WGU D251 - Advanced Auditing questions with
verified answers
A new client is audited for the first time, and there is insufficient evidence to
support the inventory beginning balance. Which type of audit limitation is this?
Ans✓✓✓ Scope limitation
After identifying the risks of material misstatement, an auditor develops an audit
plan in response to those risks. Which plan for testing revenue should the auditor
implement if the auditor believes that the control risk is high? Ans✓✓✓ Obtain
necessary audit evidence only from tests of details
alternative procedures Ans✓✓✓ Procedures used to obtain evidence about the
existence and valuation of accounts receivable when a positive confirmation is
not returned, including examining cash collected after the confirmation date and
vouching unpaid invoices to customers' orders, sales orders, shipping documents,
and sales invoices.
Altman Z-scores Ans✓✓✓ A series of ratios that have predictive power in
indicating the likelihood of bankruptcy. This score is named for the person who
first introduced the concept and associated measurement.
An auditor discovered facts after an audit report release date that may have
affected the financial statements and the auditor's report had the auditor known
the facts at the report release date. Which steps should the auditor take to
prevent further reliance on the financial statements and audit report? Ans✓✓✓
Advise the client to make appropriate and timely disclosure of the newly
discovered facts
,An auditor discovered facts after an audit report release date that may have
affected the financial statements and the auditor's report if the auditor had
known the facts at the audit report release date. The auditor notified the client to
make appropriate and timely disclosure of these new facts, but the client did not
cooperate. Which steps should the auditor take to prevent further reliance on the
financial statements and audit report? Ans✓✓✓ Notify the client and any
regulatory agency with jurisdiction over the client that the audit report should no
longer be associated with the client's financial statements
An auditor feels some pressure to acquiesce to management's demands to not
require that misstatements be corrected. What is one of the most important
drivers of audit quality in this situation? Ans✓✓✓ Audit firm culture
An auditor has assessed a client's risk of material misstatement related to the
existence of inventory as high. This client has incentives to overstate income to
achieve profit targets that affect management bonuses. The oversight of the vice
president of finance is relatively weak because of a lack of supervision by top
management. Other controls are effectively designed. Which mix of audit
evidence would be most appropriate? Ans✓✓✓ 50% tests of details, 30%
analytics, and 20% tests of controls
An auditor has concluded there is a low risk of material misstatement for the
existence assertion of a certain significant general ledger account balance. What
should the auditor do next in this situation? Ans✓✓✓ The auditor should be
willing to accept a greater risk that substantive audit procedures will not detect a
material misstatement.
An auditor performs tests of controls in the revenue cycle. First, the auditor
makes inquiries of company personnel about credit-granting policies. The auditor
then selects a sample of sales transactions recorded in the general ledger and
,examines documentary evidence of credit approval. Which financial statement
assertion(s) does this test of controls most likely support? Ans✓✓✓ Valuation
An auditor selects a sample of prenumbered shipping documents and verifies that
each transaction exists in the sales journal. Which management assertion is
addressed by this scenario? Ans✓✓✓ Completeness
An auditor using monetary unit sampling (MUS) finds that a sampling interval
should be $15,755. Which amount should the auditor round the sample interval
to when selecting the sample manually? Ans✓✓✓ $15,000
An end user of financial statements reviews an unmodified opinion audit report.
What should the end user conclude? Ans✓✓✓ That management's assertions
about the financial statements are credible
attribute Ans✓✓✓ A characteristic of the population of interest to the auditor.
Attributes sampling Ans✓✓✓ A statistical sampling method used to estimate the
rate of control procedure failures based on selecting one sample and performing
the appropriate audit procedure.
Audit reports are designed to promote clear communication between the auditor
and the financial statement user. What is delineated in the audit report?
Ans✓✓✓ The relative responsibilities of the client and the auditor
Audit Risk Ans✓✓✓ The risk that the auditor expresses an inappropriate audit
opinion when the financial statements are materially misstated.
, audit risk model Ans✓✓✓ A conceptual depiction of the relationship between
inherent risk, control risk, detection risk, and audit risk.
Audit Risk Model Ans✓✓✓ Audit Risk = Inherent Risk X Control Risk X Detention
Risk
Audit sampling Ans✓✓✓ The application of an audit procedure to less than 100%
of the items within an account balance or class of transactions for the purpose of
evaluating some characteristic of the balance or class.
audit scope Ans✓✓✓ The range of accounts and transactions that the auditor
evaluates, along with the amount of evidence that they gather, assessments of
which accounts and transactions are material, as well as the critical areas where
the auditor employed significant assumptions and made associated professional
judgments.
auditor business risk Ans✓✓✓ This risk reflects the potential for loss to the
auditor that the client poses, including being a publicly traded client, not being a
profitable engagement, damaging the auditor's reputation, and/or potential
litigation relating to the engagement.
auditor-detected misstatements Ans✓✓✓ Such a misstatement occurs when,
during the audit, the auditor comes to find that there exists an error in the
recording of a particular transaction, regardless of whether it was intentional or
unintentional.
automated purchasing system Ans✓✓✓ A networked software system that links
a company's website to other vendors whose offerings and prices have been
preapproved by appropriate management.
verified answers
A new client is audited for the first time, and there is insufficient evidence to
support the inventory beginning balance. Which type of audit limitation is this?
