Pass Key 4

Question 1

When the auditor’s risk assessment is based on the effective operation of control s, the audit will most likely involve

Answer 1

Identifying specific internal control s relevant to specific assertions

Question 2

Auditor determing that performing substantive test on inventory will take less time that test of controls

Answer 2

Perform only substantive test on inventory

Question 3

Which of the following presumptions is correct about the reliability of audit evidence?

Answer 3

An effective internal control structure provides more assurance about the reliability of audit evidence

Question 4

When performing substantive test of a random sample of cash disbursement auditor sees that original invoice have been misplaced. What should he do?

Answer 4

Reevaluate the risk of fraud and design alternate tests for the related transactions

Question 5

To be effective analytical procedures in the overall review stage of an audit engagement should be performed by

Answer 5

A manager or partner who has a comprehensive knowledge of the client’s business and industry

Question 6

When auditor increases the assessed level of control risk because some activities are ineffective, auditor would most likely

Answer 6

increase the extent of tests of details

Question 7

As the asseptable level of detection risk decrease an auditor may

Answer 7

Postpone the planned timing of substantive tests from interim dates to year end

Question 8

The auditor’s purpose in establishing materiality levels in compliance audit includes all EXCEPT

Answer 8

Establishing the basis for the opinion on effectiveness of internal control over compliance

Question 9

A principal advantage of statistical method of attribute sampling over nonstatistical methods is that they provide a scientific basis for planning the

Answer 9

Sample size

Question 10

And auditor who wishes to capture an entity’s data as transactions are processed and continuously test the entity’s computerized information system would use what technique

Answer 10

Embeded audit module

Question 11

If management declines to present supplementary information required by GASB auditor should issue

Answer 11

Unmodified opinion with other matter paragraph

Question 11

If management declines to present supplementary information required by GASB auditor should issue

Answer 11

Unmodified opinion with other matter paragraph

Question 12

On receiving a client’s bank cutoff statement an auditor most likely would trace

Answer 12

Prior year checks listed in the cutoff statement to the year end outstanding checks

Question 13

What of the following factors auditor consider most important upon subsequent discovery of facts existed at the date if the audit report

Answer 13

The client’s willingness to issue revised FS or other disclosures to person’s known to be relying on the FS

Question 14

When accountant compiles a financial forecast, the account ants report should include

Answer 14

The statement that the practitioner assumes no responsibility to update the report for events and circumstances occurring after the date of the report

Question 15

When CPA can not obtain a written representatuon letter from management acknowledging management s responsibility for internal control. CPA should

Answer 15

Withdraw from ingagement or issue disclamwr

Question 16

Advise the General Manager which of the following control achieves the objective ofaccountability and comparison.

Answer 16

The responsibility for small tools is assigned to individual foremen

Question 17

Advice the Purchase Manager which of the following control does not achieve the objective of Validity of transactions.

Answer 17

Purchases are supported by purchase requisition, purchase order, receiving report, and vendor invoice

Question 18

For inventory itemMO-6403 the Auditor’s test count was 150 whereas the client’s records showed a quantity of 127. On inquiry about the difference, the supervisor commented that the variance of 23 units was due to the additional items identified as damaged and will be returned to the vendor.

How should Smith’s audit response be to the above variance situation?

Answer 18

Review return shipment documentation to verify exclusion from inventory count

Question 19

Customer response to at request .Yes, we ordered $22,000 worth of merchandise from A2Z in early December, however, we have mailed A2Z a check for $22,000 on 12th December Year 1

Answer 19

Post rectifying entry in the books of A2Z to correct the error

Question 20

Inherent risk is evaluated to help an auditor assertion which of the following

Answer 20

The susceptibility of a FS assertion to material misstatement assuming there are no related controls

Question 21

This is the 5th year that Bane, CPA, is auditing Maya. Based on the information provided, which of the following factor most likely increases the risk of fraudulent financial reporting?

Answer 21

That Maya had an unusually successful 4th quarter.

Question 22

Subsequent to issuing a report on audited financial statements, a CPA discovers that the accounts receivable confirmation process omitted a number of accounts that are material, in the aggregate. Which of the following actions should the CPA take immediately?

Answer 22

Perform alternative procedures to verify account balances.

Question 23

Components of internal control?

Answer 23

The 5 components of internal control according to COSO are:

Control environment

Risk assessment

Control activities

Information and communication system

Monitoring

Question 24

Components of internal control

Answer 24

The 5 components of internal control according to COSO are:

Control environment

Risk assessment

Control activities

Information and communication system

Monitoring

Question 25

Which of the following procedures would a CPA most likely perform in the planning phase of a financial statement audit?

Answer 25

Compare financial information with nonfinancial operating data.

Question 26

When the operating effectiveness of a control is not evidenced by written documentation, an auditor should obtain evidence about the control’s effectiveness by

Answer 26

Inquiry and other procedures such as observation.

Question 27

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

Answer 27

Compare cash payments made after the balance sheet date with the accounts payable trial balance

Question 28

CPA firm should adopt a system of quality control

Answer 28

That encompass es HR policies and practices.

Question 29

Agreed upon procedures

Answer 29

Disclaim opinion on subject matter

Question 30

When planning a review what auditor should perform to understand customers business and internal control

Answer 30

Consider the results of audit perform with respect to current year’s FS

Question 31

Best procedures for identifying unrecorded trade accounts payable?

Answer 31

Review cash disbursements recorded subsequent to BS date to identify unrecorded trade accounts payable

Question 32

Compiled FS report

Answer 32

The accountant is not required to perform any procedures to verify info provided by management