Corresponds to CLO 2(d)
Which of the following are assertions about the revenue process?
existence or occurrence - for account balances
completeness - for both classes of transactions and account balances
valuation and allocation - for classes of transactions and account balances
rights and obligations - for classes of transactions and account balances
accuracy - for classes of transactions
both A and B
both C and D
both B and E
Question 2
Corresponds to CLO 1(c)
Which of the following is correct about the PCAOB?
The PCAOB receives its authority from U.S. Federal Law
Auditing standards issued by the PCAOB must be approved by the U.S. Congress
Anyone who wants to purchase stock on a U.S. stock exchange must follow the rules of the SEC
All audit firms performing audits of public companies are registered with and agree to comply with the auditing procedures established by the PCAOB
Question 3
Corresponds to CLO 3(c)
In the planning process, the auditor assesses the risk that misstatements have occurred in the financial statements. The source of misstatements includes
inaccuracies in gathering or processing data used to audit the financial statements
the use of auditing standards that may be unreasonable or inappropriate
differences between the amount or classification of a financial statement item and what should have been reported under generally accepted auditing standards
omissions of financial statement explanations
financial statement disclosures that are not in accordance with generally accepted accounting principles
Question 4
Corresponds to CLO 7 (b)
In the acquisition and expenditure process, the auditor might perform the following analytical procedures
Compare accounts payable, accrued liabilities, cost of goods sold, and the balance in all the expense accounts for the current year to the prior year. Investigate changes from the auditor's expectations that appear to be unreasonable.
Calculate the vendor margin percentage for the current and prior years. Investigate any changes from the auditor's expectations that appear to be unreasonable.
Consider the number of vendor accounts for the current year and the prior year and the new vendors added or lost in each year.
Compare accounts payable, accrued liabilities, cost of goods available for sale, and the balance in all the expense accounts for the current year to the prior year. Investigate changes from the auditor's expectations that appear to be unreasonable.
Calculate the merchandize inventory percentage for the current and prior years. Investigate any changes from the auditor's expectations that appear to be unreasonable.
both A and C
both B and D
Question 5
Corresponds to CLO 1(c)
Which of the following is correct about the PCAOB?
The PCAOB receives its authority from the SEC
Auditing standards issued by the PCAOB must be approved by the SEC
Anyone who wants to purchase stock on a U.S. stock exchange must follow the rules of the SEC
All audit firms performing audits of public companies are registered with and agree to comply with the auditing procedures established by the PCAOB
Question 6
Corresponds to CLO 2(b)
When management presents the financial statements to the auditor, management makes several assertions about the financial statements. Which of the following is not one of these assertions?
existence or occurrence
valuation and allocation
accuracy
categorization
Question 7
Corresponds to CLO 7 (a)
Substantive audit tests for the acquisition and expenditure process are
inspection of computer logs
internal controls
questioning
inquiry
recalculation of the assessed risk
Question 8
The Securities Exchange Commission (SEC) has oversight authority over the PCAOB. Which of the following is not within the SEC's oversight authority?
The SEC approves the PCAOB's rules
The members of the PCAOB are appointed by the SEC
The SEC approves the PCAOB's budget
The SEC determines which audit firms will be inspected by the PCAOB
Question 9
Corresponds to CLO 1(d)
Which of the following is correct about the PCAOB?
The PCAOB receives its authority from the SEC
Auditing standards issued by the PCAOB must be approved by the U.S. Congress
Anyone who wants to purchase stock on a U.S. stock exchange must follow the rules of the SEC
All audit firms performing audits of public companies are registered with and agree to comply with the auditing standards established by the PCAOB
Question 10
Corresponds to CLO 2(c)
Which of the following are assertions about the revenue process?
