Audit Test 1 UPDATED Exam Questions and
CORRECT Answers
Analytical procedures performed to assist in forming an overall conclusion suggest that several
accounts have unexpected relationships. the results of these procedures most likely indicate that -
CORRECT ANSWER - additional audit procedures are required
One reason the independent auditor applies analytical procedures with regard to the client's
operations is to identify - CORRECT ANSWER - unusual transactions
an auditor reviews an audit client's accounting policies when considering which of the following
matters? - CORRECT ANSWER - understanding the entity and its environment, including
its internal control
management's responses to inquiries can be corroborated by each of the following except -
CORRECT ANSWER - preparation of the summary of unadjusted differences
which of the following is an aspect of scheduling and controlling the audit engagement -
CORRECT ANSWER - include in the audit plan a column for estimated and actual time
An auditor is required to establish an understanding in writing with a client regarding the
services to be performed for each engagement. the understanding generally includes -
CORRECT ANSWER - the auditor's responsibility for ensuring that the audit committee is
aware of any significant deficiencies or material weaknesses in control that come to the auditor's
attention
which of the following matters does an auditor usually include in the engagement letter -
CORRECT ANSWER - arrangements regarding fees and billing
the element of the audit-planning process most likely to be agreed upon with the clients befor
implementation of the audit strategy is the determination of the - CORRECT ANSWER -
timing of inventory observation procedures to be performed
,a CPA wishes to determine how various issuers have complied with the disclosure requirements
of a new financial accounting standard. Which of the following information sources would the
CPA most likely consult for this information - CORRECT ANSWER - AICPA accounting
trends and techniques
Analytical procedures enable the auditor to predict the balance or quantity of an item under audit.
information to develop this estimate can be obtained from all of the following except -
CORRECT ANSWER - tracing transactions through the system to determine whether
procedures are bing applied as prescribed
which of the following procedures would an auditor most likely include in the initial planning of
the financial statement audit - CORRECT ANSWER - determining the extent of the
involvement ofthe client's internal auditors
which of the following best describes the primary purpose of audit procedures - CORRECT
ANSWER - to gather evidence
an auditor's engagement letter most likely would include a statement regarding - CORRECT
ANSWER - management's responsibility to provide certain written representations to the
auditor
which of the following auditor concerns usually is so serious that the auditor might conclude that
a financial statement audit cannot be conducted - CORRECT ANSWER - the integrity of
the entity's management is suspect
inherent risk and control risk differ from detection risk in that they - CORRECT
ANSWER - exist independently of the financial statement audit
which of the following statements is corect concerning analytical procedures used in planning an
audit engagement - CORRECT ANSWER - they usually use financial and nonfinancial
data aggregated at a high level
, Au-c 500 describes five generalizations about the reliability of evidence. the situations given
below indicate the relative degrees of assurance provided by two types of evidence obtained in
different situations. which describes an exception to one ofthe generalizations? - CORRECT
ANSWER - the report of an auditor's specialist regarding the valuation of a collection of
paintings held as an investment provides greater assurance that the auditor's physical observation
of the paintings
which of the following is an analytical procedure that an auditor most likely would perform
when planning an audit - CORRECT ANSWER - comparing current year balances to
bedgeted balances
which of the following types of audit evidence is the most persuasive - CORRECT
ANSWER - bank statements obtained from the client
which of the following procedures would a CPA most likely perform in the planning phase of a
financial statement audit? - CORRECT ANSWER - compare financial information with
nonfinancial operating data
an auditor who discovers that a client's employees paid small bribes to municipal officials most
likely would withdraw from the engagement if - CORRECT ANSWER - management fails
to take the appropriate remedial action
after testing a client's internal control activities, an auditor discovers a number of significant
deficiencies in the operation of a client's internal controls. under these circumstances, the auditor
most likely would - CORRECT ANSWER - increase the assessment of control risk and
increase the extent of substantive tests.
