Audit and Assurance Test 1 UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Analytical Procedures - CORRECT ANSWER - the reasonableness tests used to gain an
understanding of financial statement accounts and relationships
Audit Documentation - CORRECT ANSWER - written basis for the auditor's conclusions
Audit Plan - CORRECT ANSWER - the audit procedures that auditors need to perform to
gather sufficient and appropriate evidence on which to base their opinion of financial statements
Audit Trail - CORRECT ANSWER - the chain of evidence provided through coding,
cross-references and documentation connecting account balances and other summary results with
original transaction source documents
Continuing Audit Files (or permanent files) - CORRECT ANSWER - the audit
documentation containing information of continuing audit significance for current and past
audits of the same client
Engagement Letter - CORRECT ANSWER - a letter from the public accounting firm to
the management of an engagement client setting forth the terms of the engagement
Form 8-K - CORRECT ANSWER - the "special events report" filed with the SEC
whenever certain significant corporate events occur such as changes in control, legal
proceedings, and changes of auditor
Independence in Appearance - CORRECT ANSWER - the extent to which others perceive
auditors to be independent
,Independence in Fact - CORRECT ANSWER - auditor's mental attitude and impartiality
with respect to clients
Interim Audit Work - CORRECT ANSWER - the procedures performed weeks or months
before the balance sheet date
Lead Schedule - CORRECT ANSWER - a summary of the accounts in or components of
account group
Materiality - CORRECT ANSWER - an amount or event that is likely to influence
financial statements user's decisions
Planning Memorandum - CORRECT ANSWER - the document summarizing the
preliminary analytical procedures and the materiality assessment with specific directions about
the effect on the audit
Predecessor Auditor - CORRECT ANSWER - the public accounting firm that has been
terminated or has voluntarily withdrawn from an audit engagement
Quality Assurance Partner - CORRECT ANSWER - the second partner on the audit team
as required for audits filed with the SEC and who reviews the audit teams work in critical audit
areas
Specialists - CORRECT ANSWER - the persons skilled in fields other than accounting
and auditing- engineers, actuaries, geologists, attorneys, appraisers- who are not members of the
public accounting firm
Substantive Audit Plan - CORRECT ANSWER - the specification of substantive
procedures for gathering direct evidence on management's assertions
Termination Letter - CORRECT ANSWER - the documentation provided to former clients
dealing with the subject of future service in particular 1) asses to audit documentation by new
, auditors 2) reissuance of the auditors reports when required for SEC reporting or comparative
financial reporting, and 3) fee arrangements for such future services. It can also contain a report
of the auditors understanding of the circumstances of termination
Tracing - CORRECT ANSWER - an audit procedure in which the auditor selects a basic
source document and follows its processing path forward to find its final recording in a summary
journal or ledger
Vouching - CORRECT ANSWER - an audit procedure in which an auditor selects an item
of financial information usually from a journal or ledger and follows its path back through the
processing steps to its origin
Year-end Audit Work - CORRECT ANSWER - the procedures performed shortly before
and after the balance sheet date
Accounting Estimates - CORRECT ANSWER - the approcimations of financial statement
numbers often included in financial statments
Audit Committee - CORRECT ANSWER - a subset of a company's board of directors
composed of outside members (those not involved in the day to day operations of the company)
who can provide a buffer between the audit firm and management
Audit Risk - CORRECT ANSWER - the tisk that the auditor express an inappropriate
audit opinion when the financial statements are materially misstated (e.g. giving an unqualified
opinion on financial statemtns that are misleading because of the material misstatments the
auditors failed to discover
Audit Strategy - CORRECT ANSWER - the scope, timing and direction for auditing each
relevant assertion based on the results of the audit risk model
Business Risks - CORRECT ANSWER - the risks that result from significant conditions,
events, circumstances, actions, or inactions that could adversely affect a company's ability to
ACTUAL Exam Questions and CORRECT
Answers
Analytical Procedures - CORRECT ANSWER - the reasonableness tests used to gain an
understanding of financial statement accounts and relationships
Audit Documentation - CORRECT ANSWER - written basis for the auditor's conclusions
Audit Plan - CORRECT ANSWER - the audit procedures that auditors need to perform to
gather sufficient and appropriate evidence on which to base their opinion of financial statements
Audit Trail - CORRECT ANSWER - the chain of evidence provided through coding,
cross-references and documentation connecting account balances and other summary results with
original transaction source documents
Continuing Audit Files (or permanent files) - CORRECT ANSWER - the audit
documentation containing information of continuing audit significance for current and past
audits of the same client
Engagement Letter - CORRECT ANSWER - a letter from the public accounting firm to
the management of an engagement client setting forth the terms of the engagement
Form 8-K - CORRECT ANSWER - the "special events report" filed with the SEC
whenever certain significant corporate events occur such as changes in control, legal
proceedings, and changes of auditor
Independence in Appearance - CORRECT ANSWER - the extent to which others perceive
auditors to be independent
,Independence in Fact - CORRECT ANSWER - auditor's mental attitude and impartiality
with respect to clients
Interim Audit Work - CORRECT ANSWER - the procedures performed weeks or months
before the balance sheet date
Lead Schedule - CORRECT ANSWER - a summary of the accounts in or components of
account group
Materiality - CORRECT ANSWER - an amount or event that is likely to influence
financial statements user's decisions
Planning Memorandum - CORRECT ANSWER - the document summarizing the
preliminary analytical procedures and the materiality assessment with specific directions about
the effect on the audit
Predecessor Auditor - CORRECT ANSWER - the public accounting firm that has been
terminated or has voluntarily withdrawn from an audit engagement
Quality Assurance Partner - CORRECT ANSWER - the second partner on the audit team
as required for audits filed with the SEC and who reviews the audit teams work in critical audit
areas
Specialists - CORRECT ANSWER - the persons skilled in fields other than accounting
and auditing- engineers, actuaries, geologists, attorneys, appraisers- who are not members of the
public accounting firm
Substantive Audit Plan - CORRECT ANSWER - the specification of substantive
procedures for gathering direct evidence on management's assertions
Termination Letter - CORRECT ANSWER - the documentation provided to former clients
dealing with the subject of future service in particular 1) asses to audit documentation by new
, auditors 2) reissuance of the auditors reports when required for SEC reporting or comparative
financial reporting, and 3) fee arrangements for such future services. It can also contain a report
of the auditors understanding of the circumstances of termination
Tracing - CORRECT ANSWER - an audit procedure in which the auditor selects a basic
source document and follows its processing path forward to find its final recording in a summary
journal or ledger
Vouching - CORRECT ANSWER - an audit procedure in which an auditor selects an item
of financial information usually from a journal or ledger and follows its path back through the
processing steps to its origin
Year-end Audit Work - CORRECT ANSWER - the procedures performed shortly before
and after the balance sheet date
Accounting Estimates - CORRECT ANSWER - the approcimations of financial statement
numbers often included in financial statments
Audit Committee - CORRECT ANSWER - a subset of a company's board of directors
composed of outside members (those not involved in the day to day operations of the company)
who can provide a buffer between the audit firm and management
Audit Risk - CORRECT ANSWER - the tisk that the auditor express an inappropriate
audit opinion when the financial statements are materially misstated (e.g. giving an unqualified
opinion on financial statemtns that are misleading because of the material misstatments the
auditors failed to discover
Audit Strategy - CORRECT ANSWER - the scope, timing and direction for auditing each
relevant assertion based on the results of the audit risk model
Business Risks - CORRECT ANSWER - the risks that result from significant conditions,
events, circumstances, actions, or inactions that could adversely affect a company's ability to
