Auditing Exam 1 Precise Review Graded A+

Analytical procedures are required as a part of the: -- Procedures performed near the end of an audit In Auditing the balance sheet, most revenue and expense accounts are also audited. Which accounts are most likely to be audited when auditing Accounts Receivable? -- Sales and Bad debt expense Which of the following procedures would most likely be perfumed while evaluating findings at the conclusion of an audit? -- Calculate an estimate the total of uncorrected misstatements in the financial statements An example of an internal control weakness is to assign the payroll department the responsibility for: -- Authorizing increases in pay For clients that distribute checks or cash payments and have significant payroll control weakness, which of the following audit procedures is aimed at determining whether every name on the company payroll is a bona fide employee actually on the job? -- A surprised observation of a paycheck distribution, while establishing the identity of each employee receiving payment. Which of the following is not a procedure that is designed to provide evidence about the existence of loss contingencies? -- Confirming accounts payable Which of the following types of matters do not generally require disclosure in the financial statements? -- General risk contingencies A refusal by a lawyer to furnish information related to litigation in the letter of inquiry is likely to result in: -- Qualification of the audit report If, after issuing an audit report, the auditors find that they have failed to perform certain significant audit procedures they should first: -- Attempt to determine whether their report is still being relied upon by third parties. Which of the following subsequent events might require an adjustment to the clients financial statements? -- A major customer declares bankruptcy causing a material receivable to be uncollectible. Authorization of which of the following is least likely to be found during a review of the minutes of the board of directors? -- Write-off of trade accounts receivable Which of the following is not a procedure normally performed while completing the audit of a public company? -- Update internal control questionnaire Auditors must communicate internal control "significant deficiencies" to: -- The audit committee Which of the following procedures is not a procedure that is completed near the end of the engagement? -- Review cash transactions Management estimates the companies allowance for doubtful accounts as $200,000, and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000, with all points in that interval equally likely. The judgemental misstatement in this situation is: -- $30,000 Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events? -- ********* One reason why the independent auditors perform analytical procedures on the clients operations is to identify: -- Unusual transactions It would be appropriate for the payroll accounting department to be responsible for which of the following functions? -- Preparation of periodic governmental reports as to employees earnings and withholding taxes Which of the following is the best reason why auditors should consider observing a clients distribution of regular payroll checks? -- Seperation of payroll duties is less than adequate for effective internal control During the review of a clients payroll procedures, the auditor would consider internal control lacking if a payroll department supervisor was assigned the responsibility for: -- Distributing payroll checks to employees A common audit procedure in the audit of payroll transactions involves tracing selected items from the payroll journal to employee time cards that have been approved by a supervisory personnel. This procedure is designed to provide evidence in support of the audit proposition that: -- Employees worked the number of hours for which their pay was computed. Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued? -- Settlement of litigation in excess of the recorded liability When an audit report is dual-dated for a subsequent event occurring after the completion of fieldwork but before the issuance of the auditors report, the auditors responsibility for events occurring subsequent to the date of the audit report is: -- Limited to the specific event referred to. An auditors decision concerning whether or not to "dual-date" the audit report is based upon the auditors willingness to: -- Extend auditing procedures The auditors primary means of obtaining corroboration of management's information concerning litigation is a: -- Letter of audit inquiry to the clients lawyer. Which of the following is not correct relating to representation letters? -- They often serve as a substitute for the application of other procedures An auditor will ordinarily examine invoices from lawyers primarily in order to: -- Identify possible unasserted litigation, claims, and assessments The auditors primary means of obtaining corroboration of managements information concerning litigation is a: -- Letter of audit inquiry to the clients lawyer. A nonpublic client has provided required supplementary information with its audited financial statements. The auditors proper reporting responsibility includes: -- Adding an other-matter paragraph to the audit report Which of the following describes the threshold that auditors must request management to record any factual misstatements? -- Other than trivial The proper use of prenumbered termination forms by the payroll department should provide assurance that all: -- Terminated employees are removed from payroll Effective internal control over the payroll function would include which of the following? -- Total time spent on jobs should be compared with total time indicated on time clock punch cards. Ana auditor should obtain written representations from the company's attorney concerning litigation claims and assessments, which may be limited to matters that are considered either individually or collectively immaterial. An understanding on the limits of materiality for this purpose has been reached by: -- Management and the auditor. An attorneys response to an auditor regarding the clients letter of inquiry may appropriately limit the response to: -- Matters to which the attorney has given substantive attention in the form of legal consultation or representation.