Page 1 of 106
ACCT 460 - Exam 2 (Athabasca University) ACTUAL
EXAM COMPLETE QUESTIONS AND VERIFIED
SOLUTIONS LATEST UPDATE THIS YEAR
ACCT 460- Exam 2 Athabasca University - EXAM COVERAGE
ACCT 460 - Exam 2 (Athabasca University)
Revenue Recognition - ASC 606 / IFRS 15, identifying performance obligations, contract revenue
allocation
Accounts Receivable & Bad Debts - Allowance method, direct write-off, aging schedules
Inventory Accounting - FIFO, LIFO, weighted average, lower of cost or net realizable value
Cost of Goods Sold & Gross Profit - Calculation, impact of inventory methods
Long-Lived Assets - Acquisition, capitalization, depreciation methods (straight-line, declining
balance, units of production)
Impairment of Assets - Testing for impairment, recording losses under IFRS/GAAP
Leases - Lessee and lessor accounting, finance vs operating leases
Current Liabilities & Contingencies - Recognition, measurement, and disclosure
Statement of Cash Flows - Operating, investing, financing activities, indirect vs direct method
Financial Ratios & Analysis - Liquidity, solvency, profitability, efficiency ratios
QUESTION: Which of the following statements concerning monetary-unit sampling is correct?
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a. The sampling distribution should approximate the normal distribution
b. The auditor controls the risk of incorrect acceptance by specifying the desired confidence
level for the sampling plan
c. Overstated units have a lower probability of sample selection than units that are understated
d. The sampling interval is calculated by dividing the number of physical units in the population
by the sample size - ANSWER-b. The auditor controls the risk of incorrect acceptance by
specifying the desired confidence level for the sampling plan
QUESTION: How would increases in tolerable misstatement and assessed level of control risk
affect the sample size in a substantive test of details?
Left is increase in tolerable misstatement; right is increase in assessed level of control risk:
a. Increase sample size; decrease sample size
b. Decrease sample size; decrease sample size
c. Decrease sample size; increase sample size
d. Increase sample size; increase sample size - ANSWER-c. Decrease sample size; increase
sample size
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QUESTION: An auditor is performing substantive procedures of pricing and extensions of
perpetual inventory balances consisting of a large number of items, past experience indicates
that there may be numerous pricing and extension errors. Which of the following statistical
sampling approaches is most appropriate?
a. Monetary-unit sampling
b. Attribute sampling
c. Classical variables sampling
d. Stop-n-go sampling - ANSWER-c. Classical variables sampling
QUESTION: Considering each independently, a change in which of the following sample
planning factors would influence the sample size for a substantive test of details for a specific
amount? Left is expected misstatement; right is tolerable misstatement
a. Yes; yes
b. No; no
c. No; yes
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d. Yes; no - ANSWER-a. Yes; yes
QUESTION: The risk of incorrect acceptance relates to the
a. Effectiveness of the audit
b. Allowable risk of tolerable misstatement
c. Efficiency of the audit
d. Planning materiality
A number of factors influence the sample size for a substantive test of details of an account
balance. All other factors being equal, which of the following would lead to larger sample size?
a. Greater reliance on analytical procedures
b. Smaller expected frequency of misstatements
c. Greater reliance on internal controls
d. Smaller amount of tolerable misstatement - ANSWER-a. Effectiveness of the audit
ACCT 460 - Exam 2 (Athabasca University) ACTUAL
EXAM COMPLETE QUESTIONS AND VERIFIED
SOLUTIONS LATEST UPDATE THIS YEAR
ACCT 460- Exam 2 Athabasca University - EXAM COVERAGE
ACCT 460 - Exam 2 (Athabasca University)
Revenue Recognition - ASC 606 / IFRS 15, identifying performance obligations, contract revenue
allocation
Accounts Receivable & Bad Debts - Allowance method, direct write-off, aging schedules
Inventory Accounting - FIFO, LIFO, weighted average, lower of cost or net realizable value
Cost of Goods Sold & Gross Profit - Calculation, impact of inventory methods
Long-Lived Assets - Acquisition, capitalization, depreciation methods (straight-line, declining
balance, units of production)
Impairment of Assets - Testing for impairment, recording losses under IFRS/GAAP
Leases - Lessee and lessor accounting, finance vs operating leases
Current Liabilities & Contingencies - Recognition, measurement, and disclosure
Statement of Cash Flows - Operating, investing, financing activities, indirect vs direct method
Financial Ratios & Analysis - Liquidity, solvency, profitability, efficiency ratios
QUESTION: Which of the following statements concerning monetary-unit sampling is correct?
,Page 2 of 106
a. The sampling distribution should approximate the normal distribution
b. The auditor controls the risk of incorrect acceptance by specifying the desired confidence
level for the sampling plan
c. Overstated units have a lower probability of sample selection than units that are understated
d. The sampling interval is calculated by dividing the number of physical units in the population
by the sample size - ANSWER-b. The auditor controls the risk of incorrect acceptance by
specifying the desired confidence level for the sampling plan
QUESTION: How would increases in tolerable misstatement and assessed level of control risk
affect the sample size in a substantive test of details?
Left is increase in tolerable misstatement; right is increase in assessed level of control risk:
a. Increase sample size; decrease sample size
b. Decrease sample size; decrease sample size
c. Decrease sample size; increase sample size
d. Increase sample size; increase sample size - ANSWER-c. Decrease sample size; increase
sample size
,Page 3 of 106
QUESTION: An auditor is performing substantive procedures of pricing and extensions of
perpetual inventory balances consisting of a large number of items, past experience indicates
that there may be numerous pricing and extension errors. Which of the following statistical
sampling approaches is most appropriate?
a. Monetary-unit sampling
b. Attribute sampling
c. Classical variables sampling
d. Stop-n-go sampling - ANSWER-c. Classical variables sampling
QUESTION: Considering each independently, a change in which of the following sample
planning factors would influence the sample size for a substantive test of details for a specific
amount? Left is expected misstatement; right is tolerable misstatement
a. Yes; yes
b. No; no
c. No; yes
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d. Yes; no - ANSWER-a. Yes; yes
QUESTION: The risk of incorrect acceptance relates to the
a. Effectiveness of the audit
b. Allowable risk of tolerable misstatement
c. Efficiency of the audit
d. Planning materiality
A number of factors influence the sample size for a substantive test of details of an account
balance. All other factors being equal, which of the following would lead to larger sample size?
a. Greater reliance on analytical procedures
b. Smaller expected frequency of misstatements
c. Greater reliance on internal controls
d. Smaller amount of tolerable misstatement - ANSWER-a. Effectiveness of the audit