which of the following statements is correct regarding the predictability of analytical procedures
in a financial statement audit? - CORRECT ANSWER - relationships involving income
statement accounts tend to be more predictable than relationships involving only balance sheet
accounts
Most of the auditor's work in forming an opinion of financial statements consists of - CORRECT
ANSWER - obtaining and evaluating audit evidence
CORRECT Answers
Analytical procedures performed to assist in forming an overall conclusion suggest that several
accounts have unexpected relationships. the results of these procedures most likely indicate that -
CORRECT ANSWER - additional audit procedures are required
One reason the independent auditor applies analytical procedures with regard to the client's
operations is to identify - CORRECT ANSWER - unusual transactions
an auditor reviews an audit client's accounting policies when considering which of the following
matters? - CORRECT ANSWER - understanding the entity and its environment, including
its internal control
management's responses to inquiries can be corroborated by each of the following except -
CORRECT ANSWER - preparation of the summary of unadjusted differences
which of the following is an aspect of scheduling and controlling the audit engagement -
CORRECT ANSWER - include in the audit plan a column for estimated and actual time
An auditor is required to establish an understanding in writing with a client regarding the
services to be performed for each engagement. the understanding generally includes -
CORRECT ANSWER - the auditor's responsibility for ensuring that the audit committee is
aware of any significant deficiencies or material weaknesses in control that come to the auditor's
attention
which of the following matters does an auditor usually include in the engagement letter -
CORRECT ANSWER - arrangements regarding fees and billing
the element of the audit-planning process most likely to be agreed upon with the clients befor
implementation of the audit strategy is the determination of the - CORRECT ANSWER -
timing of inventory observation procedures to be performed
,a CPA wishes to determine how various issuers have complied with the disclosure requirements
of a new financial accounting standard. Which of the following information sources would the
CPA most likely consult for this information - CORRECT ANSWER - AICPA accounting
trends and techniques
Analytical procedures enable the auditor to predict the balance or quantity of an item under audit.
information to develop this estimate can be obtained from all of the following except -
CORRECT ANSWER - tracing transactions through the system to determine whether
procedures are bing applied as prescribed
which of the following procedures would an auditor most likely include in the initial planning of
the financial statement audit - CORRECT ANSWER - determining the extent of the
involvement ofthe client's internal auditors
which of the following best describes the primary purpose of audit procedures - CORRECT
ANSWER - to gather evidence
an auditor's engagement letter most likely would include a statement regarding - CORRECT
ANSWER - management's responsibility to provide certain written representations to the
auditor
which of the following auditor concerns usually is so serious that the auditor might conclude that
a financial statement audit cannot be conducted - CORRECT ANSWER - the integrity of
the entity's management is suspect
inherent risk and control risk differ from detection risk in that they - CORRECT
ANSWER - exist independently of the financial statement audit
which of the following statements is corect concerning analytical procedures used in planning an
audit engagement - CORRECT ANSWER - they usually use financial and nonfinancial
data aggregated at a high level
, Au-c 500 describes five generalizations about the reliability of evidence. the situations given
below indicate the relative degrees of assurance provided by two types of evidence obtained in
different situations. which describes an exception to one ofthe generalizations? - CORRECT
ANSWER - the report of an auditor's specialist regarding the valuation of a collection of
paintings held as an investment provides greater assurance that the auditor's physical observation
of the paintings
which of the following is an analytical procedure that an auditor most likely would perform
when planning an audit - CORRECT ANSWER - comparing current year balances to
bedgeted balances
which of the following types of audit evidence is the most persuasive - CORRECT
ANSWER - bank statements obtained from the client
which of the following procedures would a CPA most likely perform in the planning phase of a
financial statement audit? - CORRECT ANSWER - compare financial information with
nonfinancial operating data
an auditor who discovers that a client's employees paid small bribes to municipal officials most
likely would withdraw from the engagement if - CORRECT ANSWER - management fails
to take the appropriate remedial action
after testing a client's internal control activities, an auditor discovers a number of significant
deficiencies in the operation of a client's internal controls. under these circumstances, the auditor
most likely would - CORRECT ANSWER - increase the assessment of control risk and
increase the extent of substantive tests.
which of the following statements is correct regarding the predictability of analytical procedures
in a financial statement audit? - CORRECT ANSWER - relationships involving income
statement accounts tend to be more predictable than relationships involving only balance sheet
accounts
Most of the auditor's work in forming an opinion of financial statements consists of - CORRECT
ANSWER - obtaining and evaluating audit evidence
