WGU - D251 Advanced Auditing Questions AND Correct Answers EXAM
A client made a decision to discontinue a major line of business after the balance sheet date. How
should an auditor treat this type of subsequent event? - ✔✔ Disclose the information in the notes
to the financial statements
Accounts Payable Turnover Formula - ✔✔ Purchases/Average Accounts Payable
An auditor concludes that an illegal act has been committed, the act has a material effect on the
financial statements, and the act has not been properly disclosed.What should the auditor do? -
✔✔ Issue an adverse opinion
An auditor determines overall materiality of $500,000 would be material to the income statement
and $1,000,000 would be material to the balance sheet. Which amount would an auditor typically
assess performance materiality to be for this client? - ✔✔ 75% of $500,000
An auditor has determined performance materiality has been set too high at the beginning of the
audit. Which procedures should this auditor consider to detect misstatements? - ✔✔ The auditor
should perform additional substantive audit procedures.
An auditor is reviewing the shipping policy of a large supply company. The title to goods shipped is
not changed until the retailer sells the goods to their customers. Which primary concern should
the auditor have about this practice? - ✔✔ The amount of the client's inventory stored at the
retailer's location
Another term for Unqualified Opinion? - ✔✔ Unmodified Opinion
AP Turnover Ratio Formula - ✔✔ Accounts Payable/Current liabilities
At which percentage do auditors commonly set posting materiality? - ✔✔ 5% of planning
materiality
Auditor uses Performance Materiality for ____________. - ✔✔ Determining significant accounts,
locations, and audit procedures.
,Auditors use Overall Materiality to ___________. - ✔✔ Determine whether financial statements
overall are materially correct.
Can Monetary Unit Sampling test for Understatements? - ✔✔ No - Overstatements only
Complete relevant to AP - ✔✔ Accounts payable balances include all accounts payable
transactions that have taken place during the period.
Completeness relevant to Inventory - ✔✔ Inventory balances include all inventory transactions
that have taken place during the period
Days outstanding in accounts payable formula - ✔✔ 365/accounts payable turnover
Do inquiries, observations and analytical procedures involve sampling? - ✔✔ No
During an annual audit of a client with a fiscal year-end of December 31, an auditor reviews
disbursement records for January 1 of the following fiscal year. The auditor examines the
disbursement records to determine if the client recorded a related liability in the fiscal year ending
December 31. Which management assertion should be a primary concern while the auditor is
performing this procedure? - ✔✔ Completeness
During an engagement, an auditor may be unable to gather sufficient supporting evidence in order
to issue an unqualified opinion. Which agency or organization, with limited exceptions, will only
accept an unqualified opinion? - ✔✔ Securities and Exchange Commission (SEC)
Existence/Occurence relevant to Inventory - ✔✔ Inventory balances exist at the balance sheet
date
Existence/Occurrence relevant to AP - ✔✔ Accounts payable balances exist at the balance sheet
date.
How can an auditor increase the chances that systematically selected samples are representative
of the population? - ✔✔ By using multiple random starts
, How does inventory related to Accounts Payable? - ✔✔ When shipments of raw materials and
finished goods are received and placed in inventory, this results in an account payable until
payment is made
How does the AICPA describe audit reporting? - ✔✔ The purpose of an audit is to enhance the
degree of confidence that users can place in the financial statement. This purpose is achieved
when an auditor expresses an opinion on the financial statements.
How does the IAASB describe audit reporting? - ✔✔ To form an opinion on the financial
statements based on an evaluation of the conclusions drawn from the audit evidence obtained
How does the PCAOB describe audit reporting? - ✔✔ The objective of the ordinary audit of
financial statements by the independent auditor is the expression of an opinion on the fairness
with which they present, in all material respects, financial position, results of operations, and its
cash flows in conformity with generally accepted accounting principles. The auditor's report is the
medium through which he expresses his opinion or, if circumstances require, disclaims an opinion.
How is the tainting percentage calculated? - ✔✔ The amount of misstatement in an item divided
by the item's recorded amount
How many material weaknesses in the ICFR will result in an Adverse opinion? - ✔✔ One or more
How many material weaknesses in the ICFR will result in an Unqualified opinion? - ✔✔ Zero
How should an auditor respond to a client's claim that a financial statement estimate is at least as
good as the auditor's estimate? - ✔✔ The auditor should gather sufficient evidence related to the
estimate.