existence or occurrence - for both classes of transactions and account balances
completeness - account balances
valuation and allocation - for account balances
rights and obligations - for classes of transactions and account balances
accuracy - for classes of transactions and account balances
both A and C
both B and D
Question 11
Corresponds to CLO 4 (d)
The auditor must communicate in writing all significant deficiencies and material weaknesses to management and the audit committee. The written communication from the auditor should include:
a definition of a significant deficiency and a material weakness
a statement that the objective of the audit is to report on the financial statements and to provide assurance on internal controls
a statement that the communication is intended solely for the use of stockholders, the board of directors, the audit committee, and management
a statement that there is no such thing as absolute assurance
Question 12
Corresponds to CLO 7 (d)
An effective way to identify liabilities that were unrecorded at year-end is
reviewing liabilities recorded after year-end
reviewing journal entries after year-end
reviewing account closings after year-end
reviewing the bills paid after year-end
Question 13
Corresponds to CLO 3(a)
In planning the audit, the auditor makes decisions about the size of misstatements that will be considered material. These decisions allow the auditor to
determine the nature, timing, and extent of inherent risk assessment procedures
identify and assess the risk of misstatement
determine the nature, timing, and extent of audit procedures
establish an amount below which misstatements will always be evaluated as immaterial
C and D
Question 14
Corresponds to CLO 7 (b)
In the acquisition and expenditure process, the auditor might perform the following analytical procedures
Compare accounts payable, accrued liabilities, cost of goods sold, and the balance in all the balance sheet accounts for the current year to the prior year. Investigate changes from the auditor's expectations that appear to be unreasonable.
Calculate the gross margin percentage for the current and prior years. Investigate any changes from the auditor's expectations that appear to be unreasonable.
Consider the number of vendor accounts for the current year and the prior year and the new vendors added or lost in each year.
Compare accounts payable, accrued liabilities, cost of goods available for sale, and the balance in all the expense accounts for the current year to the prior year. Investigate changes from the auditor's expectations that appear to be unreasonable.
Calculate the merchandize inventory percentage for the current and prior years. Investigate any changes from the auditor's expectations that appear to be unreasonable.
both A and D
both B and C
Question 15
Corresponds to CLO 5 (d)
The auditing standards presume that the auditor will request confirmation of the accounts receivable balances unless
the balance in accounts receivable is immaterial
the use of confirmations would be effective if the amounts were significant
the auditor can reduce the risk of issuing an audit opinion to an acceptable low level without confirming accounts receivable
the client believes that confirmations are not necessary
Question 16
Corresponds to CLO 2(c)
Which of the following are assertions about the revenue process?
existence or occurrence - account balances
completeness - account balances
valuation and allocation - for classes of transactions
rights and obligations - for account balances
accuracy - for classes of transactions
both A and B
both C and D
both D and E
Question 17
Corresponds to CLO 4 (b)
The internal control deficiencies identified in a financial statement audit may be reported in which of the following ways?
Significant deficiencies are reported in a management letter.
Material weaknesses are verbally reported to the audit committee.
Deficiencies that fail to reach the level of significant deficiencies or material weaknesses are reported in a management letter.
Significant deficiencies and material weaknesses may be verbally reported to both management and the audit committee.
Question 18
Corresponds to CLO 6 (a)
The auditor is expected to
modify the audit opinion when fraud occurs
gather evidence to prevent two types of fraud (fraudulent financial reporting and misappropriation of assets) to determine that the financial statements are free of material misstatements
gather evidence to evaluate two types of fraud (fraudulent financial reporting and misappropriation of assets) to determine that the financial statements are free of material misstatements
report all fraud in the audit report
Question 19
Corresponds to CLO 8 (b)
IT technology related to inventory can be very useful in maintaining accurate records for inventory balances if
the internal controls for the technology are effectively designed to prevent or detect misstatements of purchases
the internal controls for the technology are effectively designed to prevent or detect misstatements in the financial statements
the internal controls for the technology are effectively designed to prevent or detect misstatements of inventory
the internal controls for the technology are effectively designed to prevent or detect misstatements of costs of goods sold
Question 20
Corresponds to CLO 6 (d)
Management can override controls by
recording fictitious journal entries (particularly at year end)
appropriately changing assumptions and methods used to estimate account balances
omitting, advancing, or delaying modification of events that occurred during the reporting period
failing to disclose facts that could affect the amounts recorded in the financial statements
engaging in complex transactions designed to represent the financial condition of the company
both A and C
both A and D
both B and D
Question 21
Corresponds to CLO 5 (b)
For an auditor to make the decision about whether a change noted in analytical procedures is unreasonable he needs knowledge of
the client's industry
current political conditions
current economic conditions
the client's competitors
the prior year's audit
both A and C
both B and D
both B and E
Question 22
Corresponds to CLO 6(c)
The condition, opportunity to commit fraud, is present when
An individual believes that he is underpaid
An individual believes that the company has plenty of money
An individual believes that the company does not deal with customers fairly
An individual believes that internal controls can be overridden
Question 23
Corresponds to CLO 5 (c)
The auditor may perform substantive tests of transactions for revenue as part of the audit of the internal controls. The auditor does this by:
testing controls that have a monetary value
using dual-purpose tests
using tests on how revenue is recorded in the system
selecting a sample of balances and performing tests on them
Question 24
Corresponds to CLO 2(b)
When management presents the financial statements to the auditor, management makes several assertions about the financial statements. Which of the following is not one of these assertions?
existence or occurrence
valuation and allocation
mathematically correct
classification
Question 25
Corresponds to CLO 4 (a)
Which of the following is a correct statement about internal controls?
