Audit Test Questions with All Correct Answers
The auditor assesses control risk because it:
A) includes the aspects of non-sampling risk that are controllable.
B) indicates where inherent risk may be the greatest.
C) affects the level of detection risk the auditor may accept.
D) needs to ...
Audit Test Questions with All Correct
Answers
The auditor assesses control risk because it:
A) includes the aspects of non-sampling risk that are controllable.
B) indicates where inherent risk may be the greatest.
C) affects the level of detection risk the auditor may accept.
D) needs to be reported on in the audit report. - Answer ✔ C
In regard to analytical procedures the correct statements is:
A) for most assertions analytical procedures are considered less effective than tests of
details, so analytical procedures are used as a supplement to tests of details.
B) for most assertions analytical procedures are considered to be more effective than
tests of details.
C) analytical procedures are often the costliest to perform.
D) analytical procedures pertain only to the planning stage of the audit. - Answer ✔ A
An example of 'tracing' a transaction is:
A) agreeing a sales invoice to an entry in the sales journal.
B) selecting an entry in the sales journal and obtaining the relevant sales invoice.
C) selecting an entry in the cash payments journal for the purchase of machinery and
tracing the physical location of such machinery.
D) a and c. - Answer ✔ A
An example of 'vouching' a transaction is:
A) agreeing a sales invoice to an entry in the sales journal.
B) selecting an entry in the sales journal and obtaining the relevant sales invoice.
C) selecting an entry in the cash payments journal for the purchase of machinery and
tracing the physical location of such machinery.
D) a and b. - Answer ✔ B
An example of a test of details of balances is:
A) agreeing a purchase invoice to an entry in the purchases journal.
B) selecting an entry in the purchases journal and obtaining the relevant purchase
invoice.
C) requesting confirmation of account balances from the entity's customers.
,D) selecting an entry in the cash payments journal and obtaining the relevant supplier's
invoice. - Answer ✔ C
A substantive procedure commonly performed prior to the client's balance sheet date is:
A) confirmation of accounts receivable.
B) the observation of physical inventory.
C) the physical inspection of investments.
D) all of the above. - Answer ✔ D
When using analytical procedures to test accounts receivable, which of these
substantive procedures would not be able to be used:
A) comparing this year's closing balance in the control account with the previous year's
balance.
B) using the closing balance to determine the percentage of accounts receivable to
current assets for comparison with the previous year's percentage.
C) comparing the closing balance in the general ledger for the current year with the
debtors aged trial balance for the current year.
D) using the closing balance to calculate the accounts receivable turnover ratio for
comparison with the previous year's ratio. - Answer ✔ C
The audit procedure that is designed to obtain reasonable assurance that expenses and
accruals transactions are recorded in the correct accounting period is:
A) analytical procedures.
B) circularisation of accounts receivable.
C) checking the bank reconciliation.
D) cut-off testing. - Answer ✔ D
Which of the following substantive audit procedures is to obtain evidence as to the
completeness assertion of inventories in the financial report?
A) Obtain confirmation of inventories at locations outside of the entities general location
B) Examine paid suppliers' contracts
C) Review drafts of the financial statements
D) Test the clerical accuracy of inventory pricing calculations - Answer ✔ A
Testing inventory pricing does not include which of these tests?
A) Enquiring about slow-moving or obsolete inventories and determine the need for
write downs
B) Vouching items on inventory listings to inventory tags and count sheets
C) Reviewing perpetual inventory records and purchasing records for indications of
current activity
D) Testing inventory pricing includes all of the above tests - Answer ✔ B
,Preliminary work on a time budget for an audit often is involved with:
A) estimating the expected hours required at each staff level.
B) identifying the charge-out rates at each staff level.
C) estimating total costs by charge-out rates at each staff level.
D) all of the above. - Answer ✔ D
Before using an expert in another profession or occupation, the auditor should be
satisfied as to all of the following, except:
A) professional qualifications of the expert.
B) reputation of the expert.
C) the expert has a close a relationship with the firm being audited.
D) all of the above should be satisfied. - Answer ✔ C
The decision to accept an audit engagement requires the auditor to undertake a client
evaluation. Client evaluations involve:
A) consideration of management's integrity.
B) identifying any special circumstances and unusual risks associated with the entity.
C) reviewing the auditing and accounting standards.
D) both a and b. - Answer ✔ D
Dealings between a predecessor and proposed auditor normally includes:
A) the predecessor auditor contacting the proposed auditor regarding undertaking the
audit engagement.
B) the predecessor auditor being required to provide the proposed auditor with the
working papers.
C) a supervised review of the previous auditor's working papers, given the client's
permission.
D) discussions regarding the audit engagement independent of whether the client has
given permission. - Answer ✔ C
An auditor has been offered a new audit. What should the auditor do next?
A) The auditor should contact the client and discuss the risks associated with the audit
for the purposes of planning.
B) The auditor should undertake a client evaluation to assess the integrity of
management and to identify unusual risks as part of the process of deciding whether to
accept the engagement.
C) The auditor should discuss with the client the possibility of performing 'other services'
before accepting the engagement.
D) The auditor should ensure that adequate facilities will be available at the client office
when the audit team starts the audit. - Answer ✔ B
The exercise of 'due professional care' requires that an auditor:
, A) examine all available corroborating evidence.
B) critically review the judgement exercised at every level on the engagement.
C) reduce control risk below the maximum.
D) attain the proper balance of professional experience and formal education. - Answer
✔B
The statement that is not correct concerning an audit engagement letter is:
A) it constitutes a legal contract between the auditor and the client.
B) a new letter must be prepared each year.
C) it outlines the responsibilities of management in the audit as well as the
responsibilities of the auditor.
D) all of the statements are correct, i.e. no statement is incorrect. - Answer ✔ B
For most engagements, the auditor makes a preliminary visit to the entity before its year
end. This visit is referred to as the:
A) interim audit.
B) pre-year end audit.
C) preliminary audit.
D) preliminary visit. - Answer ✔ A
An interim audit:
A) take places after the end of the financial period.
B) occurs if the auditor is having trouble arranging resources for a full audit.
C) normally occurs before the finalisation of the audit program.
D) will be undertaken before acceptance of the audit engagement. - Answer ✔ C
In recurring engagements the auditor's emphasis is primarily on:
A) evaluating changes to the audit committee.
B) evaluating new developments in the entity's business and industry.
C) determining the impact of new Accounting Standards on the client's financial report.
D) touring the client's operating facilities and offices. - Answer ✔ B
Knowledge of related parties is important in obtaining an understanding of the client's
business because:
A) there may be a large volume of transactions between related parties.
B) the value of transactions between related parties may be high.
C) the transactions may be between numerous related parties.
D) they may not be transactions that take place at arm's length. - Answer ✔ D
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