Potpourri
Audit Objectives
Audit Tests
Audit Evidence
SOX & Internal Control
100
The objective of the ordinary audit of financial statements is to:
What is "to express an opinion on the fairness of the financial statements in all material respects"
100
An audit test to account for the sequence of prenumbered bills of lading and sales invoices is concerned with which audit objective?
What is Completeness.
100
Count inventory item and record the amount in the audit files is an example of what type of audit test?
What is physical examination?
100
The two primary qualities of audit evidence:
What are relevance and reliability?
100
The law that establishes standards related to the audits of public companies
What is Sarbanes Oxley Act
200
The primary objective of an audit of a public company is to provide assurance to the
Who are the investors and shareholders of the public company?
200
Examine details of sales for five days before and five days after year-end to determine whether sales have been recorded in the proper period is an example of what audit objective?
What is Cut Off?
200
Calculating the gross margin for the current year under audit as a percent of sales and comparing it with previous years is what type of audit procedure?
What are analytical procedures?
200
The two most reliable forms of evidence:
What are physical examination and confirmation from a third party?
200
Which of the following statements is true of a public company's financial statements? A) Sarbanes-Oxley requires the CEO only to certify the financial statements. B) Sarbanes-Oxley requires the CFO only to certify the financial statements. C) Sarbanes-Oxley requires the CEO and CFO to certify the financial statements. D) Sarbanes-Oxley neither requires the CEO nor the CFO to certify the financial statements.
What is C) Sarbanes-Oxley requires the CEO and CFO to certify the financial statements.
300
The organization that set the standards for the audits of public companies
What is the Public Company Accounting Oversight Board (PCAOB)?
300
The auditor is determining that the recorded sales are for the amount of goods shipped are correctly billed and recorded. She is gathering evidence about which transaction related audit objective?
What is Accuracy?
300
Discussion with client about potential legal disputes is an example of what type of audit test?
What is inquiry
300
An auditor who audits a business cycle that has low inherent risk can: A) decrease the amount of audit evidence gathered. B) assign more experienced staff to that area. C) increase the amount of audit evidence gathered D) expand planning procedures.
What is A) decrease the amount of audit evidence gathered?
300
A process designed to provide reasonable assurance regarding the achievement of management's objectives in the following categories: (1) reliability of financial reporting, (2) effectiveness and efficiency of operations, and (3) compliance with applicable laws and regulations.
What is internal control?
400
The organization that set the auditing standards for private companies
What is Auditing Standards Board of the AICPA?
400
In performing your audit for a privately-held firm your inquiries have yielded that one of the company's owner's primary motivations is to pay the least amount of income tax that is possible. Based on this observation which audit objective for ending inventory would the auditor be most concerned about ascertaining?
What is Completeness?
400
Tests of controls and substantive tests of transactions are an important determinant of the extent of the auditor's use of tests of details of balances. Which of the following is true? A) They are likely to be performed together and prior to the clients end of the fiscal year. B) They are likely to eliminate the need for tests of details of balances. C) They are likely to have no impact on the planned tests of details of balances. D) They are likely to be used only in the audit of internal control.
What is A) They are likely to be performed together and prior to the clients end of the fiscal year.
400
When the auditor develops supporting evidence for amounts posted to account balances with documentary evidence, that process is called:
What is vouching.
400
Proper segregation of functional responsibilities calls for separation of:
What is authorization, recording, and custody
500
The risk that audit evidence for a segment will fail to detect misstatements exceeding tolerable misstatement is:
What is Planned detection risk.
500
Which of the following best describes tests of details of balances? A) audit procedures designed to test for monetary misstatements in the accounts summarized in the financial statements B) audit procedures designed to test for the monetary amounts of transactions C) audit procedures designed to test for reasonableness of account balances D) audit procedures designed to test for effectiveness in recording accounting information
What is A) audit procedures designed to test for monetary misstatements in the accounts summarized in the financial statements (e.g. physical examinations and confirmations)
500
The auditor is concerned that a client is failing to bill customers for shipments. An audit procedure that would gather relevant evidence would be to:
What is trace a sample of shipping documents to related duplicate sales invoices?
500
Inherent risk is ________ related to detection risk and ________ related to the amount of audit evidence.
Inversely, directly
500
3) The employee in charge of authorizing credit to the company's customers does not fully understand the concept of credit risk. This lack of knowledge would constitute: A) a deficiency in operation of internal controls. B) a deficiency in design of internal controls. C) a deficiency of management. D) not constitute a deficiency.
What is A) a deficiency in operation of internal controls.
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