AIS Chapter 7

1. Which of the following types of audits is most likely to be conducted for the purpose of identifying areas for cost savings? A. Financial Statement Audits B. Operational Audits C. Regulatory Audits D. Compliance Audits - Answer-B. Operational Audits .2. Financial statement audits are required to be performed by: A. Governmental Auditors B. CPAs C. Internal Auditors D. IT Auditors - Answer-B. CPAs .3. Which of the following is not considered a cause for information risk? A. Management's geographic location is far from the source of the information needed to make effective decisions. B. The information is collected and prepared by persons who use the information for very different purposes. C. The information relates to business activities that are not well understood by those who collect and summarize the information for decision makers. D. The information has been tested by internal a - Answer-D. The information has been tested by internal auditors and a CPA firm. .4. Which of the following is not a part of general accepted auditing standards? A. General Standards B. Standards of Fieldwork C. Standards of Information Systems D. Standards of Reporting - Answer-C. Standards of Information Systems .5X. Which of the following best describes what is meant by the term "generally accepted auditing standards"? A. Procedures used to gather evidence to support the accuracy of a client's financial statements. B. Measures of the quality of an auditor's conduct carrying out professional responsibilities. C. Professional pronouncements issued by the Auditing Standards Board. D. Rules acknowledged by the accounting profession because of their widespread application. - Answer-B. Measures of the quality of an auditor's conduct carrying out professional responsibilities. .6X. In an audit of financial statement in accordance with generally accepted auditing standards, an auditor is required to: A. Document the auditor's understanding of the client company's internal controls. B. Search for weaknesses in the operation of the client company's internal controls. C. Perform tests of controls to evaluate the effectiveness of the client company's internal controls. D. Determine wether controls are appropriately operating to prevent or detect material misstatements. - Answer-A. Document the auditor's understanding of the client company's internal controls. .7X. Auditors should develop a written audit program so that: A. All material transactions will be included in substantive testing. B. Substantive testing performed prior to year end will be minimized. C. The procedures will achieve specific audit objectives related to specific management assertions. D. Each account balance will be tested under either a substantive test or a test of controls. - Answer-C. The procedures will achieve specific audit objectives related to specific management assertions. .8. Which of the following audit objectives relates to the management assertion of existence? A. A transaction is recorded in the proper period. B. A transaction actually occurred (i.e., it is real) C. A transaction is properly presented in the financial statements. D. A transaction is supported by detailed evidence. - Answer-B. A transaction actually occurred (i.e., it is real) .9X. Which of the following statements regarding an audit program is true? A. An audit program should be standardized so that it may be used on any client engagement. B. The audit program should be completed by the client company before the aud planning stage begins. C. An audit program should be developed by the internal auditor during the audit's completion/reporting phase. D. An audit program establishes responsibility for each audit test by requiring the signature or initials of the audit - Answer-D. An audit program establishes responsibility for each audit test by requiring the signature or initials of the auditor who performed the test .10X. Risk assessment is a process designed to: A. Identify possible circumstances and events that may effect the business. B. Establish policies and procedures to carry out internal controls. C. Identify and capture information in a timely manner. D. Review the quality of internal controls throughout the year. - Answer-A. Identify possible circumstances and events that may effect the business. .Which of the following audit procedures is most likely to be performed during the planning phase of the audit? A. Obtain an understanding of the client's risk assessment process. B. Identify specific internal control activities that are designed to prevent fraud. C. Evaluate the reasonableness of the client's accounting estimates. D. Test the timely cutoff of cash payments and collections. - Answer-A. Obtain an understanding of the client's risk assessment process.