WGU - D251 Advanced Auditing questions with verified
answers
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? Ans✓✓✓
Disclose the information in the notes to the financial statements
Accounts Payable Turnover Formula Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓
The amount of the client's inventory stored at the retailer's location
,Another term for Unqualified Opinion? Ans✓✓✓ Unmodified Opinion
AP Turnover Ratio Formula Ans✓✓✓ Accounts Payable/Current liabilities
At which percentage do auditors commonly set posting materiality? Ans✓✓✓ 5%
of planning materiality
Auditor uses Performance Materiality for ____________. Ans✓✓✓ Determining
significant accounts, locations, and audit procedures.
Auditors use Overall Materiality to ___________. Ans✓✓✓ Determine whether
financial statements overall are materially correct.
Can Monetary Unit Sampling test for Understatements? Ans✓✓✓ No -
Overstatements only
Complete relevant to AP Ans✓✓✓ Accounts payable balances include all
accounts payable transactions that have taken place during the period.
Completeness relevant to Inventory Ans✓✓✓ Inventory balances include all
inventory transactions that have taken place during the period
Days outstanding in accounts payable formula Ans✓✓✓ 365/accounts payable
turnover
Do inquiries, observations and analytical procedures involve sampling? Ans✓✓✓
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? Ans✓✓✓ 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? Ans✓✓✓
Securities and Exchange Commission (SEC)
Existence/Occurence relevant to Inventory Ans✓✓✓ Inventory balances exist at
the balance sheet date
Existence/Occurrence relevant to AP Ans✓✓✓ 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? Ans✓✓✓ By using multiple random starts
How does inventory related to Accounts Payable? Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓ 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?
Ans✓✓✓ One or more
How many material weaknesses in the ICFR will result in an Unqualified opinion?
Ans✓✓✓ 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? Ans✓✓✓ The auditor
should gather sufficient evidence related to the estimate.
answers
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? Ans✓✓✓
Disclose the information in the notes to the financial statements
Accounts Payable Turnover Formula Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓
The amount of the client's inventory stored at the retailer's location
,Another term for Unqualified Opinion? Ans✓✓✓ Unmodified Opinion
AP Turnover Ratio Formula Ans✓✓✓ Accounts Payable/Current liabilities
At which percentage do auditors commonly set posting materiality? Ans✓✓✓ 5%
of planning materiality
Auditor uses Performance Materiality for ____________. Ans✓✓✓ Determining
significant accounts, locations, and audit procedures.
Auditors use Overall Materiality to ___________. Ans✓✓✓ Determine whether
financial statements overall are materially correct.
Can Monetary Unit Sampling test for Understatements? Ans✓✓✓ No -
Overstatements only
Complete relevant to AP Ans✓✓✓ Accounts payable balances include all
accounts payable transactions that have taken place during the period.
Completeness relevant to Inventory Ans✓✓✓ Inventory balances include all
inventory transactions that have taken place during the period
Days outstanding in accounts payable formula Ans✓✓✓ 365/accounts payable
turnover
Do inquiries, observations and analytical procedures involve sampling? Ans✓✓✓
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? Ans✓✓✓ 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? Ans✓✓✓
Securities and Exchange Commission (SEC)
Existence/Occurence relevant to Inventory Ans✓✓✓ Inventory balances exist at
the balance sheet date
Existence/Occurrence relevant to AP Ans✓✓✓ 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? Ans✓✓✓ By using multiple random starts
How does inventory related to Accounts Payable? Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓ 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? Ans✓✓✓ 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?
Ans✓✓✓ One or more
How many material weaknesses in the ICFR will result in an Unqualified opinion?
Ans✓✓✓ 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? Ans✓✓✓ The auditor
should gather sufficient evidence related to the estimate.