Ans✓✓✓ Scope limitation
After identifying the risks of material misstatement, an auditor develops an audit
plan in response to those risks. Which plan for testing revenue should the auditor
implement if the auditor believes that the control risk is high? Ans✓✓✓ Obtain
necessary audit evidence only from tests of details
alternative procedures Ans✓✓✓ Procedures used to obtain evidence about the
existence and valuation of accounts receivable when a positive confirmation is
not returned, including examining cash collected after the confirmation date and
vouching unpaid invoices to customers' orders, sales orders, shipping documents,
and sales invoices.
Altman Z-scores Ans✓✓✓ A series of ratios that have predictive power in
indicating the likelihood of bankruptcy. This score is named for the person who
first introduced the concept and associated measurement.
An auditor discovered facts after an audit report release date that may have
affected the financial statements and the auditor's report had the auditor known
the facts at the report release date. Which steps should the auditor take to
prevent further reliance on the financial statements and audit report? Ans✓✓✓
Advise the client to make appropriate and timely disclosure of the newly
discovered facts
,An auditor discovered facts after an audit report release date that may have
affected the financial statements and the auditor's report if the auditor had
known the facts at the audit report release date. The auditor notified the client to
make appropriate and timely disclosure of these new facts, but the client did not
cooperate. Which steps should the auditor take to prevent further reliance on the
financial statements and audit report? Ans✓✓✓ Notify the client and any
regulatory agency with jurisdiction over the client that the audit report should no
longer be associated with the client's financial statements
An auditor feels some pressure to acquiesce to management's demands to not
require that misstatements be corrected. What is one of the most important
drivers of audit quality in this situation? Ans✓✓✓ Audit firm culture
An auditor has assessed a client's risk of material misstatement related to the
existence of inventory as high. This client has incentives to overstate income to
achieve profit targets that affect management bonuses. The oversight of the vice
president of finance is relatively weak because of a lack of supervision by top
management. Other controls are effectively designed. Which mix of audit
evidence would be most appropriate? Ans✓✓✓ 50% tests of details, 30%
analytics, and 20% tests of controls
An auditor has concluded there is a low risk of material misstatement for the
existence assertion of a certain significant general ledger account balance. What
should the auditor do next in this situation? Ans✓✓✓ The auditor should be
willing to accept a greater risk that substantive audit procedures will not detect a
material misstatement.
An auditor performs tests of controls in the revenue cycle. First, the auditor
makes inquiries of company personnel about credit-granting policies. The auditor
then selects a sample of sales transactions recorded in the general ledger and
,examines documentary evidence of credit approval. Which financial statement
assertion(s) does this test of controls most likely support? Ans✓✓✓ Valuation
An auditor selects a sample of prenumbered shipping documents and verifies that
each transaction exists in the sales journal. Which management assertion is
addressed by this scenario? Ans✓✓✓ Completeness
An auditor using monetary unit sampling (MUS) finds that a sampling interval
should be $15,755. Which amount should the auditor round the sample interval
to when selecting the sample manually? Ans✓✓✓ $15,000
An end user of financial statements reviews an unmodified opinion audit report.
What should the end user conclude? Ans✓✓✓ That management's assertions
about the financial statements are credible
attribute Ans✓✓✓ A characteristic of the population of interest to the auditor.
Attributes sampling Ans✓✓✓ A statistical sampling method used to estimate the
rate of control procedure failures based on selecting one sample and performing
the appropriate audit procedure.
Audit reports are designed to promote clear communication between the auditor
and the financial statement user. What is delineated in the audit report?
Ans✓✓✓ The relative responsibilities of the client and the auditor
Audit Risk Ans✓✓✓ The risk that the auditor expresses an inappropriate audit
opinion when the financial statements are materially misstated.
, audit risk model Ans✓✓✓ A conceptual depiction of the relationship between
inherent risk, control risk, detection risk, and audit risk.
Audit Risk Model Ans✓✓✓ Audit Risk = Inherent Risk X Control Risk X Detention
Risk
Audit sampling Ans✓✓✓ The application of an audit procedure to less than 100%
of the items within an account balance or class of transactions for the purpose of
evaluating some characteristic of the balance or class.
audit scope Ans✓✓✓ The range of accounts and transactions that the auditor
evaluates, along with the amount of evidence that they gather, assessments of
which accounts and transactions are material, as well as the critical areas where
the auditor employed significant assumptions and made associated professional
judgments.
auditor business risk Ans✓✓✓ This risk reflects the potential for loss to the
auditor that the client poses, including being a publicly traded client, not being a
profitable engagement, damaging the auditor's reputation, and/or potential
litigation relating to the engagement.
auditor-detected misstatements Ans✓✓✓ Such a misstatement occurs when,
during the audit, the auditor comes to find that there exists an error in the
recording of a particular transaction, regardless of whether it was intentional or
unintentional.
automated purchasing system Ans✓✓✓ A networked software system that links
a company's website to other vendors whose offerings and prices have been
preapproved by appropriate management.
