PRINCIPLES OF AUDITING CHAPTER 5
EXAM QUESTIONS AND ANSWERS
GRADED A+ 2025/2026
To be effective, analytical procedures in the overall review stage of an audit engagement should
be performed by.
A. The staff accountant who performed the substantive auditing procedures.
B. A beginning staff accountant who has had no other work related to the engagement.
C. A manager or partner who has a comprehensive knowledge of the client's business and
industry.
D. The CPA firm's quality control manager. - ANS C. A manager or partner who has a
comprehensive knowledge of the client's business and industry.
The components of the risk of misstatement are:
Inherent Control Risk Detection
A) Yes Yes Yes
B)Yes Yes No
C)Yes No No
D)No Yes Yes
A. Option A
B. Option B
C. Option C
D. Option D - ANS B. Option B
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,13. Financial statement assertions are established for classes of transactions,
Acct Balances Disclosures
A) Yes Yes
B) Yes No
C) No Yes
D) No No
A. Option A
B. Option B
C. Option C
D. Option D - ANS A. Option A
14. Which of the following is correct concerning a "fraud risk factor"?
A. It may affect the auditor's assessment of fraud risk.
B. It requires modification of planned audit procedures.
C. It is also a material weakness in internal control.
D. If it involves senior management, it is likely to result in resignation of the auditor. - ANS A.
It may affect the auditor's assessment of fraud risk.
15. When performing a financial statement audit, auditors are required to explicitly assess the
risk of material misstatement due to:
A. Fraud.
B. Misappropriation.
C. Illegal Acts.
D. Business risk. - ANS A. Fraud.
16. As planning materiality is decreased, the auditor should plan more work on individual
accounts to.
A. Find smaller misstatements.
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, B. Find larger misstatements.
C. Increase the tolerable misstatement in the accounts.
D. Decrease the risk of assessing control risk too low. - ANS A. Find smaller misstatements.
17. Further audit procedures include:
Risk Asesmt Proced /Controls Test
A) Yes/Yes
B) Yes/No
C) No/Yes
D) No/No
A. Option A
B. Option B
C. Option C
D. Option D - ANS C. Option C
18. Assertions that have a meaningful bearing on whether an account balance, transaction class
or disclosure is fairly stated are referred to as:
A. Appropriate assertions.
B. Sufficient assertions.
C. Relevant assertions.
D. Reliable assertions. - ANS C. Relevant assertions.
19. Which of the following is not an assertion relating to classes of transactions?
A. Accuracy.
B. Sufficiency.
C. Cutoff.
D. Classification. - ANS B. Sufficiency.
20. Which of the following is required documentation in an audit?
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
EXAM QUESTIONS AND ANSWERS
GRADED A+ 2025/2026
To be effective, analytical procedures in the overall review stage of an audit engagement should
be performed by.
A. The staff accountant who performed the substantive auditing procedures.
B. A beginning staff accountant who has had no other work related to the engagement.
C. A manager or partner who has a comprehensive knowledge of the client's business and
industry.
D. The CPA firm's quality control manager. - ANS C. A manager or partner who has a
comprehensive knowledge of the client's business and industry.
The components of the risk of misstatement are:
Inherent Control Risk Detection
A) Yes Yes Yes
B)Yes Yes No
C)Yes No No
D)No Yes Yes
A. Option A
B. Option B
C. Option C
D. Option D - ANS B. Option B
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,13. Financial statement assertions are established for classes of transactions,
Acct Balances Disclosures
A) Yes Yes
B) Yes No
C) No Yes
D) No No
A. Option A
B. Option B
C. Option C
D. Option D - ANS A. Option A
14. Which of the following is correct concerning a "fraud risk factor"?
A. It may affect the auditor's assessment of fraud risk.
B. It requires modification of planned audit procedures.
C. It is also a material weakness in internal control.
D. If it involves senior management, it is likely to result in resignation of the auditor. - ANS A.
It may affect the auditor's assessment of fraud risk.
15. When performing a financial statement audit, auditors are required to explicitly assess the
risk of material misstatement due to:
A. Fraud.
B. Misappropriation.
C. Illegal Acts.
D. Business risk. - ANS A. Fraud.
16. As planning materiality is decreased, the auditor should plan more work on individual
accounts to.
A. Find smaller misstatements.
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, B. Find larger misstatements.
C. Increase the tolerable misstatement in the accounts.
D. Decrease the risk of assessing control risk too low. - ANS A. Find smaller misstatements.
17. Further audit procedures include:
Risk Asesmt Proced /Controls Test
A) Yes/Yes
B) Yes/No
C) No/Yes
D) No/No
A. Option A
B. Option B
C. Option C
D. Option D - ANS C. Option C
18. Assertions that have a meaningful bearing on whether an account balance, transaction class
or disclosure is fairly stated are referred to as:
A. Appropriate assertions.
B. Sufficient assertions.
C. Relevant assertions.
D. Reliable assertions. - ANS C. Relevant assertions.
19. Which of the following is not an assertion relating to classes of transactions?
A. Accuracy.
B. Sufficiency.
C. Cutoff.
D. Classification. - ANS B. Sufficiency.
20. Which of the following is required documentation in an audit?
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