How to gather evidence for completeness assertion? - ✔✔ Take a sample of subsequent cash
disbursements to search for under-recorded liabilities
How to gather evidence for existence or occurrence assertion? - ✔✔ Take a sample of recorded
transactions to examine underlying evidence or send out confirmations
How to gather evidence for presentation and disclosure assertion? - ✔✔ Select items and verify
estimates for proper disclosure
A client made a decision to discontinue a major line of business after the balance sheet date. How
should an auditor treat this type of subsequent event? - ✔✔ Disclose the information in the notes
to the financial statements
Accounts Payable Turnover Formula - ✔✔ Purchases/Average Accounts Payable
An auditor concludes that an illegal act has been committed, the act has a material effect on the
financial statements, and the act has not been properly disclosed.What should the auditor do? -
✔✔ Issue an adverse opinion
An auditor determines overall materiality of $500,000 would be material to the income statement
and $1,000,000 would be material to the balance sheet. Which amount would an auditor typically
assess performance materiality to be for this client? - ✔✔ 75% of $500,000
An auditor has determined performance materiality has been set too high at the beginning of the
audit. Which procedures should this auditor consider to detect misstatements? - ✔✔ The auditor
should perform additional substantive audit procedures.
An auditor is reviewing the shipping policy of a large supply company. The title to goods shipped is
not changed until the retailer sells the goods to their customers. Which primary concern should
the auditor have about this practice? - ✔✔ The amount of the client's inventory stored at the
retailer's location
Another term for Unqualified Opinion? - ✔✔ Unmodified Opinion
AP Turnover Ratio Formula - ✔✔ Accounts Payable/Current liabilities
At which percentage do auditors commonly set posting materiality? - ✔✔ 5% of planning
materiality
Auditor uses Performance Materiality for ____________. - ✔✔ Determining significant accounts,
locations, and audit procedures.
,Auditors use Overall Materiality to ___________. - ✔✔ Determine whether financial statements
overall are materially correct.
Can Monetary Unit Sampling test for Understatements? - ✔✔ No - Overstatements only
Complete relevant to AP - ✔✔ Accounts payable balances include all accounts payable
transactions that have taken place during the period.
Completeness relevant to Inventory - ✔✔ Inventory balances include all inventory transactions
that have taken place during the period
Days outstanding in accounts payable formula - ✔✔ 365/accounts payable turnover
Do inquiries, observations and analytical procedures involve sampling? - ✔✔ No
During an annual audit of a client with a fiscal year-end of December 31, an auditor reviews
disbursement records for January 1 of the following fiscal year. The auditor examines the
disbursement records to determine if the client recorded a related liability in the fiscal year ending
December 31. Which management assertion should be a primary concern while the auditor is
performing this procedure? - ✔✔ Completeness
During an engagement, an auditor may be unable to gather sufficient supporting evidence in order
to issue an unqualified opinion. Which agency or organization, with limited exceptions, will only
accept an unqualified opinion? - ✔✔ Securities and Exchange Commission (SEC)
Existence/Occurence relevant to Inventory - ✔✔ Inventory balances exist at the balance sheet
date
Existence/Occurrence relevant to AP - ✔✔ Accounts payable balances exist at the balance sheet
date.
How can an auditor increase the chances that systematically selected samples are representative
of the population? - ✔✔ By using multiple random starts
, How does inventory related to Accounts Payable? - ✔✔ When shipments of raw materials and
finished goods are received and placed in inventory, this results in an account payable until
payment is made
How does the AICPA describe audit reporting? - ✔✔ The purpose of an audit is to enhance the
degree of confidence that users can place in the financial statement. This purpose is achieved
when an auditor expresses an opinion on the financial statements.
How does the IAASB describe audit reporting? - ✔✔ To form an opinion on the financial
statements based on an evaluation of the conclusions drawn from the audit evidence obtained
How does the PCAOB describe audit reporting? - ✔✔ The objective of the ordinary audit of
financial statements by the independent auditor is the expression of an opinion on the fairness
with which they present, in all material respects, financial position, results of operations, and its
cash flows in conformity with generally accepted accounting principles. The auditor's report is the
medium through which he expresses his opinion or, if circumstances require, disclaims an opinion.
How is the tainting percentage calculated? - ✔✔ The amount of misstatement in an item divided
by the item's recorded amount
How many material weaknesses in the ICFR will result in an Adverse opinion? - ✔✔ One or more
How many material weaknesses in the ICFR will result in an Unqualified opinion? - ✔✔ Zero
How should an auditor respond to a client's claim that a financial statement estimate is at least as
good as the auditor's estimate? - ✔✔ The auditor should gather sufficient evidence related to the
estimate.
How to gather evidence for completeness assertion? - ✔✔ Take a sample of subsequent cash
disbursements to search for under-recorded liabilities
How to gather evidence for existence or occurrence assertion? - ✔✔ Take a sample of recorded
transactions to examine underlying evidence or send out confirmations
How to gather evidence for presentation and disclosure assertion? - ✔✔ Select items and verify
estimates for proper disclosure
