Multiple Choice Questions Flashcards
Which of the following substantive tests would an auditor most likely conduct at year end?
a) testing the proper authorization of purchase orders.
b) review of the audit client’s credit procedures.
c) testing the mathematical accuracy of invoices.
d) confirmation of accounts receivables.
d) confirmation of accounts receivables.
Vouching primarily tests the ______ assertion, whereas tracing primarily tests the _______ assertion.
Existence/ occurence; completeness
Which of the following statements is correct?
a) misstatements can only arise from fraud.
b) misstatements can only arise from errors.
c) misstatements can arise from fraud and errors.
c) misstatements can arise from fraud and errors.
An example of analytical procedure which provides persuasive evidence:
a) calculating commissions paid as a percentage of sales.
b) comparing sales commissions and bonuses paid with related sales.
c) reviewing cash accounts the general ledger for unusual items.
d) comparing the debtor’s turnover in the current year to the previous year.
a) calculating commissions paid as a percentage of sales.
What level of evidence can be obtained when performing substantive procedures?
minimal, persuasive, and general.
Internal control weaknesses identified by an auditor ______?
a) decrease the level of substantive tests to be implemented by the auditor.
b) increase the risk of material misstatements being undetected by the auditor’s testing procedures.
c) increase the risk of material misstatement being undetected by management’s processes and controls.
c) increase the risk of material misstatement being undetected by management’s processes and controls.
Which statement about internal controls is incorrect?
a) internal controls encompass all of the elements of an organization.
b) internal controls support the achievement of an organization’s objectives.
c) internal controls only have to be understood if a combined audit approach is adopted.
d) internal controls comprise a key component of audit risk assessment.
c) internal controls only have to be understood if a combined audit approach is adopted.
Which is the most relevant assertion when dealing with a client’s Accounts Receivables?
Accuracy, Valuation, and Allocation
Which assertion is relevant for the following risk “Fictitious sales may be recorded”?
Occurence.
Which assertion is relevant for the following risk “unit prices on customer invoices are incorrect”?
Accuracy.
A typical control in the sales function would involve matching the shipping document against the _______ before an invoice is prepared for a customer.
Sales Order
