Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Auditing > Week 3 > Flashcards

Week 3 Flashcards

1
Q

Original accounting data comprises?

A

the basic data related to entity transactions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Which of the following tests would involve the exercising of professional judgment?

A

Assessing the appropriateness of the estimate of the provision for doubtful debts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Which audit assertion relates to ensuring that all recorded sales are valid?

A

Occurrence.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Which of the following audit objectives relates primarily to the financial report assertion of valuation and allocation?

A

Slow-moving and obsolete items included in inventories are properly identified.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Which of the following is not a financial report assertion?

A

Inspection.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Your audit client is a retailer that sells some of its own merchandise and a large proportion of merchandise held on consignment from suppliers. Which account balance assertion for inventory would this cause to be most at risk?

A

Rights and obligations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Your audit client is under intense pressure to meet an earnings target. Which transaction assertion for purchases is most at risk?

A

Completeness.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

As part of accounts payable testing, an auditor reviews cash payments made post balance date. This is done mainly to gain evidence about which assertion?

A

Completeness.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

This is your first audit of Storm Ltd. During the initial planning you have discovered that the client lacks receiving reports and a policy as to the timing within which to record purchases. You have also observed that there are many adjusting entries to accounts payable, which is a material balance. The audit assertion most at risk when auditing accounts payable is:

A

completeness.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Which of the following procedures would an auditor most likely rely on to verify management’s assertion of completeness?

A

Comparing a sample of shipping documents to related sales invoices.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Which of the following audit objectives relates primarily to the financial report assertion, rights and obligations?

A

Inventories exclude items billed to customers or owned by others.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

When reviewing a loan agreement to ascertain whether the bank’s security over any of the client’s assets has been included in the financial report, the audit assertion being achieved is:

A

presentation and disclosure—completeness.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

In testing the existence assertion for an asset, an auditor ordinarily works from the:

A

accounting records to the supporting evidence.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Selecting a sample of quantities of inventory in the warehouse and tracing each item to the final stock sheets helps address which of the following assertions in respect of inventory?

A

Completeness.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Tracing is used primarily to test which of the following assertions about classes of transactions?

A

Completeness.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Vouching is used primarily to test which of the following assertions about classes of transaction?

A

Occurrence.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

You are concerned about whether all sales have occurred. The procedure that will be most effective in verifying this assertion is:

A

selecting a sample of invoices and vouching them to delivery dockets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Auditors are most likely to use focused audit procedures to examine:

A

high-risk assertions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Your audit client is under intense pressure to meet an earnings target. Which audit procedure are you most likely to use when auditing purchases?

A

Tracing.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

In the context of an audit of a financial report, substantive tests are audit procedures that:

A

may be either tests of details of transactions, tests of details of account balances, tests of disclosure, or analytical procedures.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Most of the independent auditor’s work in formulating an opinion on a financial report consists of:

A

obtaining and examining audit evidence.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

In a financial report audit, which of the following procedures is a substantive test of transactions?

A

Testing recorded sales with supporting delivery dockets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Which of the following is an essential factor in evaluating the sufficiency of evidence? The evidence must:

A

be of a large enough quantity to enable the auditor to form an opinion.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

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

A

An effective internal control system provides more reliable audit evidence than does an ineffective
internal control system.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

The following statements were made in a discussion of audit evidence between two auditors. Which statement is not valid concerning audit evidence?

A

I would not undertake that procedure because at best the results would only be persuasive and I’m looking for convincing evidence.’

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Which of the following statements concerning evidence is correct?

A

A client’s accounting data cannot be considered sufficient audit evidence to support the financial report.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Which of the following is the least persuasive documentation in support of an auditor’s opinion?

A

Schedules of details of physical inventory counts conducted by the client.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Which of the following factors is most important in determining the appropriateness of audit evidence?

A

The reliability of the evidence in meeting the audit objective.

29
Q

To be appropriate, evidence must be both:

A

reliable and relevant.

30
Q

The weakest form of audit evidence among the following is:

A

a letter of representation from management.

31
Q

Evidence is reliable if it:

A

signals the true state of an assertion.

32
Q

An auditor’s decision either to apply analytical procedures as substantive tests or to perform tests of details usually is determined by the:

A

relative effectiveness and efficiency of the tests.

33
Q

Which of the following statements relating to the appropriateness of audit evidence is always true?

A

Evidence gathered by auditors must be both reliable and relevant to be considered appropriate.

34
Q

Audit evidence can come in different forms with different degrees of persuasiveness. Which of the following is the least persuasive type of evidence?

A

Sales invoices inspected by the auditor.

35
Q

The risk that an auditor’s procedures will lead to the conclusion that a material misstatement does not exist in an account balance when, in fact, such a misstatement does exist is:

A

detection risk.