The internal control function in a company is a process designed by management and others charged with governance to provide reasonable assurance that the financial statements are prepared in accordance with the applicable financial reporting framework.
Management develops internal controls to prevent misstatements in the financial statements.
The auditor reviews the internal controls developed by management to assess whether the internal controls are effective in detecting misstatements.
The auditing standards define internal controls over financial statements as processes designed by management and others charged with governance to provide assurance that company responsibilities are met.
Question 26
Corresponds to CLO 4 (b)
The internal control deficiencies identified in a financial statement audit may be reported in several ways. Which of the following are not appropriate methods of reporting?
Significant deficiencies are reported in writing to management.
Material weaknesses are reported in writing to the audit committee.
Deficiencies that fail to reach the level of significant deficiencies or material weaknesses may be reported to management.
Significant deficiencies and material weaknesses are reported in writing to both management and the audit committee.
Question 27
Corresponds to CLO 6 (d)
Management can override controls by
suggesting fictitious journal entries (particularly at year end)
inappropriately changing assumptions and methods used to estimate account balances
omitting, advancing, or delaying modification of events that occurred during the reporting period
failing to disclose facts that could affect the amounts recorded in the financial statements
engaging in complex transactions designed to represent the financial condition of the company
both A and C
both B and D
both C and E
Question 28
Corresponds to CLO 8 (c)
The transactions audited in the inventory process include
determining the correct quality of the inventory
internal controls relevant to transactions
pricing the inventory according to accounting standards
internal controls relevant to balances
valuing the year-end inventory transactions
Question 29
Corresponds to CLO 7 (a)
Substantive audit tests for the acquisition and expenditure process are
analytical procedures
observation of the application of the control
inquiry
confirmation of control effectiveness
recalculation of the assessed risk
both A and C
both B and D
Question 30
Corresponds to CLO 5 (a)
In the revenue business process, the auditor might perform the following analytical procedures:
Compare sales revenue, accounts receivable, sales discounts, bad debt expense, and allowance for uncollectible accounts for the current year to the prior year. Investigate all changes.
Compare sales revenue, accounts payable, sales returns and allowance, bad debt expense, and allowance for uncollectible accounts for the current year to the prior year. Investigate changes from the auditor's expectations that appear to be unreasonable.
Calculate the accounts receivable turnover ratio and the number of days outstanding in accounts receivable for the current and prior years. Investigate a change from the auditor's expectations if it appears to be unreasonable.
Calculate the accounts receivable turnover ratio and the number of days outstanding in accounts payable for the current and prior years. Investigate a change from the auditor's expectations if it appears to be unreasonable.
Consider the number of customer accounts for the current year and the prior year and new accounts added and lost in each year.
both A and B
both C and E
Question 31
Corresponds to CLO 8 (a)
In the inventory process, the auditor might perform the following analytical procedures
Compare inventory transactions by category - raw material, work-in-process, and finished goods - for the current year with the prior year.
Compare inventory purchases by category - raw material, work-in-process, and finished goods for the current year with the prior year.
Compute gross margin for the current year and compare with the prior year. Investigate any unexpected changes in the ratio.
Compute cost of goods sold with the current year with the prior year. Investigate any unexpected changes in the ratio.
Compute inventory turnover. Compare the current year's turnover to the prior year. Investigate any differences.
both A and C
both B and D
both C and E
Question 32
Corresponds to CLO 3(b)
In planning the audit, the auditor makes decisions about the size of misstatements that will be considered material. These decisions allow the auditor to
determine the nature, timing, and extent of inherent risk assessment procedures
identify and assess the risk of material misstatement
determine the nature, timing, and extent of internal control procedures
establish an amount below which misstatements will always be evaluated as immaterial
