answer 5

understanding of the client’s operations and business.

Question 6

a primary objective of analytical procedures used in the final review stage of an audit is to

Answer 6

assist the auditor in evaluating the overall financial statement presentation.

Question 7

when auditing related party transactions, the auditor places primary emphasis on

Answer 7

evaluating the DISCLOSURE of the related party transactions

Question 8

test of controls are performed in order to determine whether

Answer 8

controls are functioning as designed

Question 9

a practitioner has been engaged to apply agreed-upon procedures in accordance with Statements of Standards for Attestation Engagements (SSAEs) to prospective financial statements. Which of the following conditions SHOULD be met for the practitioner to perform the engagement?

Answer 9

the practitioner and specified parties agree upon the procedures to be performed by the practitioner.

Question 10

which of the following is a step in an auditor’s decision to assess the risk of material misstatement at a low level by relying on controls?

Answer 10

identify specific controls that are likely to detect or prevent material misstatement.

Question 11

which of the following is NOT a major reason for maintaining an audit trail for a computer system?

Answer 11

analytical procedures.

Question 12

when an auditor does not receive replies to positive requests for year-end accounts receivable confirmations, the auditor MOST LIKELY would

Answer 12

ask the client to contact the customers to request that the confirmations be returned.

Question 13

an auditor assesses control risk because it

Answer 13

affects the level of detection risk that the auditor may accept.

Question 14

the audit program usually can’t be finalized until the

Answer 14

consideration of the entity’s internal control has been completed.

Question 15

which of the following activities is an accountant not responsible for in review engagements performed in accordance with SSARS

Answer 15

developing an understanding of internal control

Question 16

regarding nonaudit services (NAS), which of the following is NOT true?

Answer 16

members may properly assume management responsibilities for audit clients.

Question 17

during an audit of an entity;s stockholders equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify management’s assertion of or about:

Answer 17

presentation and disclosure.

Question 18

which of the following BEST describes what is meant by the term “generally accepted auditing standards?”

Answer 18

pronouncements issued by the Auditing Standards Board.

Question 19

When the auditor is to conduct an audit of a service organization, what considerations should the auditor make in the planning stages regarding internal control of the organization?

Answer 19

the auditor should obtain an understanding of the effect of the user organization upon the service organization.