WGU D215 AUDITING EXAM QUESTION COMPLETE COVERAGE OF AUDIT RISK, SAMPLING, INTERNAL CONTROLS, FRAUD, REPORTING, AND PROFESSIONAL STANDARDS WITH VERIFIED ANSWERS AND IN-DEPTH RATIONALES

WGU D215 AUDITING EXAM QUESTION COMPLETE COVERAGE OF AUDIT RISK, SAMPLING, INTERNAL CONTROLS, FRAUD, REPORTING, AND PROFESSIONAL STANDARDS WITH VERIFIED ANSWERS AND IN-DEPTH RATIONALES 1 Which ratio measures a company's ability to meet short-term obligations with liquid assets such as cash, short-term investments, and receivables? A) Current ratio B) Debt-to-equity ratio C) Acid-test (quick) ratio D) Cash earnings per share ratio Correct Answer: C – The acid-test (quick) ratio specifically measures ability to meet short-term obligations with liquid assets such as cash, short-term investments, and receivables. ________________________________________ 2 What is an approximation of a monetary amount when a precise means of measurement is not available? A) Accounting record B) Audit evidence C) Accounting estimate D) Audit sampling Correct Answer: C – An accounting estimate is defined as an approximation of a monetary amount when a precise means of measurement is not available. ________________________________________ 3 What threat occurs when a CPA's interests are opposed to the client's interests? A) Advocacy threat B) Adverse interest threat C) Self-interest threat D) Familiarity threat Correct Answer: B – The adverse interest threat is the threat that a CPA will not act with objectivity because the CPA's interests are opposed to the client's interests. ________________________________________ 4 Which opinion is issued when auditors state the financial statements are not fairly presented due to a pervasively material departure from the applicable financial reporting framework? A) Unqualified opinion B) Qualified opinion C) Adverse opinion D) Disclaimer of opinion Correct Answer: C – An adverse opinion is issued when auditors state the financial statements are not fairly presented due to a pervasively material departure from the applicable financial reporting framework. ________________________________________ 5 What is an electronic acknowledgement of a transaction by a supplier indicating goods shipped, prices, and other information such as freight costs or taxes? A) Bill of lading B) Advance shipping notice (ASN) C) Purchase order D) Receiving report Correct Answer: B – An ASN is an electronic acknowledgement from a supplier indicating goods shipped, prices, and other information. ________________________________________ 6 What threat involves a CPA promoting a client's interests or position to the point that objectivity or independence is compromised? A) Adverse interest threat B) Management participation threat C) Advocacy threat D) Self-review threat Correct Answer: C – The advocacy threat occurs when a CPA promotes a client's interests or position to the point that objectivity or independence is compromised. ________________________________________ 7 What measure represents the uncertainty associated with not sampling the entire population? A) Tolerable misstatement B) Allowance for sampling risk (ASR) C) Basic precision D) Confidence level Correct Answer: B – The allowance for sampling risk (ASR) is a measure of the uncertainty associated with not sampling the entire population. ________________________________________ 8 Evaluations of financial information through analysis of plausible relationships among both financial and nonfinancial data are called: A) Substantive tests B) Analytical procedures C) Tests of controls D) Reperformance procedures Correct Answer: B – Analytical procedures involve evaluations of financial information through analysis of plausible relationships among both financial and nonfinancial data. ________________________________________ 9 What term refers to the quality of audit evidence gathered? A) Sufficient B) Appropriate C) Reliable D) Relevant Correct Answer: B – "Appropriate" refers to the quality of audit evidence gathered. ________________________________________ 10 Statements or representations, explicit or implied, made by management regarding recognition, measurement, presentation, and disclosure are called: A) Assertions B) Confirmations C) Representations D) Warranties Correct Answer: A – Assertions are statements or representations made by management regarding items included in the financial statements. ________________________________________