36
Q

Auditors can eliminate engagement risk:

A

under no circumstances.

37
Q

The risk that, due to the application of an inappropriate audit procedure, an auditor will conclude that a material error does not exist in an account balance when, in fact, such error does exist is referred to as:

A

non-sampling risk.

38
Q

As the acceptable level of detection risk decreases, an auditor may change the:

A

nature of substantive tests from a less effective to a more effective procedure.

39
Q

As the acceptable level of detection risk decreases, an auditor may change the:

A

nature of substantive tests from less effective to more effective procedures.

40
Q

As the acceptable level of detection risk decreases, the assurance directly provided from:

A

substantive tests should increase.

41
Q

As the acceptable level of detection risk increases, an auditor may change the:

A

timing of substantive tests from year-end to an interim date.

42
Q

The auditor faces a risk that the audit will not detect material misstatements that occur in the accounting process. In regard to minimising this risk, the auditor primarily relies on:

A

substantive tests.

43
Q

The situation and circumstances can dictate the level of certain risks no matter what the auditor does. However, the auditor is always able to decide to reduce one of the following risks:

A

Detection risk.

44
Q

The extent of substantive tests for an assertion in relation to the assessed level of inherent risk varies in a relationship that is ordinarily:

A

direct.

45
Q

Which of the following best describes the concept of audit risk?

A

The risk that the auditor will provide an unmodified opinion on a materially misstated financial report.

46
Q

Engagement risk is:

A

the auditor’s risk of loss from events arising in connection with the financial report audited and reported upon.

47
Q

Inherent risk and control risk differ from detection risk in that they:

A

exist independently of the financial report audit.

48
Q

Which of the following is not a qualitative factor that may affect an auditor’s establishment of materiality?

A

Firm policy sets materiality at 5 per cent of pre-tax income.

49
Q

Which of the following would an auditor be most likely to use in determining the preliminary judgment about materiality?

A

The entity’s annualised interim financial statements.

50
Q

Which one of the following statements is correct concerning the concept of materiality?

A

Materiality is a matter of professional judgment.

51
Q

Which of the following relatively small misstatements would most likely have a material effect on an entity’s financial report?

A

An illegal payment to a foreign official that was not recorded.

52
Q

Your preliminary audit plan for Astro Ltd states that planning materiality is set at one per cent of total assets. This planning materiality amount:

A

may be revised based on the results of audit tests and new information as the audit progresses.

53
Q

When considering materiality for planning purposes, an auditor believes that misstatements aggregating $10 000 would have a material effect on an entity’s income statement, but that misstatements would have to aggregate $20 000 to materially affect the statement of financial position. Ordinarily, it would be appropriate to design auditing procedures that would be expected to detect misstatements that aggregate:

A

$10 000.

54
Q

Which of the following tests is intended to detect deviations from prescribed Accounting Department procedures?

A

Tests of controls designed specifically for the client.

55
Q

Which of the following procedures would be least likely to be included in an auditor’s test of controls?

A

Confirmation.

56
Q

All of the following auditing procedures are substantive tests except:

A

tests of approvals on invoices.

57
Q

‘Dual-purpose tests’ is a term used for:

A

tests of transactions that include substantive procedures as well as tests of controls.

58
Q

Which of the following statements concerning the auditor’s use of the work of an expert is correct?

A

The expert should have an understanding of the auditor’s corroborative use of the expert’s findings.

59
Q

Audit documentation prepared on audits of publicly-held clients is the property of the:

A

auditor.

60
Q

All of the following documents are typically in the current file except:

A

chart of accounts.

61
Q

Audit documents record the results of the auditor’s evidence-gathering procedures. When preparing audit documents, the auditor should remember that:

A

audit documents should be designed to meet the circumstances and the auditor’s needs on each engagement.

62
Q

Audit documents that record the procedures used by the auditor to gather evidence should be:

A

designed to meet the circumstances of the particular engagement.

63
Q

Audit documentation:

A

may be in paper, electronic or some other form.

64
Q

Which of the following is not a factor affecting the independent auditor’s judgment as to the quantity, type and content of audit working papers?

A

The expertise of client personnel and their expected audit participation.

65
Q

In planning an audit engagement, which of the following is a factor that affects the independent auditor’s judgment as to the quantity, type and content of working papers?

A

The anticipated nature of the auditor’s report.

66
Q

An auditor’s working papers will generally be least likely to include documentation showing how the:

A

client’s schedules were prepared.

67
Q

The current file of an auditor’s working papers is most likely to include a copy of the:

A

bank reconciliation.

68
Q

Which of the following is not a primary purpose of audit working papers?

A

To support the financial report.

Auditing (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions