ACC 421 Exam 2 Questions AND Correct Answers
a _____ total represents the summary total of codes from all records in a batch that do not
represent a meaningful total - ✔✔ hash
A client decides not to record an auditor's proposed adjustments that collectively are not material
and wants the auditor to issue the report based on the unadjusted numbers. Which of the
following statements is correct regarding the financial statement presentation? - ✔✔ The
financial statements are free from material misstatement, and no disclosure is required in the
notes to the financial statements.
A conceptually logical approach to the auditor's evaluation of internal control consists of the
following four steps:
1. Determining the internal controls that should prevent or detect and correct errors and fraud.
2. Identifying control deficiencies to determine their effect on the nature, timing, or extent of
auditing procedures to be applied and suggestions to be made to the client.
3. Determining whether the necessary internal control procedures are prescribed and are being
followed satisfactorily.
4.Considering the types of errors and fraud that can occur. - ✔✔ IV, I, III, and II
a major difficulty in the application of the audit risk model is to define the terms of the model -
✔✔ false
A material weakness in internal control represents a control deficiency that - ✔✔ results in a
reasonable possibility that internal control will not prevent or detect material financial statement
misstatements.
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 a larger sample size? -
✔✔ Smaller measure of tolerable misstatement
a scope limitation on internal controls requires the auditor to express a qualified or disclaimer of
opinion - ✔✔ true
a statistical, probabilistic method of sample evaluation that results in an estimate of the
proportion of items in a population containing a characteristic of interest is called - ✔✔ attributes
sampling
,A successor auditor's inquiries of the predecessor auditor should include questions regarding -
✔✔ communications to management and those charged with governance regarding significant
deficiencies in internal control.
A successor would most likely make specific inquiries of the predecessor auditor regarding - ✔✔
disagreements with management as to auditing procedures.
acceptable risk of incorrect rejection is the statistical risk that the auditor has concluded that a
population is materially misstated when it is not - ✔✔ true
according to section 404, the scope of the auditors report on internal control is limited to
obtaining reasonable assurance that material weaknesses in internal control are identified - ✔✔
true
accounts with zero or negative year end balances have no chance of being included in a standard
probability proportional to size (PPS) sample - ✔✔ true
Actions, policies, and procedures that reflect the overall attitude of management, directors, and
owners of the entity about internal control relate to which of the following internal control
components? - ✔✔ Control environment
after appropriately documenting internal controls, auditors do this procedure to ensure that the
described controls have actually been put into place. - ✔✔ test of controls
After making a preliminary assessment of the risk of material misstatement during planning and
beginning to apply audit procedures, an auditor determines that this risk is actually higher than
anticipated. Which would be the most likely effect of this finding on the auditor's desired level of
detection risk and the overall level of audit risk, as compared to the levels originally planned? -
✔✔ Decrease auditors desired level of detection risk
same overall level of audit risk
An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps
an auditor - ✔✔ measure the sufficiency of the audit evidence by quantifying sampling risk.
, An advantage of using statistical over nonstatistical sampling methods in tests of controls is that
the statistical methods - ✔✔ provides an objective basis for quantitatively evaluating sample risk.
An auditor discovers that a client's accounts receivable turnover is substantially lower for the
current year than for the prior year. This trend may indicate that - ✔✔ fictitious credit sales have
been recorded during the year.
An auditor may compensate for a high assessed level of control risk by increasing the: - ✔✔
extent of substantive tests.
An auditor uses assessed control risk to - ✔✔ determine the acceptable level of detection risk for
financial statement assertions.
An auditor will use the test data approach to obtain certain assurances with respect to the - ✔✔
procedures contained within the program.
An auditor's decision either to apply analytical procedures as substantive tests or to perform
substantive tests of transactions and account balances usually is determined by the - ✔✔ relative
effectiveness and efficiency of the tests.
An internal control deficiency may be defined as a condition in which material misstatements
would ordinarily not be timely detected by - ✔✔ employees in normal course of assigned
functions.
analytical procedures and tests of details of balances are used to satisfy AAR - ✔✔ false
Analytical procedures used in planning an audit should focus on identifying - ✔✔ areas that may
represent specific risks relevant to the audit.
analytical procedures used in planning the audit should focus on - ✔✔ areas that may represent
specific risks relevant to the audit
Analytical procedures used in planning the audit should focus on - ✔✔ Areas that may represent
specific risks relevant to the audit
a _____ total represents the summary total of codes from all records in a batch that do not
represent a meaningful total - ✔✔ hash
A client decides not to record an auditor's proposed adjustments that collectively are not material
and wants the auditor to issue the report based on the unadjusted numbers. Which of the
following statements is correct regarding the financial statement presentation? - ✔✔ The
financial statements are free from material misstatement, and no disclosure is required in the
notes to the financial statements.
A conceptually logical approach to the auditor's evaluation of internal control consists of the
following four steps:
1. Determining the internal controls that should prevent or detect and correct errors and fraud.
2. Identifying control deficiencies to determine their effect on the nature, timing, or extent of
auditing procedures to be applied and suggestions to be made to the client.
3. Determining whether the necessary internal control procedures are prescribed and are being
followed satisfactorily.
4.Considering the types of errors and fraud that can occur. - ✔✔ IV, I, III, and II
a major difficulty in the application of the audit risk model is to define the terms of the model -
✔✔ false
A material weakness in internal control represents a control deficiency that - ✔✔ results in a
reasonable possibility that internal control will not prevent or detect material financial statement
misstatements.
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 a larger sample size? -
✔✔ Smaller measure of tolerable misstatement
a scope limitation on internal controls requires the auditor to express a qualified or disclaimer of
opinion - ✔✔ true
a statistical, probabilistic method of sample evaluation that results in an estimate of the
proportion of items in a population containing a characteristic of interest is called - ✔✔ attributes
sampling
,A successor auditor's inquiries of the predecessor auditor should include questions regarding -
✔✔ communications to management and those charged with governance regarding significant
deficiencies in internal control.
A successor would most likely make specific inquiries of the predecessor auditor regarding - ✔✔
disagreements with management as to auditing procedures.
acceptable risk of incorrect rejection is the statistical risk that the auditor has concluded that a
population is materially misstated when it is not - ✔✔ true
according to section 404, the scope of the auditors report on internal control is limited to
obtaining reasonable assurance that material weaknesses in internal control are identified - ✔✔
true
accounts with zero or negative year end balances have no chance of being included in a standard
probability proportional to size (PPS) sample - ✔✔ true
Actions, policies, and procedures that reflect the overall attitude of management, directors, and
owners of the entity about internal control relate to which of the following internal control
components? - ✔✔ Control environment
after appropriately documenting internal controls, auditors do this procedure to ensure that the
described controls have actually been put into place. - ✔✔ test of controls
After making a preliminary assessment of the risk of material misstatement during planning and
beginning to apply audit procedures, an auditor determines that this risk is actually higher than
anticipated. Which would be the most likely effect of this finding on the auditor's desired level of
detection risk and the overall level of audit risk, as compared to the levels originally planned? -
✔✔ Decrease auditors desired level of detection risk
same overall level of audit risk
An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps
an auditor - ✔✔ measure the sufficiency of the audit evidence by quantifying sampling risk.
, An advantage of using statistical over nonstatistical sampling methods in tests of controls is that
the statistical methods - ✔✔ provides an objective basis for quantitatively evaluating sample risk.
An auditor discovers that a client's accounts receivable turnover is substantially lower for the
current year than for the prior year. This trend may indicate that - ✔✔ fictitious credit sales have
been recorded during the year.
An auditor may compensate for a high assessed level of control risk by increasing the: - ✔✔
extent of substantive tests.
An auditor uses assessed control risk to - ✔✔ determine the acceptable level of detection risk for
financial statement assertions.
An auditor will use the test data approach to obtain certain assurances with respect to the - ✔✔
procedures contained within the program.
An auditor's decision either to apply analytical procedures as substantive tests or to perform
substantive tests of transactions and account balances usually is determined by the - ✔✔ relative
effectiveness and efficiency of the tests.
An internal control deficiency may be defined as a condition in which material misstatements
would ordinarily not be timely detected by - ✔✔ employees in normal course of assigned
functions.
analytical procedures and tests of details of balances are used to satisfy AAR - ✔✔ false
Analytical procedures used in planning an audit should focus on identifying - ✔✔ areas that may
represent specific risks relevant to the audit.
analytical procedures used in planning the audit should focus on - ✔✔ areas that may represent
specific risks relevant to the audit
Analytical procedures used in planning the audit should focus on - ✔✔ Areas that may represent
specific risks relevant to the audit
