Instructions
This final exam consists of 25 multiple choice questions and covers the material in Chapters 9 through 13. There are five questions from each chapter.
· Question 1
6 out of 6 points
The preliminary judgment about materiality and the amount of audit evidence accumulated are ________ related.
· Question 2
6 out of 6 points
An auditor who audits a business cycle that has low inherent risk should:
· Question 3
6 out of 6 points
When allocating performance materiality:
· Question 4
6 out of 6 points
Why do auditors establish a preliminary judgment about materiality?
· Question 5
6 out of 6 points
Auditors are ________ to document the known and likely misstatements in the financial statements under audit.
· Question 6
6 out of 6 points
Two key concepts that underlie management’s design and implementation of internal control are:
· Question 7
6 out of 6 points
The PCAOB places responsibility for the reliability of internal controls over the financial reporting process on:
· Question 8
6 out of 6 points
Reasonable assurance allows for:
· Question 9
6 out of 6 points
Which of the following deal with ongoing or periodic assessment of the quality of internal control by management?
· Question 10
6 out of 6 points
The auditors primary purpose in auditing the client’s system of internal control over financial reporting is:
· Question 11
6 out of 6 points
Which of the following is a factor that relates to incentives or pressures to commit fraudulent financial reporting?
· Question 12
6 out of 6 points
Who is most likely to perpetrate fraudulent financial reporting?
· Question 13
6 out of 6 points
In the fraud triangle, fraudulent financial reporting and misappropriation of assets:
· Question 14
6 out of 6 points
Company management is often under pressure to increase revenue and/or net income. One approach is to use a “bill and hold” arrangement. This is an example of which of the following?
· Question 15
6 out of 6 points
Which party has the primary responsibility to oversee an organization’s financial reporting and internal control process?
· Question 16
6 out of 6 points
The auditor’s objective in determining whether the client’s automated controls can correctly handle valid and invalid transactions as they arise is accomplished through the:
· Question 17
6 out of 6 points
When the client changes the computer software:
· Question 18
6 out of 6 points
Controls that are designed for each software application and are intended to help a company satisfy the transaction-related audit objectives are:
· Question 19
6 out of 6 points
General controls may include firewalls which are used to protect from:
· Question 20
6 out of 6 points
Old and new systems operating simultaneously in all locations is a test approach known as:
· Question 21
6 out of 6 points
Which of the following procedures would most likely be performed in response to the auditor’s assessment of the risk of monetary misstatements in the financial statements?
· Question 22
6 out of 6 points
When the auditor has completed the tests of details of balances and enters phase 4 of the audit process, she must still perform audit procedures for which of the following?
· Question 23
6 out of 6 points
A procedure designed to test for monetary misstatements directly affecting the correctness of financial statement balances is a:
· Question 24
6 out of 6 points
An increased extent of tests of controls is most likely to occur when:
· Question 25
6 out of 6 points
Which of the following further audit procedures are used to determine whether all six transaction-related audit objectives have been achieved for each class of transactions?
Final exam part 2
· Question 1
6 out of 6 points
What event initiates a transaction in the sales and collection cycle?
· Question 2
6 out of 6 points
The audit procedure referred to as proof of cash receipts is particularly useful to test:
· Question 3
6 out of 6 points
The document that accompanies the customer’s payment is the:
· Question 4
6 out of 6 points
What critical event must take place before goods can be shipped in order to assure payment can be reasonably expected?
· Question 5
6 out of 6 points
A document that initiates shipment of goods and indicates the description of the merchandise, the quantity shipped, and customer name and address is the:
· Question 6
6 out of 6 points
Auditors often use the ________ to determine the estimated population exception rate.
· Question 7
6 out of 6 points
The acceptable risk of overreliance:
· Question 8
6 out of 6 points
When the computed upper exception rate is greater than the tolerable exception rate, it is necessary for the auditor to take specific action. Which of the following courses of action would be most difficult to justify?
· Question 9
6 out of 6 points
In systematic sample selection, the population size is divided by the number of sample items desired in order to determine the:
· Question 10
6 out of 6 points
Attributes sampling would be an appropriate method to use on which one of the following procedures in an audit program?
Answer
· Question 11
6 out of 6 points
Which of the following is likely to be determined first when performing tests of details for accounts receivable?
· Question 12
6 out of 6 points
The most effective audit evidence gathered for accounts receivable is the:
· Question 13
6 out of 6 points
When designing tests of details of balances, an important point to remember is:
· Question 14
6 out of 6 points
Tests of which balance-related audit objective are normally performed first in an audit of the sales and collection?
· Question 15
6 out of 6 points
A type of positive confirmation known as a blank confirmation:
· Question 16
6 out of 6 points
The final step in the evaluation of the audit results is the decision to:
· Question 17
6 out of 6 points
If an auditor desires a greater level of assurance in auditing a balance, the acceptable risk of incorrect acceptance:
· Question 18
6 out of 6 points
If acceptable audit risk is increased, acceptable risk of incorrect acceptance should be:
· Question 19
6 out of 6 points
As the amount of misstatements expected in the population approaches tolerable misstatement, the planned sample size will:
· Question 20
6 out of 6 points
In estimating the population misstatement, the first step in projecting from the sample to the population is to:
· Question 21
6 out of 6 points
A useful starting point for becoming familiar with the client’s inventory is for the auditor to:
· Question 22
6 out of 6 points
A well-designed computerized system of perpetual inventory master files includes information about the:
· Question 23
6 out of 6 points
To assure proper segregation of duties, who should maintain the perpetual inventory master files?
· Question 24
6 out of 6 points
Handling the receipt of ordered goods is a part of the ________ cycle.
· Question 25
6 out of 6 points
Comparing the physical counts with the perpetual inventory master files satisfies the balance-related audit objective of:
· Question 26
6 out of 6 points
The auditor is responsible for communicating significant internal control deficiencies to the audit committee, or those charged with governance. This communication:
· Question 27
6 out of 6 points
With which of the following client personnel would it generally not be appropriate to inquire about commitments or contingent liabilities?
· Question 28
6 out of 6 points
Which of the following groups has the responsibility for identifying and deciding the appropriate accounting treatment for recording or disclosing contingent liabilities?
· Question 29
6 out of 6 points
Which of the following subsequent events is most likely to result in an adjustment to a company’s financial statements?
· Question 30
6 out of 6 points
The letter of representation obtained from an audit client should be: