Audit Final Exam Solved Correctly
Which of the following is not one of the four decisions about what evidence
to gather and how much of it to accumulate?
A) Which audit procedures to use
B) Which accounts must agree to the general ledger
C) When to perform the procedures
D) What sample size to select for a given procedure - -B
-Which of the following is not a characteristic of the reliability of evidence?
A) Effectiveness of client internal controls
B) Education of auditor
C) Independence of information provider
D) Timeliness - -B
-The auditor must gather sufficient and appropriate evidence during the
course of the audit. Sufficient evidence must:
A) be well documented and cross-referenced in the audit documents.
B) be based on sources that are external to company.
C) provide evidence that prove or disprove an audit objective/assertion.
D) be persuasive enough to enable the auditor to issue an audit report. - -D
-Which of the following forms of evidence would be least persuasive in
forming the auditor's opinion about marketable securities and other
investments held by the company?
A) Responses to auditor's questions by the president and controller regarding
the investments account
B) Correspondence with a stockbroker regarding the quantity of client's
investments held in street name by the broker
C) Minutes of the board of directors authorizing the purchase of stock as an
investment
D) The auditor's count of marketable securities - -A
-Determine which of the following is most correct regarding the reliability of
audit evidence.
A) Information that is indirectly obtained from external sources is the most
reliable audit evidence.
B) Reliability of audit evidence is dependent upon the evidence being
subjective.
C) Reliability of evidence refers to the amount of evidence obtained.
D) If internal controls are effective, evidence obtained is more reliable than
when the controls are not effective. - -D
-To be considered reliable evidence, confirmations must be controlled by:
A) the client's employee responsible for accounts receivable.
, B) the external auditor.
C) the client's internal audit department.
D) the client's controller or CFO. - -B
-A measure of how willing the auditor is to accept that the financial
statements may be materially misstated after the audit is completed and an
unqualified opinion has been issued is the:
A) inherent risk.
B) acceptable audit risk.
C) statistical risk.
D) financial risk. - -B
-A measure of the auditor's assessment of the likelihood that there are
material misstatements in an account before considering the effectiveness of
the client's internal control is called:
A) control risk.
B) acceptable audit risk.
C) statistical risk.
D) inherent risk. - -D
-When dealing with audit risk:
A) auditors accept some level of risk in performing the audit function.
B) most risks that auditors encounter are relatively easy to measure.
C) the audit risk model is only used for classes of transactions.
D) most audit firms prefer to use a quantitative assessment for risk - -A
-Initial audit planning involves four matters. Which of the following is not
one of these?
A) Develop an overall audit strategy.
B) Request that bank balances be confirmed.
C) Schedule engagement staff and audit specialists.
D) Identify the client's reason for the audit. - -B
-Most auditors assess inherent risk as high for related parties and related-
party transactions because:
A) of the unique classification of related-party transactions required on the
balance sheet.
B) of the lack of independence between the parties.
C) of the unique classification of related-party transactions required on the
income statement.
D) it is required by generally accepted accounting principles. - -B
-An official record of meetings of the board of directors and stockholders is
included in the corporate:
A) bylaws.
B) charter.
Which of the following is not one of the four decisions about what evidence
to gather and how much of it to accumulate?
A) Which audit procedures to use
B) Which accounts must agree to the general ledger
C) When to perform the procedures
D) What sample size to select for a given procedure - -B
-Which of the following is not a characteristic of the reliability of evidence?
A) Effectiveness of client internal controls
B) Education of auditor
C) Independence of information provider
D) Timeliness - -B
-The auditor must gather sufficient and appropriate evidence during the
course of the audit. Sufficient evidence must:
A) be well documented and cross-referenced in the audit documents.
B) be based on sources that are external to company.
C) provide evidence that prove or disprove an audit objective/assertion.
D) be persuasive enough to enable the auditor to issue an audit report. - -D
-Which of the following forms of evidence would be least persuasive in
forming the auditor's opinion about marketable securities and other
investments held by the company?
A) Responses to auditor's questions by the president and controller regarding
the investments account
B) Correspondence with a stockbroker regarding the quantity of client's
investments held in street name by the broker
C) Minutes of the board of directors authorizing the purchase of stock as an
investment
D) The auditor's count of marketable securities - -A
-Determine which of the following is most correct regarding the reliability of
audit evidence.
A) Information that is indirectly obtained from external sources is the most
reliable audit evidence.
B) Reliability of audit evidence is dependent upon the evidence being
subjective.
C) Reliability of evidence refers to the amount of evidence obtained.
D) If internal controls are effective, evidence obtained is more reliable than
when the controls are not effective. - -D
-To be considered reliable evidence, confirmations must be controlled by:
A) the client's employee responsible for accounts receivable.
, B) the external auditor.
C) the client's internal audit department.
D) the client's controller or CFO. - -B
-A measure of how willing the auditor is to accept that the financial
statements may be materially misstated after the audit is completed and an
unqualified opinion has been issued is the:
A) inherent risk.
B) acceptable audit risk.
C) statistical risk.
D) financial risk. - -B
-A measure of the auditor's assessment of the likelihood that there are
material misstatements in an account before considering the effectiveness of
the client's internal control is called:
A) control risk.
B) acceptable audit risk.
C) statistical risk.
D) inherent risk. - -D
-When dealing with audit risk:
A) auditors accept some level of risk in performing the audit function.
B) most risks that auditors encounter are relatively easy to measure.
C) the audit risk model is only used for classes of transactions.
D) most audit firms prefer to use a quantitative assessment for risk - -A
-Initial audit planning involves four matters. Which of the following is not
one of these?
A) Develop an overall audit strategy.
B) Request that bank balances be confirmed.
C) Schedule engagement staff and audit specialists.
D) Identify the client's reason for the audit. - -B
-Most auditors assess inherent risk as high for related parties and related-
party transactions because:
A) of the unique classification of related-party transactions required on the
balance sheet.
B) of the lack of independence between the parties.
C) of the unique classification of related-party transactions required on the
income statement.
D) it is required by generally accepted accounting principles. - -B
-An official record of meetings of the board of directors and stockholders is
included in the corporate:
A) bylaws.
B) charter.
