Procedures to obtain sufficient appropriate evidence

Question 1

A debt covenant violation refers to which assertion

Answer 1

Classification, because a debt covenant violation requires long term debt to be reclassified to short term

Question 2

Substantive analytical procedures vs test of details

Answer 2

Substantive analytical procedures - test reasonableness of amounts (eg, trend analysis)

Test of details - Test directly for misstatements (eg, A/R Confirmation)

Question 3

Interim substantive procedures that validate an account balance enables an auditor to

Answer 3

Skip testing entire year account details at year end in favor of testing activity between interim date and year end.

Question 4

Confirmations should be mailed by _______

Answer 4

directly by either the internal or external auditors to preserve objectivity and independence of audit evidence.

Question 5

Analytical procedures involve ____-

Answer 5

Developing an expectation of what financial amounts (eg, net sales) should be (eg, based on prior years trend), and comparing that expectation against recorded amounts, and investigating differences.

Question 6

Four Procedures for testing controls (RIIO)

Answer 6

Question 7

An auditors decision to use substantive analytical procedures is influenced by the ________

Answer 7

reliability and precision of the data used to develop expectations.

Question 8

Completeness is managements assertions that ______________

Answer 8

All transactions are recorded.

Question 9

COVA CURVE

Answer 9

Question 10

Analytical procedures typically compare different figures or amounts.

Answer 10

The focus is on the comparing procedure to determine which is the analytic procedure if questioned.

Question 11

When the auditor believes there’s a weakness in Internal control _______

Answer 11

Auditor reassesses risk of material misstatement at a high lvl and perform more substantive testing.

Question 12

The most appropriate test of occurrence related to revenue is to _______

Answer 12

Compare sales journal entries with associated customer orders and shipping documents.

Question 13

When unusual and unexpected fluctuations in account balances are identified with analytical procedures, the auditor will most likely perform _________

Answer 13

additional substantive procedures on details of transactions.

Question 14

Completeness is achieved by recording ____ transactions that have taken place.

Answer 14

All transactions.

Question 15

Types of AR Confirmations

Answer 15

Question 16

Auditors are required to send A/R Confirms unless

Answer 16

1) AR immaterial
2) Confirms not effective
3) Risk low and addressed by other procedures

Question 17

Auditing Bonds payable likely procedure _____

Answer 17

Evaluate reasonableness of interest expense in relation to bonds payable balances.

Question 18

Reasons to not test internal controls:

Answer 18

• Control design is poor.
• Will not impact assessed risk of material misstatement.
  -Substantive testing more efficient
  -Controls do not appear reliable.
  -Controls not relevant to the audit.

Question 19

Existence vs completeness

Answer 19

Question 20

Auditors must confirm that disbursment of funds from one client cash caccount to another is recorded in the __________ period as receipt of those funds

Answer 20

Same period. Interbank transfers must be recorded as disbursed and received in the same period, otherwise its a misstatement of cash

Question 21

Documentation of audit risk assessment is included in ________

Answer 21

Engagement team discussion of RMM.

Question 22

Substantive testing at interim increases risk of undetected material year end misstatements. Interim testing is appropriate for _______

Answer 22

accounts with low incremental risk of change between interim and year end.

Question 23

Process for understanding I/C and assessing CR

Answer 23