ACCY 131 TEST 2 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Question:
1. Management assertions are:
Answer:
Implied or expressed representations about accounts, transactions, and
disclosures in the financial statements.
Question:
2. Which of the following statements about the existence
and completeness assertions is not true?
Answer:
Existence deals with understatements and completeness deals with
overstatements.
Question:
3. In testing for cutoff, the objective is to determine:
Answer:
Whether transactions are recorded in the correct accounting period.
Question:
4. Which of the following business characteristics is not
indicative of high inherent risk?
Answer:
A large number of routine sale transactions.
Question:
5. Auditors begin their assessments of inherent risk during
audit planning. Which of the following would help in
assessing inherent risk during the planning phase?
I. Obtaining knowledge of the client's strategies,
objectives, and related business
risks.
II. Obtaining knowledge about the client's business and
industry.
III. Touring the client's plant and offices.
Answer:
I, II, and III.
, Question:
6. Two determinants of the persuasiveness of evidence are:
Answer:
Appropriateness and sufficiency.
Question:
7. What is the primary objective of audit documentation?
I. Provide documented evidence that the auditors had a
firm basis for their
report.
II. Provide reasonable assurance that the audit was
conducted in accordance with
standards.
III. Provide additional support of recorded amounts to
the client.
Answer:
I and II only.
Question:
8. Cold review refers to which of the following?
I. Manager review.
II. Engagement partner review.
III. Second partner review.
Answer:
III only
Question:
9. Auditors gather a number of different types of evidence
in the course of an audit, including physical evidence,
third-party representations, documentary evidence,
computations, data interrelationships, client
representations, and accounting records.
Which of the following evidence is least reliable?
Answer:
Examine an invoice in support of a sales transaction.
CORRECT ANSWERS
Question:
1. Management assertions are:
Answer:
Implied or expressed representations about accounts, transactions, and
disclosures in the financial statements.
Question:
2. Which of the following statements about the existence
and completeness assertions is not true?
Answer:
Existence deals with understatements and completeness deals with
overstatements.
Question:
3. In testing for cutoff, the objective is to determine:
Answer:
Whether transactions are recorded in the correct accounting period.
Question:
4. Which of the following business characteristics is not
indicative of high inherent risk?
Answer:
A large number of routine sale transactions.
Question:
5. Auditors begin their assessments of inherent risk during
audit planning. Which of the following would help in
assessing inherent risk during the planning phase?
I. Obtaining knowledge of the client's strategies,
objectives, and related business
risks.
II. Obtaining knowledge about the client's business and
industry.
III. Touring the client's plant and offices.
Answer:
I, II, and III.
, Question:
6. Two determinants of the persuasiveness of evidence are:
Answer:
Appropriateness and sufficiency.
Question:
7. What is the primary objective of audit documentation?
I. Provide documented evidence that the auditors had a
firm basis for their
report.
II. Provide reasonable assurance that the audit was
conducted in accordance with
standards.
III. Provide additional support of recorded amounts to
the client.
Answer:
I and II only.
Question:
8. Cold review refers to which of the following?
I. Manager review.
II. Engagement partner review.
III. Second partner review.
Answer:
III only
Question:
9. Auditors gather a number of different types of evidence
in the course of an audit, including physical evidence,
third-party representations, documentary evidence,
computations, data interrelationships, client
representations, and accounting records.
Which of the following evidence is least reliable?
Answer:
Examine an invoice in support of a sales transaction.
